New Retail 101

In 2016, Alibaba’s co-founder and former Executive Chairman Jack Ma brought up the concept of new retail. It suggests a new world of retailing, where the relations among consumers, merchandise, and stores are transformed with the involvement of smart technology. 

Why is new retail the key to success in China marketing in 2022? 

Another way to ask the question is, what makes new retail different from traditional commerce?

When Ma coined the term, he referred to it as a seamless offline, online, and logistics merger. New retail relies heavily on leading-edge technology, big data analytics, and AI to enhance the product creation and promotional processes.

The effects of how new retail changes the relationship among consumers, merchandise, and stores are stated below. 

In traditional commerce, brands tend to focus on products, more specifically in terms of its sales volume. They may have a clear idea of their hero products, but not so much about their consumers.

Forward-thinking brands treat consumers as co-producers and incorporate the C2B (consumer-to-business) model. With data integrated from different platforms, brands can create 360 consumer profiles for a single point-of-truth. By learning consumers’ preferences and needs, brands can make marketing decisions based on consumers, and eventually improve turnover rates.

In the concept of new retail, products are not just commodities. Products are integrated into the overall consumer experience as it serves to meet the consumers’ needs. The value of the merchandise would be determined by customers in how well the product meets the their needs, with its pricing taken into consideration.

Stores are also no longer constrained to either offline or online presences with new retail. Rather, brands would combine these two presences to create one seamless authentic and consistent omnichannel experience for consumers.

By creating a multi-platform strategy, brands can meet consumers wherever they’re at, meaning the purchasing behavior can take place when people are at offline boutiques or browsing content and  networking with friends on social media. An example of guiding traffic from online to offline would be when a brand’s app or WeChat Official Account (OA) sends users notifications that they can receive discounts in stores, to incentivize offline purchases.

Livestreaming would be another example of guiding users from online to offline. While watching a livestream, online viewers can purchase coupons from hotels or restaurants and redeem them offline.

A commonly seen tactic used by brands in China for guiding traffic from offline to online is to place their Official Account QR codes in offline stores and offer incentives for users to scan and register as a member. Hublot has taken the concept of a seamless O2O journey a step further by making the customers’ “offline browsing history” available on their WeChat mini program so they can easily learn more about the watchpiece if they’ve gained interest after an offline visit.  

China sets the changing pace of new retail for the rest of the world. The  annual compound growth rate of new retail in China was as high as 115% from 2017 to 2019. It is predicted that the scale of the Chinese new retail market will exceed 1.8 trillion RMB in 2022.

The Chinese grocery industry is especially representative of new retail’s exponential growth, as it is mainly driven by the e-commerce giant Alibaba, the parent company of the e-grocery platform Fresh Hippo (盒马生鲜).

Founded in 2016, Fresh Hippo has been growing rapidly. Even in 2020, its CEO Hou Yi (侯毅) claimed that the company had already stepped into a New Retail 2.0 age. Over the years, Hippo has been experimenting with different mixes of online and offline experiences, coupled with efficient logistics to improve the overall customer experience.

Fresh Hippo gained widespread popularity with its expedient delivery. If users place an order on their app and the nearest store is within 3 km, Hippo promises to deliver within 30 minutes. Without a strong supply chain, Hippo would not be able to create such a seamless online-to-offline experience for consumers. Hou believes that only by improving the supply chain can a company’s management costs be lowered.

Why are more and more brands are embracing the new retail trend? Here are some of the benefits it brings for businesses.

Customer needs vary, and new retail is where everyone can find their places. With China’s current advanced digital landscape, Chinese consumers have become accustomed to convenience and expediency from brands, whether through forms of online customer service responses or offline deliveries. 

By improving logistics and data management, new retail can meet customer needs at “China speed” to enhance the overall experiences and thus increase brand favorability with consumers.

With new retail, data is key. Based on big data gathered through all channels, retail enterprises can build customer 360 profiles to segment their customers and target messages only to a specific group.

Brands can then customize customer experiences based on users behaviors and promote their products and services accordingly.

Traditional commerce requires brands to stock up on the products first and sell them later. Whereas in the new retail world, brands decisions are based on customer choices. Brands would only hold inventory based on consumer demand.   

This eases the issue of overstocking and can significantly decrease the brand’s management fees on inventory.

As all of these case studies have shown, a seamless O2O (online-to-offline or offline-to-online) journey and a data processing hub are crucial elements in building new retail experiences. 

For the luxury industry where personalized experiences matter more than discounts and promotions, a common industry practice in China would be to connect store sales associates with clients through WeCom, a communication platform for enterprises that includes office automation tools. In this way, even if a user unfollows a brand’s Official Account, the brand sales associate can still maintain a channel of communication with them through a salesperson’s connection.

Many brands also offer the option for users to make an appointment online to visit an offline store. This allows brand sales associates to recognize customers when they walk into the store and provide them with personalized and efficient assistance. 

Currently, there are two main channels through which brands guide consumers from offline to online: WeChat groups and WeChat Official Accounts.

Brands would often include a WeCom or WeChat group QR code inside product packages and invite users to add store associates or join the group chat to register as a member and receive post-sales services or discounts. By doing so, brands can identify the user online and have a 360 profile of the customer’s offline and online behaviors in one central data hub for complete transparency. 

With new retail, brands would be able to view all the data from all marketing and commerce channels  in one place, making it easier for brands to formulate a comprehensive and competitive China marketing strategy.

Gathering data is only the first step in building a comprehensive new retail experience. Using the right tools to gather these insights and formulate a data-driven marketing strategy is the key to success with new retail. Integrating data can help brands create products that better meets consumer needs, as to increase the product value and thus conversion rate.  

By having the data in one place, brands can also tag and segment users to send them customized messages if they trigger any rules, and have marketing analysis based on the data of follower source, QR code scanning performance, and menu clicking performance. 

New retail is all about improving customer experience and the ultimate goal is to increase the conversion rate and sales. It is centered around consumers, whom brands’ strategy should be based on.