What is “New Retail” in China? – Here is A useful overview

For the past years, China proved its capacity to innovate through unique shopping experiences. The worldwide digital leader is the most innovative country for e-commerce and retail solutions. And the reason is simple. Today, 50% of the global e-commerce sales are generated in China. It is more than the 10 next markets combined. Facing the exponential increase of e-commerce, traditional retail was described to be “dead”. Really? When you visit China, you can discover amazing restaurants with crazy racks all over the place to serve your lunch at your table. Or you can watch 3D advertising of a luxury car driving on you with a QR code to purchase it immediately. In a word, China is the most innovative and lucrative market for the retail shopping experience.

What is “New Retail” then? The concept emerged from Jack Ma, the founder of the e-commerce giant Alibaba in 2016. He stated that New Retail is a business model that converges digital and offline experiences. The revolution of retail is already there in China.

How Does New Retail Merge Online and Offline?

For Jack Ma, the future of retail is not a question of channels, but a question of experience. In a word, you do not need to close all your brick-and-mortar stores or your physical distributors. You just need to understand the way digital can merge with your retail offer to deliver a unique shopping experience.

New retail consists of offering a seamless shopping experience. This is a reconciliation of the digital and the physical world. Why do we always oppose online and offline? How can you actually merge them into a more high-end and innovative consumer experience?

Case Study: LVMH Retail Lab, the Dedicated Research Center for Innovations in Retail

This strategy aims at combining the best of both online and offline shopping experiences. The entire customer journey is redesigned with an omnichannel strategy and a phygital experience. Even the luxury group LVMH created the “LVMH Retail Lab” a secret lab installed in its headquarters on Avenue Montaigne. The innovations are only accessible by managers from the 75 Houses of the group. They select and try new technologies to improve the consumer experience in-store.

What are the innovations created by LVMH Retail Lab so far?

• Intelligent mirrors for virtual try-on
• Retail training modules for sales advisors on mobile phones
• Engraving technology for product personalization in-store
• Virtual visits of stores and pop-up stores
• Intelligent shopping list shared with family and friends through WeChat

For years, brands decided to separate the digital and the retail worlds. In the constantly evolving world, the challenge is to follow the customers through multiple contact points and devices. You need to guide and take care of each customer through the different platforms they could use to communicate with you. The objective is to provide them with a seamlessly integrated shopping experience across channels as well as personalized recommendations and offers.

Read more about Bain analysis

Chinese consumers 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.

In China, purchasing channels are not differentiated like it is in the West. We tend to different social media and e-commerce marketplaces for instance. The Instagram marketplace is a project launched several years now, and the purchasing platform does not take off. While in China, it is totally normal to purchase products through Xiaohongshu stores, the Chinese Instagram. Chinese consumers use all channels at the same time for various purposes: product research, comparison, immediate purchase, home delivery, or customer service. 

The ultimate purpose of New Retail is personalization. From data mining to targeted advertising, the digital industry is a land of opportunity for each brand. Today, brands can bring customers a highly personalized, interactive, convenient, and satisfying retail experience by utilizing the power of new technologies and data science.

Why is it that important? Because brands ensure interact with the right targeted consumers and generate deeper engagement.

Technology or e-commerce is one part of China’s innovation. Courtesy image of SK-II

 

Key innovations of New Retail

Article written by Daxue Consulting, a market research and consulting firm based in Shanghai- https://daxueconsulting.com/ by Steffi Noel

• 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 technology, consumers could see themselves “wearing” the desired garments without having to try them on. Especially since the Covid-19 pandemic, cosmetics brands had to reinvent themselves by finding alternatives to testers in stores. For makeup, they decided to create QR codes and AI to try the lipstick shades digitally.

• 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 uses 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 touchscreen 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. The success of live streaming in China is based on the concept of “See Now Buy Now”. The moment an influencer presents a product, you can immediately purchase it. In 2020, the live streaming market reached 613 million users in China. This is a direct answer to the need for people to maintain social interactions and find product recommendations online.

To meet the need for 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.

• Traceable 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. Chinese clients can benefit from the convenience of shopping online and the service of offline stores. For instance, Audemars Piguet delivered its watches in-store to enable their Chinese clients to enjoy a luxury service with a dedicated sales assistant.

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

You will discover below 3 big retailers representing China’s New Retail revolution. In a word, they found innovative solutions to transform commerce and shopping in China.

#1 – Freshippo: The Transparent Shopping Experience

Back in 2016, Freshippo is the first retail store to adopt the concept of New Retail. This well-known brand was the first example of Jack Ma’s vision for this disruptive concept. It was a “test and learn” model in real life.

The main innovation, especially in the food and beverage sector, is that shoppers can use the store’s app to scan goods. Through a QR code, they can find out information about the product: country of origin, consumption date, freshness, etc. For Chinese consumers, this innovation is very pertinent because they always go on the internet to look for information about products they are likely to purchase.

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.

The second key asset is delivery. For any customer living within 3 kilometers of the store, any online order via the app is guaranteed to be delivered in less than 30 minutes. This is a reliable advantage since Chinese consumers are always looking for the fastest delivery services. Freshippo’s innovation is very complex to enable such operations. 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.

All this complex ecosystem is possible thanks to Freshippo’s use of data. They use it for digital orders to determine which fresh goods to stock in-store, to reduce waste, and to enable the retailer to enact a “one-day farm to table” policy.

More than a supermarket, Freshippo is a lifestyle store where you can spend time. Shoppers have the option of dining in-store, with fresh fish and meat cooked to their specifications.

#2 – 7Fresh & JD.com: The Smart Shopping Experience

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 product 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 kilometers of a store.

Its spacious stores – 7Fresh’s first outlet in Beijing’s Dazu Plaza shopping center 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.

#3 – Luckin Coffee: The Convenient Coffee Star

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 cashless, with all payments 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.

How can you use New Retail for your brand in China?

The western world has looked up to China for its ongoing and explosive innovations in retail and commerce. New Retail is the current reality and no longer just the future. The more you wait to propose physical and omnichannel experiences, the less you will keep up with the performance path in China.

If you want to perform in China, you should constantly keep your team updated with new technologies, new trends, the latest tools, and consumer insights to adapt to these changes. The only way to succeed in China is to bring customers an exceptionally convenient and exciting shopping experience regardless of their physical location. Obviously, the New Retail concept could be very different depending on the industry you are working in. At the Gentlemen Marketing Agency, we have several services dedicated to brands depending on their industry:

• Food & Beverage
• Cosmetics
• Watch & Jewelry
• Fashion
• Bags & Leather Goods
• Health & Pharmacy
• Travel & Tourism
• And many more…

You can contact us to obtain more information about New Retail opportunities for your brand in China

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