Digital TransformationRetailChina’s E-Tail Revolution: Transform or Fail

China’s E-Tail Revolution: Transform or Fail

As e-commerce continues to grow in China, the only companies to survive will be those that are willing to adapt and let their consumers dictate the purchase journey.

If there’s one thing I’ve learned over my past few days in China, it’s that e-commerce dominates the digital marketplace. And with mobile-social platforms that integrate payments, such as the almighty WeChat, some could possibly argue that it is more developed than the U.S. or U.K. markets.

But as e-commerce continues to grow in China, brands that do not adapt to the so-called “e-tail revolution” will fail and die. Well, that’s according to Darren Fifield, head of Marketing and Sales, eBay Enterprise, Asia Pacific, who spoke at ClickZ Live Shanghai.

“China’s retail industry has gone in a loop. Consumers used to be able to walk into their local store and obtain a very personalized customer service with a sales representative,” Fifield said. “Everything then moved online and the focus was on high basket volume from multiple retailers. Now we are back to personal demand from consumers; yet this time it’s online and it is creating an e-tail revolution.”

E-tail in China has developed into one of the most popular channels for day-to-day shopping amongst consumers. According to eMarketer, retail sales on tablets, smartphones, and other mobile devices will reach $334 billion this year – up 85 percent from 2014.

emarketer-ecommerce-china

Improvements in security of electronic payments services, such as Alipay, and increased efficiency of delivery services have boosted consumers’ desire for shopping online in China. For example, due to large investment by platforms such as JD.com, a retailer can now deliver merchandise to the majority of Tier 1 to 3 cities within one to two days, and to the rest of the country within four days – a far cry from where the country was five years ago.

Despite these successes, the growing popularity of online shopping in China is disrupting the e-commerce landscape. As changing demands have moved from bricks to clicks, e-tailers are grappling with shrinking margins from older inventory, greater delivery costs from rapid urbanization, as well as rising labor costs. At the same time, consumers expect to get the same level of personal service regardless of how they go through the purchase journey.

“Consumers want more from their online retail suppliers. The evolution of social media has meant that we are living in a real-time world and consumers also want their products instantly,” noted Fifield. “They don’t want different strategies or prices between online and offline, which is the case at present. Also, they don’t want to wait a day or two to receive their item.”

With such an intense backdrop to do business, Fifield believes that the only way Chinese retailers can survive in the long-term is by replicating the experience seen in Western markets, and use brick-and-mortar stores to complement the buyer’s journey. This will allow consumers to order products online and pick them up in store, using the physical shop as a distribution center.

“Obviously, this is a lot easier than it sounds given the costs, but if e-tailers can find a physical store to partner with, they will be able to collectively tackle the challenges that are arising from changing consumer demands. They will transform themselves to be accessible and available whenever and wherever,” said Fifield.

Called a “click-and-collect” scheme, as opposed to a “pick-up in-store” one, Fifield proposed that each store act as an independent customer service center, with trained specialists able to pick the product, package it, and personally deliver it to consumers in-store. In time, and once this process has been perfected, Fifield believes that click-and-collect can evolve into a more on-demand service that is deliverable anywhere, similar to what has been seen in Western markets such as Kate Spade and its ‘Saturday’ initiative.

“For e-tailers, click-and-collect shouldn’t be a question of whether one should do it, but how they can better the experience to increase market share and obtain a bigger chunk of the wallet,” said Fifield, adding that satisfied customers equal returning ones. “This greatly expands the average order value (AOV) which in the long run is what really matters, and what separates the winners from the losers.”

The click-and-collect scheme isn’t a new one for China. Earlier this year, Walmart launched a click-and-collect service, while Amazon China released one in 2013. The latter has already expanded from less than 100 to more than 300 in just two years.

“Online consumers aren’t just being given the option of collecting purchases, they can also return and exchange them quickly, which is completely closing the loop,” commented Fifield.

While click-and-collect certainly seems to make sense, there is no shying away from the fact that the U.S. and U.K. are very different markets to that of China. As Chinese infrastructure continues to be built and developed, e-tailers should have brick-and-mortar partner stores as the main goal to grow their businesses further and make sure they stay relevant in a world of “always on/always more” consumers. Until that time, the growing penetration in technology and strong familiarity with e-commerce should keep them going for a while longer, but as Fifield warned at the end of his keynote, marketers should never be complacent and always look to transform.

“What you start doing today, will impact what you do tomorrow,” he concluded.

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