Jiong-Jiong Yu, senior retail analyst at IGD, reveals the top trends shaping developments at China’s largest grocery retailers
China is entering a new phase of retail, becoming more digitised and integrated, with a greater focus than ever on improving the shopping experience. Technologies such as digital price tags, mobile apps, speedy home delivery, scan & go, and facial recognition are being widely adopted – but what else is driving growth?
It is expected that China’s leading grocery retailers will grow at varying rates until 2023. E-commerce giants such as JD.com and Alibaba will see significant growth from both online and offline channels and become the country’s second and third largest grocery retailers respectively. Meanwhile, retailers with nationwide networks like Sun Art, Yonghui, Walmart, CRV and Carrefour will benefit from ongoing expansion, partnerships with e-commerce and tech companies, improved efficiencies and investment in smaller formats. Finally, regional players such as NGS and Wumart will continue their journey of transformation and consolidation.
Pursuing omni-channel retail
More and more retailers in China are pursuing what they talk about as a channel-less – or omni-channel – approach.
While multichannel as a concept has been around for some time and focuses on individual touchpoints (e.g. store, web, social media), the new omni-channel approach prioritises how all channels work together to provide a consistent, flexible and personalised customer experience. Many retailers have different terms for this omni-channel approach; for example, Alibaba refers to ‘new retail’ and JD.com to ‘boundaryless retail’.
RT-Mart, of which Alibaba is a 36 percent shareholder, has aisles designated for the most popular products available on Alibaba’s Tmall online platform, while Wumart and Dmall, a local startup, formed a partnership in 2015. Wumart’s inventory is synchronised to Dmall’s app, so that users receive updated product lists and personalised recommendations.
Suppliers should take inspiration from the concept stores that retailers are trialling and develop new products and services that address customer needs
Payment innovation
The low usage of credit cards, rapid smartphone adoption and the increasing maturity of ecommerce have resulted in the robust growth of mobile payment services in China.
The ubiquitous use of WeChat Pay and Alipay has made QR code scanning part of daily life. Almost all leading retailers have scan & go implemented in their stores.
However, very soon QR codes will be a thing of the past. Alibaba and Tencent have made huge investments in facial recognition since 2013. Carrefour, CR Vanguard, Yonghui, RT-Mart and physical stores of JD.com and Alibaba all have facial recognition payment systems installed.
Alibaba and Tencent have made huge investments in facial recognition since 2013.
Experimenting with new concepts
Different store formats are high on the agenda of China’s leading retailers, all rooted around the following three principles: adapting formats to suit local needs; generating unique in-store experiences; and making changes in-store to make shopping easier.
These retailers are not so much focused on key performance indicators such as sales per square metre, but instead are testing and learning for long-term gain.
CR Vanguard Suguo sells products that are related or often purchased in one shopping trip in several themed in-store areas. With a sales area of 600 sqm, Alibaba’s Hema fast&freshade is a convenience store and also a canteen. A high degree of self-service, a large seating area and seamless connection via the app are the store’s key features.
Adopting robot and smart carts
Technology is revolutionising grocery shopping, with an emphasis on convenience and speed. This is especially true in China, where the speed of adoption is faster than other parts of the world.
Retail robots and smart carts are starting to become the norm in many stores. They can deal with shopper queries, sell, reduce costs and greatly improve efficiency. Although it is still early days, automation will change how retailers operate and how shoppers purchase goods.
Carrefour Le Marché and Carrefour’s latest store in Beijing have robots that roam around the store, carrying promotional items and playing a soft tune to draw shoppers’ attention, while Wumart’s smart shopping carts let shoppers scan barcodes as they shop and pay for what they have picked up before leaving the store.
Carrefour Le Marché and Carrefour’s latest store in Beijing have robots that roam around the store, carrying promotional items
Making home delivery a core proposition
Home delivery is the backbone of retail growth in China. Walmart China has made it clear that it plays a very important role in its growth strategy and made further investment in delivery company Dada-JD Daojia in 2018.
All the major grocery retailers, both Chinese and global, offer express home delivery services, of which speed is the key differentiator. Customers of Yonghui Super Species can make online orders using the Yonghui app and have the goods delivered within 30 minutes. Meanwhile, Sam’s Club (Walmart) delivers more than 1,000 fresh produce items to shoppers’ homes within a one-hour timeframe, reinforcing the image of product freshness and quality.
What does this all mean for suppliers?
New technologies and new ideas are rapidly being adopted by China’s top grocery retailers, so brands need to think how to reach, connect and serve consumers in a completely new way.
Suppliers should take inspiration from the concept stores that retailers are trialling and develop new products and services that address customer needs. Alibaba and JD.com are also rapidly growing in importance. Deeper understanding of their strategies and shoppers will help suppliers create stronger, more targeted approaches.
Development of retail innovation in China is faster than other parts of the world. It is important to keep aware of what is happening, as these innovations have the potential to be hugely disruptive.
Jiong-Jiong provides insight on retailer strategies and industry trends as well as leading IGD’s innovation and drugstore workstreams in Asia. She has worked with both retailers and manufacturers in the last 10 years on shopper insight, growth strategy and category management projects. Her background is in management consulting, with experience in qualitative and quantitative research gained at GfK and dunnhumby.
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