Are Chinese companies overrunning the western retail world? No, believes Fredrik Holmvik, Retail & Omnichannel Strategist, Processverkstad 17. However, according to Holmvik, there is still much to learn from them.
Since the death of Mao Tse Tung in 1976, political change in 1978 and the official start of a new economic future in 1980, China has changed rapidly. Today, around 20 cities – each with more than 10 million inhabitants – are a symbol of change, as are companies such as Alibaba, founded by former English teacher Jack Ma.
Fredrik Holmvik made the great leap forward in his presentation ‘New Retail: How Alibaba & Co. Change Retail’ and demonstrated how the platform, originally founded in 1999 as an e-commerce company, has developed further. After all, Jack Ma was ready to start talking about New Retail when Western companies had merely finished doing their online homework and starting to focus on Omnichannel.
Holmvik, who has been working for Swedish retailer ICA in recent years, has been an independent consultant for some time. He has also been exploring how and why Chinese companies are so innovative, and what distinguishes them from Western-style corporations.
One of the key theses explored by Holmvik was that of leapfrogging: as Chinese society developed from a very low level, several stages in its development process were bypassed, creating a trampoline like-effect.
“When the people and the economy had reached a certain level of prosperity, the internet was already there,” said Holmvik. The result: all bets were on e-commerce. Or m-commerce, given the rapid penetration of smartphones. The sheer amount of desktop and mobile users alone is a big deal, as a simple comparison with the US showed.
And why has Alibaba, with its fast roll-out of HEMA stores, been relying on local stores for some time? Although payment can be made using modern methods in store, customers often order from home. People who live within a certain radius are guaranteed delivery from HEMA Fresh Stores. “People are now deliberately moving into the areas where the stores are located,” said Holmvik.
Now for a completely different way of thinking. Another case discussed was WeChat, which some Westerners wrongly consider to be a kind of WhatsApp clone. Nothing could be further from the truth: “Everything is included in the app: from messaging and payment to the functions of numerous online services that exist in the Western world as individual applications.” It can be used for trading, buying and ordering – in fact, you can live your entire (online) life in the app. The result is fantastic user cycles and numbers.
But, as Holmvik explained, there’s a catch – at least from a Western perspective. WeChat was founded in 2011 by Chinese company Tencent. The solution can – and will – be used for all possible interactions. With all data accessible by the Chinese government and the Communist Party, the service constitutes a building block of the country’s new total digital surveillance strategy – and let’s not forgot that the state, incidentally, is not a democracy.
As a result, Holmvik is convinced that Chinese companies are not able to replicate such models exactly in the West thanks to huge cultural differences. For one, issues such as data protection are of huge importance in Europe. And they are weighted differently than in a state that is currently running a veritable digital points-based reward and punishment system through AI and cameras, which penetrate every nook and cranny of daily life.
According to the retail expert, however, those wanting to get inspiration should look to the Far East, and not California. With Facebook even adapting certain strategies of the Chinese, this is reason enough.
“Don’t believe everything you see in random videos: not everything works as it should,” said Holmvik. He visited a number of Starbucks stores in China which focus on enticing customers through augmented reality; however, according to the Swedish expert, the solution does not always work very well on site. Also, in other stores that use QR and Instant Payment codes, the majority of these codes did not work upon testing.
As a result, Holmvik was able to reassure DSS attendees that even Chinese trade and internet giants are unable to perform magic. They can, however, be credited for their numerous innovations, which can in turn serve as inspiration for the industry.