Look­ing East for lessons on e-com­merce

China Daily European Weekly - - Comment - The au­thor is a part­ner at OC&C Strat­egy Con­sul­tants. The views do not nec­es­sar­ily re­flect those of China Daily.

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.

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