While China's online share of retail sales growth continues to rocket from 21% in 2014 to 55% in 2018, the eventual saturation of the mobile market will see retail brands seeking new avenues for growth.

“What’s going to happen in the future is new retail… and new retail is not just going to be about traditional adding an online channel to retail, or online getting into offline,” said Pascal Martin, partner of management consultancy firm OC&C, at the Retail Asia Conference in Hong Kong.

Martin pointed to the case of Hema grocery supermarket chain, owned by Alibaba, as an example of how effective online and offline integration can be for brick and mortar stores.

Hema already has close to 90 stores across 14 cities and more than 10 million customers since its 2016 launch. Its average daily revenue per store exceeds US$0.12m (RMB0.8m).

The company identified “a great opportunity” in China among shoppers who want to provide a healthy regime of food to their family and are obsessed with fresh, quality ingredients. It also offered consumers an integrated smartphone-centric experience, from product information (by scanning QR codes on product labels) to automated check-out enabled by RFID tags, to payment.

Based on a customer satisfaction survey conducted on Chinese consumers, OC&C found Hema to outperform all competitors on seven key dimensions (product range, freshness, price, fresh food variety, cooked food variety, store ambience and layout) with an overall score of 6.2. In second and third spot were the Carrefour and RT-Mart hypermarket chains, with ratings of 5.6 and 5.3 respectively.

OC&C also found strong evidence to suggest that Hema is a potential threat to other formats. As part of its research, it took 400 consumers who had never been to Hema to experience Alibaba’s superstore format.

Afterwards, 40-50% declared they would shop at Hema and cut down their basket size on all other formats from online platforms such as Tmall (15% to 8%), community grocery stores, fruit and vegetable stands (32% to 21%) and traditional retailers such as Walmart (42% to 18%).

“Once you experience Hema, when you look at the future, you’re pretty much hooked on the concept. You want to shop at Hema again – and not by a small proportion, but a massive proportion,” said Martin.

Sourced from WARC