China'S Retail Industry Is "Ice And Fire"

The unexpected arrival of the "new crown" epidemic situation has led to a "double cold day" situation in China's retail industry: one side is out of the need for epidemic prevention and control, and many large shopping malls are forced to close down, resulting in a dismal sale on line. On the other hand, the online retailing trend is rising and growing rapidly.

Such a scene can not help but think of the spring of 17 years ago, SARS epidemic suddenly hit, and the retail sector was depressed, while at the same time, the new business format of the new generation began to thrive and thrived. That change directly affected the pattern of China's retail industry.

Compared with SARS in 2003, the "new crown" epidemic is more intense, sweeping a wider range, disrupting retail sales under the line, and forcing people to cultivate online retail habits for a longer time. Under such circumstances, it is predicted that there will be an inflection point in China's retail industry after the outbreak. Online retail will overtake offline retail and become the main form of retail sales. Is that really the case?

Offline will not be replaced, but will fuse online.

To answer whether online retail will become the main form of retail sales, we need to look at the state of power comparison between online and offline before the outbreak. According to the data released by the National Bureau of statistics, the total retail sales of physical commodities accounted for about 20.7% of the total retail sales of consumer goods in 2019. In other words, the ratio of sales to online and offline sales is 1:4, and there is still a clear advantage under the line.

During the epidemic, offline sales were hit hard, while online sales showed a rapid growth. Some even estimate that the proportion of online retailing in the total retail sales of social consumer goods may rise to 70% during this period. That is to say, online retailing will gain absolute advantage in the short term. But can online dominance continue after the outbreak? In my opinion, the probability is relatively small.

In spite of the fact that online retailing has shown a "good scenery here", it has obvious advantages over the offline industry. But at the same time, we must give full consideration to its particularity: on the one hand, under the impact of the epidemic, the total plate of China's retail industry is decreasing. Influenced by such factors as declining income during the epidemic, increasing the cost of shopping and sluggish shopping channels, many people adopted the strategy of consumption postponement, which delayed the consumption of non essential goods to the end of the epidemic, which resulted in a significant decrease in the total consumption of retail products during the epidemic.

In terms of this decline, the estimates for different institutions are different. The interval is roughly 1 trillion ~2 trillion yuan, and the total amount is not small. On the other hand, as long as we take a detailed look at the online sales situation during the epidemic period, we will find that the growth trend is mainly concentrated in the limited commodity categories such as fresh products, daily necessities, and epidemic prevention products. Other commodities have not changed a lot, and some products even show a more obvious decline. This phenomenon tells us that for a considerable number of people, online shopping may be a kind of helpless action under the circumstances that the offline scenes are unavailable. They do not show the habit of online consumption on more commodity categories.

In this way, the denominator shrinks and the molecules are forced to enlarge, even if the proportion of online retail accounts for 70%. The amount of information given by this figure is still very small. It is hard to believe that this is a sign of a reversal in the online and offline industries.

After the outbreak, although online has gained certain advantages, its relative position with offline retailing has not changed fundamentally. With the gradual recovery of the epidemic, many customers who are forced to choose online consumption during the epidemic may return to the offline scene. In fact, this has already begun to show signs. Since late February, the epidemic situation in many cities has been easing gradually, and large business super companies have begun to resume business. A lot of large businessmen opened the queue again after they opened the door. This shows that the toughness of offline retailing is still very strong. From this point of view, if we only judge from the consumption scenario, we believe that the offline will completely replace the online, I am afraid it is still too early.

Compared with the "substitution", a word that can objectively show the direction of retail evolution in post epidemic era should be "integration", that is, the mutual penetration and mutual accommodation between online and offline.

On the one hand, a large number of enterprises under the line have adopted a large number of online technology and sales models during the epidemic. A considerable portion of these technologies and sales patterns will be inherited after the outbreak. For the traditional offline enterprises, the biggest obstacle to accepting online technology and marketing mode is actually a fixed cost problem. Usually, it is very easy for customers to get passengers under the line, so enterprises will not be encouraged to adopt these new technologies and make use of these new channels.

In the epidemic situation, the use of these technologies and channels has become the key to the survival of enterprises, which objectively produces a "forced" role, prompting enterprises to invest in these areas fixed costs. Once these fixed costs are invested, the marginal cost of maintenance thereafter is relatively low. For example, the development of a APP or small program may be more expensive, but the application of them does not require much extra input. Under such circumstances, it is foreseeable that most offline businesses will continue to use these online resources after the outbreak.

On the other hand, during the epidemic period, many online retailers have stepped up the layout of the line in order to enhance the consumer experience and grab the resources under the line. For example, during the outbreak of the epidemic, Jingdong actively increased support for its offline stores, including Jingdong convenience stores, 7FRESH, Jingdong pharmacies, etc., so that they can meet residents' consumption well, especially the needs of community group buying during the epidemic period. Alibaba has also strengthened the 1+N strategy of the box horse. Based on the original fresh store, it increased the laying strength of the box Ma Mini, so that its service could go deeper into the community level. Obviously, these offline layout will also have a sustained effect after the outbreak, allowing traditional online retailers to cut into the offline market.

Under the interaction of the above two forces, the Han boundary of the Chu River will be further broken down online and offline. The two forms of retail will be able to usher in a deeper integration after the epidemic. The big melee between the traditional line and the traditional online giants will become more intense. From this point of view, perhaps in the near future, it is unnecessary for us to distinguish between online and offline, such as whether online will replace the problem of offline, and so on, it will become meaningless.

Digital capability will become the key.

After the outbreak of the outbreak, many experts and agencies are giving retail companies the opportunity to act in a positive way. In these prescriptions, digitalization and online will be among them. Since the epidemic has led to a sharp decline in demand under the line, then the loss of levees outside the embankment and the need for efficiency on the line of war will not be realized. In fact, after the outbreak of the epidemic, many retailers also thought about this for the first time. However, the subsequent results show that the real case of getting rid of the crisis in this way is very limited. The reason is very simple. It is also necessary to realize online, and the construction of these capabilities is not so easy in itself.

For example, Yonghui supermarket showed a very strong growth after the outbreak. Its sales volume reached 12 billion 500 million yuan in January, a substantial increase compared with the same period last year. Many people will analyze the reason why Yonghui will grow against the trend. They will simply attribute the reason that Yonghui is fresh, which gives them an advantage during the epidemic. But this is obviously untenable. As a matter of fact, as long as it is a large business super company, almost all will manage fresh business. Under the epidemic situation, the fresh demand we face is common, the difficulties are common, and the methods adopted are common. But why is it that Yonghui is the last winner? The reason is, to a great extent, to find out from Yonghui's digitalization ability.

As early as a few years ago, Yonghui, a representative of the Shang Chao, formed a strategic alliance with the Tencent, and actively utilized the tools provided by Tencent to build its own digitalization capability. In order to explore new retail formats and digital transformation, Yonghui established Yonghui Yun Chuang in 2015. Yonghui cloud created this platform, Yonghui hatched out super species, Yonghui life and Yonghui life, to the three retail formats and many other online and offline integration of the retail form. These new retail forms are the bridgehead for Yonghui to break into the community during the epidemic and win the business of home business and community group buying.

While fully hatching the new retail form, Yonghui has also made a lot of money in the construction of digital infrastructure. In 2015, Yonghui set up its own technical team, launched Yonghui life APP, and pioneered the application of WeChat scan code purchase and small procedures in the domestic retail industry. In 2018, Yonghui procured Tencent cloud services and built Yonghui Yun on this basis. With the support of these digital infrastructures, Yonghui has been practicing the idea of "full touch retailing" for a long time, and is committed to opening up the user's all contact three-dimensional business matrix from online to offline.

In addition, Yonghui also used intelligent technology to strengthen its own traditional supply chain. With the help of intelligent analysis provided by Tencent cloud, Yonghui not only optimized the transportation route, but also carefully selected the location of stores and warehouses, and made efforts to optimize transportation costs.

It is in the construction of the above series of digital capabilities that Yonghui can actively develop community sales at the first time when the epidemic comes, and open Mini stores at the best location to achieve community touch and ensure the smooth supply chain. From this point of view, the so-called digitalization and online technology, though seemingly simple, require much effort.

The retail service market will usher in a new round of development.

As long as we look at the news reports since the outbreak, we will find many inspirational corporate self rescue Stories:

For example, Xibei's business suffered heavy losses and cash flow difficulties also affected by the epidemic. In the predicament, Xibei actively turns to online and seeks business opportunities. Shortly after the outbreak began, the service manager of Xibei national stores added more than thirty thousand customers through WeChat.

Under the condition that online stores can not be operated, more than 200 customer managers in the whole country pass the information of WeChat's customer circle and mass message to the consumers on the first day, and connect the online shopping mall and the WeChat takeaway order to the store personnel information page, so that consumers can conveniently find the purchase entry. Online booking operation. Through this combination of "enterprise WeChat + community operation + small program", Xibe can complete the whole process from online to final transformation at low cost, thus obtaining valuable cash flow during the crisis.

Also known as the famous clothing brand Taiping bird. Under the influence of the epidemic, half the stores in the whole country were forced to close, which would have a huge impact on their income. In this situation, Taiping bird actively seeks new retail routes. Through online platforms and live platforms, it connects customers with customers. Through the introduction of WeChat online membership, WeChat spike, small program distribution and alternate broadcast in different regions, it achieves a daily sales turnover of over 8 million.

Again, due to the impact of the epidemic, the sales of inline department stores under traditional offline stores have had a huge impact. Faced with this situation, Yintai actively develops online and receives visitors through live broadcast. Thanks to BA's live streaming and online shopping platform, meow street has brought sales back nearly half by mid February.

If we look at these examples in isolation, they seem to have very little information. At best, they are just a few typical examples of traditional enterprises struggling to save themselves. But if we put these examples together, we can see an important trend that the retail service market will probably usher in a significant development after the outbreak.

Compared with "retail", the term "retail service" is much less well-known. To put it simply, "retail service" refers to a series of activities that provide services for retailers and generate additional value.

Under normal understanding, the activity of retailing the goods from the hands of the merchants to the consumers seems to be simple and integrated, but in fact, this activity can be split into many links, each link will produce corresponding value, and the whole link will form a value chain. It is precisely because of this characteristic that Kotler, in his classic book "marketing management", regards retail as a "multi product production", and the results of every link can be regarded as a single product. Finally, the value of all products is combined to form the total value of goods. Obviously, increasing the added value in any link will enhance the value of the whole final product.

In reality, a large number of retail enterprises also split the many parts of the retail process to the third party enterprises. For example, advertising, logistics and other services are essentially part of the retail business, but most retail businesses will outsource these services to specialized enterprises. These businesses, which specializes in providing services to retailers, form a huge retail service market. The China Internet Economics Research Institute of Central University of Finance and Economics has published a report entitled "China's online retail service industry: pattern, competition and ecology". According to this report, in 2017, the volume of China's retail service market reached 6 trillion yuan, accounting for 18% of the total retail sales of the society.

Before the outbreak of the epidemic, the retail industry is also changing, but its overall pattern is relatively stable and balanced, so the growth rate of the retail service market will be relatively slow. And after the outbreak, with the intensification of online and offline convergence, the market is likely to usher in a rapid development.

As we have pointed out before, the impact of the epidemic is that the offline businesses have developed online businesses, while the other is the online companies sinking to the bottom line. For these two types of enterprises, they are not entering the market they are familiar with. If they are to rely entirely on their own strength to lay the facilities needed for these new market places, they will need huge input. In contrast, the adoption of third party services will be a more cost-effective option. Faced with such a situation, the vast number of retail service providers also have enormous opportunities.

At present, a large number of giant enterprises have seen the business opportunities of retail services. In these enterprises, the traditional giants such as Alibaba and Tencent are obviously in the front.

In many people's eyes, Alibaba is a retail enterprise, which is actually a misunderstanding. In fact, Ali is a platform for retailers. Because of this, since its inception, Alibaba's slogan has always been "let the world have no difficulty in doing business". In practice, Alibaba has always been adhering to the concept of service business. In addition to the traditional platform services, the development of cloud services, supply chain finance, logistics and other services of Alibaba has been developing rapidly in recent years. For traditional enterprises that want to realize online, these services will provide a good help.

The role of Tencent in its retail service providers is even more evident. A few years ago, Tencent raised the banner of "smart retailing". At that time, many people did not know what "smart retailing" was. But in fact, as soon as we deconstruct it, we can see that Tencent's so-called "smart retailing" itself should be "smart retail service". Tencent itself is not involved in the specific business of retailing. It is only responsible for providing support for its partners to provide intelligent tools behind them, assisting the growth of partners, and then sharing benefits with partners.

In addition to AT two giants, Jingdong, byte beating, American group, fast hand and other enterprises are more or less playing the role of retail service providers. In this epidemic, many retailers have also borrowed the tools provided by these service providers to achieve self-help and development.

With the integration of online and offline retail, competition in the whole retail market may be divided into two markets, one is the positive retail market, the other is the retail market behind. Correspondingly, the competition in the whole retail market will become more complicated. This epidemic is obviously catalyzing the coming of this trend.