What UK can learn from Chi­nese re­tail

China Daily European Weekly - - Comment - By TOM ADEYOOLA The au­thor is the founder and CEO of Me­tail.

Soar­ing sales in China show that now is the time to ditch out­dated busi­ness prac­tices and em­brace the smart­phone shop­ping revo­lu­tion “The tech-savvy Asian mar­ket is far more re­cep­tive to al­ter­na­tive re­tail tech­niques and chal­leng­ing the norm than its Western coun­ter­parts.”

Novem­ber saw a global surge in re­tail sales be­cause of two very dif­fer­ent events. In Europe and the United States each year, shop­pers bat­tle — some­times lit­er­ally — for bar­gains over the Black Fri­day week­end. In China, con­sumers en­joy the largest on­line re­tail event of the year, Sin­gles Day.

Black Fri­day — fall­ing on the Fri­day af­ter Thanks­giv­ing of Novem­ber — seems to have reached peak hys­te­ria in the West. Though Thanks­giv­ing is not a univer­sal hol­i­day, the day af­ter it in the US has be­come a shop­ping hol­i­day, with re­tail­ers en­tic­ing cus­tomers into their stores with some­times huge mark­downs. The at­tempt by the re­tail in­dus­try to boost sales in the pre-Christ­mas pe­riod is some­where be­tween a clever mar­ket­ing ploy and a des­per­ate way of shift­ing stock.

This year, shop­pers bought hun­dreds of mil­lions of prod­ucts on Ama­zon over the long week­end, and UK shop­pers went on a shop­ping spree amount­ing to £2.5 bil­lion ($3.3 bil­lion; 2.8 bil­lion eu­ros) on Black Fri­day alone.

Con­trast this with Sin­gles Day. Shop­pers at Alibaba alone spent more than $25 bil­lion dur­ing this year’s event, smash­ing pre­vi­ous records for the world’s largest re­tail ex­trav­a­ganza — to­tally eclips­ing any UK and US spend­ing on Black Fri­day and Cy­ber Mon­day. Spend­ing across Chi­nese re­tail­ers hit more than $38 bil­lion, a growth rate of over 45 per­cent on last year’s event.

Sin­gles Day be­gan as a cel­e­bra­tion of sin­gle life, which has now be­come a shop­ping frenzy. It has def­i­nitely moved on from be­ing a cel­e­bra­tion of the sin­gle life, with lonely hearts treat­ing them­selves on 11/11, a day cho­sen for its col­lec­tion of lonely num­bers.

Alibaba pounced on the day to make it the big­gest re­tail event of the cal­en­dar, em­u­lat­ing Cy­ber Mon­day and sur­pass­ing its suc­cess.

The huge surge in on­line spend­ing is sup­ported by a tele­vised gala to mark the run-up to the start of the event. This year, celebri­ties in­clud­ing rap­per Phar­rell Wil­liams and ten­nis star Maria Shara­pova gave their en­dorse­ment to the event, and to Alibaba as it en­cour­aged shop­pers to part with their cash. Along­side Jack Ma, founder of Alibaba, ac­tress Ni­cole Kid­man man­aged to say a few words of Man­darin at an event that acts as a barom­e­ter for con­sumer con­fi­dence in China.

Alibaba’s busi­ness model — a plat­form for re­tail­ers to set up an on­line store — has much to teach its UK and Euro­pean coun­ter­parts.

”New re­tail” is the phi­los­o­phy that de­fines Alibaba’s strat­egy. It aims not just to make shop­ping ef­fi­cient but en­ter­tain­ing, too. Sin­gles Day is the epit­ome of this, with Joseph Tsai, Alibaba’s co-founder and vice-chair­man, say­ing, “On Sin­gles Day, shop­ping is a sport, it’s en­ter­tain­ment.” It’s the an­tithe­sis of the tra­di­tional prac­tices of an­ti­quated UK and Euro­pean re­tail­ers, run­ning to stand still in the face of ris­ing over­heads and dip­ping con­sumer con­fi­dence.

Tra­di­tional re­tail as seen in the West is an in­dus­try where old prac­tices of­ten dom­i­nate. Own­ing prime real es­tate, de­signed to catch foot­fall and passers-by while out on a shop­ping out­ing is now be­com­ing ob­so­lete. In­ef­fi­cien­cies in an­ti­quated sup­ply chains are eat­ing away at mar­gins, and Ama­zon’s rise is only go­ing to mean tra­di­tional re­tail­ers’ lunch money gets stolen. Re­tail­ers are too short-ter­mist in out­look — their main aim is to mit­i­gate losses, rather than go for sales and see the big­ger pic­ture.

The Chi­nese e-com­merce model can be a source of in­spi­ra­tion for the turn-around of global re­tail.

Ama­zon and Alibaba have for some time been in the race for a $500 bil­lion val­u­a­tion, and Ama­zon nar­rowly pipped Alibaba to the post ear­lier this year. Both dom­i­nat­ing re­tail, they’re mak­ing strides into new ar­eas, like gro­ceries, and share prices are surg­ing. But in London and New York, com­mer­cial rents are down and high street stores are clos­ing. Cloth­ing re­tail­ers in par­tic­u­lar are be­ing re­placed by cof­fee shops, beauty sa­lons and gyms as cus­tomers spend more time on ex­pe­ri­ences than on high-street shop­ping. The con­sumer bat­tle­ground is now dig­i­tal. Whereas Black Fri­day aims to get cus­tomers in-store the day af­ter Thanks­giv­ing, Sin­gles Day is an on­line-only af­fair. The most in­no­va­tive re­tail­ers world­wide are con­cen­trat­ing their ef­forts on dom­i­nat­ing the smart­phone. Whereas 20 years ago con­sumers down­time was spent in a shop­ping mall or on the high street, this has changed. The smart­phone is now the place where work, so­cial­iz­ing and leisure take place, and shop­ping is far from an ex­cep­tion to this. In the US, al­most two-thirds of vis­its to re­tail­ers’ web­sites al­ready come from the smart­phone.

The tech-savvy Asian mar­ket is far more re­cep­tive to al­ter­na­tive re­tail tech­niques and chal­leng­ing the norm than its Western coun­ter­parts. While be­ing a young com­pany is not nec­es­sar­ily ad­van­ta­geous, the agility of nascent Chi­nese com­pa­nies and the abil­ity for mil­len­nial founders to see op­por­tu­ni­ties and dis­rupt es­tab­lished prac­tices cer­tainly is.

Not just the new smart­phone bat­tle­ground, but a fo­cus on the con­sumer and the data they can pro­vide is a char­ac­ter­is­tic of fear­less Asian com­pa­nies out to put the con­sumer at the heart of their of­fer­ing.

Har­ness­ing the dig­i­tal opens up new pos­si­bil­i­ties for per­son­al­iza­tion. This year’s Sin­gles Day of­fers were smaller but more tar­geted and per­son­al­ized, as sell­ers get to know more about their cus­tomers and what they are most likely to pur­chase.

Alibaba Group not only runs the con­sumerto-con­sumer shop­ping plat­form Taobao, but also group shop­ping and price com­par­i­son web­sites are also a key part of their wider re­tail strat­egy. When united with the datamin­ing and pro­cess­ing pow­ers of Aliyun, Alibaba’s cloud-com­put­ing plat­form, the com­pany can know its cus­tomer more in­ti­mately than any other re­tailer.

It en­vi­sions a fu­ture in which it can rec­om­mend one prod­uct on a smart­phone and an­other on a shelf in-store at the same time and de­liver them to­gether to the shop­per’s door within half an hour, all so the cus­tomer doesn’t need to carry their bags home.

Now is the prime time for the world to keep a close eye on Alibaba and China’s e-com­merce in­dus­try. What three lessons can be learned from Asian re­tail­ers?

To keep up with the rate of growth in the East, Bri­tish com­pa­nies need to take a leaf out of Asian re­tail­ers’ books and be more will­ing to free them­selves from es­tab­lished busi­ness prac­tices that frus­trate in­no­va­tion. Busi­nesses need to be more aware of the dig­i­tal in­no­va­tions and data that will in­crease ef­fi­ciency and could trans­form the sup­ply chain. Fi­nally, they need to put the con­sumer at the heart of their busi­ness model and em­brace the smart­phone revo­lu­tion.

By con­nect­ing the phys­i­cal with the dig­i­tal, young Asian re­tail­ers are in­vest­ing more in em­brac­ing all chan­nels to get their cus­tomers over the line, and the epi­cen­ter of global spend­ing has ac­cord­ingly shifted east­ward. Whereas in the West, the fo­cus is on sur­vival and cost-sav­ing, the rise of the mid­dle class and the rapid ur­ban­iza­tion in the East mean that the emer­gence of a con­sumer class has cre­ated a dra­matic in­cen­tive to in­vest in growth.


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