The Economist Magazine recently concluded that the US still has an advantage across technology, but China is catching up fast. They also observed that:
The big tech companies in China operate in a retail environment that’s nurturing/fostering their move into food retailing for several reasons, and here are three big ones.
1. The growth of ecommerce in China has been driven by a weakness in the physical store infrastructure. Until now the premium grocery experience typically has been delivered online, not in-store, but that’s changing with Alibaba’s development of Hema, its digitally enabled food stores, and JD.com’s opening of Seven Fresh. These high-tech food stores blend the online and offline experience. For example, at Seven Fresh:
2. Chinese companies don’t face committed brick and mortar incumbents like Walmart, and more importantly, they haven’t had to replace a generation of big box stores as they moved into ecommerce. This means Chinese tech companies can – and do – think about retailing differently than Amazon, Google, and traditional retailers, who must navigate a generational transition in the US.
They also view food retailing in a broader context, so consumer purchase patterns outside of grocery (like apparel) are considered relevant. Services like mobile payment are seen as important throughout retailing.
3. Chinese big tech is leading the development of the next generation in grocery brick and mortar retailing with an already well-developed understanding and execution of online shopping. Instead of adding digital to physical stores, they’re building stores to extend/complement an online shopping infrastructure – they’re moving toward the goal from the opposite direction, and this creates a different blend of on and offline retailing capabilities.
As a result, their mindset, and therefore their performance metrics, are different. For example, the Chinese seem to think more about reaching a larger audience of customers than driving sales and they focus more on marketing solutions versus merchandising tactics.
We reached out to a couple of BMC Black Belts to get their take on the key implications of developments in China for US operators. Steve Lauder’s response focused on the consumer perspective, while Ron Lunde focused on the business perspective.
By Steve Lauder
Food distribution and retailing is part of a country’s core infrastructure. If citizens spend a better part of their day just getting to the market, buying and preparing food, then there is less time spent on other economic activities. The investment being made in China into both the technology and infrastructure of food will allow them to continue to grow in other areas of their economy.
I thought it was insightful that Bill’s comments were based on food and not the broader category of grocery. In America, food is the easiest thing to procure. The number of ways and outlets to get food is astonishing, and once you see yourself competing in that ecosystem then your approach to retailing changes, as I believe we see in China.
If food is the easiest thing to buy, then consumers don’t have to invest much time thinking about it, and this creates a whole new way of marketing. Food is no longer about the weekly trip to the store, now those decisions take place in micro moments. One of the largest queries Google gets is the string “what’s near me.” Insert lunch, dinner – as in “lunch near me” – and you can see the micro moment in which a decision will be made about how to spend food dollars. As a retailer, you have to be part of that conversation.
The Chinese investment in technology to support this new world of “micro moments” is impressive. AI will help retailers become more anticipatory with their supply chains.
By Ron Lunde
For both retailers and brands, it is as simple as . . . the customer’s system of buying is replacing your system for selling.
The new consumer mantra is IWWIWWIWIWIWI . . . I WANT WHAT I WANT WHEN I WANT IT WHERE I WANT IT!
As good as Amazon is . . . China is the epicenter of the digital revolution that is transforming both retailers and brands. China’s digital big 3 (Alibaba, Tencent and JD.com) are deploying a global model for “new retail” that’s bigger than a remodeled store or shelf reset; rather, it is a reimagined customer relationship that melds pure digital ecommerce and the physical world.
Grocery, shopping malls, hypermarkets, convenience stores, pop-up stores, new buying and delivery points, auto dealerships, cashier-less stores, banks, entertainment, retail locations, travel, payment, logistics, inventory management, home delivery – and lots more – are now “linked” together for emphasis.
Brands and retailers, regardless of industry, will no longer compete just through their brands and physical stores. Instead, combining technologies into an inclusive personalized platform, they will compete for customer attention through digital linkages — a complex technological infrastructure among independent / interdependent enterprises, aligned to specific customers via interoperable technologies (Smartphone, Voice & IOT) and targeted creative communication efforts.
Today, we are at the start of a major disruption: China is creating a New Retail, supported by end-to-end, data-linked customer-specific eco-systems. It’s both the challenge and the opportunity. You can build it here, or they will!
These four videos show you what it looks like.