What is China’s “new retail” about?
19.10.2018
China as an e-commerce market is world’s biggest single market
Chinese e-commerce figures are impressive. The market has 927 million active internet users, out of which 84 % shop thru mobile device. It is truly a mobile market, while 90 % purchase thru mobile. In the market you have ecosystem giants like Alibaba Group, which not only own largest e-commerce sites, but provide everything else necessary for the ecosystem namely big data/cloud services, payments, marketing tools, AI tools and the list just goes on.
Another giant in the market is Tencent with its flagship service WeChat. WeChat again is not only a messaging tool, but a set of tools in the internet within an internet. With WeChat you order your food online, order taxi, take care of your social media thru moments functionality, buy online, pay for you purchases, play games and more. There is practically a tool or mini program for every possible daily activity, you need to do in WeChat. In this market, there is no Google, no Amazon, no Youtube, no Snapchat, and no WhatsApp but instead you have Baidu, T-mall, WeChat and Youku.
New millennial consumer groups drive Chinese market growth
The biggest driver for e-commerce and growth overall in the market is growing middle class and especially the millennial consumer groups. The new millennials is massive population of digital natives, who like to spend and seek leisure and entertainment. Instead of just investing in big brands, they want to individually express themselves with their selection of goods and services they use. They value speed, easiness of use and the voices of key opinion leaders.
What is China’s “new retail” about?
These marketplace elements set a scene to another interesting dimension for e-commerce. The integration of offline and online world for brand experience. What is this new retail about? In China, big players are in the forefront of building new physical retail experiences, which integrate offline with digital. They focus on expanding their reach of existing ecosystems to new ones like retail. On contrary what the rest of the world is doing Chinese online companies are investing in brick-and-mortar more and more. They are innovating the future of services by introducing new digital services, like smart mirrors, online games and competitions on the shop floor. They see retail as entertainment and enhanced offline /online experience.
As an example in the Kerr&Kroes shop, you can use a virtual fitting room thru smart mirrors. The virtual fitting room service scans your face and body and allows you to try on the whole collection without a need to step into an actual fitting room. In the virtual fitting room, you can also change your hair or make-up look and your body measurements and try on different accessories. In the Sephora store, you can try on different make-ups and styles and get recommendations for the products that fit your selected style. You can scan a QR code and play a mobile game, where you try to get as many products from the virtual store and collect points. With those points if you are good enough, you can redeem rebate coupons. Every product has a QR code, which leads to the online shop, where you can purchase the product easily with your Alipay or Wepay without a need to carry the product home. In addition, the delivery happens very fast, normally within 24 hours but sometimes even faster.
Alibaba recently introduced a new retail concept called “Hema”. These totally automated retail shops are in the busy suburban areas and serve a 3-kilometer radius with a speed of the delivery of 30 minutes. Hema offers new retail experiences with integration of automated buying and by providing cooking services on the shop for you groceries.
As European brands are still very much struggling with their traditional retail and online integration, China is showing signs of light in this area. Our recommendation is to follow, learn and adapt quickly from these Chinese online and retail markets. The backseat is not the place to be any more in the digital retail.
Haaga-Helia University of Applied Sciences eComLab project supports Finnish small and medium size e-commerce companies in their efforts to extend to new markets.
Haaga-Helia eComLab is a physical and digital learning environment, which supports students and companies learning and e-commerce development with different courses and projects.
More information: Tiina Laiho/Haaga-Helia, tiina.laiho2@haaga-helia, puh. 040 488 7126
The author Tiina Laiho is Innoboost Manager at Haaga-Helia.
