"I had been reading and hearing from colleagues in the market about the rapid pace of change in China, so I wanted my team to experience that," Kinsella said. "We structured our trip all with the goal of bringing meaningful insights back to our clients."
The objective was to experience a diverse, representative mix of forward-thinking Chinese companies, catering to consumer preferences.
Chinese consumers like to shop at brick-and-mortar stores and prefer fresh food they can see and touch. In fact, China's online retail activity makes up less than one-fifth of total retail sales, according to the Ministry of Commerce. The success of retail in China is evidence that a future does exist for legacy brick-and-mortar establishments that are willing to embrace new digital technologies and experiences.
The Havas Media N.A. leadership team visited three distinct cities — Beijing, Hangzhou, and Shanghai — that, together, tell a story about a rapidly changing retail marketplace.
Beijing – Business-Model Innovation
Their first stop was the Beijing-based T11 Food Market, which takes Jack Ma's "new retail" to new heights. T11, founded by technologists and software developers, integrates online, offline, logistics, and data across the supply chain. Imagine a supermarket-as-a-software model and you have the T11 Food Market, which opened in June. "Speed to market is a tangible asset in China. If something doesn't exist, they build it and build it very fast," said Ankeney.
The T11 team created the software to manage and sync the supermarket's back-end retail operations, such as supply chain, stock replenishment, and employee scheduling, while building and designing the physical store. "When we think about the shopping experience as it currently exists in the US, we now have a whole new vision of how we as marketers and innovators can guide our own retail clients into the future," Ankeney added.
T11 has a multi-revenue model: building uniquely designed state-of-the-art supermarkets and offering software-as-a-service to supermarket chains around the world.
According to a study by Retail Store Tours, winners in retail optimize performance in six areas: employee selection and training, store design and experience, the use of technology, business model, customer and loyalty management, and a unique and memorable brand story. T11 leads the way in all six areas, facilitated by connecting and optimizing the entire shopping process in one technology stack.
Kinsella and team also visited 7-Fresh, launched by JD.com to leverage its existing digital technologies to gain share in the physical retail space, where most Chinese consumers still shop. Offline, thus, becomes the new online.
7-Fresh's most remarkable innovation is the RoboCart, an early-stage shopper assistant that follows customers as they make their way through the store; the retailer also delivers any food item in 30 minutes for customers who are within three kilometers of the store. "The reduction of customer friction in the buying and check-out process gives China's grocery giants a leg up on competitors," Sargent said.
Hangzhou – Technical Innovation and Massive Scale
Alibaba, based in Hangzhou, has gone all-in on Hema, its new retail play. The idea behind the supermarket was to transfer the online shopping experience that Alibaba's customers already enjoy to the physical world. Hema's chief executive officer, Hou Yi, recognizes there is no reason why his customers can't have the same digitized shopping experience in-store as they have online. To that end, shopping at a Hema store is similar to shopping online at Alibaba — except that in-store customers can actually inspect the food they are buying.
Hema accomplishes this through bar code labels found on all of its products. After installing the Hema app, customers have the ability use their smartphones to scan the codes, allowing access to the same information they would find on Alibaba's website. The code on a carton of eggs, for example, displays details of the supply chain that carried the eggs from farm to store, nutritional information, and reviews by customers who have purchased them. The app even displays relevant government inspection certificates.
Hema stores also double as distribution facilities, unlike American markets. Any item that can be purchased in-store, is also available online. Like 7-Fresh, Hema guarantees delivery in 30 minutes to customers within a three-kilometer radius. Commuters are incentivized to order groceries on their way home, confident that their order will arrive before they do. According to an Alibaba survey, home prices within each Hema delivery radius have increased as a result.
"From an e-commerce perspective, branded sites have less of an influence, which make branding interesting and more complicated," Kanefsky said.
Hema stores make use of a new design concept that individualizes each department with separate counters, similar to how some U.S. groceries highlight their fish and meat departments. These individual counters are designed so the Hema team member selecting the products for e-commerce orders keep the delivery organized, and the process streamlined. They have the ability to move the bag of product on the floating conveyor belt to the next section of the order. This also seems to encourage customers to engage more with the products they are buying.
"Hema connects the physical and digital worlds — from the earliest stages of the supply chain to the last mile," Evia added. "The result is a retail experience unlike anything we've seen in the U.S. Checking out with facial recognition, for example, is far beyond what is happening now or next in U.S. grocery stores."
Shanghai – The Immersive Retail Experience
Kinsella, Ankeney, Evia, Kanefsky, and Sargent came across several immersive and highly imaginative retail experiences in Shanghai, such as the Starbucks Reserve Roastery. It's retailed as theater in a multifaceted space that can flex from morning coffee to evening dinner to late-night cocktails; and with queues wrapping around the block, the company seems to be onto something. "We look at the retail experience and where it is going, versus where it is today," Evia said."Automation and payment culture is five to seven years ahead. Much of what is dreamed of or tested elsewhere is already real and established in China," she added.
For retailers like Starbucks, success is no longer about being a single-use business for purchasing one type of item (e.g., coffee); customers want to visit a space with multiple experiences that can adapt to accommodate their shifting needs throughout the day. An ever-increasing number of retailers are including convertible spaces to host different in-store events — from fashion shows to cooking classes — and expanding their service offerings so people are able to shop, work, relax, socialize, or be entertained at different points of the day.
"The idea of owning a customer for an entire day is especially compelling," said Kanefsky.
Fueling the Future
New retail is clearly the winning play, ushering in the retail renaissance where technology, innovative thinking, and imagination are fueling the concept. These changes are profound, fast-moving, and far-reaching. Keeping pace with this evolution requires seeing them firsthand, whenever feasible, to gain a deeper understanding of what's possible and what it takes to achieve it.
The Havas Media leadership team's trip to China is a perfect example of this. The purpose of the retail experience today is more and more about humanizing the brand and engaging people emotionally, rather than just purveying products.
"At Havas, we believe that more meaningful media can help build more meaningful brands" Kinsella said. "This trip helped us all understand new and creative ways that consumers are interacting with brands — and showed us what's possible when brands connect in a way that is truly engaging, trusted, and meaningful to a consumer.">