I’ve just returned from one of three Demandware Retail Connect events; this one in Shanghai. I was fortunate enough to unveil our Democratization of Retail research, which we collaborated with EKN and Li & Fung, and it was an honor to share the stage with the other keynote presenters: Jeff Barnett, our COO, and Jay Li, General Manager, Skullcandy Greater China.
I was also thrilled to spend time with our clients, who not only represent some of the most recognizable brands in the world, but also have thrived in one of the world’s most challenging and complex regions for retail.
The highlight from my week was experiencing this unique, awesome, and growing metropolis. As I sift through observations and attempt to put China’s cultural and retailing phenomenon in perspective, here are some of the most interesting points to share:
Online2Offline is Real
While many western retailers obsess over the often vague and poorly defined concept of omni-channel, many retailers in China have adopted Online2Offline – O2O, that’s what they call it – a much more practical and tangible concept to create a seamless experience between the virtual and physical world. Skullcandy’s Li discussed how this strategy has taken off for the following retail powerhouses, via significant investments that bridge the historical online and offline divide:
- Walmart acquires 100% of YHD.com
- Alibaba acquires 32.8% of Yintai Commercial Real Estate Group
- JD acquires 10% of Hui Supermarket Chain
This new world has caused Skullcandy to rethink their traditional organizational structure, go-to-market strategy, employee skills and incentives. Jay shared an insightful framework that helps define what ‘good’ looks like, and make decisions regarding allocation, marketing, and pricing.
China Leads Democratization of Retail
Democratization of Retail recognizes that connected consumers increasingly dictate and control the terms of retailer engagement. In this distributed, disruptive, and democratized operating environment, retailers must effectively extend their unique brand experience beyond their physical and virtual four walls to wherever and whenever consumers demand.
Retailers in China have embraced democratization more than any other country, primarily driven by the rising middle class, mobile ubiquity, and consumers’ openness to socially-based shopping paradigms. Lacoste and Clarins are two Demandware clients that innovate at the pace of the consumer. Lacoste (see below) has established a fully functional shop on WeChat, and Clarins has integrated its site into WeChat Payment. These brands are now closer to consumers and have reduced the friction that often occurs between browsing and purchasing.
Mobile, Mobile, and More Mobile (Apps)
The mobile nature of Chinese consumers is well known, but it came to life for me as my taxi passed a scooter with a woman on the back playing Mind Craft. Mobile devices are everywhere. The staff at the Hilton Shanghai even had pins that stated “I Heart Digital.” Most, if not all, of mobile interactions are via native apps. Browsers are passed over in lieu of the many icons on peoples’ phones, which are leveraged constantly throughout the day to communicate, navigate, and shop.
Interestingly, though, I didn’t observe store associates leveraging mobile in stores during our tour around some of the largest and most luxurious malls in the world. In fact, we visited a Cole Haan pop-up store next to the Jing An Temple, and while it was an innovative concept that drew a lot of attention, shoppers were required to go in the physical store in the adjacent mall to purchase merchandise.
So, What Does it Mean?
To say that retail is alive and kicking in Shanghai is an understatement. After all, where else would you see two Gucci stores within 2km of each other? While there are some similarities between retail in China and in the US or Europe – mainly the rise of marketplaces, fulfillment challenges, and global competition – it’s truly a unique environment. Western and domestic retailers must understand the local nuances and embrace connected consumers to thrive in this fertile, yet complex retail mecca.