Two years after Alibaba founder Jack Ma coined the term “New Retail,” China continues full speed ahead in accelerating its national adoption of these principles that could very well influence how commerce evolves worldwide.
Chinese consumers long ago leapfrogged the U.S. in adoption of mobile for many retail activities, including payment. In fact, paying via smartphone is so prevalent in China that when these consumers travel abroad, they expect to be able to use mobile payments wherever they go. Data from AliPay and Nielsen shows that 65 percent of Chinese tourists paid via mobile, and 63 percent did so when shopping.
A new report produced by Bain and AliResearch reveals that New Retail is built on six ideas bringing consumers, products and physical stores closer together in what’s envisioned to be a seamless merger of online and offline.
New Retail principle No. 2
Above all, brands must rethink their operations and adopt a new, consumer-centric business model. The consumer must be prioritized along every step of the purchasing and product interaction journey. To accomplish this, brands must continually collect and analyze customer data form sources both internal and external, according to the report. Creating this “closed loop” of data will drive better informed business decisions, the report said.
New Retail principle No. 2
Last year Mondelez launched the Oreo Music Box, which went from concept to Tmall in just seven days. It looks like a mini record player, and when you put an Oreo where the “record” would go and then drop the needle—it plays a tune. Take a bite out of the cookie and replace it on the pseudo-turntable, and a new song plays. The Music Box is pre-programmed with five songs but consumers can record their own vocal samples and also decorate the exterior with their own personal touch.
The Music Box launch drove gangbusters results for Mondelez, which generated 80 times the average business on its Tmall website, with 90 percent of that coming from new customers. The report holds up this product launch as a prime example of the second New Retail idea: retooling supply chains and R&D activities around flexibility and efficiency to drive consumer-centric engagement and innovation.
According to the report, brands that will win with consumers will engage them early and often during the development process. This “co-creation” approach can improve the likelihood that the product will succeed on the market while fostering a sense of ownership and investment among the testers.
What’s more, R&D and supply chains will require flexibility as brands increasingly offer personalized products to the consumers, though the level of customization can vary wildly. For example, personalization could mean allowing consumers to purchase two different shoe sizes as a pair, which wouldn’t require any changes to the product assortment. The complexity increases when permitting consumers to customize aspects such as packaging—colors, fonts and more—and reaches its apex when a product springs up from a consumer’s ideation and relies on consumer input through the production process, according to the report.
Technologies such as artificial intelligence, Internet of Things (IoT) and blockchain will help to provide more accurate demand forecasts, the report said. Manufacturing and warehousing in the New Retail world will be almost entirely tech-driven, with automated, robotics-powered production, IoT sensing and troubleshooting remote machinery, self-driving vehicles executing cargo drop-offs and delivery, and drones tasked with remote, last-mile deliveries.
New Retail principle No. 3
New Retail envisions marketing evolving from an expense into an asset.
“Online becomes a closed loop for interacting with consumers, collecting data, and gaining the insights that can help brands develop and deliver personalized marketing messages at the appropriate customer touchpoints, constantly reﬁning what they learn and how they market,” the report noted. “It is a shift in philosophy that turns marketing from a brand expense into a brand asset.”
New Retail principle No. 4
Across its 3,250-mile-wide expanse, China is chock full of mom-and-pop retailers in need of a systems upgrade. New Retail’s fourth step envisions a great modernizing of the “route to market” powered by data and analytical insights, which will require an overhaul of traditional distribution methods powered by expensive middle men. Digital platforms, according to the report, benefit both retailers and brands, enabling the latter to make data-driven decisions based off of channel sales information as well as consumer needs. What’s more, the upheaval in distribution is empowering brands to launch targeted retail formats that drive higher SKU productivity while keeping communications and marketing costs under control, the report found.
New Retail principle No. 5
In a New Retail world, businesses must organize around digital, rather than seeing it as just a piece of the puzzle. That’s because success for a New Retail company relies on collaboration across traditionally siloed groups including customer engagement, marketing, sales and data analysis. In multi-brand companies, it’s even more important to coordinate efforts across brands, according to the report.
Businesses must continually finetune their digital mindset as they mature as a New Retailer. While early on, it might make sense to house the digital team inside the unit that’s making the biggest digital push—so launching digital commerce as a new channel, for example, or driving engagement via digital. A company with more advanced digital capabilities can keep its digital team independent while having it report into both sales and marketing, the report said.
Regardless of their maturation, all companies should strive to achieve agile operations. “All Agile teams operate according to the same manifesto: Teams are cross-functional and empowered, activities are time-boxed around speciﬁc outcomes, work is iterative and incremental, and problems are solved in a modular and adaptive manner,” the report noted.
New Retail principle No. 6
Finally, New Retail companies must put their dollars toward high-value tech investments, identifying where they are are the digital journey and where they want to be. That will help them create a feasible roadmap of digital transformation and pinpoint the tools and technologies necessary to get from Point A to Point B.
“New Retail is a work in progress, requiring brands to constantly reﬁne and reinvent themselves for new occasions, new formats and the steady ﬂow of new ideas that will deﬁne retailing tomorrow,” the report concluded.