This is my nephew, Yuan Yuan. He’s five years old, super adorable. I asked him the other day, “What would you like for your birthday this year?” He said, “I want to have a one-way mirror Spider-Man mask.” I had absolutely no idea what he was talking about, so I said, “Wow, that’s really cool, but how are you going to get it?” He told me, without a blink of his eyes, “I’m going to tell my mom and make a wish before I go to bed. My mom will go to shake her mobile phone. The next morning, the delivery uncle will give it to me when I wake up.” I was about to tease him, but suddenly I realized he was simply telling me the truth, the truth of what shopping looks like for this generation.
A huge shopping revolution is happening in China right now. Shopping behaviors, and also technology platforms, have evolved differently than elsewhere in the world. For instance, e-commerce in China is soaring. It’s been growing at twice the speed of the United States and a lot of the growth is coming from mobile. Every month, 500 million consumers are buying on mobile phones, and to put that into context, that is a total population of the United States, UK and Germany combined. But it is not just about the scale of the e-commerce, it is the speed of adoption and the aggregation of the ecosystems. It took China less than five years to become a country of mobile commerce, and that is largely because of the two technology platforms, Alibaba and Tencent. They own 90 percent of the e-commerce — pretty much the whole market — 85 percent of social media, 85 percent of internet payment. And they also own large volumes of digital content, video, online movie, literature, travel information, gaming. When this huge base of mobile shoppers meets with aggregated ecosystems, chemical reactions happen. Today, China is like a huge laboratory generating all sorts of experiments. You should come to China, because here you will get a glimpse into the future.
One of the trends I have seen concerns the spontaneity of shopping. Five years ago, in a fashion study, we found that on average, a Chinese consumer would be buying five to eight pairs of shoes. This number tripled to reach about 25 pairs of shoes a year. Who would need so many pairs of shoes? So I asked them, “What are the reasons you buy?” They told me a list of inspirations: blogs, celebrity news, fashion information. But really, for many of them, there was no particular reason to buy. They were just browsing on their mobile site and then buying whatever they saw. We have observed the same level of spontaneity in everything, from grocery shopping to buying insurance products. But it is not very difficult to understand if you think about it. A lot of the Chinese consumers are still very new in their middle-class or upper-middle-class lifestyles, with a strong desire to buy everything new, new products, new services. And with this integrated ecosystem, it is so easy for them to buy, one click after another. However, this new shopping behavior is creating a lot of challenges for those once-dominant businesses. The owner of a fashion company told me that he’s so frustrated because his customers keep complaining that his products are not new enough. Well, for a fashion company, really bad comment. And he already increased the number of products in each collection. It doesn’t seem to work. So I told him there’s something more important than that. You’ve got to give your consumer exactly what they want when they still want it. And he can learn something from the online apparel players in China. These companies, they collect real consumer feedback from mobile sites, from social media, and then their designers will translate this information into product ideas, and then send them to microstudios for production. These microstudios are really key in this overall ecosystem, because they take small orders, 30 garments at a time, and they can also make partially customized pieces. The fact that all these production designs are done locally, the whole process, from transporting to product on shelf or online sometimes takes only three to four days. That is super fast, and that is highly responsive to what is in and hot on the market. And that is giving enormous headaches to traditional retailers who are only thinking about a few collections a year.
Then there’s a consumer’s need for ultraconvenience. A couple of months ago, I was shopping with a friend in Tokyo. We were in the store, and there were three to four people standing in front of us at the checkout counter. Pretty normal, right? But both of us dropped our selection and walked away. This is how impatient we have become. Delivering ultraconvenience is not just something nice to have. It is crucial to make sure your consumer actually buys. And in China, we have learned that convenience is really the glue that will make online shopping a behavior and a habit that sticks. It is sometimes more effective than a loyalty program alone. Take Hema. It’s a retail grocery concept developed by Alibaba. They deliver a full basket of products from 4,000 SKUs to your doorstep within 30 minutes. What is amazing is that they deliver literally everything: fruits, vegetables, of course. They also deliver live fish and also live Alaska king crab. Like my friend once told me, “It’s really my dream coming true. Finally, I can impress my mother-in-law when she comes to visit me for dinner unexpectedly.”
Well, companies like Amazon and FreshDirect are also experimenting in the same field. The fact that Hema is part of the Alibaba ecosystem makes it faster and also a bit easier to implement. For an online grocery player, it is very difficult, very costly, to deliver a full basket quickly, but for Hema, it’s got a mobile app, it’s got mobile payment, and also it’s built 20 physical stores in high-density areas in Shanghai. These stores are built to ensure the freshness of the product — they actually have fish tanks in the store — and also to give locations that will enable high-speed delivery. I know the question you have on your mind. Are they making money? Yes, they are making money. They are breaking even, and what is also amazing is that the sales revenue per store is three to four times higher than the traditional grocery store, and half of the revenue orders are coming from mobile. This is really proof that a consumer, if you give them ultraconvenience that really works in grocery shopping, they’re going to switch their shopping behaviors online, like, in no time.
So ultraconvenience and spontaneity, that’s not the full story. The other trend I have seen in China is social shopping. If you think of social shopping elsewhere in the world, it is a linear process. You pick up something on Facebook, watch it, and you switch to Amazon or brand.com to complete the shopping journey. Clean and simple. But in China it is a very different thing. On average, a consumer would spend one hour on their mobile phone shopping. That’s three times higher than the United States. Where does the stickiness come from? What are they actually doing on this tiny little screen? So let me take you on a mobile shopping journey that I usually would be experiencing.
11pm, yes, that’s usually when I shop. I was having a chat in a WeChat chatroom with my friends. One of them took out a pack of snack and posted the product link in that chatroom. I hate it, because usually I would just click that link and then land on the product page. Lots of information, very colorful, mind-blowing. Watched it and then a shop assistant came online and asked me, “How can I help you tonight?” Of course I bought that pack of snack. What is more beautiful is I know that the next day, around noontime, that pack of snack will be delivered to my office. I can eat it and share it with my colleagues and the cost of delivery, maximum one dollar.
Just when I was about to leave that shopping site, another screen popped up. This time it is the livestreaming of a grassroots celebrity teaching me how to wear a new color of lipstick. I watched for 30 seconds — very easy to understand — and also there is a shopping link right next to it, clicked it, bought it in a few seconds.
Back to the chatroom. The gossiping is still going on. Another friend of mine posted the QR code of another pack of snack. Clicked it, bought it. So the whole experience is like you’re exploring in an amusement park. It is chaotic, it is fun and it’s even a little bit addictive. This is what’s happening when you have this integrated ecosystem. Shopping is embedded in social, and social is evolving into a multidimensional experience. The integration of ecosystems reaches a whole new level. So does its dominance in all aspects of our life.
And of course, there are huge commercial opportunities behind it. A Chinese snack company, Three Squirrels, built a half-a-billion-dollar business in just three years by investing in 300 to 500 shop assistants who are going to be online to provide services 24/7. In the social media environment, they are like your neighborhood friends. Even when you are not buying stuff, they will be happy to just tell you a few jokes and make you happy. In this integrated ecosystem, social media can really redefine the relationship between brand, retailer and consumer.
These are only fragments of the massive changes I have seen in China. In this huge laboratory, a lot of experiments are generated every single day. The ecosystems are reforming, supply chain distribution, marketing, product innovation, everything. Consumers are getting the power to decide what they want to buy, when they want to buy it, how they want to buy it, how they want to social. It is now back to business leaders of the world to really open their eyes, see what’s happening in China, think about it and take actions.
Massimo Portincaso: Angela, what you shared with us is truly impressive and almost incredible, but I think many in the audience had the same question that I had, which is: Is this kind of impulsive consumption both economically and environmentally sustainable over the longer term? And what is the total price to be paid for such an automized and ultraconvenient retail experience?
Angela Wang: Yeah. One thing we have to keep in mind is really, we are at the very beginning of a huge transformation. So with this trading up needs of the consumer, together with the evolution of the ecosystem, there are a lot of opportunities and also challenges. So I’ve seen some early signs that the ecosystems are shifting their focus to pay attention to solve these challenges. For example, paying more consideration to sustainability alongside just about speed, and also quality over quantity. But there are really no simple answers to these questions. That is exactly why I’m here to tell everyone that we need to watch it, study it, and play a part in this evolution.
Latest posts by S. Jack Heffernan Ph.D (see all)
- Smollett Has Destroyed Ocasio-Cortez and Booker 2020 Hopes - February 17, 2019
- African Gangs Leave Melbourne Unsafe - February 17, 2019
- What is Wrong with Politics in Australia? - February 17, 2019