Where are Chinese Consumers Headed Next?

Online shopping is the future of retail. This is accepted wisdom in China.

But should it be?

News came in last week that, according to an industry report, improved shopping experiences due to better use of technology are pulling Chinese consumers back to brick-and-mortar stores. For years, we’ve been hearing about how brands must move online or perish, but now, is the traditional retail experience making a comeback?

According to the article, which cites Kantar Worldpanel’s report, the answer is yes. Brands are proactively reformatting their existing stores, with Walmart and Carrefour introducing new stores that are just half the size of their older stores, while closing poorly performing outlets. At the same time, Walmart has launched a digital wallet in cooperation with China Union Pay to make mobile payments easier. Yonghui and BuBuGao also expanded their store networks.

Should we be surprised? Yes and no. Retailers have not been sitting idle while the online revolution has happened, and it should not be a shock that they are finally rolling out a retaliation aimed at recapturing their one-time customers. At the same time, customers still want a physical experience with many products before they buy, says Andrew Kuiler, CEO of The Silk Initiative. That said, the report is an important reminder that the pendulum swings both ways, and brand managers need to stay on top of consumer sentiment if they are going to maximize sales. In some categories, at least, the pendulum is swinging back to offline.

Chinese consumers at Easy Carrefour Shanghai

[ABOVE: One of Carrefour China’s Easy convenience stores in Shanghai where customers are able to pick up their online orders]

The takeaway is that brands need to be constantly talking to prospective partners, whether they are right for your brand right now or not. In one case study, a Silk Initiative client who was searching for a grocery partner decided against Yonghui for a number of factors. At the time, Yonghui’s environment, including hygiene, didn’t match the class of consumer the brand was after. These factors may now have been resolved, as the grocery chain revamps and expands, and Yonghui might now make a suitable business partner for our original client. But they would only know that by keeping tabs on partners and China’s retail market in general, which is constantly maturing and shifting.

Yonghui Chinese consumers

[ABOVE: Consumers are attracted by the fresh seafood and cooking service at BravoYH in Fuzhou, Fujian province. Photo by Zheng Shuai]

It’s also important to have an integrated offline/online strategy, as the article makes clear, with Yonghui (again) cooperating with Jingdong to deliver fresh produce and grocery items within one hour from its stores, and introducing its own app, Yonghui Life, to increase direct consumer exposure.

For many customers, direct retail still serves a real need, and in the rush to move everything online and in the hype of O2O, it pays to remain grounded and be where your customer needs you – which is not always where you may think.

Stay on top of the retail landscape with The Silk Initiative’s Market Monitor, which can help match you with a partner, put you in front of the retail leaders of tomorrow, and protect and grow your product in China’s famously fickle retail marketplace.