A thorough explanation of "new retail"

Many people have discussed the concept of new retail, but do you really understand what new retail is? In this article, the author tries to explain "new retail" from the perspectives of definition, value, and future development trends. Let's take a look.

The concept of new retail was first mentioned in 2016, and it has been 7 years today. However, I find that many people still cannot explain clearly or do not quite understand what new retail is. I also want to try to talk about my views on new retail and provide some reference for myself and students who read this article.

A lot of the content involves data that was found online. The purpose is not to be long-winded, but to make it more tangible for everyone to understand, rather than just ending with a conclusion without a certain degree of real understanding.

1. What is new retail?

Before discussing this issue, let’s first look at what “retail” is. Retail is a commercial activity that directly sells goods or services to individual consumers or end consumers. It is the final link for goods or services to enter the consumption field from the circulation field. In essence, it is a commercial behavior that matches demand and supply. The three core elements are people, goods, and places. The optimization of commercial behavior around lower cost, higher efficiency, and larger scale has led to the emergence of new retail.

In the words of a certain encyclopedia, this model refers to a new retail model in which enterprises rely on the Internet and use advanced technologies such as big data and artificial intelligence to upgrade and transform the production, circulation and sales processes of goods, thereby reshaping the business structure and ecosystem, and deeply integrating online services, offline experiences and modern logistics.

2. Why do we need to engage in new retail?

Looking at the development history of China's e-commerce in the past 30 years, it seems that e-commerce has "met" most of our daily shopping needs. However, I looked through the relevant data of China's social consumer goods retail sales in the three years from 2019 to 2021 from the National Bureau of Statistics. It showed that the total in 2019 was 41.2 trillion yuan, a year-on-year increase of 8%, and the growth rate slowed by 1 percentage point from the previous year. The online retail sales of physical goods were 852.39 billion yuan, an increase of 19.5% , accounting for 20.7% of the total retail sales of social consumer goods; in 2020, the total was 3919.81 billion yuan, a year-on-year decrease of 3.9%, of which the online retail sales of physical goods were 975.90 billion yuan, an increase of 14.8% , accounting for 24.9% of the total retail sales of social consumer goods; in 2021, the total retail sales of social consumer goods was 4408.23 billion yuan, an increase of 12.5% ​​over the previous year, and the average growth rate for two years was 3.9%. The online retail sales of physical goods was 1080.42 billion yuan, an increase of 12.0% , accounting for 24.5% of the total retail sales of consumer goods;

The core conclusion is: the growth rate of online retail sales of physical goods has slowed down in the past three years, and its proportion in the entire social consumer goods retail has been relatively fixed and has reached a certain peak of about 25% . Traditional e-commerce obviously needs new growth points. Compared with offline shopping, offline shopping focuses on experience, has a strong sense of instant feedback, and has a certain degree of strong communication and accessible social dependence. How to make up for these natural deficiencies? New retail provides new solutions.

Unlike the older generation who get information through reading, reading newspapers, watching TV, listening to the radio and making phone calls, we have a very typical fixed characteristic of obtaining information. The reason is that the broadcast time nodes of TV and radio are fixed. It is not that we have chosen a channel, but that these are the only options available.

But our consumers today are in an era of information explosion, with the morning subway, office elevators, and even toilet bulletin boards, plus the full coverage of various mobile terminals. The diversity of channels has fragmented our time. Today , the boundaries of shopping behavior have become blurred . At first, it was barter, and then there were markets, shopping malls and other formats. Now we can complete the link of selecting products and settling accounts on a beverage vending machine in a scenic spot with the help of technologies such as facial recognition.

There are more choices, but the cost of choice has also increased, and in the later stage, the cost of acquiring customers on the supply side has indirectly increased. The supply side needs to know where its recent and potential consumers are and how to place ads. At the same time, a channel can allow A to place ads, and it can also allow B to place ads. A has one more customer, and B, a supply of the same type, has one less customer. In addition, the method of increasing advertising quotes and lowering prices is not benign and long-term. How to reduce consumers' purchasing decisions and reduce the cost of acquiring customers on the supply side? Can there be a better way for traditional placement and advertising channels?

In 2021, the per capita disposable income of residents nationwide was 35,128 yuan, a nominal increase of 9.1% over the previous year. Our consumption power is strengthening, and there is room for further growth in non-planned consumption demand. At the same time, we also pay more attention to personalized ideas. The popularization of a single hot product cannot completely solve our pursuit of self-consumption stratification needs. The era of people looking for goods and goods looking for people, and the efficient coexistence of the two at the right time, has come. When the capital flow, logistics, and information flow have been relatively efficient within their respective scopes, how to better integrate the three is also something that new retail needs to think about.

3. How to do new retail well?

1. Focus on user experience

The return rate of offline shopping is generally lower than that of online shopping. The reason is that we have real contact with the products, and we will only buy when our expectations and actual situation are basically in line. Online purchase decisions are more based on elements such as pictures and videos. Some products are quite different from the pictures. After the seller has carefully edited them, it is difficult to see the shortcomings. When the products are very different from the photos after they arrive, we often choose to return them, and the probability of subsequent repurchase is very small. This is why we now look at negative reviews first when buying things, because the positive reviews and pictures on the product details page are not as real as offline ones.

Therefore, only by paying attention to user experience can there be subsequent repurchase and word-of-mouth effects. If the offline differences can be magnified, it will be more effective. For example, convenience stores can provide heating areas, and clothing stores can provide try-on and photo check-in services. This kind of experiential service is not available online.

2. Create your own traffic pool

The China Internet Network Information Center (CNNIC) released the 49th "Statistical Report on the Development of Internet in China" in Beijing. The report shows that as of December 2021, the number of Internet users in my country reached 1.032 billion, an increase of 42.96 million from December 2020, and the Internet penetration rate reached 73.0%; the report also shows that during the same period, the number of non-Internet users in China was 496 million, and non-Internet users were still mainly people in rural areas. Lack of skills, cultural limitations and age factors are the main reasons why non-Internet users do not go online.

In addition, according to Tencent's third-quarter 2021 financial report, as of the end of the third quarter, the monthly active combined accounts of WeChat and WeChat were 1.26 billion, which was basically consistent with the market estimate of 1.26 billion, an increase of about 10 million in the quarter, a year-on-year increase of 4.1%. The core conclusion is that the growth of the scale of Internet users in my country has begun to slow down due to regional and technical coverage, age and other reasons. Excluding factors such as multiple WeChat accounts for one person, the scale of Internet users is approaching the number of WeChat users.

According to the logic of the sales funnel, Internet users -> single-industry users -> single-demand users. The early front of attracting new users has expanded to two fronts: plundering users and finely operating existing users, and the latter is even the main one. The current fierceness of market competition lies in the fact that the top players in a single industry will expand their product categories and begin to intercept downstream customers. Single-demand customers will move between the various supply-side representatives in the field, such as brands, and each will gain and lose. Whoever has their own traffic pool first, prolongs the consumption cycle of a single user, and increases the consumption value, will survive longer in the market.

Different from the relatively extensive user operation in the early stage, in the stock competition environment, every user is crucial. They may represent a group of users, and if these users are not well served, they will not even say hello to you when they leave. At this time, it is more appropriate to use "membership" operation as the operating principle, which involves deeper user operation depth, more member access channels, more complex membership system, more attractive rights and interests, richer membership marketing activities, more exciting new member recruitment mechanism, higher renewal rate member experience, and a larger member operation organizational structure at the back end.

3. Decentralized promotion channels and more centralized trading experience venues

In the past, when big brands placed advertisements, CCTV was the first choice because CCTV represented brand strength and a certain endorsement, and consumers mainly obtained information from television.

But nowadays, various content platforms, communities, groups, and even different offline media, elevators, and bus stops are all "must-pass roads" for our daily travel.

How do we know who potential consumers are, where they are, how to reach them, how many channels there are to reach them, and how to trace back (the issue of brand-effect integration needs to be viewed dialectically. If the purpose is a marketing event, I think we can dispense with the topic of brand-effect integration, but we should talk about process indicators, such as customer flow, on-site activity, etc.; if the purpose is sales, I think the monitoring can be done in two time periods, because in addition to those who place orders immediately, there will also be potential consumers who, when demand arises after a period of time, will recall the brand they have seen before and place an order again)?

As mentioned earlier, the diversity of information channels, the fragmentation of personal time, and the emergence of various KOLs have forced us to embrace decentralization. Trading and experience venues need to be more centralized. This concentration does not require sales and experience in only one place, but a shelf that can hold all the goods and can be given to different terminals, even individuals. The purpose of meshed decentralized distribution is to better realize the centralization of experience and transactions.

4. Structural changes on the supply side should be coming

I really don't like some people talking about reform all the time. I think making some changes first is a way to implement them in stages, and then gradually accumulating and achieving certain results before expanding the scale of application. Only then can we talk about whether reform has taken place.

The so-called supply-side changes, in a broad sense, are to correct the distortion of factor allocation, expand the effective supply of the market, improve total factor productivity, better meet the needs of the people, and promote the sustainable and healthy development of the economy and society from the perspective of supply, production, and business environment. In a narrow sense, it is to clean up zombie enterprises, eliminate backward production capacity, and revitalize new economic growth points such as science and technology. The core content of the structure is "three cuts, one reduction, and one supplement", namely, cutting overcapacity, reducing inventory, deleveraging, reducing costs, and supplementing shortcomings. There is too much content here, and I will expand it later if I have the opportunity.

Small businesses that grind tofu also need to study how to make changes, such as grinding raw materials, grinding tofu tools, etc. Everything starts from reducing costs and increasing efficiency on the supply side.

4. What is the future of new retail?

1) Two-way traffic: It is not just people looking for goods and goods looking for people in the past, but also two-way traffic is mutually guided, and the final cost is closed and deposited on an infrastructure platform. For example, Tmall's home improvement new retail is a good example. Consumers can close the loop from leaving information online to completing transactions in stores online, and can also use online consumption data sedimentation and endorsement to make conversion tools online, thus forming two-way traffic.

2) Strong connection between production and consumption. In the past, many traditional enterprises have accumulated a lot of technologies and patents, but these have not clearly explained what problems they solve for consumers in what scenarios. In addition, after consumers have accumulated a large number of browsing and transaction behaviors, their innovations in production design have not been fed back to the production design end. The new retail in the future must be a model with strong connection between production and consumers.

3) Digital capabilities will become an indispensable foundation, needless to say.

Of course, the current new retail is definitely not the end point of any business behavior of matching supply and demand. I firmly believe that it will continue to evolve into different models in the future. Perhaps one of them will go abroad with China’s infrastructure to serve the international market. Let us wait and see.

Author: Flower Planter