With the rapid growth of the internet economy in the Mainland in recent years, the once profit-making sales model of the traditional retail industry has experienced setbacks while the e-commerce retail model, driven by online sales, has seen exponential growth. The traditional retail industry was further hit by the Covid-19 outbreak in 2020.
To survive the challenges brought by the pandemic, traditional retailers have been forced to transform quickly. However, does embracing digital sales channels necessarily mean a change in fortune for companies amid the current headwinds?
Daphne is one of China's "shoe kings"
– a large shoe company with thousands of outlets across the country. However, it announced in the second half of 2020 that it was planning a large-scale closedown of offline physical outlets in pursuit of its strategic transformation into an "asset-light" business model focusing on online sales. Will such a restructuring lead to a change in the company's fortunes? It remains to be seen.
The commercial use of emerging technologies such as big data and cloud computing enables the in-depth combination of data and business logic, which has created a new retail landscape and an opportunity for a new wave of explosive growth.
However, if the new retail model is simply seen as an integration of physical stores and digital sales channels, it could be said that business transformation is only completed on a superficial level.
The rise of the new retail landscape is not only driven by new technologies, but also by a fundamental change in consumer perception.
While consumers were initially attracted to online shopping by the lower prices and convenience, a "consumption upgrade" means that product price is no longer the key factor for consumers in making a purchase. Instead, they are placing more emphasis on their shopping experience.
From the perspective of customer experience, traditional retailers enjoy intrinsic advantages such as extensive outlets and a physical interactive experience between staff and customers. E-commerce merchants cannot compete in this way. However, there are many ways that online retailers can use technology to enhance customer experience.
Transformation to the new retail model is a major undertaking for traditional retailers. It requires a restructuring of people, products and outlets, which involves an in-depth integration of online and offline channels. Making use of technologies like big data throughout the whole sales process, from personalized and accurate marketing, inventory and logistics forecasting to product delivery, is the key to building a personalized, digitized and smart retail model.
Under the new retail landscape, restructuring and upgrading is an inevitable path for traditional retailers to emerge from the current doldrums. To lay a solid foundation for enhancing their competitiveness, traditional retailers should identify their weaknesses, understand the essence of the new retail model, restructure and upgrade based on existing infrastructure, accelerate strategic adjustment to meet market demand, while also building and retaining customer loyalty and trust.
Traditional retail has limited ways to acquire new customers, and imprecise marketing, which make it difficult for businesses to get an accurate picture of their consumers. The new retail model allows retailers to thoroughly record user data with digital tools, thereby developing a full and clear picture of their customers, which serves as a reliable basis for decision-making. By making a range of marketing tools available, digital transformation also helps increase the repurchase rate of old customers effectively and attract new customers efficiently.
Quality technical support can help retailers shift from physical outlets to the new retail model. HKT, for example, has helped jeweller Chow Tai Fook transform into a sales platform integrating more than 4,800 physical branches and online shopping. This is an example of good practice of adapting to the new retail landscape with clear planning and comprehensive deployment.
Unlike the O2O model that focuses on drawing customers from online channels to physical stores, the new retail model aims at more than just meeting the needs of customers both online and offline. Its aim is also to achieve two-way close-looped channelling, where the online and offline channels, interconnected by a logistics network, are complementary instead of competitive to each other. Ultimately, this offers customers a diverse range of shopping experiences based on different consumption scenarios.