China’s scramble for “new retail”

Earlier this year JD launched its first 7FRESH, a 4000 square-metre grocery store in Beijing that follows many of the new retail concepts from Alibaba’s Hema stores. JD heralded the supermarket the first of 1000 stores that could open in the next three to five years.

The focus of 7FRESH is a “personal and educational” hands-on shopping experience including “magic mirrors” that sense when customers pick up a product, and display product information such as nutritional facts and origin.

It is part of the growing “new retail” trend in China which has seen online giants shake up the bricks-and-mortar scape by creating richer, more convenient shopping experiences which drive significantly higher sales than traditional retail stores. Much like Alibaba’s Hema, JD is using big data from its 266.3 million shoppers to help craft the experience.

Physical stores still account for more than 80 per cent of China’s retail overall and well over 90 per cent of grocery sales, so JD and Alibaba’s battle for supremacy will be interesting to watch.

Whilst JD’s market cap is just one-seventh of Alibaba’s, it has some very powerful organisations behind it. Tencent is the largest shareholder of JD, owning a fifth of the retailer. Its super-app WeChat leads China’s o2o and social media spheres, which will provide valuable data and influence to assist in the success of 7FRESH.

Walmart – the world’s largest company by revenue – owns 12 per cent of JD and is likely to provide insights and support to 7FRESH from its wealth of retail experience including 22 years in China.

In short, there is no better player than JD to take on the mighty Alibaba in the new retail game. “New retail” in China is happening, and happening fast, and brands that best understand and embrace it are most likely to succeed in the years ahead.

Marketers need to understand that the difference between the China and Australia markets is not only about the “Great Firewall” and language barriers, but more importantly, the consumer motivations and behaviours. In other words, why do they buy?

One important fact is the Chinese government’s implementation of the one-child policy in 1979. Demographers estimate that the policy averted at least 200 million births between 1979 and 2009. From an online marketing perspective, it is important to recognise that the majority of China’s online consumers between ages 20 to 40 are from those only-child families.

For the parents and grandparents (post-50s) of the one-child policy children, having lived through The Great Leap Forward and Cultural Revolution, they consider it an imperative to improve the conditions and experience for their children.

What does this mean to marketers?

The 20 to 40 age group represents a huge market and, unlike their elders, they are more willing to try new things, to indulge in luxury goods, are more brand conscious and more receptive to foreign ideas. The older generation are hesitant to spend money on themselves, but are more compelled to buy for the benefit of their child/grandchild.

China Digital Conference 2018

Now in the seventh year the China Digital Conference 2018 (CDC) is taking place in Melbourne on 21 August and Sydney on 23 August, and will present a major focus on the key drivers across the eCommerce platforms in China and important insights to new retail developments.

Find out more and secure your seat at www.chinadigital.com.au

Mark Tanner, Founder, China Skinny Shanghai

Inside Small Business is an official media partner of the China Digital Conference 2018

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