Retail in China – the dragon is soaring to new heights

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Digital transformation has had a rapid and profound impact on the retail sector in China. Innovation and rate of growth in Chinese retail can compare with any western economy, and customer preferences are evolving rapidly, too. The line between physical and digital shopping is now blurred, and Chinese consumers have jumped on board the omnichannel approach to retail – though with that, their expectations have increased as well.

Today’s Chinese consumer now expects a seamless, integrated “anytime, anywhere” retail experience. This evolution is forcing retailers to improve their processes and capabilities to meet these new customer demands, creating significant opportunities for agile and forward-looking companies, as they seek to deliver digital support and innovations to enhance the retail customer experience.

The new Chinese consumer

The evolution of retail in China can be linked to socio-political changes in general. Shoppers are simply spending more, with demand in retail increasing 11.9 percent annually. Disposable income rose by 6.3 percent in 2016, and consumers are now essentially doing what the government wants them to do – spending more and invigorating the economy rather than putting the money away for a rainy day.

The online imperative

According to research by KPMG, almost 50 percent of Chinese consumers purchased a product online two to three times a month in the past year, far in excess of the global average of 27.9 percent. China’s e-commerce industry has become huge, and today far outstrips any other country in the world. According to the Chinese National Bureau of Statistics, Chinese shoppers spent $750 billion online in 2016 – more than the U.S. and the UK combined.

That China’s retail landscape has changed so dramatically, with the rapid embracing of digital marketplaces, technology platforms and online habits, is perhaps surprising – but the fact that it has so swiftly surpassed retail sectors in Western markets is truly amazing.

For digital, see mobile

Another interesting element is that China has leapfrogged the initial e-tailing boom of the 1990s and gone straight to digital and mobile shopping. The digital revolution in China coincided with growing disposable income and consumption, and as a result, e-commerce has quickly become the norm for consumers.

Mobile online payment users in China grew rapidly in 2016 and reached 469 million, a rise of 31.2 percent year on year. The percentage of China’s connected consumers making mobile online payments also grew to 67.5 percent in 2016, up from 57.7 percent in 2015.

New tools, new customers, new approaches

Retailers in China are using new digital tools like chatbots and predictive voice analytics to enhance the retail offering. Customer experience management (CEM) is all about creating differentiated experiences for customers across multiple touchpoints, including the traditional contact center. Chatbots can be integrated into retailers’ systems to engage with consumers in all new ways and create much more in-depth conversations.

This multiple touchpoint experience ties in with the omnichannel approach to retail. Chinese retailers who want to lead and stay competitive need to think digital first and be customer-centric: which means being an “omni” business. In the same way that customers want to benefit from communicating with retailers via every available communication channel, retailers should enable information flow between themselves and all partners in the supply chain. This can encourage faster production and supply of goods and in scalable ways to address Chinese shoppers’ demands.

China’s retailers are taking this need seriously; enabling the integration of new ways of communicating with customers and partners means removing complex legacy systems from the organization. It means getting rid of vertical applications and it means digital transformation, shifting to robust cloud or hybrid IT platforms that are tailored to providing seamless, efficient information transfer.

Research shows that Chinese companies will invest pretty much as much in cloud services as the global average over the next one to three years. They are also much more likely to move to cloud services to reduce capital expenses than the global average and more likely to adopt cloud services to better enable mobile workforces. Chinese retailers are leveraging the power of cloud to take the lead in the global retail market, with around 20 percent of them stating they believe cloud technology will drive innovation in the industry over the coming years.

Innovate to succeed

Chinese retailers are putting their faith in innovation to keep driving the sector forward. One in ten believes that automated technology will be the main driver of innovation, while they also believe mobile platforms and apps, 3D printing, biotech/digital health tools, Internet of Things (IoT) and AI are the tools that will help them thrive and continue to grow.

It is an exciting time for retail in China, and digital technology is central to the industry’s prosperity.

 

To read more about China and the digital retail revolution, download the whitepaper titled “Winning the China Retail Game.”

Jack Zhang
Jack Zhang is Country Manager, China for Orange Business Services, and is responsible for leading the business and managing operations country-wide. He supports Orange’s digital transformation vision for enterprises by developing opportunities in key growth areas including hybrid networks, IT services and cloud.  Jack has over 15 years of experience in the dynamic IT and telecommunications market in China and has a deep understanding of the market and the communications industry.