Have you heard of China’s New Retail, but aren’t quite sure what it is or how retailers can use it in their advantage? Read on to get up to speed in record time – all it takes is the time to read this blog post and 5 slides!
New Retail was first proposed by Alibaba’s Jack Ma in 2016 in China. This concept was further refined by Alibaba’s research arm, AliResearch, where they arrived at the following definition:
A consumer-centric, data-driven form of retail, the core value of which is to improve the retail industry’s operating efficiency.
For those familiar with deciphering written pronouncements in Chinese, you’ll recognize the key here is the second part of the sentence – improved operating efficiency. Indeed, when Alibaba’s Hema supermarket revealed its financial results for the first time at Alibaba’s Investor Day in September 2018, Revenue Per Square Meter, a measure of operating efficiency, was front-and-center.
Slide 1: Hema’s results, as reported at Alibaba’s Investor Day
Understood in this context, China’s New Retail is a way to increase revenue and decrease cost in offline retail locations. This is to stave off the type of malaise physical retail has experienced in other markets.
Increasing revenue or decreasing cost can be done using high-tech or low-tech tactics. Hema supermarkets, for instance, feature in-store eateries which encourage additional in-store discretionary spending. That’s hardly cutting edge. On the flipside though, purchase and payment through Hema’s own app gives SKU-level data on each consumer, which is used for more effective advertising and promotions. You can see some other tactics in Slide 2 below.
Slide 2: How New Retailers Increase Revenue and Reduce Cost per Square Meter
At present, many of the China’s New Retail experiments we are seeing are happening at the storefront (see Slide 3). Consumers are being greeted with new experiences, gadgets and gizmos in-store. Admittedly, some of those are gimmicks and PR stunts. Others, however, have a meaningful impact on revenue or cost per square meter.
Slide 3: How New Retail Techniques Have Been Deployed at Innisfree in Hangzhou
However, the real business impact will be felt when China’s New Retail trickles into the supply chain – making retailers more responsive and efficient. If you’re keen to see what that looks like, check out these Tao Factories. Small vendors operating on Taobao can partner with Tao Factories to do small-batch and custom manufacturing, which allows small vendors to control costs and inventory pressure.
Slide 4: How New Retail will Move through the Supply Chain
Although China’s New Retail might not be very well known in other markets, it’s a big deal in China. As early as last year, “New Retail” was mentioned and searched more times than the Chinese word for “e-Commerce” (see Slide 5). And, as more successful China’s new retail case studies emerge, some of the revenue-boosting tactics and cost-cutting techniques will likely be adopted in other markets.
Slide 5: New Retail is Big in China
At AgencyChina we are leading observers and students of New Retail. You can receive our complete New Retail slide deck by contacting us on LinkedIn or WeChat (id: AgencyChina)
If you thought this was easy enough to digest and if you want to get more information about one of the most popular digital marketing channels in China, check out a previous blog post “Get To Know Little Red Book In Just 5 Slides”.