How New Retail Is Changing The Future
In 2016, Jack Ma, the founder of Alibaba, coined the term “New Retail” to describe how offline, online, and logistics channels were merging to create an integrated retail experience that would seamlessly blend what were previously separate spaces.
This transformation is rapidly taking place in China, where millions of small shops are being turned into order-and-delivery stations for e-commerce and stationary retail is getting converted into experience stores. The revolution in retail sales models is driven by the ubiquity of smartphones and the evolution of physical and online commerce toward omnichannel experiences.
Hema: A Cornerstone in Alibaba’s New Retail Strategy
Hema, whose English name is Freshippo, is a high-tech supermarket that is designed around your smartphone. Your smartphone is used for everything in the store, from placing items in a digital shopping cart while you shop for groceries, to getting product nutritional information, to paying for your goods. Part of Alibaba’s success in designing a store around a smartphone app is due to the high mobile phone usage in China. 98% of internet traffic in China is generated on a mobile phone vs. 43% in the United States.
In-store Smartphone Functionalities
- Digital in-store shopping: Customers shop by scanning product QR codes adding the item to their digital shopping cart. Customers can then decide to either carry their purchased items home by themselves, have them cooked into a freshly-made meal at the Hema restaurant or have them delivered to their doorstep.
- Product information: Scanning a product’s QR code also provides information about the time it was delivered to the store, government safety certificates, nutritional information, customer reviews, recipes suggestions, and delivery options.
- Personalized shopping recommendations using artificial intelligence: The Hema app remembers shopper buying behavior and leverages machine learning to make personalized product recommendations for customers.
- Digital price tags: Products have digital price tags that can be updated in real time. They can be particularly useful if Hema wants to, say for example, update the price of seafood based on market rates. It also allows the retailer to ensure that prices online match in-store when necessary.
Inside Alibaba’s new kind of superstore: Robots, apps and overhead conveyor belts
The Hema business proposition means that the vision of people ordering the night’s food on the way home is a reality, as is the idea of using the supermarket as a showroom of sorts, with the delivery following you home. This is convenient for metropolitan shoppers who are time-poor commuters and don’t drive.
Why Customers Still Visit Physical Hema Stores
- Experience Store: Hema supermarkets are essentially grocery store / restaurant hybrids where customers can shop for groceries as well as sit down and have dinner with their family if they choose to. Customers like the fact that they can easily choose a fresh piece of seafood and then it is cooked fresh for the customer to eat while they are at the restaurant.
- Sample Stations: Trying out new products, this allows consumers to experience the look, feel, taste and smell in first person and builds their trust towards new brands.
- Digital in-store shopping: Super-fast delivery allows consumers to experience and look at the products in person, while still enjoying them at home the same evening. Customers shopping at Hema can have groceries delivered in 30 minutes for free, if the delivery address is within three kilometers of a Hema store. This applies to customers that shop in store and want their orders delivered to their homes or if they made the purchase online.
How To Effectively Enter the Chinese Market Using New Retail
Import Regulations
According to the Food Safety Law, food and cosmetic products, whether domestic or imported, must be registered or filed with the CFDA (the China Food and Drug Administration). However, products brought into China through cross-border e-commerce are exempt. According to the CFDA, cross-border e-commerce brands that sell food are even allowed to open offline display (experience) stores. However, it is not actually allowed to sell products in these stores. If there are offline sales they need to apply for a license in accordance with the regulations.
Importance Of Omnichannel Retail
China’s e-commerce has fueled sales of Western brands in China— especially during the pandemic. However, a concrete omnichannel strategy with strong digital resources and offline presence is vital for new entrants from Western brands in China and brick-and-mortar tactility is still vital to local shoppers post-COVID-19. In-store beauty and nutrition experts, in particular, offer a range of services. They educate consumers on new products and brands, provide customers with personalized services, including skin tests, nutrition plans and SPA, and offer knowledge-sharing scientific beauty and nutrition advise.
From social selling to memorable, in-store experiences that are elongated beyond physical events, Western brands with an omnichannel approach in China are achieving a higher customer loyalty and retention rate over the long-term. Thus, brands who work with both reliable local offline and online retailers are not only helped in finding their target customers, but they will also live much longer in the minds of their highly-valued community.