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The Future of Retail: Made in China

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The Future of Retail: Made in China

  1. 1. TheFutureofRetail MadeinChina? 1 Welcome to Jack Ma’s ‘New Retail’. We’ve set out to understand the four fundamental principles of this retail paradigm shift and what it means for brands everywhere. Read on!
  2. 2. “New Retail - the integration of online, offline, logistics and data across a single value chain” 2 -Jack Ma, Chairman, Alibaba Group Those at the forefront of the future of retail are defining it this way:
  3. 3. 3 Alibaba’s Singles Day, the world’s largest retail event, was a tangible showcase of “New Retail” at work… Photo credit: TBD
  4. 4. SinglesDay2017bythenumbers 4 • Grossed $25bn in 24 hours • Hit $6bn in the first three minutes to put that in context, that’s roughly equal to the total annual sales for Amazon UK in 2016, at 6 billion GBP • Alibaba Cloud handled the infrastructure and managed 325,000 orders at peak • Alipay processed 1.5 billion payment transactions, up 41 percent • Over 140,000 brands - incl. 60,000 international - took part on Tmall where they offered 15 mn product listings • 167 merchants generated over 100 million RMB ($15.1 million) in sales each • 17 merchants surpassed 500 million RMB ($75.4 million) each • Six merchants surpassed 1 billion RMB ($150.9 million) each
  5. 5. NewRetail. Let’sunpackwhatitmeans. 5 Through the rest of this presentation, we’ll take a look at China’s complex retail landscape, the principles driving it, and best practices from brands thriving in it. Then, we’ll take a look at how to apply it any retail context. All this in an effort to arm you with key insights and tools to help you navigate and better utilize current digital & ecommerce solutions, while future-proofing your approach to retail. Get ready, because New Retail is here and it’s made in China.
  6. 6. 6 Contents 1. What is New Retail? 2. The Four Principles of New Retail 3. Best Practices: Starbucks, Adidas, JD.com 4. Conclusions
  7. 7. 1. What is New Retail? 7
  8. 8. “A new unichannel “O2O” experience where the notion of e-commerce versus brick-and-mortar seems quaint, if not wholly irrelevant.” 8 - Fortune Magazine Photocredit:StephanLawlessseeninhisrecentbook‘BlackFriday’
  9. 9. 9 New Retail, more than anything, recognizes that humans are the common overlap between online and offline and places them at the center of everything, with near seamless purchasing power. New Retail brings customer-centricity to a completely new level. Offline People Online
  10. 10. 10 The online world has fundamentally altered our expectations as consumers. All aspects of online discovery, from AI suggestions based on past preferences and purchase history, to keyword or visual searches that let us find things instantly, offer personalization, convenience, recognition, and efficiency. We navigate the world with a digital lens now, and thus our expectations of offline reality are the same. New Retail puts customers new expectations at the center by applying online expectations to the offline world.
  11. 11. It’sabouttheblendedspace between,whereonlineexperience isappliedtoofflinereality. 11 It’s not about online vs offline.
  12. 12. This is pervasive in China, but examples of this are popping up elsewhere, such as the Amazon Go concept launched in the US. Photocredit:TBD
  13. 13. What’schangingishow we’llexperienceit. 13 Even in China, eCommerce was just 16.6% of total retail sales in 2017*. The real threat is the increasing likelihood that e-commerce giants will turn their attention to doing bricks and mortar better than traditional players can. Traditional offline retail isn’t dead. *Source: China E-Commerce Research Center
  14. 14. 14 So what’s driving it?
  15. 15. 2.The Four Principles of New Retail 15
  16. 16. 16 The Four Principles of New Retail With the rise of mobile, we’ve transferred our online expectations to the offline world. Here are the four secrets to success in that context. Entertainmentization 1 Digitalization 4 Omni-channelization 2 Platformization 3
  17. 17. 17 1. Entertainmentization A.k.a Experience-driven Retail Experiential activities as part of a marketing mix have become ubiquitous, but the New Retail experience means mixing immersive environments with culture, courtesy of Key Opinion Leaders (KOLs) – or influencers as they are known elsewhere. For example, digital walls that amplify your experience and interact with you the way you would online, providing information about the designer, product quality and who’s wearing the piece you’ve just picked up. source:Beanpole Next page: The Beanpole Store in Seoul offering immersive digital screens that put the buyer at the center with 3-second delay so you can really see how those pants look from all angles!
  18. 18. 1. Entertainmentization
  19. 19. 19 KFC China allows customers to pay with smiles. 64% of consumers think customer experience is more important than price.* - PSFK 2017 1. Entertainmentization source:https://www.cnet.com/news/smile-to-pay-kfc-facial-recognition-payments-alipay-ant/
  20. 20. 20 2.Omnichannelization A.k.a Seamless path to purchase Don’t look for scale, look for new ‘touch points’ and integrate intelligent transactions and on-demand buying into immersive retail experiences. This isn’t simply consistency across channels - think immersive experience overlaid with barrier-less buying. Convenience is key. Retailers are taking a new approach to convenience: they’re leveraging always-on assistance, intelligent transactions and on-demand delivery to inject even more seamlessness into the purchase path. Higher level surface offerings are the new secret differentiation. “Magic mirrors” at L’Oréal’s pop-up store during Singles Day letting shoppers try on things like sunglasses, cosmetics and apparel virtually. If they like a product, shoppers can make a purchase through Alipay by scanning the QR code. source:Digiday
  21. 21. 21 Singles Day featured “Cloud Shelves”, digital screens supported by RFID that automatically track and identify tags attached to objects. When a shopper places an item in front of the screen, it automatically displays availability, customer reviews and more on Tmall. The shopper can then scan the QR code to buy it on Tmall. Seamless ability to purchase layered on top of immersive entertainment Service is the secret to differentiation: inject seamlessness into the path to purchase by removing barriers. Don’t look for scale, look for new ‘touch points’ and integrate intelligent transactions and on- demand buying to immersive retail experiences. source:Digiday 2. Omni-channelization
  22. 22. “59% of smartphone users feel more favorable toward companies whose mobile sites or apps allow them to make purchases quickly.” 22 - Google 2016 Alibaba-backed grocery store chain HEMA offers a curated selection of 3,000 products from 100 countries. Consumers can order through an app for 30 minute delivery, or shop in-store, where digital price tags are updated in real time, shoppers can scan bar codes, pay via the HEMA app and have purchases delivered for free. Stores offer a dedicated “food booth” experience where shoppers can have their groceries cooked for them. 2. Omnichannelization
  23. 23. 23 3.Platformization A.k.a Data-driven, disruptive tech Platformization is the great synthesizer – unifying online and offline data regarding customers, products and services. Data-driven, disruptive, intelligent tech: think, true synthesis of online and offline data as it relates to the consumer. Users on Line, WeChat and Weibo can converse with Microsoft’s Xiaoice either by text or speech. The chatbot, used by 40mm people across China and Japan, is able to engage in conversation, identify photos and suggest new products to purchase.
  24. 24. “1 in 3 smartphone users has purchased from a company or brand other than the one they intended because of information provided in the moment they needed it” 24 - Google 2016 With each interaction, sophisticated CRM systems provide a nuanced understanding of individual shoppers, and a more personalized brand experience. 3. Platformization Photocredit:TheNorthFace
  25. 25. 25 Platformization at work: The North Face x Watson platform, xps, uses Artificial Intelligence to allow for natural language search and thus easier navigation through myriad product options. Photocredit:ttps://www.thenorthface.com/xps
  26. 26. 26 4.Digitalization A.k.a Total digital business transformation Digitalization is a transformation of business through new models and digitized operations. A complete digitization of supply chain to creates efficiencies within supply chains that are not reliant on human capital. Digitizing operations provides new revenue and value-producing opportunities at a faster pace. Next page: Wheelys mobile concept
  27. 27. 4. Digitalization
  28. 28. “73% of consumers prefer to do business with brands that use personal information to make their shopping experiences more relevant.” 28 - Google 2016 At Alibaba’s Tao café staffing, location, inventory management and delivery all improve drastically with a digital operating model. 4. Digitalization Photocredit:Contagious
  29. 29. 3. Case studies 29
  30. 30. 30 The most successful cases are embracing new retail principles in full force • Experience-drivenretail • Seamlesspathtopurchase • Data-driven,disruptivetech • Holisticdigitalsupplychain
  31. 31. 31 But behind their success lies a long- time commitment to customer centricity and mastery of the brilliant basics What’s clear across all of the success stories is that they don’t just embrace the Four New Retail principles with a strong consciousness of customer needs, they’ve shown a reverence for building a solid foundation.
  32. 32. 32 Starbucks China Global brand, local product Starbuckswillopenonestoreadaythrough 2020whileotherbrandsareexitingthemarket. How? • Successbuiltonthebasicsof SeamlessLocalization • EmbracingtheNewRetailprincipleof “Omni-channelization”(SeamlessPathto Purchase)
  33. 33. 33 Seamless Localization StarbucksdidmanythingsrightenteringChina,butmost importantly,theylocalized. Theyhiredpartnerstohelpthemlearnwhattheydidn’tknow. First, locationwaseverything.Premiumisingmeantappearingin commercialcentersfullofluxurybrands,cateringtothe emergingmiddleclass,andbecomingastatusaccessory. Second,theyintroducedcoffeeinthecontextofalocal ritual– the”thirdspace”. Storesweredesignedtoencouragespending timewithfriendsandfamily,oppositetotheWesternmodelof movingordersinandout.Theyintroducedgiftingand“Sayit withStarbucks”viaredenvelopes–leaningintoalocalcustom topenetratenewoccasions. Ultimately,payingattentiontothefocusonstatus,locationand occasionshelpedStarbuckscommandapricepremium (ofup toathirdmorethanpricesinothercities!!* *http://www.bbc.com/news/business-24619544
  34. 34. 34 Omnichannelization Seamless path to purchase StarbucksunderstoodtheimportanceofO2O,thehybrid experienceofonline/offlinethatkeepsyouconnectedandengaged whileonyourphoneorinaretaillocation,fromthebeginning. Consistentfocusonbeingwherecustomersare(service)has enhancedandupheldthepremiumperception. Online: • IntegratedtechtitansbyadoptingWeChat (Tencent)andAlipay • Loyaltyprogramspansplatforms,12mmmembers(andcosts moneytobelong)! • Findingasmanytouchpointstomeettheircustomersonas possibleandneverbeingafraidtobeinmultiplebetas. Offline • TheO2OcomestogetherwiththeabilitytointeractwithSB throughmobileWeChat,Loyaltyprogram,giftgivingwhile spendingtimewithyourfriendsandfamily.
  35. 35. 35 adidas China Multi-brand Retail-tainment Adidasiswinningthe battle,despiteentering themarket17yearslaterthanNike. How? • Successbuiltonthebasicsof multi-brand strategyandunderstandingofhowto contributetocurrentculture • EmbracingtheNewRetailprincipleof “Entertainmentization”
  36. 36. 36 Multi-brand Strategy Recognizingthatindividualperformancesportsweren’tyet mainstreaminChina,adidastookadifferentapproach: Theylookedattheirentireportfolio,includingNEOandOriginals andmappedoutvariouslineswouldbringsomethingnew, compellingandcomplimentarytoexistingculture,fashion,and trendsacrosseachmajorcity. Theywentbottomup,startingwithTier2and2+cities,versus top-downnationallaunch,andspenttimeunderstandingwhich linesintheirportfoliowouldresonatewitheachdemographic. Thismoretargetedapproachactuallyhelpedadidasdrive considerationandpreferencemorebroadly;forexample OriginalsandY-3caughtonwithfashionenthusiastswhohad zerointerestinperformancegearandnocross-overwiththe aspirationalathletesmostsportswearbrandsarefocusedon. Thiswasdoneintandemwithinnovativeproductstrategy,as adidasactivelyreleasednewproductsgearedtonewerfashion- focusedsegments.
  37. 37. 37 Entertainmentization Experience-drivenretailisakeydriverofadidas’successinChina. Amixoffashion,fun,andanintensefocusonculturalrelevance helpedadidasmovedeeperintothesportspaceasthemarket matured,vssellingperformance athleticsandperformancetechina marketthathadyettolatchontotheconcept. What’stheingredientmix? • KeyOpinionLeaders(KOLs-China’sanswertoinfluencers) • CulturalIcons • Pop-upenvironments • Integratedtech • SponsorshipasthenewTV LocalCulture-shapingpartnershipexamples • OriginalsNMDXDJIMavic • AdidasOriginals:Angelababy,EasonChen,KrisWu,Fan Bingbing,LuHan • AdidasNeo:GuoCaijie,ZhengKai,Adidas:PengYuyan,Ning Chang • NingZetaoandHuiRuoqiasstarsinnewcampaign“Oneina Billion”.
  38. 38. 38 An adidas Originals “This is Me” pop-up store that travelled to 9 cities in china over 5-weeks, complete with social sharing opportunities and interactive in-store tech. The campaign incorporated influencers, KOL, owned social, Tmall, and DTC channels (an app, in this case) on top of integrated payment options like Wechat and Alipay, and drove a 78% lift in shoe sales. Photocredit:http://neocha.com/creative-agency/adidas-originals-mobile-pop-up-store/
  39. 39. Now that individual performance sport has taken hold and attracted mass government investment, adidas is well placed to capitalize on their already established cred.
  40. 40. 40 JD.com Chinese eTail giant who really gets 020 WhoareJD.comorJingdong? With25%ofChina’sB2CeCommercesales and258mmmonthlyactiveusers,timetoget familiarwiththem… • Successbuiltonthebasic Fearlessness,failingfast&alwaysinbeta • EmbracingtheNewRetailprinciplesof “Platformization”&“Digitalization”
  41. 41. 41 Fearlessness JD.com hasbeenfearlessaroundpartneringwherethemarket leastexpectedthemto. Ratherthantryingto“build”theecosystemthemselvesor establishownedproperties,theyexperimentedinplacesthey hadnopresenceinbyfindingpartners. Theyidentifiedthewhitespacestheyneededtobeinandfound thecomplementarypartnerstohelpthemscalewherethey couldn’tontheirown. ThismeantallianceswithTencentand FarfetchandevenseemingcompetitorssuchasWalmart. Theyledwithawillingnesstobetterunderstandthemarketanda commitmenttomeetingconsumerneedsandanticipating serviceofferings.
  42. 42. 42 Platformization & Digitalization TheconceptofpartnershipshasbeencentraltoJD.com’s approachtointegratingnewtechintotheirbusinessmodeland makingthedatatheydohaveworkharderforthem. Whenyouhave80%ofthepicture,findthepartnerswhocan completethemissing20%ofthedataandworkwiththemto createaricherandmorenuancedviewofcustomerhistorythat bringstheironlineandofflinedatatogether. Keystosuccess? • UtilizingpartnershipsinthePlatformization&Digitalization process • Betatesting • Leveragingexistinginfrastructure
  43. 43. 4. Conclusions 44
  44. 44. In summary… Brilliant Basics 1.Entertainmentization 2.Omnichannelization 3.Platformization 4.Digitalization Embrace the New Retail Principles from a solid foundation: • Localization drives ability to command a premium • Use cultural rituals to drive occasions strategy • Partners help you see what you don’t know • Take a portfolio approach to build local relevance by city • Fail fast and often! Experience-driven retail with a twist: demonstrate what your brand can add: • Play in culture, fashion, trends, music and have fun • Think about how you can shape culture vs brand first, and bring something fresh and new • Move with the market, don’t try to lean on something un- known • Rethink service; how can you anticipate not just product wants, but experience? Inject seamlessness into the path to purchase by removing barriers: • Don’t look for scale, look for new ‘touch points’ and “fish where the fish are” • Integrate intelligent transactions and on- demand buying to immersive retail experiences. • Don’t be afraid to experiment in channels you don’t “own” and aren’t “in” Data-driven, disruptive, intelligent tech: think, true synthesis of online and offline data as it relates to the consumer: • Make your data work harder: If you have 80% of your customers’ story, someone else has 20%! A total transformation of your business and supply chain through new, self-service models and digital systems: • Partner to get there faster • Borrow and test existing infrastructure to see if it works for you
  45. 45. The future is already here.
  46. 46. The future of retail Made in china
  47. 47. 48