Freshippo: Business Model Evolution in Alibaba’s New Retail Platform

The first Freshippo store opened in Shanghai, China in January 2016. It was not until nine months later that the second store was opened. However, from that point on, Freshippo stepped up its nationwide expansion by opening a new store every six days, on average. By June 2018, Freshippo owned 46 stores in 13 cities and had set a target of operating over 100 stores by the end of 2018. When entering a Freshippo store, customers not only saw an array of fresh produce that reminded them that they were in a supermarket, but they also saw food being prepared, people dining, and meals being packaged and sorted in bags for customers to pick up and take home to eat. Although the number of services were impressive, flaws had started to surface in the evolution of Freshippo’s business model, such as store management issues, poor service, and long wait times for food preparation. Freshippo had to make some decisions regarding expanding and exploring new business models, or instead resolving problems and making improvements. Which option was a higher priority?

This case is suitable for a graduate-level course on entrepreneurial innovation, business model innovation, or business models for new retail platforms. It can also be used to illustrate business model innovation and evolution in retail markets. After working through the case and assignment questions, students will be able to<ul><li>design a business model canvas based on the case information and understand the interrelationship among the nine modules in the canvas;</li><li>use the value proposition canvas and evaluate the fit between the value propositions (products) and the customer segments (markets);</li><li>determine whether an innovative business model is sustainable and profitable;</li><li>discuss how a start-up can manage multiple business models and how to address strategic issues such as the separation or integration of business models; and</li><li>deliberate on whether Freshippo should follow Steve Blank’s customer development model (currently prevalent in Silicon Valley), which advocates moving from zero to one first and then from one to n.</li></ul>

• new retail, Freshippo, Alibaba