Retail

While smartphone penetration has been soaring in China, in-store technology has been left behind, and remains a largely untapped retail resource. That’s going to change. Souped-up stores Some clothing retailers have built systems that allow shoppers to browse and order out-of-stock items from within the physical store. And cosmetics brands have pioneered ‘virtual mirror’ services that allow shoppers to experiment with new colors. But beyond that, the digital instore experience just hasn’t got going. In the Year of the Rooster, we’ll see greater collaboration between digital agencies and retailers. This will inject new life into stores, delivering the sense of theater and richness of experience that’s becoming so important in winning sales and loyalty. Enabling customers to interact with products on the shelf, understand their benefits or investigate the supply chain without having to switch to looking at their phone, will encourage footfall and improve the in-store experience. We know consumers are using their own screens to seek out reviews and information while they browse; in-store tech is the opportunity for brands and retailers to both streamline and liven up that process. In 2017, winning brands will use in-store technology to enhance the shopping experience – at scale.

There’s been proof in the past year of the value of looking beyond the most affluent Chinese cities for growth. As the country’s economic slowdown has hit consumption in first and second-tier cities, those brands with the vision to roll out in third and fourth-tier cities have been rewarded. The rise of rural In the Year of the Rooster, we’ll see an extension of this trend. The smart money will not just be backing lower-tier cities but also rural consumers, who have been largely overlooked for years. Very few brands have considered these generally lower-income consumers worth the investment it would take to overcome the headache of distribution. But rural consumers are not just a buffer against slowing growth in the top-tier cities – they’re also the big spending citydwellers of the future. As people move up the income ladder, they’ll migrate to cities and be in the market for a whole new range of goods and services. Now’s the chance to capture their attention and loyalty – and set yourself up to win longer-term battles in key cities.

A channel, not THE channel in China e-commerce. This is the biggest e-commerce market in the world, and you’d struggle to think of anything that you can’t buy online in China. But there are some categories in this sea of online sales that are battling to stay afloat; they’re finding it tough to maintain margins, create meaningful consumer connections and control their own brand image in the e-commerce world. E-commerce: A channel, not THE channel We noted a year ago that brands would need to bridge the gap between physical and virtual shopping, and this continues to be the case. In recent months, online retailers have been making big investments in physical space, but the bigger challenge will be in blending sales across channels to get the ideal balance between margin and volume. The brands that manage to work across the channels – not just use e-commerce to float flagging volumes – might take a hit on growth this year, but will be far better positioned for the inevitable changes ahead.

Augmented Reality (AI) is providing a fresh take on gamification that retailers are realizing can take the shopping experience – and customer engagement – to a whole new level. Dare we say it … it’s a game changer. In it to win it Gamification has long been deployed as a way for brands to tap into the innate human desire to compete for rewards and recognition. Service providers in China have frequently been the fastest off the blocks, and have had huge success. Tencent generated incredible levels of engagement with their WeChat red envelope (Hongbao) campaign to attract consumers to WeChat Pay, which saw an astonishing 8 billion red envelopes sent during Chinese New Year 2016. Red paper envelopes traditionally contain ‘lucky money’ as gifts at festival time. Likewise, Alibaba’s used gamification in the loyalty program for its Sesame credit rating system, and the taxi app Didi uses promotional games and lucky draws to boost loyalty. But it’s the global phenomenon that was Pokémon GO in 2016 that shows how augmented reality can add a whole new dimension to gamification. For retailers, AR games stand to generate a wealth of information about customers’ preferences and behavior. Games will help brands see which items are considered in the purchase cycle, see how a customer shops, and gain additional insight on what drives the final purchase. For the customer, AR promises to bring to life – or virtual life – information on product features and benefits, promotions and price-scanning features.

The rapid expansion of China’s middle classes is transforming the consumer landscape. These increasingly affluent consumers are seeking ways to lead healthier lives, fuelling demand for products and brands from across the globe that are linked to health and wellness. In the Year of the Rooster, the markets for healthy food, drinks and fitness will expand. The challenge for brands will be in remaining sympathetic to the country’s wellness traditions, while providing enough modern luxury to satisfy people’s desire for hi-tech solutions. Global fitness and lifestyle brands are already making a big impression in China, and many have announced ambitious launch and expansion plans. These include apparel brands Lululemon and Under Armour, along with Nike, fitness club chain Virgin Active, and Adidas, which has plans to open 3,000 new stores in China by 2020. The pursuit of fitness and wellbeing will also prompt a rise in niche health and wellness retailers. Smaller store footprints that can offer a more personalized service from knowledgeable sales representatives will appeal to health-conscious consumers seeking expert guidance. This shift explains the recent rise of Chunbo, a niche B2C e-commerce platform specializing in healthy, organic foods.