Future of Retail: Redefine Market Share in Time

The unique digital landscape in China is a joint product of consumer preference, technology and a variety of market players. The two indicators that mark the forming of this landscape are the ever increasing penetration of online retail and adoption of mobile devices. Online retail revenue in China in 2016 totaled USD 758 billion, accounting for 15.5% of the retail sector, with the first three quarters in 2017 seeing online retail maintain an over 25% growth rate along with higher penetration rate. Meanwhile, the increasing adoption of mobile devices also prompted China’s shift towards digital retail. Not only have mobile devices become the primary media for online shopping – 82% of the Singles Day sales in 2016 were made on mobile devices, they have also become the top payment choice for consumers – third party mobile payment in Q2 2017 amounted to USD 4.2 trillion in volume.

In this unique digital environment, a variety of consumer-centered forerunners and pioneers, aided by improved tech and analytics, are reshaping the retail ecosystem and creating the future of retail: 

• Disruptor. As market forerunners, Alibaba, Tencent and JD have built on their exponential growth and expansion two multi-industry and consumer-centered ecosystems, thus becoming the leading force in facilitating the transformation of the retail sector via resource integration and technological advances.      
• Partner. The substantial development in China’s retail sector has made service and technology suppliers an integral part of the market. By providing relevant support for the retail system, these suppliers build partnerships with disruptors, jointly reforming the retail ecosystem through technology and innovation.       
• Retailer. Faced with the revolution in the retail sector driven by disruptors, conventional retailers are taking an increasingly proactive stance with regard to the changing consumers and technology as well as the transformation and reshaping of the retail ecosystem.

Fig 1. Reshaping the Future of Retail through Innovation

All the attempts made by these players are innovative efforts aided by tech and analytics to keep up with the changing needs and purchasing habits of the new generation of consumers. In its consumer research, Deloitte finds that the new trends in consumer needs have raised new demand for the market players: 

• Make it easy. Along with the product purchased, the life scenario and the very experience of such purchase are held in equally high regard by consumers. The new generation of consumers expect to enjoy efficient and effortless shopping experience at any time and in any life scenario.
• Make it personal. Personalized consumer demands require players in the retail market to gain an in-depth understanding of their consumers and cater to their precise needs.    
• Make it special. In addition to sales events designed for the general public like Alibaba’s “Singles Day Sale” or JD’s “618 Festival”, consumers are looking for unique experience to celebrate and share the special moments of their lives. 

Fig 2.  Three Dimensions of Consumer Demands

Fig 3.  Major Trends in Consumption

The very notion of the “future of retail” stems from the changes brought along by disruptors and the future landscape of the retail sector will continue to change as the transformation deepens. According to Zhang Tianbing, “leading disruptors such as Alibaba and Tencent & JD are devoted to facilitating penetration at a range of consumer touch points and propelling the transformation via resource integration and innovative models, which will inevitably trigger another significant change in the future of retail – retail competition will no longer be bound by conventional notions of products and geographic markets. Future competition will be a battle for consumers and their time, with the key criterion to assess market share being the percentage of the 24 hours of a consumer’s day occupied by the market player.” Tencent’s WeChat has already taken up 30% of smartphone users’ time in China, while Alibaba is also trying tirelessly to occupy consumers’ time with increasing investment in social network, media and entertainment. By taking up more time in the daily life of consumers, disruptors can reinforce the connection with consumers and provide precisely personalized products and services based on the consumer profile generated from collected data, meeting consumer demands around the clock. This can be seen in the examples of Alibaba and Amazon:

• Alibaba’s ecosystem consists of a variety of elements including shopping, media, finance and logistics. Through this ecosystem featuring high level of O2O integration, Alibaba is able to meet consumer needs on all fronts, to integrate consumer data and form the most valuable core – consumer insight.
• Amazon’s entry into fashion has shown the market another strength of disruptors. Equipped with more direct consumer engagement and more comprehensive consumer data, disruptors are able to gain profound understanding of consumers and use this insight in the design and production of their own brands to precisely cater to consumer demands. Moreover, aided by ever more sophisticated consumer insight, disruptors may also explore more precise segmentation, further challenging the long-established positions of conventional brands.   

Fig 4. 24 Hours in a Consumer’s Day

In this article we have covered the characteristics of consumers and market players in the transformation towards the future of retail and the idea of engaging consumers in different life scenarios around the clock. More articles on the future of retail will be released on major trends and coping strategies.