The pains of traditional retailers in China

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Traditional retailers in China feel the intense pinch these days. According to the latest data from Kantar worldpanel, value of China FMCG retail under the category of super and mini markets decelerated from 9.5% to 4% in 2015. Sales of hypermarket declined as well, losing 0.2% in value, as traffic fell by 4.6% and volume per household sank by 4.7%.

In the physical world of retailing, only convenience stores seems a silver lining, with 8.5% penetration growth across all city tiers. They appeal to cash-rich, time-poor urban consumers. That is why retailers like Carrefour and Vanguard—which built their success in larger formats—are offering Easy Carrefour and Legou Express convenience stores in China, hoping to seize this last hope.

None of above matches the overpowering challenge from China’s e-commerce, which continues to flourish, growing at an annual rate of more than 35% over the past four years and generating revenues of nearly RMB 4 trillion. China remains the world’s largest e-commerce superpower. Online penetration continues to increase at an astonishing pace, reaching 43% in 2015 from 25% in 2012.

More than ever before do retailers in China need to reinvent themselves for their existing business model. Big data analytics, personalized marketing and omni-channel are becoming the key buzzwords for the survival of future retail. However these are easier to be said than done.

-Big data analytics

For traditional retailers, there are two main hurdles in data analytics.

1)Data integration process

Retailers claim they actually have big data, collecting from in store, PC website, Apps&mobile site, social media, call center etc, but the data integration process across all these channels has become a daunting task due to the huge volume and growing complexity of the data nowadays. Based on the China retailer survey conducted by IBM in 2015, only 36% of the respondents indicate they are “good” in big data capture and integration. The bottleneck here is the inconsistency of the data from diverse channels, the incompatibility of traditional IT infrastructure to ease data capture, and lack of efficient data processing tools-hardware and software.

2)Lack of data analytics talent

More and more local retailers complained it is difficult to find data analytics talents who can not only analyse the data but also make actionable recommendation for the retailing business upon data insights.

Additionally, the cost of hiring data analytics professionals in house is getting too expensive, especially because they are competing with giant internet companies to recruit and retain these talents.

In a word, many retailers consider themselves have “big data” but fail to turn them into “smart data”

-Personalised marketing

Unlike pure e-commerce, most traditional retailers would tell it is impossible, technically, at this stage, to conduct 100% personalisation for their customers. Given thousands of sku for a typical FMCG retailer, even though they know the preferences of every customer, assigning each one with a label to match corresponding preference and personalise everyone with a unique marketing message, they consider it is sth too labor intensive, time consuming and costly.

-Omni-channel

Ask any industry expert today and many would judge even the most leading retailers in China still stay in the phase of multichannel, that is various, disconnected channels for customers to use independently.

Without the building blocks of big data analytics and personalised marketing, Omni-Channel, which requires an integrated, seamless experience across multiple devices and touchpoints, remains more than one leapfrog for traditional retailers to cross over from multi-channel.

-In conclusion

Though supposedly we know what the future of retail will require, though digital technology is coming to rescue, the pains of traditional retailer surmounting existing barriers linger on. Their competitive advantage over e-commerce hangs in the balance in the long run in China.

Cecilia Wu

A witty, nutty and frosty writer who hopes to jot down moments of inspiration from her daily life

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