Category Archives: Consumer Goods

Can multinational retailers be successful in the Chinese market?

Since 2004, China has officially liberalized restrictions on the store opening of multinational retailers. Multinational retailers have experienced about 5 years of rapid expansion and development. In 2010, the multinational retailers collectively suffered a crisis of survival in the Chinese market. Carrefour, Home Depot, Best Buy and even retail giant Wal-Mart announced the closure of some stores or withdrew from the Chinese market. It was unexpected that the multinational retailers would encounter Winter in a market full of infinite potential. While McKinsey estimates: “From 2008 to 2025, just for Chinese cities, the consumption increment will be equivalent to that of creating a new market”. Undoubtedly, China’s retail market is full of potential.

To further emphasize my point, multinational retailers have the opportunity to succeed if they can implement the correct strategy in China. To this end, the following points require some attention:

#1:  To better serve the middle-class customer segment. According to McKinsey, the ‘’middle class will account for the largest share of consumption, affluent and above households will lead consumption growth by 2025 in China”. Significant expansion of the Middle class brings new demands and multinational retailers should be prepared to serve this new, emerging customer segment: Relatively mid to high end categories; Customized products and services; Seamless omni-channel retailing; More comfortable shopping environment etc.

#2:  To invest in retail service products. Retail services meaning product lines which can enhance the core retail experience by offering value-added products and services. Products including: Prepaid card and 3rd party card, Financial Services (Credit Card, Money Transfer, Installment Loan, Insurance etc.), Convenience Products (Welfare Lottery, Bill Payment, Extended Warranties etc.) and Lifestyle Products (Tourism, Fitness Center, Children’s Education Center etc.). Retail Services is still quite a new idea and field for retailers in China. It can help retailers gain market share in four ways: meet customers needs, drive traffic and sales, reduce cost of payments and provide standalone profits. At Tesco, the income of Retail Services products accounts for almost 7% of its total income. So, for multinational retailers, the earlier they invest in this field, the earlier they will get returns from both financials and customers’ satisfaction.

#3:  To steer the front from 1st and 2nd tier cities to 3rd and even 4th tier ones. According to the China Statistics Bureau, in 1st and 2nd tire cities, retail employees annual income growth is 5-10% and a core gold district annual rent increase is over 10%.

Along with the soaring rate of manpower and real estate costs in 1st and 2nd tier cities, it has been declared the end of the dividend era, and the retail industry will now step into an era of meager profit or worse. Instead, Midwest, 3rd and 4th tier cities will be the driving factors of China’s urbanization. We can get a glimpse from the performance of China’s Top 100 retail enterprises; the average annual sales increase was 6% for those in 1st and 2nd tire cities, while this number was 18% in 3rd and 4th tire cities. Multinational retailers should actively build strategic alliances with local enterprises to seek entry into the market, or select the appropriate approach in anticipation of the future development of 3rd and 4th tire cities.

#4:  To invest to improve food safety. In China, food retailing is definitely an important pillar of the retail industry, food products sales account for over 50% of retailers’ total sales. The frequent food safety incidents have made the customers lose confidence in retailers. With customer attention increasing on food safety, multinational retailers can bring their best practices and experiences in other countries to the Chinese market and to invest to make it their core competitive advantage.

Opportunities and risks coexist. Multinational retailers should face the reality that the local Chinese retailers have made significant progress in recent years, learning from local players and the multinational retailers should be prepared to evolve with them in the market.

What are the top 3 E-commerce trends in 2014 and which market segments are expected to grow the fastest?

This article is structured into three parts to provide the context for:

  • Companies (the seller).
  • Consumers (the customer).
  • E-commerce technology (the tool).

Companies (the seller)

The key point for companies to take away is that e-commerce is (becoming) mainstream. For US companies this is a fact, one which is further confirmed by the high percentage of e-commerce-led venture capital exits. However, for some European companies, e-commerce remain a strategic debate at executive level, where the marketing manager is joisting with brands or retail managers, or a push-pull relationship between the information officer and a newly-created function, the e-commerce manager.

E-commerce is challenging the traditionally silo-ed organization; the path to purchase is getting shorter, the return on investment is measurable, innovation is fast-paced; the blurring of the frontier between traditional marketing and sales or the divide between traditional retail and e-commerce. Such evolution is pushing the limit of traditional silo-ed organization structure and is creating new opportunities for companies to further develop their direct to consumer (DTC) effort. Additionally, companies are creating and manage the Zero Moment Of Truth of their product to have the right content at the right time throughout the customer journey.

E-commerce has somewhat gone through a complete cycle from when it started as a stand-alone online store to ‘just’ another sales channel, to becoming a crucial part of a business with a strategic imperative that integrates traditional retail, wholesale distribution and the e-commerce dynamic into one omni-channel model.

Consumers (the customer)

From the customer’s perspective, this is marked by a strong growth of e-commerce traffic coming from mobile devices representing 25% of all e-commerce traffic in 2014. 75% of this traffic is coming from iPads and iPhone devices.

These hyper-connected consumers are seeking information online that eventually influences 52% of all retail sales. This is an opportunity for companies to offer a coherent customer-centric online journey throughout the purchase cycle from product search (on or offline) to delivery of the products and customer care services. While using the active and passive data collected throughout this journey to better serve their customers and provide a personalized e-commerce customer experience.

E-commerce technology (the tool).

Firstly, looking at the Gartner Hype Cycle for Emerging Technologies Maps, amongst the key technology trends relevant for e-commerce application are big data, prescriptive and predictive analytics.

The democratization of big data tools and applications is leading the path to a better prescriptive and predictive analytics that contributes to an enhanced customer experience, a better personalization and recommendation services, thus enabling mass personalization (an oxymoron). It is therefore reconciling the traditional paradox of mass services or products (economy of scale) versus personalization (hard to scale). Another positive side effect of data is that it allows companies to make more data driven decision throughout the organization at all levels of customer touch points.

Secondly, the omni-channel technology is going mainstream with services and products such as digital stores, where e-commerce is blended to complement traditional physical retail. They provide the advantages of omni-channels and enable companies to provide new services in-store that deliver a personalized experience and increase in-store revenue.

Thirdly, the growth of SaaS (software as a service) e-commerce solutions that are supported by an eco-system of developers who develop plug-in or features for the platform. Such models are often preferred as a way for companies to keep up with the speed of change and development of the web. On the other hand, it increases the complexity of companies to maintain their online store to ensure that it is up to date and support of the latest proven technology.

The fastest growing market segments

The largest and fastest growing segment for e-commerce (US) is the media segment, which includes products such as music, video, magazines and books. Within this segment e-commerce represents 24% of total retail sales in 2013. In 2014 this trend will continue to accelerate for all segments.

I hope this article provides you with a glimpse of the trends, opportunities and challenges of e-commerce as it become a norm to complement existing businesses. E-commerce is becoming just commerce, losing the ‘e’ as we fully embrace the digitalization of business.

If, like me, you believe that software will eat the world, such trends and the development of technology in general will profoundly change the way in which we search, buy, consume and live our life.

Top Trending Topics – Consumer Goods

  • In 2014 industry supply chain investments will increase two-fold due to retailers
  • By the end of 2014 ERP, core merchandising, FAR, and planning investment will be driven by transformations within business at a growth rate of 8%
  • Due to an increase in both globalization and integration product lifecycle management strategies will become more innovative and customer-focused

Food Scandals: Changing the Face of the Food Retail Industry?

Pink slime in the United States, horse meat in beef products in Europe, fake eggs in China: 2012 was not short on global food scandals, which shook the food and retail industry. With growing uncertainty and distrust towards large multinationals, could increasing awareness about the origins of what we eat change the face of the food retail industry? Continue reading

Chocolate: The Recession-Proof Good

When looking at the global chocolate market, one could comment that it is a recession-proof commerce. Despite the troubled state of the global economy, the market for chocolate is still growing steadily, leading to the conclusion that chocolate is a small, affordable luxury which people still choose to indulge in.

The global chocolate market is dominated by five large multinationals Continue reading

A Looming Food Crisis?

The World Bank strives to eradicate hunger and extreme poverty by 2015, but this goal is in danger as a new food crisis is already looming for 2013. Failure to prevent a shortage and heightened food prices will prove detrimental, not only to underdeveloped regions, but also to the already weakened economies of the West. A new geopolitics of food has emerged. Continue reading