4 innovative “New Retail” models will boost China’s physical retail sector

From February 15th to 21st, the week-long Chinese New Year holiday, sales in the offline retail and catering sectors in China reached RMB 926 billion (USD 146 billion) and were 10.2% higher than the figures from the same period last year.

The accessibility and efficiency of online shopping and e-commerce’s contributed to the sales of offline retail. The 10.2% offline growth not only casts light on the sector’s strong performance during the recent holiday week, but also demonstrates an ongoing growth trend from 2017.

According to figures released by the National Bureau of Statistics of China, the total retail sales of consumer goods reached RMB 29451.1 billion in 2017. An analysis report from Economic Information Daily claimed the rise of “New Retail” strongly supported the re-emergence of physical retail stores and that the trend will continue in 2018.

The Hema supermarket chain, owned by Alibaba, integrates both online retail platforms and offline stores, and it provides clues to the future of “New Retail” models. During the recent Chinese New Year Holiday, daily visits by consumers to Hema offline stores in Beijing, Hangzhou and Shanghai rose 131%, 129% and 89% compared to the week before holiday. More and more customers are welcoming novel “New Retail” experiences. The promotion of “New Retail” businesses helps more customers learn about these services that integrate online and offline retail with big data and other related technologies.

“New Retail” is one of the most active business sectors in China. Everyone is talking about the concept, including manufacturers, retailers, investors, technology suppliers, as well as government officials. Furthermore, companies are creating better technologies for the new format, and Internet, 5G, RFID, and automatic identification systems are driving its development.

Bao Yuezhong, a retail expert, said this round of “New Retail” transformation will be technology-driven and dominated by online business. Capital investors are also playing an important role in the retail revolution. The current retail enterprises should have strong records of innovation and should actively participate in the growing the sector. So, Bao suggested that retail companies pay attention to the following innovations:

1. B2B model for Fast-Moving Consumer Goods (FMCG)

Companies can work to enhance their cooperation with small grocery shops through new retail solutions. Major retail companies have advantages in marketing, supply chains, and distribution channels, and they can grow their profits by using B2B platforms, much like RT-Mart.

The hypermarket chain has developed its B2B ordering app for medium-sized and small grocery shops. Convenient stores in local communities can order various products, from snacks to fresh fruits and from office supplies to home appliances, via the app,. The hypermarket chain, as reported, thus turns its 400 stores in 200 cities into 400 storehouses. Local convenience stores can receive the ordered products within 24 hours. The app is now running on its eighth version and has attracted more than 200,000 users since January 2017.

2. Unmanned model

The unmanned retail model, which includes unmanned stores and unmanned shelves, can expand within the retail business in the future. Unlike startups, which may struggle to adopt unmanned retail models, major retail companies with experience in retail operations may be able to keep their products from being stolen.

3. Vending machines

According to Yang Zhi, General Manager of Sanquan Xianshi, there is one vending machine for every 50 people in Japan, and one vending machine for every 5,000 people in China. There is clearly huge potential in increasing the number of vending machines. Major retail companies can combine store upgrades with the commissioning of vending machines, and more of these machines will be promoted in the retail sector in the future.

4. Unmanned cashier

Self-service payments can create value not only for stores, but also for customers who enjoy the experience and the speedy checkouts.

After all, innovation has become the main driving force for promoting social and economic development. It is crucial for retailers to recognize these changes and be more creative and active in expanding “New Retail” services.

(Top photo: Alibaba’s Hema store. Photo from Sohu.com)

Y.R. Zhao
Y.R. Zhao

Zhao is our columnist. She previously worked at China Daily, and she was the chief Southeast Asia correspondent while living in Bangkok. She holds two master’s degrees from the University of Sydney and Australian National University. She is a foodie and avid marathoner. She believes technology will change our lives and that China is leading the trend.

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