The death of retail has become an ever-present narrative in the West, with retail giants such as Walmart, Kmart, Toys R Us and the UK’s Marks and Spencer being forced to close some locations.
But retailers in China sing a different tune. Rather than blame e-commerce for destroying brick-and-mortar, retail giants are leveraging the internet to boost sales by merging online and offline experience. Chinese e-commerce giants are actually opening up offline stores, social media influencers sell products with great success, shopping festivals set off semi-annual spending frenzies, and mobile payment platforms push consumers to make purchases faster than ever before.
Jack Ma is New Retail pioneer
“New Retail” is a phrase coined by Alibaba CEO and global icon, Jack Ma. Ma started advocating for the concept in 2016, which he outlined as “the integration of online, offline, logistics and data across a single value chain.” Since then, e-commerce retailers across the country disrupted China’s retail ecosystem by putting thought into action. The trends that have emerged pave the way for retailers worldwide to profit from the digital economy.
According to a report by AliResearch and Bain & Co, there are five measures brands can take to get with the times: new governance principles for a model focused on the customer, new flexibility and efficiency in R & D and supply chains, re-imagining marketing and consumer management, modernizing retail paths, and transforming the organization and operating model for digital investing in the development of new technologies.
Social shopping is a runaway hit
Zhang Yi of iiMedia Research, a Chinese firm, estimates that 15% of sales on Taobao, WeChat or social media platforms are influenced by internet celebrities or wanghong. These digital tastemakers can be thought of as Instagram influencers with a much broader reach thanks to livestreaming integration on China’s biggest e-commerce platforms. Wanghong use selling techniques such as surveying social media users to design products, determining launch date based on hits, and conducting live broadcasts of product pitches with built-in links to product purchase pages. Chinese research firm Analysys estimates that e-commerce sales accounted for about half of wanghong earnings last year.
According to the PricewaterhouseCoopers’ 2017 Global Consumer Insights survey, 61% of Chinese consumers began their shopping journey through searches on Tmall and JD.com suggesting that in China, e-commerce sites are multifaceted portals that direct users to discover new products and shop socially.
E-commerce companies open offline stores
E-commerce retailers are opening up offline stores in China, but they’re entering through the window rather than the door. Instead of opening stores that carry the same products they sell online, they’re leveraging the success of mobile payment and food delivery in China by focusing on the fresh food sector.
In January, JD.com opened up its Fresh supermarket called 7Fresh. The first retail location was 4,000 feet and equipped with smart carts that guided consumers to their desired products. Last year Alibaba launched a chain of Hema supermarkets, which boast Alipay checkout, a mobile app that lets users purchase food from the comfort of their homes, and in-app promotions for offline products to blend O2O experience
Pop-up shops drive brand awareness
Riffing off of classic economic theories of scarcity and supply and demand, pop-up shops are a tried and true method of getting consumers attention. According to the American Marketing Association, Pop-up shops drive brand awareness by introducing consumers to brands through direct interaction with the benefit of accumulating customer data. “Those high-touch experiences have always been part of any brand’s journey to go directly to a customer,” says Arati Sharma, director of marketing at Shopify. “It’s not a new phenomenon, but because retail is changing so much, pop-up shops are that new high-touch way of getting in front of your customer, client or consumer.”
In China, it’s not just brands that open pop-up shops, it’s e-commerce platforms themselves. According to Alibaba, 82% of retail sales in China still take place offline. During the 2017 shopping festival Single’s Day, Alibaba’s Tmall opened 60 pop-up shops that let users shop by ‘catching the cat’ on a mobile video game, a shout-out to the platforms cat logo. WeChat opened a pop-up store for 16 days this January, WeChat Life. There’s even a young startup in China dedicated to renting pop-up space to retailers called Putiandi. After round A funding, the company is valued at US$13.6 million.
While consumer habits of Chinese and Western nations show some differences, China’s e-commerce retailers are pushing retail forward rather than accepting brick-and-mortar defeat. Keeping abreast of these trends not only informs future investments, it helps consumers get excited about integrating their online and offline worlds.