Thursday, June 20, 2013

The emergence of seamless retail

The juggernaut of online shopping

It is just to state the obvious that the Internet has totally transformed the world for both the shoppers and the retailers. Shoppers have taken to online shopping with gusto and entrepreneurs and businesses are straining hard to exploit the opportunity. In the early days of Internet, it was common to consider the web as a resource or an aid to shopping, and it was expected that consumers will rely on the Net to look for information about products, to locate a store where they can buy and to perhaps look for advice and assistance on how to make the right choice. It is indeed true and nearly all agree that the Internet has become a very useful resource for shopping. However clearly it has gone far beyond that and has become a gigantic marketplace - consumers are buying everything from luxury goods, shampoo, automobiles and freshly slaughtered chicken on the Internet. 

Online shopping has not just established itself in the developed markets, it has firmly established itself in the developing markets and e-tailing already accounts for 5-6 percent of 2012 retail sales in China and about 5 percent in the United States. In China online sales recorded an astonishing estimated 60% year-on-year growth in 2012 (Source: McKinsey. MGI China e-tailing report)

Last year online shoppers grew by 25% in China, with nearly 50 million new shoppers added to the fold (Source: CNNIC January 2013). The growth of group buying or tuan gou (which actually originated in China), also continues. We also see that consumers are losing their fear on online payments. In the initial era of online shopping, cash on delivery used to be a common method of payment, but thanks to Taobao (the largest online shopping platform in China with more than 6 million merchants listing their products), and the escrow system of payment known as Zhifubao, which protects both the buyers and the sellers, online shoppers are now ready to pay online.

The circuitous consumer journey

For the consumers the two worlds of online and offline shopping are now intrinsically intertwined. In the initial days of online shopping the consumers often looked for information on products online but the then returned to the comfort and security of the familiar bricks and mortar environment to lighten their wallets. While this is still a reality, the other phenomenon is more prevalent and on the rise - consumers today often touch and feel the product in the traditional stores, but come back to their comfortable chair at home, where they sit in front of their favorite computer or the newly acquired tablet and enjoy in-home retail therapy by clicking the "Buy" button.

The fact is that today the Internet is as much a part of the retail scenario, as is the supermarket or the hypermarket. Whether you are a retailer or a marketer of brands, it is no longer a question of developing an e-commerce strategy - the task really is to entirely reshape and develop a retail strategy for the digital world.

Online, offline and seamless..

This juggernaut of online sales has huge implications on the online as well as the traditional retail industry. It is not possible to understand the implications for e-commerce unless we simultaneously look at and compare the respective roles that online retail and conventional retail are carving for themselves. And to understand that we must understand what consumers expect in an online environment and what are their expectations in a traditional store.

Consumers are very clear when they think about what is important to them in an online store – ‘saving money’, ‘more payment and delivery options’ and  ‘better selection and delivery’ top the list. The needs from an offline store are very different. ‘Ability to touch and feel the products’, ‘satisfaction of immediate delivery’,  ‘better service’ and ‘enjoyable experience’ top the list. So the two channels have very different strengths and at this moment at least, it is too early to proclaim the demise of the traditional trade, though some change in its role is definitely in the offing

According to Deloitte’s Store 3.0 Survey among retail executives, it is apparent that the role as well as form of a bricks and mortar store will inevitably change. Today the executives say that he role of in-store employees is largely in providing basic purchase service and assistance and display some product knowledge. But this is expected to be totally transformed five years from now, when the most important skill of the workers will be to be able to leverage technology to enrich the customers' experience. Another important role of the sales staff will be to act as brand ambassadors. In fact retail executives indicated that in five years, providing customers with a compelling brand experience will become the primary role of the store.

So what does it augur for the future of online and offline trade. Online retailers need to clearly understand, that they lag behind the traditional trade when it comes to providing immediate gratification, intimate touch and feel, the immersive experience and the joy of shopping. They need to look at innovative ways of providing that intimacy - can technology be used to provide a better virtual touch and feel of the products, can virtual reality be used to help consumers come closer to the product? Can they collaborate with traditional retailers or can they establish their own limited brick and mortar presence (as some of them are doing already)? 

For offline retailers, the task it to zealously guard and enhance their ability to facilitate human interaction with the consumer. The store's function is not just to act as a convenient transaction center, it is to provide a valuable and important experience to the customer. For brands it is an opportunity to develop a relationship and bond with the customer, which is more of a challenge in an impersonal online environment. The most successful retailers will be those who can offer the best of both offline and online shopping and in fact offer a seamless shopping experience in which the shoppers can effortlessly move from online to offline, back to online then again to offline if they so desire .

This article is based on FutureBuy 2013 - a research study conducted by GfK in 14 markets across the world – which focuses on understanding shopping trends across the globe.

Written by Ashok Sethi

Spring festival blues and commercial opportunities

The Chinese new year is a festival of joy, family reunion, fun and celebration. However when 1.3 billion Chinese decide to celebrate and get reunited with their families during the same seven day period, it generates unprecedented competition for limited resources and ensuing hardship. At the same time it generates a commercial bonanza. According to data from the Ministry of Commerce in China, total retail sales during the week long festivities reached 539 billion yuan ($86 billion)- 14.7% more than last year. The commercial opportunities do not just exist for the big retailers and manufacturers, this special time of the year generates some rather niche, ingenious but also sometimes dubious commercial activity.

Take me home

The most intense competition during this period is for transportation to go back home. According to popular estimates in the media, the Chinese will make 3.4 billion trips during the peak 40 day travel period around the Chinese New Year, of which 3.1 billion will be road trips. 220 million are expected to take a train ride during this period. Online ticketing, which started just a few years ago, was expected to make the whole process relatively painless - however it turned out to be a barrier for migrant workers in buying tickets to go back home during the spring festival. According to a survey by the Shanghai Institute of Foreign Trade, more than 90% of the migrant workers preferred taking a train to go back home and almost 80% of them said that they would do so by buying tickets from a ticket office. 70% of them said that they were not familiar with the online ticketing procedure and only 18% had tried using the online ticketing service. A kindly couple who was offering the service for online ticket purchase at a small fee to migrant workers was apprehended with the accusation of touting. 

For those who are internet literate the task of making a booking is no less arduous. The average daily number of hits on the website has topped 120 million during the peak days. Online sales are now responsible for over a third of total tickets, accounting for as many as 6 million tickets a day. The buyers often face interminable waits while the overtaxed computers cope up with the deluge of booking requests. In an exhibition of ingenuity, three internet giants - Qihoo360, Kingsoft and Sogou - designed plug-ins for browsers to automate the task of repeatedly trying to login and buying  train tickets on the overloaded train booking website. Critics opined that the software gives the internet savvy an unfair advantage to secure the much prized tickets.

The road less travelled 

Many consumers are taking the "road less travelled" with one entrepreneur from Hangzhou choosing to take 48 buses to reach his home in Linyi in Shandong. Another enterprising soul undertook the arduous journey back home using 8 train tickets and transfers from Shanghai to his home town in Sichuan. As direct tickets are most difficult to secure, this segmented approach worked well for him and he was able to get home smoothly and relatively quickly. In fact the train enthusiast is offering consultancy to others on identifying circuitous routes back home where ticket purchase is still a possibility.

Meet your future son/daughter-in-law

When the young city workers go home, the parents are solicitous about their quest for marriage partners. Those who have not achieved success in this area, are worried about creating anxiety among their parents and persistent pressure on themselves. Taobao, china's online megastore, which offers everything from the latest iPad to freshly slaughtered chicken, comes to rescue on this count also. For a few thousand yuan, any unattached youth can hire someone who would pretend to be his or her future life partner during the golden week that is spent with the parents. Things do not always go as smoothly and dispassionately as planned, with a genuine spark of affection for the hired companion. 

Happy meals

Those who have already tied the knot and are the sole bearers of the family name and hopes for their parents ( as a result of family planning) need to make the difficult decision of with which set of parents should they have the nianyefan or the New Year's Eve dinner. Restaurants have come to the rescue urging the young from hosting the dinner at their premises, including both set of parents and even grandparents. The service is popular and the good restaurants are often booked months in advance.

Packaging for 'face'

Of course, when you go home you must carry gifts. Migrant workers who have left their children in their home towns and villages in the custody of their elders, have no dearth of what they can buy, and go back home loaded with toys for their children. The elderly are often rewarded with health foods, which will provide them with even more energy and stamina to look after their grandchildren. Marketers often exploit the gifters' need for face and desire to be seen as someone who has done well in the city and has come back with generous and valuable gifts. The often modest gifts are made to look more alluring and grand through excessive packaging. The authorities have taken notice of this and are coming down or deceptive and wasteful use of extravagant packaging.

Sleep well while you travel home

A product named "sleep support" has gained popularity on the internet as a sleep support for sitting upright sleep. The gadget provides head and chest support to the users, while sleeping upright on a train. a netizen suggested that if the instrument can also provide a place for comfortably holding an iPad its value will be considerably enhanced.

Written by Ashok Sethi