2019.03.29
  • Author

    Steven JIANG

    Partner and Vice President at S.POINT

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    In recent years, the concept of new retail has been constantly brought up by industry leaders. With a boom of intelligent technology, new retail brands are emerging, traditional enterprises are seeking new retail business models, and new retail R&D teams are offering third-party solutions, all making new retail a popular word. But such popularity also calls for pondering on the questions of what kind of model new retail truly is and how enterprises could do well in new retail.


    The key to new retail lies in a start with scenarios and combination with technology and human for a superior seamless experience.

     

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    Thriving new retail in recent years is closely linked to the fast developing internet and mobile technologies. Based on years of service experience in new retail scheming for enterprises, the biggest difference between new retail and traditional retail is the utilization of numerous emerging technologies that enable online-offline integration, which is also an important driving force for new retail development.


    In the past, shopping is to place merchandises at particular places such as shopping malls where customers go for contact and selection; today technology has increased touch points for numerous merchandises and consumers can shop easily without going to physical shopping malls. These ubiquitous contacts have not only enriched user scenarios but also broke the existing proportion of business models. It can be well said that the currently popular new retail might not exist if not for the technological supports.


    With rapid technological development, there have been abundant contacts between products and consumers, such as trial make-up device by Magic Mirror, online ordering system from McDonald and KFC, the self-checkout system from Fresh Hema, all making use of the diversity of offline devices to increase touch points. Take Fresh Hema for example, a successful example of new retail in China, its take-out service enables customers to buy products without going to the store. New retail is actually a competition for sales volume, with a narrow profit margin, many traditional retail companies have set up their new brands. From the perspective of traditional supermarket business model, Fresh Hema should be a brand that stresses a lot on ASPUA (Average Sales Per Unit Area), as it needs enough sales to support outlet business operations. The reason why it can tolerate zero comment effect in the experiential space is that its highly frequent online purchase number can make up for the insufficient ASPUA in experiential space, so its definition of ASPUA transcends physical space and therefore offline ASPUA is not such a big deal. 


    This shows that against the backdrop of online-offline integration, retail elements have been redefined as three key factors of the customer, merchandise and scenario. The center of shopping has shifted from the merchandise in traditional retail to customers in new retail; the key to new retail lies in creating new and more scenarios to increase the value of related merchandises. Pinduoduo is one of the cases that has done the “customer – scenario – merchandise” model to an extreme. Apart from its product quality, Pinduoduo seeks for suppliers by the needs of customers before ordering and delivering, which is the biggest change in the essence for new retail. Therefore new retail can also be said as extending scenarios and boundaries of traditional retail through technologies to boost sales. 


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    The aim of new retail is to create seamless consumption. Compared with traditional retail, the biggest difference is that new retail utilizes many new technologies. However, not all enterprises have strong technological genes as Alibaba and enterprises tend to overdo when making use of such technologies. Developers with a misunderstanding of new retail are over-dependent on technology and believe that technology changes and solves everything, which is an extreme obsession of technology. Excess application of technology in retail space can lead to counter effects, therefore new retail should pay particular attention to the sense of balance to connect technology with customers to create a better experience, rather than applying excessive technologies that leave no room for the development of the relationship between customers.


    The self-service vending machines emerged since 2016 are very advanced in terms of technology. However technological application separated from scenarios can be counter-productive for new retail, and that’s why self-service supermarkets and vending machines have not been completely successful. Consumers will not approach technology proactively, only when technology is placed at places where consumers can contact and made close to customers' needs can it find its market. Enterprises hoping to grasp new retail should understand traditional retail from the heart – i.e. consumers see the product first, then recognize the brand, and compare prices in the end. If consumers can not see the product or understand the product, it will be very difficult to push sales.

     

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    Enterprises are different in their resources and offerings, face different challenges and seek different business growth directions under the new retail context. Despite all the differences of new retail models for different enterprises, the key lies in an insight into customer scenario and only by understanding and extending scenarios for their consumers can have the chance of winning new retail opportunities.


    In the process of creating a new retail business, a four-step method of “inspiration – conversion – innovation – implementation” has been utilized to realize different needs of enterprises in launching a new retail business through collecting insights for innovation, finding innovation opportunities, ideation, and concept realization.


    For instance, the key insight of a Chinese pharmaceutical brand is the health practice of “observe – explore – insist – share” and five types of health upgrade indexes of “time – perception – knowledge – recognition – hobby”. S. POINT finds the common characteristics amid varying needs and problems before converting them into opportunities for innovation. Through methods of lowering threshold for trying out, gradual arouse of health awareness, enhance first-time purchase, increase consumer loyalty, and encourage re-purchase. S. POINT delivered new retail business models with multiple touch points and customer scenarios including DIY healthy kitchen, 24 solar-term food, health bank, and many other concepts.


    Different from the multi-scenario approach of the above project, Pizza Hut has a objective of attracting more young consumers while enhancing brand image and sales volume, S. POINT focused on a design methodology of co-existence of individual customer scenario and rich technology in Pizza Hut’s new retail store development, creating a tech-driven restaurant that is appealing for younger generation. With its rich innovative digital technologies and unique themed restaurant environment, the restaurant creates a story to attract target customers; then, through various emerging tech services, which enhances interaction and enriches brand image to build a stable relationship between customers and Pizza Hut; the continuous launch of new products, which incentivizes customers to come for a second time, enhances customer loyalty, thereby influencing other customers for a herd effect.


    If the insight for Pizza Hut is the new customer scenario brought by rich technology, the new retail business model of “customer centric” for Under Armour is another extreme.


    The pitfall of new retail lies in over-dependence on emerging technologies, the key should be an extension of new customer scenarios and the new retail business model of Under Armour is a typical case of customer scenario renovation. The customer experiential scenario of Under Armour mainly lies in five parts of “enter – guidance – try on – purchase – return”, so it only takes four types of customized service roles of "welcome ambassador", "sports expert", "wardrobe consultant", "cashier specialist", and three retail golden service levels of “basic", "quality", and "superior"  to create a completely different new retail scenario. The key to Under Armour’s new retail lies in product positioning. Unlike traditional sense in which buying clothes is buying an instrument, Under Armour expresses an idea of equipping a sense of superiority with its products, which is not spending money for the instrument, but rather a fulfillment of personal belief.


    No matter it's a "multi-touch-points" retail experience for a Chinese pharmaceutical brand, or emerging tech-driven retail experience for Pizza Hut, or zero technology involved “customer centric” retail experience for Under Armour, their success all lies in an insight into customer scenario and subsequent innovation to achieve the best fit and most appropriate approach for new retail.

     

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    New retail is not a new business model completely different from traditional sales, instead, it is a seamless consumer experience with more touch points through design and technology on the basis of traditional sales. The key for new retail lies in updating and extending scenarios and reserving space for human connection while increasing touch points through technology, so as to achieve the long existence of new retail for enterprises.

     

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