One of the benefits of living and working in New York is the opportunity to walk from place to place, up and down the avenues, one side of town to the other, taking in the sights along the way. Among the sights frequently observed nowadays is the growing number of “For Rent” signs in shop windows. Even on upscale Madison Avenue, it seems every third or fourth store is empty. It’s not news to anyone, marketers and consumers, alike, that even some of the most iconic retail brand names have disappeared. When you see this rapid change up close over a compressed period of time, it’s almost certain that business as usual will not suffice.
In “Shift Ahead,” Allen Adamson wrote about what it takes for brands to stay relevant in a marketplace that is changing with unprecedented speed. Based on interviews with senior people in more than 100 organizations, Adamson examines how companies in a range of categories approach disruption, how some take it on and overcome it, and others are overcome by it. Among the key factors those executives say are required for a successful shift ahead is the ability to not just look at what’s happening to the right or left of you, but to be able to zoom out, to take a broader look at the situation from multiple perspectives. It’s important to observe what’s happening in other categories, and other markets, to see if you can apply that learning to your own business challenges.
In addition to this, success in the ongoing quest for relevance requires the ability to move quickly and with agility, to be able to shift away from risk-averse and fixed, to risk-managed and open-minded.
With the above in mind, think back to our talk about retail in New York: If one thinks the retail competition is tough and the market demanding in the US, consider China. In the US, the top 100 retailers account for approximately 40% of the total retail market, whereas China’s top 100 retailers enjoy just 6.4%. Not to put too fine a point on this, compared to the US, in China the competition is extreme, and the requirement to shift ahead of the pack is increasingly challenging and essential.
So, how do retail marketers in China deal with this situation? And, what can retailers worldwide learn from them? China is forecast to account for nearly 56% of all online retail sales globally, with that figure expected to exceed 63% by 2022. In fact, e-commerce will account for about 35% of all sales in China (up from 15% last year). Nearly 80% of this is conducted on mobile devices powered by aggregation and social commerce. With this data, along with our firsthand experiences as context, let us highlight three key things the rest of the world’s retailers can learn from their Chinese counterparts:
1. Solve for one, scale for many. From looking at its business solutions, it’s obvious the West is enamored with the individual. When you’re dealing with 1.5 billion people, such an approach just won’t suffice. However, this doesn’t mean devaluing the individual – China champions human-centered design as much as the next market. Rather, this is about designing solutions that aren’t inherently limited in their reach. For example, tech retailer HeyShop embodied this attitude when they tested – and then quickly transitioned away from – in-store screens. The thinking had been to free up in-store consultants to be able to have deeper engagements with clients (and alleviate any perception of pressure) by allowing customers to self-serve information about products through screens. The company pivoted away from this solution when it realized its limitations. “We found that only one or two customers at a time could use the screen, which isn’t very helpful when you have a full store,” says Bo Li, CEO of HeyShop. Further, he added that “large screens take up space that could be otherwise used, and we have to maintain the hardware, which can be expensive and time-consuming.” The solution? Use the screen that every customer brings with them into the store – their own smartphone – and create an experience that is scalable, discreet and personalized.
2. Clicks in bricks. On that note, the era of the distinction between “digital” and “traditional” is just about over. Consumers walk through stores, with their devices in hand, ready to compare products and prices, read reviews, and share their experiences with others. At home, they consume media and other content simultaneously, often on multiple devices. (Incidentally, in China, they’ve taken the notion of “time poor” to extremes, often consuming media at hyper speed.) Successful Chinese brands have taken this behavioral evolution seriously. Alibaba’s Hema is a mobile-first supermarket that uses an app as the unifying key between channels. Whether in a store, or standing in their kitchen, a consumer can use it to receive offers, get product information, recipe ideas and then order and pay. The app is so key to the Hema experience that the Hema website does little but direct consumers to download it. Crucially, Hema does not try to convert customers to one channel over another. Instead, it was created as a channel-agnostic experience that simply tailors itself depending upon the channel the customer is using at any given time. Anyone still thinking in terms of digital versus physical is out of touch.
3. Treat experiences like they’re software. Nike, which has enjoyed 18 quarters of double-digit growth in China, has leaned into the notion of experiential retail. It has recognized that, given that consumers expect delivery of items purchased online within 30 minutes, physical environments no longer have the edge on immediacy. While no one should underestimate the importance of e-commerce in China, traditional retailing is holding its own as the years of high growth and high margin sales through platforms like Tmall and JingDong appear to be dwindling. Experience-focused retail environments are proving to be the next evolution of physical spaces. In China, retailers create physical brand experiences in which the brand becomes the interface for consumers. Visits to stores are less about purchasing an item and more about the experience, itself. In turn, purchases often take on the role of souvenir. In Shanghai, Nike’s “House of Innovation” is a good lesson in how to create an iterative experience. The multi-level space contains an LED floor and a three-story wall which can be dynamically updated. Meituan Dianping (this year named “The Most Innovative Company in the World”) is a transactional super-app company that facilitates many retail transactions across the country. Its shared-bike product has several generations in service at any one time, each an improvement on those which came prior.
The overarching themes to these “shift ahead” lessons are perceptiveness, speed and agility. Quoting from an article in Harvard Business Review, “Organizations must shed the mindset that any idea needs to be fully baked … before it’s deployed.” It’s clear that, in China, successful brands cannot afford to be complacent if they wish to retain their position. Retailers must stay continuously attuned to the expectations and needs of their customers and be ready and able to design and deliver new and often unprecedented solutions.
This is as true for communications as it is for systems, platforms, tools and processes. While it became apparent in the research for “Shift Ahead” that many Western brands do incorporate this thinking into their strategies for future growth, we have found that, by necessity, Chinese retailers have this capability and attitude baked through to their core.
Sam Sterling is the Managing Director of Greater China and Japan for experience design and innovation company, AKQA. Outside of work, she is undertaking a doctorate in business administration through Fudan and Durham Universities.