What UK can learn from Chinese retail
Soaring sales in China show that now is the time to ditch outdated business practices and embrace the smartphone shopping revolution “The tech-savvy Asian market is far more receptive to alternative retail techniques and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.