What can America learn from China’s retail tech revolution?

In order to survive the digital age, retailers are having to understand the importance of providing consumers an omnichannel experience- something China has aced.
25 May 2018

What can others learn from China’s retail industry? Source: Shutterstock

As we enter the fourth industrial revolution, retailers are beginning to realize that they must digitize or risk dying.

Many retail companies are failing to innovate and keep up with new consumer trends. The US retail sector seems to be in an uncertain condition, with over 9,000 stores closing last year and another 12,000 expected to follow this year.

Despite a 4.2 percent rise in 2017 over the previous year, US retail growth is bumpy. Yet, online sales have been rising significantly, serving as the foundation of the sector’s overall growth.

But while the “retail is dying” statement has hit many headlines – it is becoming more apparent that this is inaccurate. Rather, consumers are demanding a more valuable experience from their shopping journey.

China develops new retail models

Eight-thousand miles away in China, a new model of retail is evolving the industry. Tales of a “dying retail” is definitely not the case here.

In a recent report named “Retail’s revolution: How retail and consumer goods companies can adapt”, Oliver Wyman explained how China is developing new retail models to address the challenges of today’s industry.

According to the report, many Chinese retailers are blending digital and physical features to create O2O (online-to-offline) solutions, China’s equivalent of omnichannel.

In the past few years, this phenomenon has evolved into the notion of “New Retail”.

A perfect blend of online and offline

Online is no longer just being leveraged as a sales channel, but rather a platform which can provide ubiquitous touchpoints to interact with customers and their community.

More retailers are using their online platforms to connect with consumers and provide personalized offers. Source: Shutterstock

Offline retailers are also trying to keep their consumers in their stores for longer by offering better customer experiences via digital technologies.

“China is a very interesting market and is ahead in a few regards.  First, online penetration is higher in many retail categories – because China leapfrogged and started going online before store retail was fully developed,” Nick Harrison, global retail practice co-leader at Oliver Wyman told Tech HQ.

“Second, though, online players in China are now working out that they need to develop a physical presence as well,” added Harrison.

By harmonizing both online and offline experiences, China is seeing it’s retail industry flourish magnificently. The country is seeing vast investments in the offline retail space by tech giants such as Alibaba, Tencent, and JD.com.

Last year, Alibaba invested US$2.9 billion in one of China’s largest supermarket chains, Sun Art Retail Group. It aims to transform Sun Art’s offline business of over 400 ­­hypermarkets by providing technology to enhance customer data and inventory management.

So, how can other countries follow suit in China’s retail revolution? Here are a few examples of how China is building the future of retail.

Tech-integrated stores

Today’s consumers are becoming more and more impatient as they rely more on technologies to speed up processes. For instance, an increasing number of shoppers are choosing to have their shopping delivered straight to their door instead of doing it themselves.

But what about those shoppers who still like the experience of visiting a store- but still want an effortless experience as online delivery?

Offline retail businesses are incorporating tech to attract customers. Source: Shutterstock

Alibaba’s Hema supermarkets epitomize the o2o shopping experience.

The company has incubated new retail innovations to abolish the challenges of the traditional supermarket. Shoppers can simply take out their smartphone and scan a barcode to get price and product information.

Once you’ve finished your shop, forget queuing in long lines to pay. In fact, in Hema stores, you don’t even need your purse. Simply pay using your mobile wallet.

Not only does this provide a more convenient experience for the shopper, but for the retailer – Alibaba in this case – they are getting shiploads of valuable data at their fingertips.

Alibaba uses big data analytics to remember the purchase preferences for each customer and then make personalized recommendations through the Hema app.

Alibaba currently runs 40 Hema stores in ten cities. It wants to open 2,000 in the next five years

Social customer relationship management

With the rise of social media, it is now easier than ever for brands to establish direct relationships with customers.

China’s Tencent’s WeChat has produced a new wave of customer engagement. Beyond messaging, the popular platform is a source of news and promotional information for its users.

Through social platforms, retailers can offer consumers personalized offers. Source: Shutterstock

“Retailers can also trace customers’ purchase journeys – how they discovered and eventually chose products – to determine the best marketing channels,” said the Retail’s Revolution report.

“To foster viral promotion, they can offer incentives to customers who re-post product offers in their social circles. They can turn some of these customers into brand ambassadors.”

The vast amounts of data generated by these businesses can be utilized to develop customer relationship management with a much more advanced degree of personalization that is present today.

Furthermore, advanced machine learning algorithms can predict what other products customers might buy based on their shopping and browsing activities. From this, they can target shoppers with suitable promotions or vouchers.

Improved logistics efficiency

Many aspects of retail operations are also being accelerated by technology.

In China, the logistics company Cainiao is improving its efficiency through hi-tech enabled hardware and software. In its warehouses, the company’s “Geek+” robots facilitate staff to sort packages using computer vision.

Alibaba is also enlisting the help of robots in their warehouses. They can carry up to 500 kilograms and can even take themselves off to be charged apon running out of battery.

This improved logistics efficiency is vastly improving customer experience. Not only will shoppers receive their goods sooner, but they will also receive them with fewer errors. This is especially valuable in the fresh produce market where the value of freshness is everything.

China’s retail game is constantly evolving. The country is at the forefront of innovation and experimentation.

It is becoming crucial for brands to follow suit and acknowledge the importance of digitizing their current models in order to survive the digital age.