New Retail: The Best of Both (Physical and Digital) Worlds
The ease and widespread use of e-commerce and digital credit have made life in China so much different than it was before. The traditional physical space is losing out as e-commerce replaces the current system. However, there is still hope for retailers if they are able to bring the digital world into their physical retail spaces.
Conventionally, retailers have split the two arenas of shopping to online to offline segments or commonly known as the O2O model. Retailers who predominantly reached customers through their physical stores begin setting up e-commerce websites and engaging in digital marketing. Yet, barriers to purchase still exist in the new arena of making purchases. Many consumers still have the tactile desire to feel and try on their goods. This need is first fostered when the consumer searches for the items he or she wants to buy online, makes a list, and manifests that desire by going to the physical retail store to make a purchase.
The Life of New Retail in China – Online Merge Offline
E-commerce companies in China such as Alibaba have noticed this nook of an opportunity and are looking to bridge that demand. Alibaba is leading the way and have pushed boundaries to develop a New Retail model called Online Merge Offline (OMO) commerce. With this new concept, every aspect of the shopping experience is enhanced – for both the consumer and the retailers of every scale.
Despite the internet providing the platform to satisfy the constant search for products and the consumer base becoming increasingly knowledgeable, consumers seek the comforts of physicality when purchasing products. This is when consumers visit a physical shopping space to touch and feel products. Once they are satisfied perusing the product and ready to purchase, they can just whip out their latest Huaweis and scan the product’s QR code to have the item delivered directly to their doorsteps.
This complete digitalisation of retail services becomes the new consumer experience. This move by Alibaba eliminates all the barriers that are present on both sides of the consumer experience and in fact enhances to its optimal point. Consumers get the best of both worlds and there is no need to test out products at the physical store and frantically source for the best deals online. No queues and confirmed inventories are a boon for consumers too.
Here Comes The Hippo
One of Alibaba’s OMO creations, Hema (Chinese word for Hippo), was launched with much fanfare in 2015 and this integration has enabled cashless checkouts. A collaboration with the Bailian Group has further expanded retail options by including supermarket fresh goods and household items. Consumer data gathered from these offline choices can be used to enhance their online experience and vice versa. Chris Tung, Chief Marketing Officer of Alibaba Group said, “We want to bring Alibaba experience to support retail brands, to run the operation with our data capability. It’s about digitizing the footprint of the digital store and optimizing the shopping experience.”
China is leading the way with its OMO model and businesses will be wise to feature similar methodologies. Tung adds, “Online experience is [constantly evolving] because we personalize the web page for customers. Offline has always been the same, and we believe offline should be more exciting. You have to integrate the data to enhance the in-store experience.”
A quick look into social media for this year, there were more than 3,300 social mentions about Alibaba’s Hema and there were predominantly on forums. Comments from forums made up more than 77% of the total number of social mentions. To harness a greater understanding of what the consumer wants, social insights companies such as Meltwater are supplying retail organisations with rich knowledge about their consumers. This knowledge can further boost the quantitative insights drawn from the OMO model.
Commenters on Chinese forums came out in full force on the topic of Hema and interesting insights on consumer perception towards the revolutionary retail concept. Many netizens discussed when and where a Hema outlet would open in their vicinity and they were generally delighted if one really did. They also discussed the user experience of the technology in Hema, primarily QR codes to enter the premises, auto payment when you end your OMO journey in the physical retail store, and the rapid delivery of the purchases.
Give Me OMO Please
All in all, I believe this relatively holistic business strategy needs to be quickly embraced and implemented by retailers as knowledgeable consumers establish positions to new trends. Retailers must be ready to step out of one or the other platforms and endorse a more streamlined and unified platform.
The old dichotomy of separating offline and online commerce is unsustainable to reach out to the larger consumer base. The many pain points that consumers experience with current retail models serve as exciting opportunities for retailers to innovate on. Understanding this importance will bring about great benefits and create an entirely new digitised shopping experience for consumers.