The final session of NRF Retail Converge was devoted to a wide-ranging discussion of retail’s digitization and its role in brand engagement. Participants were Diane von Furstenberg, founder and chairman of DVF, and J. Michael Evans, president of the Alibaba Group; the conversation was moderated by former Macy’s executive chairman and CEO Terry Lundgren, now founder and CEO of TJL Consulting.
Lundgren began by mentioning the COVID-19 pandemic, and asked his panelists to describe what they had done to innovate and capture business during that trying and very complex time.
“All of a sudden, the world stopped,” von Furstenberg said. “I don’t want to say I took advantage of the stop, but since it did stop, I thought, OK, maybe now is the time to rethink the business model and see how we can go into the future.”
When the pandemic struck in Wuhan, all the major Chinese luxury and fashion influencers were in New York for Fashion Week. They were devastated by what was happening in China, and one of von Furstenberg’s chief assistants suggested a digital event, possibly raising some money for Wuhan. von Furstenberg agreed immediately and did a live-stream on Alibaba with the entire Shanghai Fashion Week show.
“Two things happened during the pandemic,” von Furstenberg said. “We all got closer to nature, and at one jump we accelerated five to 10 years into the digital world.”
The Chinese market
Much of the digital future, especially the most highly developed parts of it, lies in the East. Asked to place Alibaba in the context of Chinese retail digital technology, Evans said, “Our platform is an ecosystem of businesses and business ecommerce platforms, serving 900 million consumers.”
With that platform, he explained, Alibaba seeks on the one hand to serve the Chinese population, and on the other to connect brands and small businesses directly to the Chinese consumer.
Many of these brands are American companies like Starbucks, Procter & Gamble, Estee Lauder and DVF. In addition, Alibaba also works with many smaller companies. “A lot of CEOs have told me that being in the China market in 2020 was the difference between growing and potentially failing and going out of business,” Evans said. “Doing business in China isn’t easy, and it’s not for every single brand or small business. But there are tens of thousands of brands from outside of China on the platform. If you handle it right, it’s a great opportunity.”
There are two important and slightly contradictory components of handling it right, he said. One is tenacity: It is impossible to connect with the Chinese audience and gain credibility if your plan is to try it for six months and then bail if it doesn’t work. You need to plan to be in the market for a good period of time. Once you’re there, however, you have to be agile and quick to adapt, because the Chinese consumer is rapidly changing.
This assessment was seconded by von Furstenberg. “Michael is a great ambassador,” she said. “He speaks of brands with a lot of respect, and in China, respect is everything. You have to respect the consumer, and you have to think long-term.”
The new retail
Lundgren asked Evans to describe the Chinese retail landscape, and how it differs from the West. “Online shopping is far more advanced in China,” said Evans. “We think that in 2021, 50 percent of Chinese retail sales will take place online, which is a much higher level than we’ve reached here or in Europe.”
“We think that in 2021, 50 percent of Chinese retail sales will take place online, which is a much higher level than we’ve reached here or in Europe.”
The amount of Chinese online shopping today partially reflects the revolution in smartphones, which in a little over a decade have gone from being a mildly exotic rarity to being nearly ubiquitous. It also, however, reflects the lack of physical store infrastructure in most parts of China. There are lots of stores in the cities. (And there are lots of cities. An estimated 103 Chinese cities have populations of 1 million or more, and there are 13 with populations above 10 million.) But outside the cities, not so much.
This combination has given rise to what Alibaba refers to as the new retail. What the new retail does is try to digitize the entire retail value chain: manufacturing, supply chain, warehousing, merchandising, marketing, logistics, fulfillment — and in-store operations.
This enabled the Chinese retail industry, during the pandemic shutdown, to use its closed and shuttered stores as fulfillment centers. Instead of sitting there and losing value, the inventory could be sold online and delivered, sometimes in less than an hour.
If we don’t do it...
The new retail creates a holistic retail environment that is fully integrated. “It also creates a completely different merchant/consumer value proposition,” Evans said, “and that’s what excites Chinese consumers.”
It also excites retailers: The available volume of data and consumer insight is being used by many brands to help them decide where to open their next offline location.
That’s not yet happening in other countries, he said. One reason is simply the newness factor: China got to skip a step in technological development. Most of China never had conventional wired telephone service; they went straight from no phones to cell phones and now smartphones.
By the same token, a lot of Chinese retailers started out with digitized inventory, and the rest have adapted quickly — thus enabling one-hour delivery from stores during COVID-19. “This is how the Chinese consumer wants to live,” Evans said. “If we don’t supply it, someone else will.”
Among fans of the new retail is von Furstenberg; DVF opened a store on Alibaba at the end of 2019, which has grown to 320,000 loyal customers. She sees China as a harbinger of the future. “Even in our flagship store in New York,” she said, “we have integrated as much digitization as possible. At the end, it’s great for the consumer.”
Related content
