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Adapting Customer Relationship Management to New Retail in China.

New Loyalty in New Retail.

The retail environment in China is in a period of transformation, and customer relationship management is changing alongside it.

China’s retail landscape is in a period of transformation.

On the one hand, it’s getting bigger. This year, China is expected to post up retail sales of $5.6 trillion and overtake the US to become the world’s largest retail market.

On the other hand, it’s getting more interesting. China being mobile-led, online and offline integrated retail landscape is changing the way retailers, both big and small, think about supply chains, shopfronts and marketing.

We’re here to tell you how customer relationship management approaches are changing and what you can do to stay ahead of the pack.


It’s been a little over two years since Jack Ma first proposed ‘New Retail’, the seamless integration of offline and online retail.

New Retail is a consumer-centric, data-driven form of retail, the core value of which is to improve the retail industry's operating efficiency using an offline and online merging as catalyst.

Channels and formats are turning into “retail services” integrated and accessible via a unified digital experience based on a singular, 360 view of the consumer across all touchpoints.

It turns the store into a showroom, an experience center, a data warehouse and order-and-delivery fulfilment center.

Chinese tech giants – Ali and Tencent/JD - are offering a full Retail-as-a-Service stack to brands covering virtually every link of the retail value chain, from sourcing, manufacturing, supply chain, warehousing, POS, to last mile delivery to the customer’s door.

Mobile first: 98% of Internet users access it on mobile.

WeChat ubiquity: 1 Billion monthly active users, virtually anyone with a smartphone in China has WeChat installed on it.

Mobile payment dominance: 45% m-payments, cash only represented 6% of transactions in 2017 (iResearch).

Retail tech is turning stores into data warehouses.

New Retail is made possible at scale by a combination of the following factors:

Chinese tech giants are building a full “Retail as a Service” brand stack covering virtually every link of retail’s value chain.


New Retail improves customer retention and strengthens all aspects of the loyalty impact: increased basket, repeat, operating costs reduction and referrals.

Most common customer relationship management challenges for brands in China (Deloitte, Coresight, Bain)

Membership as a precondition of purchase significantly improves the capacity to identify and target high value segments

SKU-level data on each consumer can be used for retargeting, and singular customer knowledge can feed cross sell and upsells

New product development facilitation and reduced risks, mass personalization at product, buying journey and communication levels

Retailers have up-to-date and homogeneous information and a singular customer view across all channels (e.g., in-store, online, social media, home)

New Retail’s value proposition

Ineffective Loyalty Programs: Customer loyalty program often lack strategy and purpose. They also fail to actually drive retention and loyalty.

Poor retention: as much as 80% of FMCG brands’ customers are new on a yearly basis.

Inadequate customer focus: demographics in China are changing very fast and companies struggle to keep up with the pace of changing customer preferences.

Inconsistent experience: heterogeneous communications, service level, and recognition across channels are leaving customers confused or frustrated.


This deck introduces three key New Retail changes, and then explains how they impact customer relationship management and customer retention.

Everyone’s A Member

Shifting Center of Gravity

Physical Retail’s e-Commercification

1

2

3

New Retail Readiness4

Membership is becoming a precondition of purchase.

Products and communications are customized and personalized based on historical data, enrichment and predictive analytics.

Increasing deployment and ubiquity of retail-tech makes quantifying and analyzing in-store retail experience easier: the physical store is becoming the new Digital Platform.

Organizations need to go through a deliberate process to have more impact with more data and navigate Chinese tech giant's dependence.

Everyone’s A Member

Membership is becoming a precondition of purchase.

1

Traditional Loyalty Programs.

Traditionally, membership of loyalty programs was opt-in during or after purchase.

Traditional Loyalty: From Purchase to Loyalty Sign-Up.

Membership’s first benefit is to understand their customers and their buying patterns, that data is paid with loyalty incentives.

Purchase Loyalty Sign-Up

New Loyalty Programs.

However, in China’s New Retail, membership is moving towards a pre-condition of purchase.

New Loyalty: From Loyalty Sign-Up to Purchase.

The benefit of incentive against data is removed entirely, and convenience is the incentive.

PurchaseLoyalty Sign-Up

Main customer benefitis convenience:

Eliminating checkout line Personalized offers, recommendations Instant repurchase

New Loyalty Programs = Everyone’s A Member.

Alibaba’s Hema Supermarket is the perfect illustration. To shop at Hema, downloading the app is a must. Upon downloading the app, you’re automatically a Hema member and receive members benefits.

Hema: Members into Customers, Rather Than Customers into Members

Membership &Benefits Upfront

Well before the customer has purchased anything,

the customer is a member and has access to an introductory offer.

Photos: Jinghan Hao

Pay a visit to a store

Connect to in-store WiFi

Bind to Alipay Account

Scan QR Code to DownloadHema App

-20%

Receive initial sign-up offers

Shop in-storeUse Hema App to Pay at self-service checkout


For those brands that already have a mix of customers and loyalty program members, there are ways and means to work towards New Loyalty.

Membership Card (RMB 88) offered at point of sale. The card includes three buy-one-get-one-for-free coupons, one free upgrade coupon, and one breakfast coffee coupon. That’s more value than the cost of the membership card.

The customer can use any of the coupons as soon as they have bought the membership card, and added it to their Alipay wallet.

It’s understood that Starbucks members have higher single-purchase consumption, and the average expenditure per purchase is three times that of non-members.

Starbucks: Membership Card Offer


Carrefour & Walmart: Login Wall to Convert Mini-App Users to Members

For those brands that already have a mix of customers and loyalty program members, there are ways and means to work towards New Loyalty.

Carrefour and Walmart supermarkets introduced just enough friction to identify their customers.

They offer a self check out option in their Chinese supermarkets as a WeChat Mini Program. The first step to use it is to share your WeChat profile details and phone number.

This one time identification is a very acceptable trade off for convenience.


Comparison Between Traditional and New Loyalty Customer-to-Member Ratio

Customers, but not loyalty program membersLoyalty program members

Loyalty program members

Traditional Loyalty

New Loyalty

The membership-first, purchase-later approach means all customers are members. That turns traditional loyalty programs, where only a fraction of customers are members, on its head.


Customers

VIPs

Members

Foot traffic

Members

VIPs

Customers

Foot traffic

Membership for all inverts the traditional customer/member funnel stages.

1

It significantly improves the capacity to identify and target high value segments.

2

The Everyone’s A Member approach inverts traditional funnel stages and resultsin a significant improvement of the bottom of the funnel.

The Everyone's A Member approach invests traditional funnel stages and results in a significant improvement of the bottom of the funnel.

Joy City’s Super Members.

Joy City is offering a chain-wide mobile wallet and WeChat Mini Program allowing their customers to have any purchased registered with their membership program.

Regardless of the brand or shop, purchases made through Joy Pay are automatically and instantly credited to their points balance, without the member having to show identification or a physical card.

Number of Members who have signed up for Joy City’s rewards program in 2017, which gives 10-15% off at most participating stores.

Of the membership base spends RMB 10,000 a year at Joy City stores, a contribution three times more than ordinary shoppers and makes up 88% of Joy City’s total sales.

3M 30%

Joy City, COFCO’s commercial property arm, has a highly-effective membership program - 3 million members account for 88% of it’s total sales.


Luckin reports that 54% of customers make a repeat purchase.

Text message discounts sent to customers based on previous purchase behaviour, and coupons directly added into app wallet.

Profiles of repeat purchasers developed and offers targeted towards specific segments (i.e.: morning coffee drinkers, those who purchase for a small team, those who purchase for meetings, etc.)

Consumer receives a free coffee in exchange for downloading the app

First Purchase

VIPs

Repeat Customers

App downloads 1

2

3

4

Luckin Coffee uses a free coffee to entice as many downloads as possible.It then uses dynamic vouchers and personalized offers to get the…

App or Mini Program?

Fully blown native Apps are a better fit for offline traffic as a source, while online traffic will onboard a Mini Program easier. Whenever possible, a combination of both is recommended.

User resources Time to

accomplish a task & complexity

Mini Program

App + Mini Program

Low

High

HighFrequency of useWeChat Mini

Program App

While the native app is heavily promoted in store, Luckin Coffee users can also register directly via their Mini Program, which offers a near frictionless experience.

Most of its traffic comes from users referring friends to benefit from invitation coupons.

Source: 31Ten

New Loyalty Risks and Rewards.

Insisting customers download a native app or use a Mini-Program to facilitate purchase and payment has its risks, but the potential rewards are substantial.

Making customers download or use apps or WeChat Mini-Programs to facilitate purchase and payment adds friction back into China’s effectively seamless transaction environment. It could inconvenience some consumers or alienate those that aren’t particularly tech-savvy.

However, the potential rewards are substantial.

With 100% of your customers as members of your loyalty program, there’s significant scope to craft or re-craft your loyalty program. It can be made more effective and more engaging with the significantly heightened customer intelligence brought.

With your customers as members, you can then move towards getting a single view of the customer in-store, on e-commerce and on social media.

100% Customer Loyalty Program Penetration

Scope to Craft a Meaningful Loyalty Program

Used Alongside ID Matching for Unified Customer View

Get More Out of Your CRM System

New Loyalty Risks and Rewards.

Value of benefits to consumers

(for example, airline miles& upgrades)

Loyalty margin

Cost of benefitsto the program

Total expenditureper member

Incremental share

Original expenditure per member

Total company revenues

Program size

Share of revenues generated

from loyalty members (%)

The three pillars of Loyalty Program ROI are affected:

1. Increased customer knowledge allows for easier identification of status and appreciation rewards, having the highest loyalty margin (customer value minus company cost)

2. The scale for segmentation and retargeting enormously increases the incremental share potential

3. The size of your loyalty program - its penetration among your customer base and critical mass is becoming a given

Loyalty Economics – How a Rewards Program Creates Value

Source: BCG analysis

-

=

-

=

x

=

Program revenuesProgram ROI

New Loyalty, New Rewards.

Meaningful Loyalty Program

Create differentiated loyalty programs based on expenditure

or engagement.

100% PenetrationOpen up new possibilities by

allowing all customers to enjoy rewards from their spend and interactions with the brand.

Unified Customer ViewCombine social and paying

customer data to understand how an individual consumers interacts

with your brand across all channels.

More from CRMUse the Unified Customer View to better pre-empt customer needs and respond to disengagement.

Everyone’s a Member

Enough Chinese consumers are willing to exchange personal data for convenience to make it worth offering a good data deal, in the form of a simple membership program.

The details of the program will be different from industry to industry, but the objective is the same; when everybody is a member, the brand can reconcile the entirety of its business with unbiased consumer behavioral data. This is a mandatory component of a New Retail strategy.

Stephane MonsallierCEO – System in Motion & Shops of the Future

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Shifting Center of Gravity.Products and communications are customized and personalized

based on historical data, enrichment and predictive analytics.

2

Shifting Centers of Gravity.

We’re at an inflection point. In the near future, customized SKUs will contribute more to brand growth than mass variants. Brands will accordingly shift their line of sight to micro-segments that possess similar customization motivations and results.

Shift 1Brand Growth Engine Shifts from Mass

to Customized SKUs

Shift 2Brand Focus Shifts From Products To Micro-

Segments and Individual Consumers

Bespoke

Personalization

Customisation

Mass Micro-Segments

Experience

Customisation

Product

Segment

Retail Gets Personal.

Well before the advent of New Retail, companies and consumers had integrated some level of customization or personalization into their products, services or marketing communications.

NikeID, for instance, allows consumers to customize colours and graphics on particular shoes and have it delivered to their door. Similarly, Longchamp’s dedicated WeChat Mini-Program allows consumers to customize Longchamp Le Pliage bags with different colours, badges and imprints.

This is part of a broader trend. Consumers are morphing into prosumers -dictating what they want, as well as when and where they want it.

And they’re more than willing to pay a premium for something that’s crafted according to their needs and preferences.

Customization and personalization was gathering momentum, even before New Retail came along.

Retail Gets Personal.

Customization and personalization was gathering momentum, even before New Retail came along.

Users can customize the Fendi Kan I F bag by personalizing colour, leather, hardware and other add-ons.

Function of Beauty offers a unique formulation based on results of a user quiz, which asks about the users’ hair type and goals.

Start Today, Japan’s largest e-commerce company, piloted a made-to-fit private label clothing line, Zozo, which takes individual user’s measurements.

Fendi x Farfetch “Customize It” Function of Beauty Haircare Zozo Suit

New Competition Accelerates Differentiationand New Value Creation.

Over the past two years, brands have seen the entry of e-commerce giants Alibaba, JD and NetEase into private label goods. For instance, Alibaba’s Taobao Xinxuan designs and manufactures homewares based on search and purchase data across Taobao and Tmall. Last year, Little Red Book released its own private label homewares and personal wares, based on research sourced from the platform’s product reviews.

With e-Commerce marketplaces leveraging their data, manufacturing partnerships and marketing channels to introduce private label products, brands are acutely aware of the need to add more value to products, services, experiences and marketing communications.

Without it, they face death by a thousand cuts.

e-Commerce giants’ entry into private label goods heightens the need to create personalized products and experiences.

Balance Value Creation With Additional Costs of Customization.

Offering more personalized products and services comes with cost implications. However, smart planning can minimize costs and maximize benefits.

Increase Value To Customer Control Cost of Customization

Marketing Provide option for customers to market productsto their friends in exchange for in-store credits

Earned media through provision of opportunitiesto share and express personalization experiences

Sales Turn those in customer-facing roles into customization advisors,thereby turning stores into showrooms

Implement simple and fun online and offline tools to collectcustomization preferences of current and prospective customers

Product/Service Development

Curate recommended customizations through byanalyzing fashion trends and working with influencers Undertake modular approach to new product development

Manufacturing/Service Operations

Implement modular approach with a limited number of baseline specification and a menu of options that limits complexity

Postpone customization to latest possible pointin design and manufacturing process

Supply Chain Provide visibility across supply chainto keep customers invested in their creation

Catalog total cost to service each customizationand manage inventory and price accordingly

IT Infrastructure Upgrade systems and capability to manageadditional product and service complexity Tightly integrate e-commerce and digital strategy with back-end IT

Personalization is Just One Shift.

Outside of personalization, buying and shopping have decoupled. High and low involvement product categories will take on increasingly differentiated purchase journeys.

High Involvement

LowInvolvement

Significant Differences

Between Brands

Complex Shopping Behavior

Variety-Seeking Buying Behavior

Few Differences Between Brands

Dissonance Buying Behavior

Habitual Buying Behavior

High Involvement

LowInvolvement

Significant Differences

Between BrandsPersonalisation Subscription

Models

Few Differences Between Brands

On-Demand Product Trial

AutomatedPurchases

Distinction Between Different Buying Behavior

Potential Ways for New Retail to Change Buying Behavior

Involvement is how much time and resources consumers dedicate to their purchase in terms of research, while brand differentiation is how much impact brand has on the actual choice for similar product characteristics. Habitual buying will be increasingly automated (e.g. 1-click repurchase), while personalization will be facilitated for complex shopping.

Not Just Product Personalization.

Although products are the most visible examples, personalization of marketing communications and loyalty programs are becoming more widespread and sophisticated.

Personalised WeChat Rewards Ctrip Partial or Fully Customizable Trips Onboarding, Leading to Interest-Based Content Segmentation

Increasing Lifetime Customer Value

CRM plays a key role in assisting brands move from a simplistic understanding of the customer, to segmenting, to offering personalized products and services.

Personalization

Segmentation

Understanding The Customer

Lifetime Consumer Value

Create differentiated accounts, loyalty programs, content pathways or product options.

Cluster customers based on similar behavior and preferences, collected through you or platform partners.

Use qualitative and quantitative research approaches to understand consumer needs, pain points and category shifts.

By combining efficiency and satisfaction, mass personalization will have a huge impact on FMCG and retail in China and the world in the coming years, covering all 4Ps.

Product: through deploying smart services, social media will become CIY (create it yourself) platforms where customers can co-design their own products.

Promotion: leveraging New Retail’s wealth of data, grouping consumers by attributing them different tags and feeding their data to tailored AI algorithms, the FMCG retail will become even more targeted.

Process: brands will continue to eliminate barriers between the online and offline sales

Price: some Chinese brands have already started moving into the maximum profit/minimum inventory model. Soon more and more consumers will be also able to enjoy a personalized price. Via probabilistic purchasing, they can choose to buy a specific/handpicked/personalized product at full price, or they can purchase a mass variant at a discount.

Ashley Galina DudarenokAuthor, China’s New Retail Revolution

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Physical Retail e-Commercification

Increasing deployment and ubiquity of retail-tech makes quantifying and analyzing in-store retail experience easier: the physical store is becoming the New Digital Platform.

3

Doing More With More.

As the amount of data collected in offline retail locations increases, we see offline retail becoming quantified and analyzed much in the same way e-commerce stores are today.

Time in dairy section

Brands considered

Items added to cart

Facial expression In-store

Items picked upand rejected

Past purchase history

Overcoming Physical Retail Data Gaps.

e-Commerce provides a vast array of data on consumers’ visiting, browsing and buying behavior – everything from time spent on page, to what product photos were viewed, to the time from consideration to purchase is all measured, stored and analyzed.

By contrast, physical retail outlets are the equivalent of a data black hole: beyond foot traffic measurements and transaction data, physical retailers don’t have a great deal of access to robust, granular data on the customers, potential customers and window-shoppers who enter their stores.

New Retailers are working hard to change this dynamic.

Until recently, physical retail outlets have been a data black hole.

New Retailers, forward-thinking brands and mall owners are trying to collect more data in physical retail locations, and connect that data to what they know about customers through other channels.

Aside from membership-first, purchase later loyalty programs, we’re seeing deployments of heat maps, facial recognition technology and geo-location technology to close the gap between e-commerce and physical retail store data.

All this is going towards identification of individual shoppers across channels, better data and sophisticated analytics.

Turning the Heat on Store Mapping.

e-Commerce sites receive significant benefit from tracking users’ browsing and purchase behavior. In physical retail stores, cameras equipped with heat mapping software are promising to bring similar analytics.

Heat map insights, combined with in-store A/B testing, can be used to understand whether in-store placement or some factor such as pricing, quality or marketing message creates dead spaces or slow sellers.

This level of understanding adds much-needed science to in-store merchandising that has traditionally been done by gut feel and observation.

Tracking movement in-stores promises to add science to in-store merchandising that has traditionally been done by gut feel and observation.

Turning the Heat on Store Mapping.

Belle International, China’s top female shoe retailer, has deployed store heat mapping, RFID tags and weight-sensing shelves and floormats to optimize individual store performance.

Belle International: Using Heat Mapping In Combination With RFID

Heat maps are used to understand how consumers are moving through the store and which SKUs attract the most attention.

RFID tags in shoes and weight-sensing shelves show which shoes are tried together, and what shoes tend to be rejected.

Diving in Face-First with Customers.

Facial recognition isn’t a distant pipe dream, and leading retailers are grappling with early use cases.

China has arguably taken the lead in facial recognition applications. Over the past year, we’ve seen an increasing number of applications in education institutions, office buildings, shopping centres and public security.

In the retail context, facial recognition is being applied to facilitate transactions. It’s also being applied to identify repeat customers and shoplifters.

While still far from ubiquitous, as the technology matures, facial recognition promises to track consumer journeys in-store, recognize dissatisfied customers, identify high-value customers and provide dynamic, targeted marketing through social media to members of existing loyalty programs who are recognized in-store or in its vicinity.


Facial recognition can now identify new & return customers, estimate their age, gender, mood and offline browsing behavior

Bundled together with wireless probes and heat mapping, the technology allows to build offline navigation and conversion funnels, nearly the same as Ecommerce.

Funnels can be built around:

ü Passed by the storeü Enteredü Browsed productsü Picked up and tried productsü Put back on shelf (cart abandonment)ü Purchased

Capture from the Xiaoyi Gravibit力引万物 backend showing offline funnels tracking.Picture: Matthew Brennan


Tracking movement in-stores promises to aggregate demographics, refine understanding of store traffic ad notify shop assistants of high-value customers.

Adrian Cheng's museum-retail brand K11 is testing facial recognition technology through an investment in AI company AIbee.

It’s hoped that this will help track a customer’s entire journey not just in one store but across the entire retail complex, whether it's food and beverage, fashion, art exhibitions or entertainment.

Aeon China is set to launch a self-service store network equipped with technology to anticipate what a customer will buy upon entry. The facial-recognition technology will activate recommendations and coupons displayed on the customer’s phone, based on individual purchase habits and digital payment history.

The data that Chinese smart retail systems can capture from a single store is mind-blowing. Face Recognition can now identify new & return customers, estimate their age, gender and mood. Analyze time spent in-store and create live store foot traffic heat maps. Hidden camera in the shelves record which items were picked up and what customers are looking at and for how long.

You can now build offline store conversion funnels, exactly as you would expect for online. And all of this data can be tied to the individual's online behavior, closing the loop between online and offline creating a holistic picture of each customer's behavior.

Matthew BrennanFounder, analyst, speaker and writer - China Channel

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Identifying Customers Through Physical Touchpoints.

Making customers identifiable loyalty program members is key to maximizing the new levels of data being collected at physical retail outlets.

Bioderma used QR codes on its packages to allow for one-step product authentication and loyalty program sign-up. The package loyalty sign-up rate (80%) was many multiples higher than sign-up through WeChat or Tmall.

Unified Offline/Online Customer View.

Systematic identification of your customers solves the missing link between all your channels in China and allows to build and enrich a complete singular view of your customer (SCV).

WeChat Official Accounts

WeChat Union IDCellphone

Member IDActivities

WeChat Union IDGenderNameactivities

Member IDCellphoneFilled out formsTransactionsLoyalty activities

Tmall

Tmall IDCellphone

AddressTransactions

JD

MiniPrograms

Offline Sales

WeChat ID + Phone number

32 slides introduction on how to identify customers across channels:

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Unified Offline/Online Customer View.

Systematic identification of your customers solves the missing link between all your channels in China and allows to build and enrich a complete singular view of your customer (SCV).

BINDINGStore visit

Product page visit

Follow

Registration

Menu interaction

Share campaign

Visit anotheroutlet

Service

Cart abandonment

Click invitation After sales

chat message

New Visit

Book beauty consultation appointment

SCV

Store locator

Points redeem

PurchaseLoyalty

registration

Mini Program usage, App download

Do Consumers Even Want To Be Identified and Tracked?

Sensitivities to data collection, storage and use differ between China and overseas markets.

Retailers’ continued experimentation with phone number identification, facial recognition and heat mapping has occurred in a context where Chinese consumers generally have less data-related privacy concerns than their counterparts in overseas markets. In fact, the expectation is that retailers are collecting, monitoring and using data to benefit consumers through personalized offers.

67%

61%

59%

34%

34%

29%

China US

Expect a retailer to have up-to-date information across all channels (e.g., in-store, online, social media, home delivery).

Comfortable with a retailer monitoring shopping patterns and purchases.

Happy for a retailer to identify when nearby and send personalised offers.

Note: Percentages represent respondents who agreed with the survey questionSource: PwC, 2018, “China’s Next Retail Disruption: End-to-End Value Chain Digitization”

Chinese and US Consumer Attitudes Toward Sharing Data with Retailers, % of Respondents (Sep 2017).

New Retail Readiness.

Organizations need to go through a deliberate process to have more impact with more data and navigate Chinese

tech giant's dependence.

4


Processes and culture needs to be in place before the data deluge hits.

While more data sounds like a valuable asset, the asset’s value is only realized if that data is turned into insight and is acted on as part of strategic and operational decision-making.

In our experience, brands don’t fully make the most of their current customer relationship management system, let alone a customer relationship management system which has a unified view of the customer from e-commerce, social media, transaction data, heat maps and facial recognition.

Also, a lot of corporations prioritize tools over the need for robust in-house analysis talent. Investing into the profiles that have the skills to use platforms and the dedication to run a long term marathon with them is key.

Organizations need to go through a deliberate process to have more impact with more data.


Without understating the changes needed to transition to an effective data-driven organization, there are six steps you can take to improve how you can make a bigger splash with your CRM data.

1# Set Goals 2# Data Consolidation 3# Customer Matching

Break the silosIdentify goals

and gaps Binding


Without understating the changes needed to transition to an effective data-driven organization, there are six steps you can take to improve how you can make a bigger splash with your CRM data.

4# Understand What Matters 5# Customer Engagement 6# Build Culture

Segmentation & mass personalization

Key sourcesand metrics Data drives decisions

Reorganizing Retail Around Clusters.

Increasing store performance requires smarter clusters that go beyond geography and size.

Historically, stores have been segmented based on the regions primarily from a better operations and organization management perspective.

Store clustering is a process of sifting through multiple store characteristics to understand which stores are like-for-like.

The resulting store clusters can help retailers to create customized cluster level execution strategies pertaining to promotions planning, pricing, markdown/clearance planning, new product launch, assortments, inventory and labour staffing.

Hema, for instance, uses a neighborhood's aggregated purchase data in each neighborhood to adjust SKU assortment in local stores, improving margins and reducing waste.

Source: Deloitte

Rethinking Affiliate Marketing.

Brand-controlled virtual stores, operated by affiliate marketers give new levels of scale to affiliate marketing.

Coffee Box developed a virtual, customizable store within WeChat. Users act as vendors, and sell discounted coffees to their friends and co-workers. Coffees are delivered by Coffee Box.

The vendor can customize their store and menu. Vendors’ stores have QR codes which they can share via private message or via their WeChat Moments. Customers who purchase through the vendor discounted coffee. When the vendor reaches a ‘sales target’ set by Coffee Box, they receive a free coffee.

During the campaign, 500,000 stores were created and 10% of stores made sales.

China's social e-commerce platform Xiaohongshu, or RED, is testing a new social e-commerce product Xiaohongdian(literally ‘Little Red Shop’).

The test is limited to 11 SKUs, which are mainly snack foods. At the time of publication, products for the next iteration have yet to be decided.

A Xiaohongshu user has r Little Red Shop and sell snacks to their friends through links shared via WeChat. Vendors earn a small commission (between 10-20%) off each sale made.

Balancing Collaboration with Tech Giant Dependence.

An increasing number of brands adopt Ali or Tencent’s physical hardwareand cloud services for their POS, fulfilment and logistics.

Taobao-powered AR Counters in Hema stores Ele.me delivery Ali app

Starbucks has developed very strong ties recently with Alibaba’s ecosystem, from equipping its Shanghai Roastery with Taobao-powered AI, to exclusive delivery infrastructure with Ele.me and an Ali-powered virtual Starbucks store. The store offers consumers numerous points of entry, regardless of the Starbucks or Alibaba mobile app they prefer: Taobao, Tmall, Alipay, Koubei etc.


While Alibaba and Tencent’s large scale customer data analysis is very tempting for brands for the short terms ROI, it forces brands to “pick a side” and may build dependency to an ecosystem

As part of their New Retail offering, one of the core bricks of the two Chinese Internet giants is large-scale first party “data analysis as a service”. It leverages enrichment from their enormous wealth of data to:

• Optimize product assortment• Develop new SKUs based on unleveraged customer insights

Building a standalone New Retail capacity is very challenging for the average international brand, and partnering with the local tech giants is almost mandatory at some point.

However, brands that do this may face an increasing risk of moving to a “pay to play” situation where they need to pay to retarget their own customers.

Joy City partnered with Alibaba to build a full stack membership management and CRM system. Launched in 2017, it tracks the customers’ behaviors the moment they enter the mall, calculates and analyzes their preferences and behaviors.The system has helped promoting tailored products to over 300,000 customers, reaching 80% success rate according to Ali.


Organizations need to make sure they capture and own at the very least first party customer data to avoid a “pay to play” while building customer intelligence and retargeting them.

Tools: A platform like Splio allows brands to take full ownership of their customer data and benefit from the tech giants’ capabilities while keeping dependence to a minimum. It gathers and consolidates it across all channels into one place:

• Transactional data, offline and online (Tmall, WeChat, own brand store etc.)

• Behavioral data

Capacities: Investing into in-house profiles have the skills to run the data platforms and the business knowledge to make sense of it is as fundamental as the tools.

Processus: Build a data culture, and a structured iterative learning process: identify what you want to track before testing.

A customer profile in Splio’s backend showing a unified picture of transactions and interactions with the brand across all touchpoints

Authors & Acknowledgements.

We would like to thank in particular the following for their insights and the review of the draft versions of this presentation:• Chris Baker, GM – Totem Media• Stephane Monsallier, CEO – System in Motion & Shops of the Future• Jenny Chan, Senior Reporter – Campaign Asia Magazine• Nishtha Mehta, Founder – CollabCentral Consulting• Sylvia Boutoubou, former CRM Program Manager @Carrefour• Clement Ledormeur, GM – 31Ten• Matthew Brennan, WeChat expert – China Channel• Ashley Galina Dudarenok, Author, China’s New Retail Revolution• Olivier Marescq, Head of Business Innovation – Pernod Ricard

Romain HenriotSplio China COOWeChat: 15618500415Email: [email protected]

Michael NorrisChina Consumer and Tech Trend ResearcherWeChat: 18710187237Email: [email protected]

Joseph LevequeSplio China Marketing & BD DirectorWeChat: 15618123028Email: [email protected]

Research Sources:• Deloitte x Alibaba - Six Major Changes in Science and Technology Reshaping the Retail

Industry• Bain x Alibaba – Embracing China’s “New Retail”• Deloitte - Delivering Superior Customer Experience in China: the Essential Ingredient

to Building Customer Loyalty• Coresight Research - CEO Xiaodong Chen On How Working With Alibaba Has Changed

Chinese Retailer Intime• AgencyChina – Copycat or Trailblazer: What’s ‘new’ in China’s New Retail• Tencent - Introduction to Tencent Smart Retail

ReportResearch on Retail Paid Membership

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