Foreign retailer bets on China’s ‘New Retail’ future
A consumption-driven economy creates bright opportunities
With the Chinese economy becoming more consumption-driven and the country’s “New Retail” layout booming, foreign investment cannot miss out on growth opportunities, a senior executive told the Global Times.
An amazing change has been witnessed in the last few years in the retail and consumer environment in China, Bernie Stefan, vice president of Nestle Zone AOA, told the Global Times in an exclusive interview on Wednesday during the World Economic Forum (WEF)’s Annual Meeting of the New Champions, also dubbed the Summer Davos Forum, which was held in North China’s Tianjin city from Tuesday to Thursday.
“A few years ago, the Chinese retail system was very traditional, mainly driven by the normal stores, yet with the emergence of e-retailers or e-commerce platforms, this has completely transformed within a short period of time, like a leapfrog,” Stefan said.
“Today, China’s retailing has really taken a leading position globally and is now shaping the future of New Retail, an advanced form of complete integration between online and offline retailing,” he continued.
The New Retail model proposed by Chinese e-commerce giant Alibaba Group Holding in 2016 is now booming in China.
The company’s Hema Supermaket, which allows users to order online and then have products delivered to their homes within half an hour, has been testing the new model and has made footprints with 64 stores in 14 Chinese cities so far, serving about 10 million consumers since it was established in January 2016, according to Alibaba’s annual investor day event held on Tuesday.
Stefan believes that the biggest link between online and offline integration is payment solutions, which is a key driver of new retail implementation. “Most people in China are using digital payment tools, which creates a new level of integration and data availability.”
Chinese e-commerce platforms are helping to create such “a link ecosystem”, and transnational brands like Nestle are also embracing it.
To define competition in the Chinese market, which is quite fierce and the most competitive in the world, it is very different from years ago when the market size was a key index. “Now, it is whether you can offer products and services that can meet targeted consumers’ expectations for a vertical segment or sub-segment,” Stefan noted.
“To become more relevant with consumers, Nestle is partnering with Alibaba and JD.com to become more digitalized since the boundary between digital economy and real economy is becoming more blurry in China,” he added.
So far, Nestle has set up 33 factories in China, the second-largest market for the company after the US.
“The last few years have witnessed a strong shift to domestic and personal consumption for China’s economic growth from investment-driven, which I think is a positive indicator and an opportunity for us to increase investment in the market,” Stefan said.