International advisory service Ernst & Young has released figures encouraging retailers to invest in digital transformation to grasp opportunities in the Greater Bay Area.
While some analysts have shown increasing doubts about China’s domestic consumption amidst a global economic slowdown and international trade conflicts, especially as the country is shifting towards a more consumption-driven growth path, EY thinks that strength remains in domestic consumption. Its figures reflect a fundamental shift in consumption habits as well as transition from service to experience economy in the digital age.
According to the firm, with change come opportunities – and the retail sector should embrace this shift by further promoting digitalisation, which can also help them grasp opportunities in the Greater Bay Area.
“It is important to note that in comparison to other major markets around the world, China’s overall retail figures are still robust and stable,” commented EY’s Greater China digital strategy & transformation leader Benson Ng.
“We see the figures as a reflection of a change in consumption habits of the digital natives in China, where consumers become more impulsive in spending and are more reactive to digital sales events rather than promotions during traditional festivities. In face of the transition to an experience economy, retailers can capture higher market share by adopting digitalisation to predict, create and provide products that consumers really need, and to deliver an experience that is memorable to those consumers.”
Apart from increasing market share, digital transformation can also help retailers expand their business into the Greater Bay Area. According to the blueprint announced by Chinese authorities, Hong Kong and Macau will be connected with nine other cities in southern China to create the Greater Bay Area, aiming to make it a high-tech megalopolis.
“The geographical vicinity of the GBA means increasing synergy between markets and an increasing convergence in consumption habits, which will create new opportunities for all retailers. Large tech corporations tend to invest in online platforms and expand their product offerings, while small-scale online stores invest in content to maintain a niche positioning.”
According to EY’s figures, examples where retailers can leverage on opportunities in the GBA include:
- The area’s investment in emerging technologies such as 3D printing can enable retailers to adopt a new revenue model, especially large tech corporations. They can diversify their product offerings using existing resources and IPs.
- Perceived as China’s Silicon Valley, GBA acts as a sandbox for retailers to use big data and AI to predict consumer needs and create suitable products.
- The ample startups in Greater Bay Area encourages big tech corporations to merge physical space with digital experience offerings, for instance, major retailers might work with startups offering virtual wardrobe services to create a virtual changing room for consumers.
- The hyper-connected network in the GBA and connections with other neighbouring markets create a more efficient logistics and supply chain, helping retailers to deliver better after-sale digital experience to consumers. This can range from product delivery after online purchase, to providing product-care and warranty services through digitalised platforms.