China, model of rebound for retail: recovery, growth and digital transformation – Chine Magazine

By Olivier Lamarre, Business Manager at China Telecom (Europe) – After ten years of GDP growth, China has never experienced such a decline in economic performance as in 2020. The consequences of COVID are more serious than in previous crises such as SARS in 2003 or the global financial crisis of 2009. All sectors are affected: industrial production, investment, retail sales and exports.

In 2020, the whole world recorded a drop in retail sales, due to the health crisis and successive confinements, between 10% for Asia and the United States and 13% for Europe.

But China, the first affected, has all the assets to get back on its feet quickly. Already, its annual growth amounts to 8.1% in 2021, the strongest recorded since 2012, and better than forecasts at 6%.

Companies will take less than a year to recover from the health crisis in the Chinese market.

What are China’s strengths? Why is multi-channel communication a plus? How does it materialize? What are the technological and regulatory challenges to be met?

Not all sectors have been affected in the same way. The retail sector lost $200 billion in China in 2020.

The companies that held up the best were those that had a strong presence in e-commerce.

The advantage of e-commerce

E-commerce in China represents 700 billion euros in 2020, 500 million buyers. Half of the Chinese population uses e-commerce as a mode of consumption and, during the crisis, e-commerce platforms have grown by 82%.

In China, 650 million parcels are delivered every day via Alibaba compared to 6 million in the United States via Amazon.

In addition, payment by smartphone has become a habit for Chinese consumers who make more than 60% of online payments through this channel, 10 times more than in the United States according to 2016 figures from McKinsey & Company.

Wechat lists 1 billion active users for payment solutions, the first in the world. The main technologies are the QRcode, the NFC (Near-Field Communication = contactless) and the credit card emulator with the mobile.

The Chinese population is ultra-connected with the highest rate of household Internet and mobile services in the world.

Innovative approaches

Faced with this technophile public, brands are constantly innovating. Piaget, L’Oréal, Galeries Lafayette, LVMH or Givenchy are considering investing in the development of e-commerce platforms, interactive 3D holographic windows, live streaming, mini-programs in the WeChat application or even virtual reality.

Indeed, brands adopt what is called a phygital strategy consisting in finding the right balance between physical signs and online presence. Stores have a new role as showrooms and are no longer the only place of purchase, now supplemented by e-commerce platforms, social networks and instant messaging.

More than elsewhere, brands have an interest in using multichannel to reach as many people as possible and be effective.

– Vlogs, microblogging, instant messaging and live streaming

Their means of communication will be vlogs, microblogging, instant messaging and live streaming or reality video.

For example, the microblogging application Sina Weibo is one of the largest sources of information for the Chinese with 500 million users in the country, ahead of Tencent Weibo (250 million users), Renren Weibo (150 million users).

WeChat has become the perfect communication channel to improve the customer experience, offering the possibility of creating applications, mini programs complementary to e-commerce distribution channels and integrating chatbots for after-sales service or customer service.

Live streaming is live video broadcast by influencers. It’s a new form of e-commerce that has become essential in China because Chinese consumers are so crazy about it. According to Deloitte, this channel reached $4.4 billion in revenue in 2018, a third more than the previous year, reaching 456 million viewers.

For example, influencer Lijiaqi sold over 15,000 lipsticks in five minutes while trying over 380 shades in a two-hour livestream and on November 6, 2019, Ki Kardashian West garnered over 13 million fans on her Tmall platform and sold 150,000 units of its KKW fragrances during the session.

– Gamification, augmented reality, holograms, virtual reality and artificial intelligence.

Brands must base their customer experience on gamification, augmented reality, holograms, virtual reality and artificial intelligence.

To get to know their customers better and serve them better, brands have every interest in betting on the gamification of the relationship by assigning VIP status, quizzes, interfaces resembling games to win rewards. It is a good way to educate the brand, increase customer engagement, collect data and increase conversion rate.

Holograms are mainly used as point-of-sale advertising (POS), in the form of an interactive showcase in a phygital showroom. Some features such as facial recognition or the motion detector can be added to accentuate the interactive side when consumers pass by.

Also used for POS, virtual or augmented reality improves the customer experience. For example, it can be mirrors with augmented reality in fitting rooms. Virtual reality can recreate a 3D environment comparable to a virtual showroom to allow you to try on a car, make-up, clothes or even create pop-up stores to validate concepts.

Artificial intelligence, also called machine learning or deep learning, is made up of algorithms that learn with experience and perform human tasks. This is how the WeChat Chatbox works for after-sales service and responding to customers 24/7.

Solutions based on new technologies, dependent on telecommunications, a headache in China

With 720 million users and 20% of purchases made online, China represents great potential, difficult to operate without a perfect knowledge of the market, but also of telecommunications regulations.

More than 10,000 sites are blocked in China including Facebook, Whatsapp, Instagram, Bloomberg.

There are different IT barriers: blocking IP or DNS addresses, filtering specific URLs or keywords in the URL. Bottlenecks are very common when traffic enters and leaves China.

The Ministry of Industry and Information Technology (MIIT) regularly publishes new measures or decrees aimed at regulating international activities in telecoms.

Only China Telecom, China Mobile and China Unicom have licenses for the construction, rental and sale of international dedicated lines, such as point-to-point links or virtual MPLS networks.

Many VPN services are blocked.

Similarly, the Chinese GDPR requires that personal data be hosted in the country. It is also possible to host them in Hong Kong or Singapore which are geographically close but the transfer of international data is very sensitive. All data collected must be recorded and timestamped with proof of user consent.

It is advisable to update its privacy policy regularly, with an audit every year.

The data centers are managed by the three authorized state players and some independents such as 21Vianet or JDS offer attractive prices, but you have to be vigilant because there are regional or general data center licenses, and only general licenses can cover the whole country. .

Two major international data center players are also present in China: Equinix with four data centers in Shanghai and Telehouse with two data centers in Beijing and two in Shanghai.. Their global nature makes them more expensive.

The virtualization of Chinese society is a tremendous opportunity for French companies, in particular to develop their visibility in a market of one billion inhabitants.

China represents great growth potential for companies that adopt its codes and offer solutions adapted to the habits of its population. Digitization makes it possible to create a unique customer experience around new technologies, which are closely linked to telecommunications. It is based on a perfect knowledge of local operators, regulations and technical constraints.

We wish to say thanks to the writer of this article for this amazing material

China, model of rebound for retail: recovery, growth and digital transformation – Chine Magazine


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