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A vision of China’s future retail experience: zero stock or zero malls?

Under current retail market conditions in China, and in particular those related to luxury products, we have seen brands reducing or cancelling their expansion plans and focusing on enhancing the overall experience of their existing stores. Consumers are still showrooming, but now they are using their mobile devices to investigate products they have seen in a store in order to find them cheaper elsewhere. These consumers have become more knowledgable about the brands and the products, and more trusting of favoured certain e-commerce sites. Those who travel still buy the products overseas that they have seen in China if they have the chance, because they can save money and potentially buy something not available here, and/or that may in their eyes be more authentic than that sold by the same brand in China. Disruptive technologies are entering all our lives and changing the way we do things, and China in particular is at the forefront of global developments in new mobile technologies.

So what does this all mean for the future of retail in the country?

At first sight, all these changes and pressures may be seen as a huge threat to luxury retail, and as previously mentioned, luxury brands are traditionally not known as early adopters of new technologies. Unfortunately and particularly in China, the option to opt-out does not exist and the huge consumer base means that brands must step up and turn these challenges into an opportunity. The retail landscape in China will undoubtedly continue to change and adapt, so what might we expect to see in the retailing environment over coming few years?
Luxury brands will not be able to eliminate the showrooming habit in China because it’s an addiction of consumers of all classes including the wealthy. But they do have the chance to benefit from it themselves, and to channel showrooming customers in their own direction and not away to an alternative product source. The use of new and innovative technology will assist luxury brands to engage with their customers, rather than being something to shy away from. The core brand values do not need to change as a result of disruptive technology if used well, and it will smooth the relationship between the brand and its consumers.

In future the store will principally become purely a showroom in which consumers see, touch and try products because they want that physical shopping experience, but they also want to buy at the best price and get the best value. These consumers will be assisted by store staff to purchase via the branded online store within the physical confines of their own retail space, and offered the branded phone app from which they can both place orders, be sent special and tailored offers, or news of events and new product arrivals.

For the brand, the store does not need to hold stock in high volume as customer orders can be sent from a distribution centre remote to the store. Store staff take on a more advisory role and consumers don’t feel they are being sold to, the shopping experience becomes richer for the consumer and the brand is able to gather more personal consumer data as a result; the positive attributes of showrooming now benefits both parties. Mirrors will be fitted with recognition functionality that can read data from the bar code on any item a customer is trying and that can then present to them a selection of other companion items that work with it, or other pieces of a similar colour or style. This passive advisory approach fits with the Chinese culture, where the customer will not admit they don’t know what they want, but would actually like advice without asking for it.

In future the shopping experience will differentiate brands from one another, particularly in the luxury sector. Using technology to improve the overall store experience and enhance what is currently a weak service standard is an opportunity to be developed. Prompts to staff in terms of other product suggestions and alternatives, together with customer size and purchase preferences can all be stored and monitored via a mobile app, driving sales and customer engagement. Walk into the store and your phone will tell you what is new based on your preferences, and where to find them. Chinese luxury consumers will easily adapt to the use of new technology, particularly from those brands they know and trust, and the brand will gather consumer data via the mobile app in order to deliver better service to the customer in the future. …

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