The incremental market of retail industry

At present, if the traditional retail industry and the Internet retail industry want to find opportunities in the market, what can they do? Perhaps they can try to find potential incremental markets from the customer's perspective. In this article, the author analyzes and interprets how to find incremental markets in the retail industry from the customer's perspective. Let's take a look.

In 2023, both traditional retail and Internet retail are facing huge challenges. So: Are there opportunities in the huge challenges?

Today we will study whether we can find incremental markets in the retail industry from the customer's perspective.

1. Four major effects of the retail industry

From the customer's perspective, customer behavior can be roughly divided into two dimensions:

1. Save time and kill time;
2. Guide and purchase.

We give these four quadrants names: memory effect, remembering effect, emotion effect, and life effect.

1. Memory Effect

Representatives of this quadrant: traditional businesses such as CCTV, Focus Media, etc., and Internet businesses such as Tmall, JD.com, Baidu, etc.

The core of this quadrant is neural short circuits and muscle memory.

For example, traditional retailers and brands, through saturated advertising bombardment and channel flooding, ultimately want to create a "brand = category" neural short-circuit effect, as well as a muscle memory effect that makes the customer think of this brand first the next time they have shopping needs.

Internet retailers and brands use search e-commerce and traffic interception, which can also cause neural short circuits and muscle memory.

2. Remembering Effect

Representatives of this quadrant: traditional businesses such as convenience stores, discount stores, etc., and Internet businesses such as Li Jiaqi, Vipshop, and Dianping.com, etc.

The core of this quadrant is the ecological closed loop of key people, key places, and key goods.

Convenience stores are the key venues in space; discount stores are the key goods in price; Li Jiaqi is the key person with the lowest price on the entire network; Vipshop is the key venue and key goods in price; Dianping is the key venue and key goods (rating rankings and reputation lists) based on LBS (location-based services).

3. Emotional effect

Representatives of this quadrant: traditional businesses such as Zhengjia Plaza, The Longest Day in Chang'an, and Wenheyou; and Internet businesses such as Xiaomi, NetEase, and Xiaohongshu.

The core of this quadrant is emotional value and emotional identification, which brings daily active users (note that they are users, not customers).

Guangzhou's Zhengjia Plaza is the only AAAA-level commercial scenic spot in Guangzhou; Xi'an's The Longest Day in Chang'an is also an immersive cultural and tourism scenic spot; Changsha's Wenheyou is a celebrity check-in spot for civic culture; Xiaomi is a community for young people's first product; NetEase is a community for fans of big-name substitutes; and Xiaohongshu is a virtual shopping street that young women must visit.

4. Life Effect

Representatives of this quadrant: Tsutaya Books, Eataly, Hema, etc. in traditional commerce; Oriental Selection and Zui E Niang, etc. in TikTok, an internet-based business.

The core of this quadrant is to trigger non-essential and low-desire shopping needs in lifestyles and life scenarios.

Tsutaya Books is a proposal service provider for a better lifestyle; Eataly is an Italian slow-life cultural service (and the originator of fresh food e-commerce such as HEMA Fresh); HEMA Fresh is a community public refrigerator; Oriental Selection is a model of cultural sales; Zui E Niang is a reverse supply chain and customized red wine brand that first attracted the attention of members.

2. The underlying logic of the four major effects

Let’s take a look at the underlying logic of these four major effects.

1. Seize the customer’s mind

Both the memory effect and the recall effect are simplification and classification of the customer's mind.

The memory effect is designed based on the human memory characteristics and forgetting curve. The focus is to remember the brand so that the next time a certain demand arises, it can be awakened through the inspiration of the nervous system. At the same time, this brand is listed at the top or forefront of a certain industry's contempt chain, thereby increasing the probability of choosing this brand.

The remembering effect is not something that customers come up with themselves, but something that happens in real time and space when a trigger condition is encountered. This condition forms the availability of a neural system, and within the availability range, customers make a purchase decision for a certain brand.

2. Induce customer behavior

Emotional effect and life effect are both inducements and driving forces of customer behavior.

The emotional effect does not start from the product, but from people's emotional identification. In the customer journey map, a large number of users who have no desire to shop are provided with super-value experience and impression, thus obtaining huge traffic dividends.

The life effect does not start from the product, but from the customer's lifestyle to help customers analyze existing problems. The product itself happens to be one of the solutions, or even a customized solution with heavy customer participation.

3. Several major trends for retailers and brands

1. Retailer trends

Obviously, retailers have changed from seizing traffic share in shopping scenarios to seizing non-shopping scenario share and non-shopping content share.

The number one trend for retailers:

Market share = traffic share + scenario share + content share

The second biggest trend for retailers:

Leading retailers are becoming more gourmet, cultural and tourism, and landmark-oriented.

Among them: gastronomy is a tool to attract the local half-hour living circle; cultural and tourism is a powerful tool to attract the city's living circle; landmarkization is a killer weapon to attract family-type customers from surrounding cities. For example, Guangzhou Zhengjia Plaza attracts more than 2 million families from all over the country and overseas every year.

The third trend for retailers:

From the product-centered specialized division of labor efficiency to the customer-centered cross-border collaborative efficiency, many new business species have been born.

2. Brand trends

For traditional brands, customer guidance and purchase are separate: channels are large-scale touchpoints, and advertising is large-scale notification. If channel traffic does not reach the ceiling, most brands will not pay attention to advertising. Now it is different:

The first major trend for brands:

A cross-border integration of guidance and shopping. A good brand should not only occupy a share of customers’ shopping scenes, but also occupy enough attention and time in customers’ non-shopping scenes.

The second biggest trend for brands:

Establish high-dimensional and diversified operational capabilities, specifically the operational capabilities of traffic pools, customer pools, and content pools.

The third trend for brands:

It is to establish a product matrix of functional products, content products, and service products. Different domains focus on different products and formats. The public shopping domain focuses on standard products, the non-shopping domain focuses on content, the private domain focuses on services, and the third domain focuses on commodity mechanisms, ultimately establishing a new business ecology with full-domain reach, full-domain links, and full-domain transactions.

IV. Conclusion

By analyzing the underlying logic of the retail industry, we stand from the perspective of customers and simply divide customer business behavior into saving time and killing time. Now killing time can also sell goods, and even intercept and overdraw part of future shopping needs.

The key to saving time is to give the strongest reasons for purchase, and at the same time allow customers to form neural short circuits and muscle memory when they are motivated to consume.

The key to killing time is to provide more dimensional emotional connections and social communication with customers in terms of content, services and other dimensions beyond product functions.

Traditional brands are good at memorization, while Internet brands are good at guidance. By deepening the above two main lines, it is not difficult to find the incremental market of the retail industry from the perspective of customers.

Author: Cao Sheng; Official Account: Grayscale Cognitive Society