How is China building the future of retail in 2021: Alibaba, JD and Pinduoduo?
Under the influences of the pandemic, the retail industry in China has experienced very extreme circumstances. While it’s no surprise that the majority of retail business is being severely hit by the pandemic, retailers who have online businesses are not as heavily affected. Businesses that focus on daily necessities such as supermarkets even managed to receive some growth for their online portion. COVID-19 has without doubt accelerated the scale of transformation and even opened doors of opportunities for the retail industry.
China has Further Digitized Post-COVID-19
Before the pandemic, China was already very much ahead in digital. We can see the presence of digital in everything from 5G, mobile payment systems, social media platforms, e-commerce, IoT, smart cities, driverless cars and buses, you name it.
China has been particularly successful in advancing the digital scene as all parties were unified in terms of the developments to China’s digital ecosystem. For instance, the central government would give direction as to future initiatives and developments to be made; the public, private sectors and regular citizens would then act on it. Local government would execute relevant policies. Businesses would invest and increase employment in relevant fields. Citizens would work on getting upskilled so they could pursue a career in those up-and-coming fields. It is exactly these unified efforts that made advancements in the digital space successful in achieving the China speed that it was before the pandemic.
It is Now Moving at “China Speed” on Steroids
As the pandemic hits, the whole world did not have much choice but to enhance the speed of digitalization in their regions, with remote working and e-commerce being more active than ever. The already robust China speed was essentially on steroids after the COVID outbreak. The pandemic has further propelled digital developments and applications in China as we now see a surge of e-medicine, online education, service robots, etc.
China’s New Retail Ecosystem is More Than an E-Shop
The New Retail concept was among one of the five topics proposed by Jack Ma back in 2016 to cope with the new economy. The four remaining ones were New Manufacture, New Finance, New Energy Source and New Technology. New Retail proposes a seamless engagement between the online and offline world through data technology and has been the most important focus of Alibaba during recent years.
Can Small Businesses Benefit?
E-commerce platforms such as Alibaba, JD, etc. offer a very comprehensive ecosystem for small businesses. Small businesses can simply join these platforms and plug themselves into these massive ecosystems and gain instant access to their data, cloud services, analytical capabilities, etc. This sense of mutualism means that these Chinese tech giants are in it to win it with you, not against you. Tech giants are essentially developing technology for you and your business, so you can learn more about your consumers and behaviours and achieve great business results. In fact, small companies are the biggest beneficiaries of this ecosystem setup most times. This is very different when we compare it to Western e-commerce giants such as Amazon where they would replicate high performing products on the platform and eventually become competitors of those brands and businesses.
New Retail Helps You Invent Products
Mondelez China, the parent company of Oreo, developed a brand new product after acting on the feedback and recommendations of Alimama, Alibaba’s data centre and has access to its gigantic set of consumer data. Its range of consumer data is so extensive that it can even tell you what the hot trends in the market are. You can therefore incorporate these features in your products and have a much higher chance in succeeding in the China market as you are making a sound decision supported by solid data. From Alimama’s insights, Oreo discovers a strong market demand for healthier snack options. The brand acted on these insights and launched a new product that consists of mini Oreos, assorted nuts and dried fruits. The product was particularly successful and achieved the sales volume of over 550,000 packets during the Double 11 event in 2019 (which was only 2 months after its launch).
Supermarkets: The Best Large Scale New Retail Testing Ground
Freshippo is perhaps one of Alibaba’s earliest and most successful implementations of New Retail when it comes to merging offline activities with online. Everything in the supermarket is driven by mobile. Customers can simply scan QR codes in store to see where the fresh produce is coming from. Freshippo also doubles as distribution facilities where customers can place orders online and have staff handpick and directly deliver groceries to their doorsteps.
Alibaba is not the only one implementing the New Retail concept in supermarket chains. JD has also launched 7-Fresh. In fact, Freshippo and 7-Fresh offer very similar services and data-driven functionalities throughout all of their stores. All these interactive features and robot assistants are surely impressive, but what’s more important here is how effective and seamless Alibaba and JD can manage to merge offline and online activities. They are also providing a very high degree of everyday convenience all while gathering a massive and comprehensive set of data from consumers to further enhance their ecosystem.
In 2020 New Retail is Taking Over Breakfast
The big set of daily purchasing data from consumers is especially helpful in training algorithms. The latest online and offline integration is when Alibaba, as well as others, take breakfast digital. Consumers can now order breakfast in advance on their way to work through the app and pick up their food at the Freshippo Pick’n Go store. The stores consist of a manned counter and a self-service section. The manned counter is for food handling and preparation while the 24 cabinets next to it are for self-service pick-up. The first store in China opened in Shanghai in July 2019. In the future, Freshippo Pick’n Go will be implemented across the country. This breakfast Pick’n Go concept is ideal as it reduces rental costs for retailers and enhances operational efficiency.
It’s Not Just Alibaba
JD also came up with their own version of the New Retail concept and presented it as Boundaryless Retail in its furniture store. Multiple digital tools are being used throughout the store to collect consumer insights such as customers’ preferences, engagement, shopping behaviour, etc. Customers can shop in stores and also access the entire JD inventory through smartphones and interactive smart screens in store. JD stores can also showcase their product display in smarter and more flexible ways as they now have data such as the most likely purchases for each store. The JD furniture store is also actively developing new technologies such as computer vision, AI assistants, etc. to help deliver a better offline and online shopping experience for consumers.
The above are just a few of the many examples, but the concept of New Retail is definitely accelerating and advancing the e-commerce scene in China.
What has Changed on Alibaba, JD, PDD Post-COVID-19?
Alibaba Further Boosted its Livestreaming
Alibaba has offered various support to small businesses during the pandemic in ways such as waiving Tmall service fees and offering fast payment-collection options, etc. There has been an increasing demand for e-commerce during the pandemic. Alibaba has lowered restrictions for livestreaming so small businesses who have not met the prerequisites can also start livestreaming and promote their products through this channel. As a matter of fact, the hottest skill for Chinese salespeople in 2020-21 is surely livestreaming. A lot of China’s major e-commerce companies have been investing in livestreaming training for their in-house sales team.
JD is Ruling in the Supply Chain Realm
JD was in quite a good position even during the early stages of the COVID outbreak. Logistics is the backbone and perhaps even the biggest advantage of JD’s business. One of the company’s key aims has always been on developing the smartest, most efficient logistics system in China. Even in the days when international logistics were a mess, JD logistics still remained strong and reliable. In the post COVID era, JD has started going to low-tier cities, i.e. started working with local farmers, to capture the majority of the consumption in China.
Supply chain and last minute delivery are the names of the game for New Retail. Every tech giant is indeed focusing on it at this time. While e-commerce giants are trying to perfect their logistics system, some strong supply chain companies, such as Meituan are looking to explore into the full loop ecosystem and perhaps consider expanding to e-commerce.
PDD is Killing at Social E-commerce
Pinduoduo continues its expansion and growth in high-tier cities. Pinduoduo has been very active in providing subsidies to encourage sales of premium products such as Apple or even Tesla, on its platform. These subsidy strategies have been particularly useful in acquiring new customers and we see more tier 1 consumers buying on Pinduoduo. Pinduoduo is still not yet profitable but situations are certainly improving for them.
Rural social commerce is killing it in China as people from low-tier cities are more active and less shy about what they share with their social media circle. The videos can sometimes be seen as silly, but it is still efficient in driving sales with the purchase link at the end. China’s social commerce market is huge. It’s now projected to reach USD 234 billion this year and grow to USD 341.6 billion by 2022.
How can Foreign Brands Enter China via Alibaba, JD, PDD in 2021?
PDD is Not For Everyone
Pinduoduo is not yet an option for foreign businesses at the moment. Even if you are a China-registered business, the platform provides more of a branding effect a lot of the times. Despite Pinduoduo’s ambition in entering the high-tier market, the general impression of the platform still remains to be of lower-tier. You may want to consider if that matches your brand appeal, or it may be difficult for your brand to make a comeback.
Alibaba and JD are Open for Business
Foreign businesses can work with Alibaba and JD through cross-border e-commerce options – Tmall Global and JD Worldwide. If you are a China-registered business, you may want to plug into their ecosystem so you can save money, collect customer information, gain consumer and market insights right away. The sooner you fo it, the sooner you benefit from it. Now is also a good time to enter both of these platforms as you may be required to choose to commit to just one platform in the future.
Is it Coming to Stores Near Me?
After covering all these New Retail practices and applications in China, it’s likely that some of you from the other side of the world would struggle to put that in perspective and see how this is all relevant to you. This can be especially true if your business does not plan to enter the China market.
Tourists Will Return
Point taken. Keep in mind though, even if you are not planning on entering the China market, China will come to you. Once the international borders reopen, tourists will come back. You will need to fight for the attention of customers who are used to and require this level of service in their customer journey.
New Retail is Coming to Stores Near You
More importantly, China is going to export this New Retail technology and ecosystem globally. If you strive for a global presence and want to appeal to the remaining international consumers from Southeast Asia, Africa, Latin America, etc, you need to be a part of this New Retail world.
There will never be a time where it’s cheaper to enter the New Retail ecosystem than right now. These ecosystems will only become more sophisticated and well-established than ever. As the popular Chinese proverb goes “The best time to plant a tree was 20 years ago. The second best time is now.” Your consumers are ready, all these comprehensive e-commerce ecosystems are ready – are you ready?
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