Looking East for lessons on e-commerce
Scale of China’s sector and pace of evolution should inspire retailers seeking both online and offline growth
ratings their users gave retailers around the world, which informed the platform’s decisions about whom to open negotiations with to source products. The buying patterns of e-commerce customers provide a constant feedback loop on what is likely to sell — the platforms are effectively crowd-sourcing their buying priorities.
But don’t think it’s only online sales where you can learn from China’s leading businesses. Roughly a quarter of all retail sales in China now come from e-commerce, but the platforms have ambitious plans for their investments in physical stores, too.
Here, they bring an online mentality to traditional retailing. For example, Alibaba’s investments in the supermarket chain Sun-Art have seen it introduce a best-seller promotion in each store. The idea is to test the sales of popular online products that the store wouldn’t normally stock; products that sell remain on sale, but those that disappoint are quickly taken off the shelves. This trial-and-error approach to retailing — a willingness not to get it 100 percent right the first time but to rapidly iterate new promotions — is common in e-commerce but avoided by traditional retailers.
Elsewhere, Alibaba’s focus on generating traffic for its online platforms is playing out in the stores of Hema, its own offline supermarket format. Based on its understanding of the number of repeat purchases required to convert a buyer into a loyal customer, Hema discounts key products for much longer than traditional supermarkets in order to drive repeat visits and build customer loyalty.
China’s Tencent offers another example of what is possible for e-commerce players operating offline. Its purchase of a stake in Yonghui Superstores gives it access to a wealth of data on customer spending habits. Combined with the data it is already generating from its e-commerce platform and social media sites — its WeChat service has 1 billion users — it is a hugely powerful resource.
All of China’s leading e-commerce players are working hard on building a holistic picture of customers’ online and offline behaviors to inform their direct marketing and sales strategies. None of which is to suggest that leading Western e-commerce players aren’t also doing good things. Amazon has its own forays into physical retailing — new-format bookshops and cashierless supermarkets, for example — where it is also applying what it has learned from e-commerce.
Nevertheless, the sheer scale of China’s e-commerce sector, and the pace at which it is evolving, make it the place to study for retailers developing a strategy for both online and offline growth. For a vision of where your business should aim to be in six months — and beyond — look to China.