Lessons to learn from Chinese Retailers - Episode 228

INTERVIEW WITH MARK GREEVEN

DESCRIPTION

In today’s podcast, we are talking with Mark Greeven about how China is influencing online retail. We discuss the innovations in technology that Chinese companies are using to connect with their customers and boost sales. Learn about the potential of Chinese private equity and venture capital firms entering the FBA aggregator space. Also, national brands are having a hard time competing with Chinese manufacturers who are starting to sell directly to consumers.

Make sure you tune in to find out more!

Mark Greeven is Professor of Innovation and Strategy at IMD. Drawing on a decade of experience in research, teaching and consulting in China, Mark explores how to organize innovation in a turbulent world. He has been collaborating with innovative Chinese companies and entrepreneurial multinationals to explore novel ways of organizing, accelerating corporate innovation, enabling digital business transformation and designing business ecosystems to thrive on uncertainty. He is a fluent speaker of Chinese. Mark is one of the authors of the book, The Future of Global Retail, which was published in 2021.

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“We started to observe over the last five or six years that a lot of retail brands, retailers and retail platforms started to embrace lots of digital innovations in the way that they connect to consumers.”

— Mark Greeven

KEY TAKEAWAYS

When we think about China, we don’t think about innovation but copying and knock-off products. However, Chinese companies have pioneered lots of digital innovations, leveraging tech to connect with customers.
Early last year, economists started reporting on why retailers should be looking to China and big brands started considering some Chinese models as the future of marketing.
Some of the retail innovations that have recently come to the west from China:
- Livestream shopping - gained most attention.
- Social commerce - playing into a need that people have to make shopping a fun experience to share with others.
- Merging of online and offline experiences - China has pioneered this years ago. Consumers don’t have to choose, they can have both experiences.

Marketing or user experience innovations that are unfolding in China right now that should be top priority for western retail brands to consider:

Tracking of consumer trends to create fast fashion - the clothing retailer SHEIN as an example of the phenomenon, described in the article How Shein Beat Amazon at Its Own Game.
Other examples using similar models as SHEIN: Anta, Perfect Diary, Pop Mart, Neiwai
The idea of the customers’ journey has always been a process with the end in the shopping cart. Now no the stages aren’t separated, and there is transaction potential at every stage. TiktTok that integrates with TaoBao is an example of this.

National brands in the US sometimes find themselves competing with Chinese manufacturers who are selling directly to customers on platforms like Amazon. The manufacturers obviously have a major cost advantage. Competing with this is not easy. The major shift is to understand how to compete: multichannel marketing, understanding data, digitizing the supply chain. This may bring about some existential questions for some companies.
For now Chinese private equity and venture capital firms are noticeably absent from the list of the largest FBA aggregators (included in the article Marketplaces Year in Review 2021) even though a big part of the items sold on Amazon are from China. Will they become a part of the Amazon FBA Aggregator ecosystem?
- Any potential aggregator would first look at what’s happening inside China, especially in the retail space, looking for opportunities.
- The aggregator model is not so popular inside China with platforms like TaoBao, for example, or JD that has an FBA-type solution, but it doesn’t offer many brands.
- They could go into Amazon, but investing in smaller companies from other countries is still a leap.
- With more and more D2C brands popping up on Amazon and also some new players like Nebula, an Amazon aggregator for Chinese brands, this may change.
- Mark also sees challenges with aggregators buying manufacturers - logistics, data requirement, possibly regulatory
Mark is excited about livestream shopping, because it is a challenging concept for the brand. The power is with the influencers and the platforms. The example of this is “Mr Lipstick”, a show with 250M live viewers.
Mark has changed his mind about retail not being complicated - it’s actually very complex.