Transforming landscapes: the New Retail challenge in China
For retailers in China, the influx of new technologies, media and distribution channels have transformed the way consumers interact with brands. These innovation disruptions to the retail landscape have challenged the role of the brick and mortar store and created astronomical consumer expectations. This is pushing foreign and domestic brands to reimagine their China marketing strategies and step their game up.
Online to offline matters
New retail is a hot topic of conversation for Chinese market watchers, the new era of retail which has merged online and offline resources. In recent years, brands have shifted towards e-commerce as the focus of their China marketing and distribution strategy. Yet despite the threat from online retail, the brick and mortar store is still relevant. And where there was once an over-saturation of giant mega malls in the city, particularly in China’s socioeconomic development hubs in Tier 1 and Tier 2 cities, the new retail ecosystem is making way for a more streamlined and data driven experience by fusing online and offline retail together.
As a result, retail therapy in China has become a source of entertainment and curiosity for consumers to seek out the latest innovations and offerings from retailers. The mega malls synonymous with Chinese cities are being used as ‘fulfillment centres’ using ecommerce and digital commerce to support the physical store and using the upgrade to better service their customers, according to Xiaodong Chen, CEO of Intime. Led by key domestic players like Alibaba, brands are taking strides to merge their offerings to incentivise and excite consumers. Alibaba’s acquisition of Intime and the introduction of Hema supermarkets, for instance, has blurred the lines between online and offline retail booming with augmented reality and new technologies, and pioneering the omnichannel shopping experience.
Stakeholders and consumer-driven branding
Reflecting back to where the China digital landscape stood 10 years ago, WeChat hadn’t yet entered the scene, and Alibaba and Tencent were still battling it out between them to take their place in the global market. Nowadays, retailers are struggling to keep up with the pace and demands of the Chinese market. Chinese consumers have become key stakeholders and decision makers in the branding process on a global scale. The demand from Chinese consumers to be wooed by brands has steered the conversation towards how foreign players can establish and build relationships with Chinese consumers beyond a purely transactional relationship.
This is where brand storytelling and creating relevant and localised colourful content for the Chinese market comes in the play. Foreign brands like Nike and MAC are also localising their services and combining augmented realities in their Chinese stores for consumers to virtually sample products with personalisation programmes and games, and they are seeing the results in-store. The key challenge for retailers is building foot traffic and keeping consumers engaged, but shopping festivals like 11.11 have proved to be a success for Intime malls thanks to features like Order Processing Centres where consumers can order online and pick up their items within 2 hours of purchase. This has played an important role in driving foot traffic as consumers can see for themselves the other in-store offerings. And a recent survey from McKinsey found that 88% of online consumers interviewed had shopped in physical stores in the past 3 months compared to 83% of shoppers in 2017, which is good news for brick and mortar retailers.
The motivations behind purchasing have changed for Chinese consumers and they are demanding more from retailers and brands. The extensive offerings in the local market mean shopping is no longer a purely transactional process and consumers are seeking the combination of tangible and intangible rewards from their purchase decisions.
Brand storytelling takes on a different form altogether in China and the role of brands in the daily lives of consumers influences each purchase. Merging online and offline retail has been a success story for China to bridge the gap between the two. And, whether your strategy in China is e-commerce, digital campaigning, or brick and mortar, it's advisable to consider the foreign and domestic competition you are up against before taking the leap of faith.
Performance driven partnerships drive instant awareness and distribution, and investing in the right retailer connections helps brands to manage expectations, build brand equity, monitor competitors, seek out opportunities, and influence a stronger position in the local market. Oriental Retail Ventures is a performance driven agency consulting some of the worlds leading retail brands on partnerships in China.
By Katherine Brown, Marketing Specialist for Oriental Retail Ventures.