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China Has Already Aced New Retail While the West Trails Behind

When it comes to modern retail, China is already doing what the West has been scrambling to do—to little avail.

Whether it’s a pop-up, a collaboration designed to bring in a new, cool consumer, adding an onsite Instagram wall or serving Rosé for an experiential in-store event, brands and retailers in the West are employing all manner of efforts to get customers’ attention.

In China, the approach has been simpler—albeit one Western companies likely believe they have embraced—brands selling to Chinese consumers are meeting those consumers where they are: on WeChat.

And yes, while in the West, social commerce is starting to take up greater space in the conversation about the future of retail, platforms like Instagram, Facebook and Snap still aren’t converting consumers in a big way.

Social commerce, according to Roger Min, co-founder of Easy Retail Pro, who spoke at the recent Sourcing Summit: Hong Kong, is the way forward for retail in China, and for any brand hoping to sell to the Chinese consumer, a presence on WeChat has become table stakes.

“In China, the whole retail market is 40 trillion RMB [$5.8 trillion], and for online commerce, it’s 7 trillion RMB [$1 trillion],” Min said. “But social commerce, if we just look at the WeChat media program in the last year it’s over 1 trillion [RMB][$144.6 billion].”

Recognizing the potential for social commerce in China, where consumers spend as much as two hours a day using their mobile phones for WeChat alone, Easy Retail Pro launched to help brands and retailers build SCRM capabilities on WeChat. Today, the company counts Tencent among its shareholders and Inditex and C&A among its more than 300 retail clients.

By current counts, upward of 1 billion users are on the Tencent-owned WeChat platform, which is a sizable 72 percent of China’s total 1.386 billion population. What began as largely a messaging platform, WeChat now also lets users pay for things using WeChat Pay, hail a ride, check the weather, book a flight and, of course, shop their favorite brands and retailers. While Instagram said it crossed the 1 billion user mark just a few months after WeChat’s milestone, the still largely image driven platform hasn’t made the same kind of inroads when it comes to commanding users’ mindshare.

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More than anything, China’s consumer is truly mobile and much of their world is navigated through WeChat, including their shopping.

“A lot of the people don’t buy anything offline, they just buy online, so that gives a technology company like or Alibaba a lot of opportunity to innovate in the consumer shopping experience, and it’s one of the reasons why China is leading in terms of creating innovative experiences for consumers,” said Paul Wong, vice president of Innovation at the Fung Group’s Explorium, an innovation ecosystem where startups, incubators, accelerators and venture capitalists come together to create and launch disruptive technologies for the global supply chain.

While the West isn’t short on innovations, those innovations may not be quite as well targeted as those in China that have been geared exactly toward improving the shopping experience for consumers.

Tech innovators in Silicon Valley or the Bay Area are coming up with “wonderful, amazing ideas,” Shukun Xie, chief data officer of Whale Inc. explained, but those developments are more focused on the technology than actual demand. “For those working on technology in China, it’s more market oriented…they see something that needs to maybe improve a lot and they see the opportunities there.” With Whale Inc., a leading IoT and AI startup in China, Xie is focused on retail experiences and solutions for digesting the glut of data companies now need to take in to accurately forecast and meet demand.

Taking data even a step further, Black Lake Technologies is using it to connect factories directly to consumers, as shoppers both in China and the world over, increasingly drive design and customization. More than brands, today’s consumers care about products that are individualized and that fit their personality. And even for companies like Alibaba, which has built a leading e-commerce business on connecting brands to consumers, ongoing innovation is critical.

“These days you can see even Alibaba they feel threatened if the new generation thinks brand is less relevant…so they are self-innovating a new project called the Tao Factory,” said Yuxiang Zhou, co-founder and CEO, Black Lake Technologies, which builds plant floor collaboration tools designed to digitally transform factories. Alibaba’s Tao Factory manufacturing project has set out to upgrade garment production process with AI and cloud computing. “They want to connect the consumer directly to factories and Black Lake became their chosen vendor in digitizing the factory and supplying them with factory data.”

From there, it’s about using that data to directly deliver on consumer demand.

“This is the trend we’re observing and I think, really, it could bring a lot of opportunities for startups to make and empower factories to be able to connect with consumers as they take individualized orders, they are able to produce in an agile way,” Zhou said.

Whether it’s direct from the factory or from online channels, consumers care less about where they get product and more about whether it resonates with their personality.

“More importantly, they care about the social aspect, whether their friends are buying a similar product, having a similar lifestyle, so they are not just looking for product, they are looking for a brand experience that resonates with their lifestyle and their social status,” Wong explained.

That’s why WeChat works where traditional retail doesn’t.

“I think that’s a challenge for a lot of brands that don’t understand China, because the typical way to sell products is to make products, do a marketing campaign, do promotion in your store and hope the product will sell,” Wong said. “But in China there’s a lot of new ways, leveraging technologies and new services from startups…to not just have the product and promote it, but to use the technology to figure out exactly what you want to make and how you want to make it and the kind of products you want to provide to your customer.”

And China, with a still keen and exceedingly tech savvy shopper, may be the best test case for what retail’s future should look like.

“Technology wasn’t implemented yesterday. Technology has been around for decades,” Wong said. “It’s just that China is a very big market and there’s a lot of opportunities for companies to try out the technology for providing a better experience.”