The past 10 years have seen China rise to become the leading innovator in e-commerce and retail spheres.
The “New retail” model, a concept introduced in 2016 by Jack Ma, founder and chairman of e-commerce giant Alibaba, is not just a hype.
Across China, grocery stores, shopping malls, supermarkets, hypermarkets and convenience stores are getting a digital upgrade designed to usher in the next generation of shopping experience.
New Retail — or business models that converge digital and offline experiences — is blossoming in China.
What is New Retail?
For Jack Ma, the future of retail is not a question of channels, but experience.
New retail consists of offering a new shopping experience without boundaries: merging online and offline commerce.
This strategy aims to combine the best of both online and offline shopping experiences. The entire customer journey is redesigned.
For years, the physical sales network and the digital networks were managed separately by companies when it came to database, customer relationship, loyalty program, transactions, logistics… Therefore, the real challenge is to follow the customers through multiple contact points and devices, to provide them with seamlessly integrated shopping experience across channels as well as personalized recommendations and offers.
With new retail model, Chinese consumers will no longer think in terms of separate purchasing channels, but use all of them at the same time for various purposes: product research, comparison, Click and Collect, Store To Home, delivery or customer service.
The ultimate purpose of New Retail is to bring customers a highly personalized, interactive, convenient and satisfying retail experience by utilizing the power of new technologies and data science.
Accordingly, brands also have more ways to interact with targeted consumers and thus ensure deeper brand engagement.
Technology or e-commerce is one part of China’s innovation. Courtesy image of SK-II
Key innovations of New Retail
- Extreme Digitalization:
New Retail stores allow users to try on clothes virtually, fill a virtual cart that will then be delivered to their home, or pay via facial recognition without going to a checkout counter.
During Alibaba’s Singles’ Day in 2018, the company partnered with brands to bring pop-up stores to its consumers, where Artificial Reality mirrors and smart speakers could initially be connected to personal shopping accounts on retail websites Tmall and Taobao.
Thanks to the technology, consumers could see themselves “wearing” the desired garments without having to try them on.
- Data hunger:
New Retail makes stores omniscient. They collect phone numbers, purchase history, payment activities, financial transactions and addresses for their customers…, so they know everything about customers.
Data is the most important element in redefining retail. With big data, multi-dimensional digital marketing can help increase the monetization rate of advertisements as well as the conversion rate of the online and offline merchants with the platforms.
China’s biggest fast-food operation, Yum China is harvesting data from the more than 180 million Chinese who belong to KFC and Pizza Hut loyalty programs and use artificial intelligence to customize a menu for each diner based on preferences and local tastes.
The AI-powered menu has already boosted average per-order spending by 1 percent—the equivalent of about $840 million worth of fried chicken and pan pizzas each year.
Customers use touch screen displays to order a meal at a KFC restaurant in Shanghai
- Immediate shopping:
You see a product, you scan it, you leave, and it arrives at your home. Or even more convenient, while watching a showcase of products, you can directly choose to have one on your plate or shopping cart.
To meet the need of immediacy, the whole supply chain has been transformed excessively. As a result, the production cycle is faster, reducing the risk of excess inventory, therefore, optimizing margins.
This is a fundamental change for the current retail model, but it meets the immediate needs of Chinese consumers and would, therefore, lead to better customer satisfaction.
- Traceble quality:
Today, the youngest Chinese consumers are becoming more selective in the choice of their products, and are willing to pay more for quality.
Healthier products, higher food safety, and more precise tracking are now part of consumer demand. Thus New Retail has introduced the new concept of product tracking right at stores.
For example, at Hema supermarket, you can now watch short reports on the origins of items (by scanning the QR code of a product, the customer will be able to access all this information).
This report will show you the product’s circuit, its origins, and transformations. The information includes audits such as pictures of the distributor’s operating permits and food safety certificates.
- In-store display strategy, generate a strong desire to buy:
Retail is consumer-centric, meaning that the products will be arranged in an attractive way that helps customers make purchasing decisions quickly.
In-store technology is part of this strategy. New Retail in China means the end of static stores, stores are now lively: crustaceans wiggle in their tank, images on screens scroll, and staff assertively maneuver between customers.
Finally, ”sensory marketing” which aims to enhance the 5 senses of customers at stores: taste, smell, touch, sight and hearing will seduce and influence the behaviors of customers.
Tomorrow’s supermarket can’t just be a place to shop but a place to live where you like to spend time.
Thierry Garnier, the CEO of Carrefour in China
Giants racing at the forefront of China’s New Retail revolution
Here are 3 big retailers representing China’s New Retail revolution, and here’s what they’re doing to transform commerce in China.
Launched in 2016, Freshippo’s stores are well-known as the first example of Jack Ma’s vision for New Retail.
Shoppers can use the store’s app to scan goods and find out information about their origins and freshness. Online orders via the app are guaranteed within 30-minutes for customers living within a three-kilometre delivery radius of a store.
When an order is taken in-store or online, Hema teams pick the products in-store and hang the basket on a high rail that runs through the store to transport it in reserve.
Large conveyor belts move above shoppers’ heads, transporting fresh goods to be assembled behind the scenes.
Freshippo uses data from its digital orders to determine which fresh goods to stock in-store, which reduces waste and enables the retailer to enact a “one-day farm to table” policy.
Shoppers also have the option of dining in-store, with fresh fish and meat cooked to their specifications.
7Fresh, like Freshippo, is also a chain of grocery stores.
7Fresh was more recently-launched than Freshippo, with the first store opening in January 2018, and its outlets are less numerous, although 7Fresh is reportedly aiming to open 1,000 stores across China in the next three to five years.
7Fresh’s supermarkets target high-income consumers wanting a more upmarket grocery experience, and stock sought-after produce like Iberian ham, Japanese seafood and French pastries.
Much like Freshippo, the produce is available to sample and choose from in the store, with orders then assembled and delivered to the shopper’s home, often within 30 minutes if they live within five kilometres of a store.
Its spacious stores – 7Fresh’s first outlet in Beijing’s Dazu Plaza shopping centre is 4,000 square feet in size – have smart shopping carts to guide shoppers to their desired aisle, large-scale digital signs, and QR codes that can be scanned for product information.
Many items in the fruit and vegetable aisle can also be placed on RFID readers, where product details will be displayed on a digital screen.
Luckin Coffee is a coffee delivery service, imprinted with New Retail DNA.
The brand has opened two thousand brick-and-mortar stores, mostly in upscale commercial districts.
Many of Luckin’s outlets are simply take-out kitchens, where customers order coffee through the app for collection or delivery. If a delivery doesn’t arrive within 30 minutes, customers will receive a free coffee. The take-out kitchens are also cashierless, with all payment carried out digitally.
Lunkin Coffee has undoubtedly changed the game for coffee in China by bringing New Retail to coffee sales and creating demand for a fast, convenient, online-to-offline coffee experience.
Western world has looked up to China for its on-going and explosive innovations in retail and commerce. New Retail is the current and no longer just the future.
Brands should constantly keep updated with new technologies, new trends, latest tools and consumer insights to adapt to these changes and succeed in bringing customers an exceptionally convenient and exciting shopping experience regardless of their physical locations.