By Chris Daplyn, UK Managing Director, Valtech
Despite being at the centre of the Covid-19 pandemic, China’s retail sector has bounced back at unparalleled speed. While western countries have been slow to reopen and cautious of future lockdowns, China’s unique “New Retail” mentality has helped revitalise the sector at record speed.
To a large part, this has been due to China’s willingness to embrace the very latest technologies and trends across the retail and ecommerce space.
So what are these technologies and trends, and how can western retailers, learn from them, disrupt and adapt traditional thinking and kindle similar transformation and growth?
1. Innovation in contactless delivery by default
During COVID, contactless delivery was key to China’s success. One reason the country was able to roll out next-level contactless delivery so successfully during the crisis was that commercial drone delivery was already well underway in China. In fact, contactless drone deliveries have been in the works in China for the last five years, with reports of Alibaba experimenting with drones as early as 2015.
Since then, the country has moved forward with a far stronger rollout. In March 2018, SF Express, China’s biggest logistics firm, was given the green light to begin delivering packages via unmanned aerial vehicles. At the same time, Chinese e-commerce giant JD.com also got the go-ahead to start its own drone delivery service. The competition between these ecommerce giants has pushed the drone race into overdrive, helping keep shoppers buying during China’s lockdown.
If western retailers are to learn from China’s experience and follow a similar roadmap for innovation in delivery, it’s vital that we invest more in our contactless delivery infrastructure. While few retailers have the budgets to build their own Amazon-style drone armies, it’s vital that brands work together to set expectations, ensure this delivery technology moves forward and ultimately delivers the right customer experience. This is where retail consortiums and industry bodies will prove vital — ensuring that this type of contactless delivery infrastructure progresses and isn’t owned by Amazon alone.
2. A truly mobile-first society
In much of the west, services like PayPal, Venmo and Apple Pay have been gaining in popularity for years. However, these options don’t have the same adoption rates as their Eastern equivalents. A 2019 report from eMarketer showed that while 577 million people in China were making use of mobile payment options, only 64 million individuals in the US used mobile payments that year.
So what accounts for China’s exceptionally high numbers? Until recently, China was almost exclusively a cash-based economy. While the rest of the world transitioned away from cash and towards credit and debit cards, China didn’t make this journey. As e-commerce continued to gain traction in the country, the country found itself skipping the credit card step and becoming the world’s first truly mobile-first society.
Mobile commerce is a vital part of China’s economy and has also played a major role in the country’s retail recovery since Covid. While western retailers saw a significant boost in mobile commerce due to Covid-19 (up 30% during lockdown) it’s vital that brands don’t lose this mobile focus now that their physical stores are reopening. From mobile “Scan & Go” functions to app-based subscription services, mobile-first shopping experiences should stay front of mind post-pandemic as consumers continue to rely on the convenience and safety of their mobile devices.
3. Face Pay has people smiling
Between Scan & Go and the RFID technology behind Amazon Go, it’s evident that retailers can move customers through a store with little need for contact points. However, with both of these options, an added step from the customer is still required. Whether it’s logging into your Amazon account or using your phone to scan items and QR codes, there’s still friction in the process.
To overcome this friction, China introduced facial recognition as a means of payment. Unveiled in 2017 by Alibaba affiliate Ant Financial, “Smile to Pay” allowed anyone who had an Alipay account with facial recognition enabled to pay for purchases simply by flashing a smile at the POS.
While the west may not be quite ready for Smile to Pay (and the related privacy implications) new, innovative contactless payment options are essential to avoid spreading germs. Optimising offerings for contactless touchpoints will become as important as optimising a site for mobile.
As is often the case with new technology it only takes one disruptor to take a chance on something and prove demand, for it to change the masses.
However, innovation doesn’t always require brand new foundations. Many retailers have responded to the pandemic in creative ways by re-imagining the use cases for existing technology. We helped one customer leverage its existing clienteling app to enable staff to take orders over the phone. This involved connecting with the warehouse systems to process orders efficiently. The retailer innovated at unbelievable speed, processing orders in fewer than two weeks from ideation to launch.
Contactless technologies and services are crucial for building trust with consumers. As desire grows for safer shopping practices, these technologies could be the lifeboat that saves the bottom line in the sea of uncertainty still ahead of us.