Signal: China's E-commerce Giants go Offline
China is the world’s biggest retail market with a booming e-commerce sector. Online retail in China is projected to grow from 17 per cent in 2017 to 25 per cent by 2020. During the past years online mega-retailers have been transforming retail by embracing the “online to offline” (O2O) model. Chinese online giants are currently in a competition to open physical stores as well as experiential spaces and pop-up shops in order to dominate the new retail industry.
Bricks and clicks
China is the world’s biggest retail market with a booming e-commerce sector. Online retail in China is projected to grow from 17 per cent in 2017 to 25 per cent by 2020. The traditional brick-and-mortar retail industry was first challenged by Alibaba’s online shopping platform Taobao which was launched in 2003 and today China’s retail market consist of various forms of new omnichannel initiatives. During the past years online mega-retailers such as Aamazon.com, Alibaba, Tencent and JD.com have been transforming retail by embracing the “online to offline” (O2O) model. This combination of physical shops with integrated e-commerce enables the customer to get the “best of both worlds” and is referred to as the “brick and clicks” trend or “new retail”.
Chinese online giants are currently in a competition to open physical stores as well as experiential spaces and pop-up shops in order to dominate in the new retail industry. As a response to this fashion and luxury brands are looking into ways to increase customer visitation by developing high-tech and high-end experience stores. Some of the elements featured in these new stores are for instance apps that recognise customers’ arrival, autonomous hands-free shopping carts and sensors that enable customers to just walk out of stores whit the amount payable deducted automatically from their mobile payment accounts.
In so far, the Chinese tech giant Alibaba has been the one to showcase a few of the most forward-looking online to offline initiatives. These include e.g. the hyperlocal Hema Supermarkets where customers can scan the products whit their mobiles and e.g. get information about the product as well as recommendations of similar products. Hemas’ customers can also place orders through the Hema-app and get the food home delivered if they live within three kilometres from the supermarket. When customers are ready with their grocery shopping they pay by using the Hema-app which is linked to their Alipay.
Further, some of the activities related to retail operations are becoming increasingly machine-led in China. The logistics company Cainiao is e.g. using drones, robots and computer vision in its daily logistics operations.
Insights for Finland
Retailers in China are currently looking for innovative ways to elevate their offline activity by the usage of data analytics and new or existing online services. Finnish e-commerce companies with new and innovative solutions might be able to find opportunities in China related to this. An increased provision of online services also results in the need for retailers to ensure that their online platforms are secure in terms of privacy and cybersecurity. This could lead to opportunities for Finnish companies with privacy and cybersecurity expertise.