Thorsten Linz, Exponential Business Designer, Startup Mentor, SingularityU Munich Ambassador
explains why we should be looking to China to find out what is the future of retail
A customer visits their local grocery store where they can research and purchase items using their mobile phone or order online the items they want and have it delivered within an hour. Another customer heads to the mall and can order an out-of-stock colour or size of a shirt, which they tried on in the store using a virtual shelf kiosk. A young woman uses a magic mirror in the ladies restroom to see new colours and styles of cosmetics that can then be purchased from a vending machine. A small shopkeeper uses big data to make sure his convenience store is stocked with the items his clientele demand most and these customers can order ahead and pick it up on their way home. Sounds like an interesting shopping experience in the future? Well, in China, the future is now.
Technology advancements in retail are gaining traction and favour in China. Total Retail survey data shows that China’s retail shopping habits are about three years ahead of the rest of the world, so if we want to see the future, we simply need to look to China to see where we’re heading and what retail trends will emerge. Customers want a convenient, personalised and customisable shopping experience no matter where they live. This is how China is using emerging tech and customer data to create these new retail experiences. Savvy retailers are following China’s lead to stay relevant in the face of monumental change.
It’s all about the Big Data
Customers will exchange personal information and preferences with companies in exchange for a better, more personalized experience. In some cases, all it takes is a single line of code for companies to take the data they receive and convert it into personalised experiences for their customers. Big data and emerging tech can help retailers big and small compete in today’s ever-changing consumer market. Geo-political issues, such as the new General Data Protection Requirements (GDPR) in the EU will no doubt affect global companies ability to store and use data, it doesn’t change the fact that customers are demanding more personalized experiences. In fact, China’s new Data Privacy Standard is even more far-reaching than what Europe has established with GDPR. So the new privacy standard shouldn’t scare anyone away from utilising Big Data to create more immersive and personalized experiences.
How mobile helps create online/offline shopping experiences
China is on the cutting edge when it comes to using mobile to blend online and offline shopping. Mobile shopping in China is huge because of the prevalence of mobile phones versus home computers and more importantly, the three Chinese eCommerce giants – Alibaba, Tencent and Baidu – are leaders in mobile personalisation. Using their massive data-analytics platforms Chinese shoppers receive personalised information based on their shopping habits, location and even their income level. This helps blend the online and offline experiences seamlessly. Hema, Alibaba’s grocery venture, allows customers to do just that. All transactions are through the customer’s mobile phone, shoppers can order online and get their groceries within an hour, or can go into any Hema location where they use their phone to research products, order and pay or arrange for delivery to their home. Alibaba build Hema from scratch as part of their ‘New Retail’ initiative. Not only are they disrupting grocery retail, but also how Chinese shop for cosmetics and fashion, and even cars. As for the shopping mall, Alibaba is investing in this space as well by installing digital shelves within stores so customers can still purchase out-of-stock sizes and products and have them delivered. They’re also creating experiences for traditionally difficult try-before-you-buy products such as cosmetics by installing ‘magic mirrors’ in restrooms that allow customers to virtually try on different cosmetics and purchase in vending machines using their mobile phone.
Outside of China, we are already seeing these types of retail innovations. For example, Amazon Go, Amazon’s venture into the online/offline space as a solution for grocery convenience. Using technologies like RFID and an Amazon customer’s profile, customers can walk into the store, grab what they need and go – all with no check out and no hassle. Sephora, the retail cosmetics giant is thriving where others are floundering. This is because they made digital a priority. They are using their mobile platform to personalize and customize the cosmetics-buying experience and – most importantly – bridge the gap between online and offline shopping.
Shopping as a social construct and entertainment
Chinese consumers love shopping and love sharing the products they love on social media, more so than their American or European counterparts. Chinese shoppers look for peer approval through their shopping lifestyle. Because Chinese customers prefer marketplace shopping, brands are a relatively new concept. This means that brands have an opportunity to listen to their Chinese customers through their social media purchases and can develop shopping experiences and even new products to suit them.
This is not something that can’t be accomplished here in the US or in Europe. With technology that makes it easier to produce custom goods, we will definitely see this trend spread outside of China. Facebook, Pinterest and Instagram are already providing members the ability to shop and purchase items they like. Facebook takes it a step farther by allowing members to sell products to each other using a Marketplace model. With Blockchain technology becoming more mainstream, we can forecast cashless transactions via social media between private parties in the coming future.
While those of us in the US and in Europe lament the commercialization of our holidays, China literally created a holiday for shopping called Singles Day or 11:11. Alibaba and its founder, Jack Ma, transformed the de facto holiday from an ‘anti-Valentine’s Day’ for Chinese singletons to a global shopping festival back in 2009. It went from a holiday to spend shopping, eating and spending time with friends to the largest online shopping holiday in the world. The 11:11 star-studded festival countdown brings in more viewers than the Superbowl and allows customers to preview new products to purchase during the 24-hour spend-a-thon. Will we see our Black Friday turn into this type of celebration in the future? Only time will tell.
Artificial Intelligence and the Rise of the Virtual Shopping Assistant
If the future of the Internet is voice, and that means that the future of shopping is AI. While Amazon Echo and Google Home are still gaining a following in the US and in Europe, more than half of Chinese customers surveyed stated that they plan to purchase a virtual assistant device in the future. AI-enabled devices will soon become the norm, and customers will begin to demand that every product they purchase can interact with their virtual assistant to get them the goods and services they want faster and easier.
AI technology can only run on Big Data. Smart companies are converting their retail spaces into customer-data retrieval stations. Machine vision monitor in-store performance for products and B2B Robots manage inventory control, even restocking products in some cases. Bluetooth Beacons track customer movement within stores in exchange for coupons and discounts on the products they love.
New distribution models and consequences for big brands
Changes in supply chain and distribution have been slow to happen because the larger CPG brands own the store shelves. But, grocery chains are expanding their own private label brands – like Costco’s Kirkland and Amazon-owned Whole Food’s 365 – at a customer-friendly cost and a lower cost and higher profit margin for the store and online, displacing other brands. Savvy customers are starting to demand better ingredients and environmentally-friendly packaging. Big Food will be looking for newer, leaner startup-type food creators for meat alternatives and healthy, millennial-preferred fare. Supply chains need to adapt from big box and grocery store to ecommerce-ready packaging and ready-to-ship sizes. All of these changes require technological solutions. China is already ahead of the curve and if these big brands want to sell in China, they need to implement these solutions quickly.
China is already embracing these technologies and with 1.3 billion (and growing) customers
embracing the ‘New Retail’ who are we to question the success?