What’s happening with retail in China?

It’s time to sit up and take notice of China – if you haven’t already. After all, this is the year that it will overtake the US to become the world’s biggest retail market. Or so a new report from eMarketer says. What’s more it’s expected to stay that way until 2022 at least. That’s a pretty amazing feat given that just 10 years ago China’s retail sales were only a quarter of the US’.

With 800 million consumers though, is it any wonder that China is packing such a retail punch? The country is also the world leader when it comes to ecommerce sales, helped in large part by the efforts of home-grown behemoth Alibaba which sucks up more than 50% of all ecommerce in the country.

It’s this online boom that is helping China to claim retail’s top spot. At present online claims just over 35% of overall retail sales in China. That’s a far higher percentage than any other market in the world. That’s not to discount the importance of physical stores, which still bring in more than 65% of business

The country is also benefitting from greater wealth among consumers, even though China’s economy grew at its slowest rate last year since 1990. Rising incomes mean that many people have more purchasing power and are spending more overall. In November, Alibaba had another record-breaking Singles Day, China’s annual shopping festival, with sales of $30.8 billion. Rival JD.com notched up $23 billion of sales, which shows just how big this retail event is as a whole.

This is just the tip of the iceberg for China’s retail though. The country’s adoption of digital innovations like mobile wallets for payment and shopping through social media channels like WeChat are helping to drive growth in sales.

Reportedly 37% of Chinese customers shop from their smartphone. What’s more, reportedly over 95% of people in China who go online have used a smartphone to do so. Alibaba’s own annual active users number 636 million – although this is across its various services.

No wonder brands from all over the world are looking at how to get a piece of the pie. To do that though you need to understand what’s happening in the market. Here’s our lowdown on the big developments currently taking place:

New Retail

If you’ve heard anything about Chinese retail, you’ll have heard the term ‘New Retail’. Coined by Alibaba back in 2016, it’s a vision of retail that blends stores, data, online and logistics in a seamless way.

It intends to erase the gap between online and offline retail and instead lets customers shop how they want to shop – whether that’s the instant gratification of in-store, buying online for pick-up, shopping in-store for home delivery…. You get the idea. You could argue that New Retail is not actually that ‘new’ but a more sophisticated version of the omnichannel idea that we all know too well.

Key to the New Retail movement though is the smartphone. Given Chinese consumers’ ease with tech and the fact that smartphones go everywhere with us, and are often never far from our reach, it makes a lot of sense to put them at the heart of the store experience. By linking up the store and online, and adding useful tech integrations, companies like Alibaba are making sure they cater to how customers shop now – and in the future.

One of the best examples of New Retail in action is Alibaba’s very own Freshippo (formerly Hema) supermarkets. The stores are a great mix of tactile and digital experiences that let customers shop how they want.

You can go in-store, pick the groceries you want, pay and go. You can browse the store and get your purchases delivered to your home. Or you can buy online and go in-store to collect. Or you can buy online and have your groceries delivered.

You need to download the partner app to navigate the space. Every product can be scanned to bring up information from when it arrived in the store to logistics information to reviews to recipe ideas. It’s the sort of information we’re used to accessing when we shop online, but now easily translated into the store. Payments are made via the app through Alibaba’s own Alipay or Taobao. There’s also the option to pay through facial recognition if you desire

Online orders are fulfilled from the store with staff getting orders to their devices, picking goods from the shelves and bagging them up. The bags are loaded onto overhead conveyor belts which whisk them out to the back of the store for delivery. You can have your products at your home in as little as 30 minutes from placing your order for delivery.

Naturally Alibaba is harvesting masses of data from these interactions to help improve its service. This might mean letting you quickly reorder past purchases, but it’s also used to run each store better by tailoring what’s in stock based on local demand.

While there’s all this great tech-powered stuff going on, the store is also a place for customers to physically explore, touch and be inspired by the food on offer. Customers can shop for fresh seafood, which can be prepared and even cooked for them if they wish, visit the café, browse the deli, have food cooked for them ready to eat, and more. In the Shanghai store there is an app-powered restaurant where your food is delivered by mini robots.

The idea is to give people a feeling of connection to their food, so they get more enjoyment out of buying and eating it. The New Retail approach seems to be paying off as Alibaba has reported that Freshippo stores that have been open more than 1.5 years see 60% of sales come fro