What is New Retail? What are the supply chain systems in New Retail?

New retail, an innovative concept proposed by Jack Ma in 2016, is gradually reshaping the way we shop. It is not just a simple integration of online and offline, but also a new business model that reconstructs the relationship between "people-goods-place" with data as the core. This article will take you to a deeper understanding of the connotation of new retail, explore its differences from e-commerce, and the special features of the new retail supply chain system.

To understand what "new retail" is, we must first know what retail is. Then, what was the previous "retail" like, and what is the "new retail" like? What is the difference between the two?

1. What is new retail?

The following contents are excerpted from online articles, industry reports, professional books, etc. If you are interested, you can search for keywords for in-depth reading.

Retail is a general term for a series of business models. It is to connect consumers and goods through a certain "transaction structure" and sell goods to consumers; vice versa, it allows consumers to find goods. In Alibaba's discourse system, retail is actually the "field" that connects the "people" (consumers) who ultimately pay and the "goods" (goods) together. This "field" may be a scene, a physical location, a call center, or your behavior of visiting unfamiliar customers. Many business models can be regarded as retail, including offline clothing stores, supermarkets, and even a knife sharpener carrying knife sharpening equipment and shouting on the road.
——Excerpt from "New Retail: The Road to Low-Cost and High-Efficiency Data Empowerment"

On October 13, 2016, at the Alibaba Cloud Conference, Jack Ma first proposed the concept of "new retail" in his speech.

Jack Ma asserted: "The era of pure e-commerce will soon end. In the next ten or twenty years, there will be no e-commerce, only new retail. That is to say, online and offline and logistics must be combined to create real new retail."

PwC Strategy& believes that "new retail" is a data-driven pan-retail format centered on consumer demand. Its core is the redefinition and reconstruction of the three elements of retail: "people", "goods" and "places". The most fundamental driving factor behind the reconstruction is data. With the help of big data technology, retailers have obtained a large amount of accurate data on users, and data is the most reliable basis for decision-making.
——Excerpt from "The Winning Strategy for Retail Enterprises in the "New Retail" Era"

There are many definitions or opinions about new retail in the industry, but after all, I feel that they seem to be more official and theoretical. They make people feel very high-sounding after listening to them, but they still don’t quite know what the specific difference between the two is.

After reading some materials and studying some cases, I think this question can be thought out of context. Don't dwell too much on its definition, but pay more attention to the differences and distinctions in the actual implementation process. As for whether it is called new retail or traditional retail, it is nothing more than a "noun definition".

The following content is excerpted from Strategy&’s industry research report:

The winning formula for retail enterprises in the “new retail” era. Compared with the traditional retail model, the new retail has the following characteristics: Reconstruction of the “people-goods-market” relationship Changes in people: from passive to active Changes in goods: rich variety and category segmentation Changes in the market: from single channel to omni-channel integration

1. Reconstruction of the “people-goods-place” relationship

In the previous retail model, consumers often went to a fixed place to make purchases and consume, and what they could buy depended on what the retailers in the place could supply. However, the new retail model allows consumers to be in the consumption scene anytime and anywhere, and can integrate personalized design and customization into the products according to their own preferences and needs. At the same time, consumers are in the experience in every consumption link and various consumption channels.

2. Human Change: From Passive to Active

First, what products do consumers need? Consumers' active demands can be quickly conveyed to merchants through online channels, social platforms, etc., and merchants will upgrade their products and services to meet consumer needs. With the help of technologies such as big data, the portrait of consumer groups will gradually become clear, from vague consumer group portraits to accurate consumer individual holographic portraits. In this way, merchants can develop better quality, more complete functions, and more attractive products based on the needs of each consumer, while avoiding product design defects and risks. Therefore, consumers, through their active demands, reversely promote the development, design and iteration of new products.

Second, when do consumers need what volume of products? By accurately positioning consumer groups, merchants can also accurately predict production quantities and supply chain time based on online consumer consumption habits, such as the number of visits to stores, and greatly improve merchants' efficiency and profits through the use of big data. Therefore, consumers' active demand also further reversely affects production and supply chains.

Third, through what channels do consumers obtain products? Consumers are also the ones who choose consumption venues. In each consumption link, they can choose a variety of ways, such as mobile shopping, web consumption or traditional on-site experience to search, purchase and experience products, which in turn promotes the construction and innovation of the "venue" by merchants.

3. Changes in goods: rich variety and subdivided categories

Wider product selection: Online channels have successfully broken the geographical boundaries of product distribution. As a great supplement to offline channels, offline retailers are no longer limited to a fixed geographical location. At the same time, with the virtuality of online channels, merchants can display countless different SKUs at the same time without being troubled by store area restrictions and booth layout.

More subdivided categories: With the intensification of competition, merchants have to subdivide in terms of precision, detail, and professionalism in order to establish unique advantages and brand positioning. This has prompted multi-category retailers to transform from a unified classification method to more distinctive boutiques, such as JD.com's "Super Species", which attracts consumers who love new experiences by creating theme workshops to extend various experience scenes. JD.com's salmon workshop, Jinghou Huakai Art Workshop, Life Kitchen and other clearly positioned subdivided places and formats have successfully increased customers' consumption frequency and stagnation time, thereby increasing the sales of stores.

Non-standardized products: The new generation of consumers pursues interaction with merchants, likes to participate in more service experiences and likes personalized products. This has prompted merchants to start transforming to provide non-standardized products when the traditional, standardized commodity market is already saturated. For example, the Oreo 3D printed biscuit vending machine allows consumers to customize personalized colors and flavors and choose different types of biscuits, thereby stimulating a new round of sales growth.

4. Changes in the market: from single channel to omni-channel integration

After the transformation from a single offline channel to multiple online and offline channels, the changes in the new retail "field" are reflected in the omni-channel integration in all aspects of the consumer journey, stimulating a panoramic consumer experience.

From a horizontal perspective, we break down the consumer journey into six parts: search, comparison, purchase, payment, delivery and after-sales.

From a vertical perspective, we observe the omni-channel integration of physical stores, e-commerce PC terminals, e-commerce mobile terminals and information media.

2. What is the difference between new retail and e-commerce?

Through the above definition, we roughly know some of the differences and differentiations between new retail and traditional retail, but for most non-experienced practitioners, it must still be a bit confusing, because these concepts and logic are not concrete enough and not vivid enough.

As I mentioned above, as a supply chain product manager, you don’t need to worry too much about what is “new retail” and what is “old retail”. These are all differences in concepts and terms. We should still focus on actual business scenarios, how the three flows of the supply chain operate, and what unmet needs and uncovered scenarios are there in the current business informatization and digitalization process.

Because we use e-commerce to shop on a daily basis, and we have also come into contact with many e-commerce ERPs, e-commerce service providers, etc., we are naturally more familiar and close to e-commerce business. So when many friends first heard the concept of "new retail", they immediately had a question in their minds:

What is the difference between new retail and e-commerce?

Although new retail and e-commerce are both important components of modern retail, they have significant differences in operating models, user experience and business processes.

Here are the main differences between New Retail and e-commerce:

1. Business Model

New retail: New retail emphasizes the integration of online and offline, using technology to integrate online e-commerce and offline physical stores to provide a seamless shopping experience. It not only includes the sale of goods, but also involves the integration of services, experience and data. Consumers can choose to pick up the goods in offline stores after placing an order online, or place an order online after experiencing the goods offline.

E-commerce: E-commerce mainly relies on online platforms for the sale and transaction of goods. Consumers browse goods, place orders and pay through the Internet, and wait for the goods to be delivered. Consumers cannot directly touch and try the goods, and can only choose through pictures and descriptions.

2. Entity and business model

New retail: adopts the S2b2C (Supplier-to-Business-to-Consumer) model, that is, suppliers empower small Bs (such as retailers and individual merchants) to better serve consumers. New retail emphasizes the integration of online and offline, and uses new technologies (such as big data, cloud computing, and artificial intelligence) to optimize the supply chain and improve efficiency.

Traditional e-commerce: usually a B2C (Business-to-Consumer) model, where the e-commerce platform acts as a middleman to connect buyers and sellers. E-commerce relies more on platform traffic and information matching to promote transactions.

3. Consumption scenarios

New Retail: focuses on creating rich offline experience scenarios, such as setting up interactive display areas and experience areas in the store, while providing the convenience of online shopping.

Traditional e-commerce: The consumption scenarios are relatively random, and consumers can shop at any location through computers or mobile devices.

4. Logistics and delivery

New Retail: New Retail’s logistics and distribution are more flexible and efficient. Consumers can choose to pick up their orders at offline stores or enjoy fast delivery services. New Retail may also use intelligent logistics systems, such as unmanned delivery vehicles and drones, to improve delivery efficiency.

E-commerce: E-commerce logistics and delivery usually rely on third-party logistics companies, and delivery time and cost may be subject to certain restrictions. Although there are fast delivery options, they usually cannot reach the speed of instant retail.

5. Data Utilization

New Retail: Under the new retail model, companies can use online and offline data for in-depth analysis to optimize inventory management, forecast demand, and provide personalized recommendations. Data integration and analysis is one of the core advantages of new retail.

E-commerce: Although e-commerce also uses big data for analysis and optimization, the source of data and the scope of application are relatively limited, mainly focusing on online transactions and consumer behavior analysis.

New retail and e-commerce are unique in many ways, but they also complement each other.

New retail provides more comprehensive services and experiences by integrating online and offline resources, while e-commerce meets consumers' basic shopping needs through the convenience of online platforms.

Understanding these differences can help companies better formulate strategies to meet changing market demands.

If we start from the perspective of learning business or quickly understanding a new field, we can simply and roughly think that: new retail includes e-commerce business, new retail refers to a broader business scenario, and e-commerce is just one of the sales scenarios.

3. What’s special about the new retail supply chain business?

Compared with conventional e-commerce business, new retail business has some special scenarios in its business model, so when it comes to the specific supply chain field, there will also be some different requirements and characteristics.

1. Omnichannel integration

New retail emphasizes the deep integration of online and offline, which requires the supply chain to support omni-channel inventory sharing and order fulfillment.

For example, if a consumer places an order online, it may be delivered directly by a nearby store, or the consumer may purchase the product in the store, but due to out-of-stock conditions, they may choose to have it shipped online to their home.

This requires a unified inventory pool and flexible distribution rules. The supply chain needs to support this cross-channel experience and ensure that product information, inventory status, price and other data remain consistent across channels.

2. More complex inventory management

Under the new retail model, inventory may be distributed in multiple locations, including central warehouses, regional warehouses, physical stores and even mobile warehouses. This multi-level inventory structure requires a higher level of inventory management and coordination mechanism to ensure the timely supply of goods.

Through a unified inventory management platform, we can achieve consistency of product information across all sales channels and ensure real-time updating and accuracy of inventory data.

3. Stores are warehouses

In the new retail model, physical stores are not only sales terminals, but also serve as forward warehouses, experience centers, logistics nodes, and other multiple roles. This requires the supply chain to support these diverse functions and ensure efficient collaboration between stores and warehouses. It also requires the POS system to support both the store retail business and the store's warehouse management business, including order placement, picking, packaging, and shipping processes.

4. Last-mile delivery

New retail emphasizes rapid response to consumer demand, so last-mile delivery becomes more important. This may include instant delivery, scheduled delivery and other forms, requiring the supply chain to access sufficient distribution channels, while also requiring high flexibility and responsiveness.

In general, the supply chain of new retail is more complex and requires higher flexibility and intelligence. It not only needs to integrate online and offline resources, but also needs to be able to quickly respond to changing market demands and provide personalized services. All of these have brought new challenges and opportunities to supply chain management.

4. What are the supply chain systems in new retail?

As a product manager, in addition to understanding what new retail is and what characteristics the new retail supply chain business has, we are also very concerned about which supply chain systems are available in the new retail business scenarios. What are these systems? What are they used for? What is the difference between them and supply chain systems in other fields? What competitive product knowledge can be referenced?

Regarding the competing products of related supply chain systems, function lists, and business scenarios that can be solved, I will introduce them in detail and gradually disassemble them in subsequent articles. Here, let’s take a quick look at what these systems are to deepen our impression.

1. Purchasing Management System or SRM

In the new retail business, procurement is a very high-frequency action. As the variety of goods gradually increases, the number of suppliers will also become huge, and the corresponding procurement management difficulty will also increase, so it is very dependent on the support of information systems.

The procurement management system or SRM is mainly used to manage the procurement process, including supplier information management, contract management, supplier performance evaluation, procurement requirements, procurement plans, purchase orders, procurement reconciliation, etc.

2. Order Management System (OMS)

In the new retail business, OMS (order management system) plays a core role. OMS needs to integrate orders from various channels, including online shopping malls, physical stores, mobile applications, etc. At the same time, based on factors such as inventory status and delivery distance, OMS can intelligently decide which warehouse or store to complete the fulfillment order from to optimize delivery efficiency and cost. In addition, OMS also needs to provide a real-time omni-channel inventory view, support online and offline inventory sharing, and improve inventory utilization.

For example, when a customer places an order for an item on a mobile app, the OMS will immediately check the inventory of nearby stores and warehouses, and then decide to ship the item from the nearest location with inventory, update the inventory information and start tracking the order status. This process reflects the important role of OMS in achieving a seamless shopping experience in new retail.

3. Warehouse Management System (WMS)

WMS is very common in the supply chain of any industry, and new retail is no exception. For some retailers, since their business volume is not sufficient, they will not consider building their own warehouses to manage their own goods, but will choose to use third-party warehouses for hosting, so the relevant business systems must be connected with WMS in advance. Some retailers have sufficient business volume and can build their own warehouses and WMS to manage inventory, which will involve the construction of WMS system.

4. Enterprise Resource Planning (ERP)

Different fields and industries have different definitions of ERP. For new retail, ERP often represents a comprehensive management backend system that integrates the core business processes of the enterprise, such as goods, procurement, sales, suppliers, customers, finance, human resources, etc., to provide a comprehensive management view for the enterprise. Point of Sale System (POS)

The POS system is used to manage the daily operation of the store, involving the store's goods purchase and warehousing, transfer and delivery, sales and delivery, retail cashier, retail returns and other scenarios. The POS system is generally divided into two parts: the cashier end and the management end. The cashier end is mainly used to complete the work of retail cashier, while the management end is somewhat similar to the purchase and sales inventory system, supporting various supply chain businesses and the management of operational businesses.

5. Distribution Management System (DMS)

In the retail industry, distribution is a common business, and DMS is used to manage the relationship with distributors, manage the information of distributors, agents, retailers and other channel partners at all levels, support the management of multi-level distribution system, and process orders from distributors at all levels, and support different ordering modes, such as pre-order, direct delivery, and skipping. It also includes the management of reconciliation and settlement with distributors, and supports multiple settlement modes, such as distribution and agency sales.

In addition to the common supply chain systems mentioned above, there are many scenarios in the new retail business that also need to rely on information systems. However, these systems may not belong to the supply chain field or their popularity and exposure are not so high, so I did not list them:

• Store building system;
• MDM (Master Data Management System);
• CRM (Customer Relationship Management);
• Operational systems;
• Work order system;
• Demand and inventory planning systems;
• …

V. Conclusion

It is difficult to explain new retail and the new retail supply chain clearly, and it cannot be done in just one article, but it is a "difficult but correct thing" worth doing.

Therefore, I plan to spend about a year in the future to continuously update multiple articles in this field, and use the method of "output forcing input" to start the long learning journey of the new retail supply chain. I believe in the power of "one step at a time" and practice the concept of "long-term patience". Welcome to join me on the journey of this new field and new track.

Finally, most of the definitions and concepts of some terms in this article come from industry research reports and explanations of AI tools, so strictly speaking, this article is not an original article. If you find some answers that are "AI illusions", please leave a message in the comment area to correct them.