January 2018 JD.com, China’s second largest e-commerce company, launched its first offline fresh-food supermarket, called 7Fresh. I went to take a detailed look…
Located in Beijing near JD headquarters in Yizhuang district this is their response to China’s booming market for online fresh food shopping and this growing segment of the domestic retail market.
4,000-square metres of floor space. It’s a true manifestation of the merging of online and offline. It’s equipped with “smarts” and serves as both a physical store for consumers and fulfilment for on-line orders.
The retail component of the store itself is a mix between Wholefoods, Eataly and a traditional supermarket, it combines cooked and fresh-food offerings. In an eclectic selection of products, it includes fruits from New Zealand and beef from Australia, a live wet fish market and cooked-food stalls where you can pick up and either eat there or take away from traditional Chinese food, salads to Pizza.
Its “smart” components include carts which can help guide shoppers to the right aisles. The entire store is based on JD’s smart logistics system. It’s so smart that 7Fresh will know what you want better that you will. Getting smarter about you the more frequently you visit. The system also powers a delivery services so on line shoppers can get their groceries in about 30 minutes in a defined area around the store.
This store is impressive and a testament to how advanced China is in retailing today and especially the world lead it now has in the convergence of online and offline retailing. 7Fresh is a physical manifestation of seamless integration of online and offline shopping systems that will be the model for the future of retail globally.
The retail world should sit up and take note.
For key insights on JD.COM and the implications of 7Fresh to you as well as understanding JD.COM please get in contact with me. To learn more about JD.COM please watch my documentary film “Hidden Dragon. The Rise of an E-commerce Giant”
History of the Chinese New Year the Chinese New Year, known in China as spring festival, is the country’s most important holiday. The Chinese New Year is based on a calendar established about 4,700 years ago. Various legends explain the origin of the Chinese New Year. One describes how people dreaded the New Year because a fearsome beast named Nian annually terrorised the population and devoured children. Then one year a child appeared dressed in red. The beast, frightened by the colour, fled and never returned. That’s why the Chinese New Year traditionally features red lanterns and noisy firecrackers to ward off evil spirits. The Chinese New Year is based on a calendar that calculates time using both lunar and solar events. Time passes in 12-year cycles, with each year represented by an animal of the Chinese zodiac. Traditionally, people prepare special foods and hope for a future of good luck. They attend many family dinners, starting with a New Year’s Eve feast. Travel home for the family reunion produces a mass migration. The New Year period culminates in the lantern festival, a joyful celebration around the first new moon in the lunar New Year. To learn more about the Chinese New Year and how the holiday unlocks year-round brand and retailer opportunities, download this informative and visual BrandZ™ study.
Chinese Astrology Believers in Chinese astrology attribute a person’s personality characteristics to the profile of their birth year animal. It’s not that simple of course. According to the Chinese view of the world as being composed of opposites, the animals of the zodiac are divided equally: yin animals and yang. They are also linked with similar animals into categories called trines. In addition, each animal is connected to one of five elements: wood, fire, earth, metal and water. The possible combination of animals and elements produces a 60-year cycle and a complicated system of astrology. People who are born in the Year of the Rooster are believed to have the following characteristics: They tend to be neat, meticulous, organized, self-assured, decisive, conservative, critical, perfectionists, alert and practical. They can also be critical, puritanical, egotistical, abrasive, proud and opinionated. ROOSTER YIN, (FIRE)
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.
WeChat gets even bigger The role of WeChat as the ‘super app’ that does just about everything will expand even further in the Year of the Rooster. WeChat combines an online browser, messaging app, social media platform and payment function under one virtual roof, and has in excess of 700 million users who can access over 10 million internal apps (known as official accounts). Appy days – WeChat gets even bigger WeChat provides the ultimate gateway through which retailers can reach consumers. Retailers can use their WeChat account to do everything from sharing news and special offers to customer engagement, loyalty programs and payment. WeChat allows users to get product recommendations from their peers, then choose those products directly from the site and pay for them via WeChat wallet – without ever leaving the WeChat app. It’s a proven business model and one that overseas retailers should embrace as its influence increases. WeChat
With the rise of mobile, social and cloud technologies, customer expectations of the brands they engage with are constantly on the rise. The pursuit – and expectation – of unique and memorable retail interactions makes customer experience the new battlefield for brands. Those brands that deliver a winning experience will attract new customers and keep them. Cutting out the middleman When manufacturers sell through retail distributors, their ability to influence how their product is sold is often limited. They’re essentially at the mercy of the distributor to ensure that every shopper leaves the store – whether that’s online or offline – a happy customer. In 2017 we expect to see a stronger push from brands to cultivate direct relationships with their consumers. They’ll offer more focused brand experiences that build their brand story, and will be able to deliver more targeted messaging. By selling directly to consumers (DTC), brands can determine how the customer journey should be, and work to make that vision a reality. Going DTC provides not just a sales channel but can also give a huge boost to the lifetime value of consumers; brands can gather information about their customers and use it to provide personalized shopping experiences. Nike and Under Armour are leading the charge on DTC. This year, there’ll be more entrants in the race to deliver the best customer experience, directly.
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.