New Retail – using technology to merge online, offline, logistics, big data, cloud computing, entertainment, news and social media into a seamless shopping experience – was a concept introduced by Jack Ma in 2016.
“What Alibaba wants to do in the next 10-20 years is to enable the innovation of traditional business,” Ma said in October 2017.
Even with the current trade tensions between China and the US – which he expects to last two decades – New Retail is still the company’s main focus.
New Retail as well as the JD and Tencent versions of it, Boundaryless Retail and Smart Retail respectively, are continuing to grow and develop. So, what can brands do to keep up with the changes and what lessons can they learn in the process that can help them in their home market and the global market?
Experience versus product
New Retail has blurred the boundaries between online and offline, retailer and manufacturer, consumer and creator. This new seamless, unified model provides new opportunities to drive recognition and sales. Previously, brands competed on product alone but now, the game is won by those who provide unforgettable shopping and life experiences. It’s a shift from return on investment thinking to a return on experience mindset.
This means marketing through unique events that allow customers and fans to participate in fun ways. They should be shareable and appeal to the senses and emotions. Metric measurement should be built-in and subtle.
But it is more than that. It also means that brands need to look at every aspect of their interactions with customers and every aspect of customer interaction with their products. From product search to after-sales service, from installation to exit, processes should be streamlined and intuitive. Chinese consumers have high expectations for speed and service. Bringing techniques that measure up to their standards to your home market can’t fail to win over new customers.
This brings us to the next two areas, which are highly interrelated.
Smart digitisation and automation
Another challenge is implementing innovative and practical digitisation and automation. Big data, AI, machine learning, RFID technology, the blockchain and many other technologies can help retailers to gain insights, track processes and serve customers more flexibly while consumers get faster, more efficient, fun service.
French sports retailer Decathlon has many of these processes in place. Its use of RFID tags, for example, is world-class. Some of the tags are made of fabric and integrated into standard clothing tags while others are seamlessly incorporated in packaging. This allows smart displays in stores to read the tags and provide more information. It also means that when products are taken to be checked-out, usually in their specially designed rolling trolley baskets, the items aren’t put on a counter. They instead go into a sunken box in front of the checkout where the RFID tags are automatically read and the total is tallied in seconds. This embedded tech and automation also allows the retailer to adjust and modify its checkout process easily if it wants to.
Customised and personalised service
This area goes hand in hand with prioritising experience, digitisation and automation. It is also something that consumers in some markets, such as China and some Nordic countries such as Sweden, have come to expect and take for granted. Successful brands need to use AI and data to help them move fast and provide well-targeted, interesting services together with their products.
UK Charity Marie Curie, which provides care and support for terminally ill patients, used data and a digitisation approach to create a personalised map for each recipient in its email fundraising campaign. The maps used geolocation data from each person to show them where the nearest charity collection site was. Each message was also tailored to the recipient’s persona. The campaign boosted registrations and increased online sign ups dramatically.
Chinese consumers, more than any others in the world, are willing to share massive amounts of data about their identity and preferences but with this come high expectations for personalised experiences. On top of that, personalisation, rapid delivery, product satisfaction and good customer service are important factors in terms of brand loyalty. Expectations and pressures on brands to work 24/7 to personalise, customise, and keep up a dialogue with each consumer are increasing.
China is a nation of smartphone users. Lots of them. As of late last year, the China Internet Network Information Center (CNNIC) published data indicating that more than 800 million Chinese people were active internet users and 98 per cent were mobile users. The country has an extensive, reliable mobile network and people use it for nearly everything.
For brands and companies, this means that if you don’t have a mobile payment option that is familiar to Chinese users, you may have already lost the market. Mobile payment options, mobile checkout options and heavy social media integration are some of the top requirements for Chinese consumers.
Although mobile payment penetration rates may be different in other markets, this is a lesson you can take home with you. Chinese tourists abroad can use payment options familiar to them outside of the country. Even if you are not aiming at the Chinese tourist or cross-border shopping market, adding these options with local payment providers will increase convenience for consumers and boost sales.
Integration with China’s platforms
Alibaba’s Tmall Global was the first and is currently the largest cross-border marketplace in Mainland China. Foreign brands and retailers build a digital store on the marketplace and place inventory in a bonded warehouse in a free-trade zone where products are picked, packed and shipped through its logistics wing called Cainiao. Tmall Global also recently launched and English-language site for businesses wanting to establish stores on the site. It streamlines the process and opens the door to even more foreign brands on the platform. Unlike Amazon, Tmall is not a competitor to the brands and gives businesses access to their sales and customer data.
JD also has a cross-border commerce marketplace called JD Worldwide and the business model for international brands is virtually the same. There is also a fairly new cross-border marketplace called Kaola. The company was created by China’s technology giant Netease and the platform, by volume of purchases, is China’s largest cross-border marketplace. Despite that lofty achievement, few outside China know Kaola because they keep a low profile. Their model is wholesale to retail. They buy products from brands, take possession of inventory and then market, merchandise, sell and fulfill. To date the company has relied primarily on buying from brand’s local or overseas distributors. This plays into their focus on offering mass market goods at rock bottom prices.
Working with influencers (KOLs)
Finding your target audience and understanding the mindset and preferences of Chinese consumers is the key to success in China. Traditional marketing and ads are not as effective as they used to be. Word of mouth marketing, via social media, is the most efficient strategy in China.
Around half of consumers in China consider shopping a highly social activity and many consumers there belong to online communities where people with common interests share opinions about products.
Social media also serves as a search engine. Recommendations and shopping experiences that people want to talk about play increasingly important roles in the retail process. Many online consumers in China seem to trust other consumers’ comments and recommendations. Because of this, and the fact that people in China spend a lot of time online, brands cooperate with key opinion leaders (KOLs) to promote their products and drive sales.
KOL campaigns successfully attract public attention to new brands and products and create positive word of mouth. Here it’s important to understand that today’s consumers are very experienced and are sensitive to whether a KOL’s promotions match their authentic persona or if they feel like ill-fitting cash grabs.
Has your brand already made changes to deal with the New Retail world that’s coming? If not, it might not be around for long. Don’t wait until it’s too late.
- By Ashley Galina Dudarenok and Michael Zakkour with additional research by Maureen Lea.