An Explosion of Online Lifestyle
Due to the impact of COVID-19, most Chinese people have been staying at home for more than three weeks. This is a normal working afternoon at the CBD in Guangzhou, China. It was neat & beautiful as usual, well-ordered, but it seemed so empty, and much quieter.
At the same time on the other side of the city, two more self-check-out points opened in the neighborhood supermarket, but there were still long queues.
Supermarkets must have been the busiest and most lively public place over the past three weeks in China. To avoid being infected by the virus, staying away from public places has proved to be the best solution. However, food acquisition, as a life necessity, has beaten the panic toward infection risk. During this special period, supermarkets have well addressed people’s daily needs. It has also functioned as a comfort for any depressed and anxious people after a prolonged time of staying at home.
Traditional supermarkets have struggled over the past few years, due to the disruption from online shopping and an increase in people dining out and using food delivery. Given the epidemic situation with restaurant closures, logistics slowing down and an under-serving online grocery offer, greater reliance has resumed on supermarkets. They’ve suddenly become so busy, that because of insufficient manpower, Hema supermarket (Freshippo) even developed a new model of “shared economy” – sharing staff among restaurants.
The biggest beneficiary seem to be the online fresh produce and grocery platforms. The surging customer base was totally unexpected three weeks ago. Even some “old-fashioned” grandmas and grandpas have become new fans of shopping online. New temporary delivery points have become a special sight at the gates of many neighbourhoods.
"Necessity is the mother of invention." In a way, necessity during this epidemic triggered the explosion of a new lifestyle: Online shopping, entertainment, education, medical service and cloud work platforms have all become vital parts of our daily life.
A New Crossroad Facing Physical Retailing
In this context of "online lifestyle", we want to dig into such questions as:
- Will this trend of “consumption shifting online” in the past few weeks continue in the long term?
- If yes, what then, makes physical retailing valuable?
In 2019, the online retail sales of consumer goods in China reached 8.5 trillion RMB, accounting for 20.7% of the total retail sales. With expanded user groups “born” in this epidemic to continue their contribution, undoubtedly this figure will climb to a new high in 2020.
In fact, this is a not a new trend to retailers in China. For many retail brands, investments into online have long been in full swing. Meanwhile, online business channels are also diversifying: Traditional e-commerce platforms such as Taobao, Tmall and JD.com are facing increasing challenges from new platforms such as WeChat Mini Programs, Tiktok KOL Live Marketing etc. Omni-channel retailing is becoming more and more complicated.
However, it doesn’t mean that physical retail venues are falling out of the game. Thanks to mobile payments and immediate delivery, a “delayed transaction” could happen anytime and anywhere after a consumer’s store visit. Physical stores are likely to turn the “offline traffic” into potential online shoppers. They may not purchase during store visit, but they could always buy from the WeChat mini-program or other online channel anytime anywhere later. In some sense, it is a “traffic generator” for online sales.
Since Jack Ma, founder of Alibaba, developed the concept of "new retail" and launched Hema Supermarket (Freshippo) at the end of 2016, more and more traditional e-retailers entered the “offline” battle ground. Among them, there are JD.com, Lifeease.com, Three Squirrels, Perfect Diary, Inman fashion etc. Benefiting from the data and experiences accumulated through previous online operation, their offline expansion easily outraced their peers, and proved to be more efficient. On the other hand, through “adding WeChat friends” from offline stores and interacting with them, they’ve acquired new customers and more online transactions. According to data presented by Perfect Diary, 65% of their new customers are from offline stores.
Therefore, the focus of retailers' online competition today is no longer how many e-channels you operate in, but how efficient is your omni-channel campaign? Have you successfully achieved data interactions of online/offline channels, and transferred them into sales transactions?
On the other hand, it has been proven that the passion for physical shopping and an entertaining environment will never be diminished because of the impact from online consumption. After more than three weeks of “quarantine” at home, Chinese consumers have grown an even deeper feeling and understanding about their profound demand on “space with various functions”, “offline social interaction”, and “physical, situational experiences”.
A recent online survey by People's Daily presented some interesting results about “What do you mostly want to do after the epidemic?”: More than 100 million people participated in this survey, sharing these common answers: “get out to public spaces, watching people come and go”, “get-together with friends”, “go travelling”, “outdoor sports”. Other behavior data shows that on 20th Feb, Hangzhou Tower shopping center witnessed a sales break-through to 11 million RMB within 5 hours of re-opening!
An imminent call for omni-channel network integration
The campaign of traditional e-retailers going offline has suggested how important it is to have the leverage of offline outlets. The most typical cases are Hema Supermarket (Freshippo) and Luckin Coffee, who require consumers to place orders and payments through their dedicated mobile app. In this way, they’ve successfully created a membership ecosystem and accumulated data covering both online and offline: location data, consumer profile, and behavior data successfully linked up.
Obviously, it is unrealistic to ask the consumers to install endless apps. Nevertheless, when a retailer is selecting an online platform, it is worth checking: what kind of “data return” could I get?
In the short to medium term, some shopping malls may suffer from rent drops and tight cashflow. To retailers, a tenant market might be on the horizon. But more importantly, this is also a key point to review and layout an integrated omni-channel network plan!
To shopping centres, this might be the worst of times, and the best of times. In addition to further effort on “looking attractive, optimizing experiences, creating freshness and differentiation”, a very important subject for shopping centers is to think about how to provide more value to tenants, by online/offline integration. In fact, some front-runners in this industry have invested significant resources on relevant technology a long time ago, and this has proved to be unexpectedly fruitful.