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by Jane Lee Aug 21. 2017

[英] 신유통(新零售)은 혁신이 아닌 빛 좋은 개살구?

“Online e-commerce will disappear in the next few years, and only ‘New Retailing’ will remain. “ — Jack ma

During the Ali Cloud Developer Conference, 2016, held in Hangzhou on October 13th, Jack Ma, founder and CEO of Alibaba, introduced the concept of New Retail and reviewed the effect of technological progress in the retail industry. He predicted that the future would be mainly about a new type of retailing, manufacturing, finance, technology, and resources.


After the conference, things quickly changed. Alibaba, JD, and many other start-up companies that began in those markets, especially in the retail market, were subject to big and rapid changes, which attracted lots of media attention. However, on the other side, some said that the New Retail market is not a new innovation and is full of problems.


What is New Retail ?    

New Retail(新零售)

: Enterprises will be using Big Data, artificial Intelligence, and other advanced technologies to improve products, production, logistics, and selling processes. New Retail will integrate online e-commerce, offline stores, and logistics systems to improves consumer experience and operational efficiency. - baidu (百度)


The offline innovation strategy report released by the Chinese government supplied more specific information about the New Retail business model and how China will change the future of the retail Industry.


1. An Improvement of Business Systems to remedy disadvantages within systems and structures of the retail industry to meet increasing demands.

2. Development of strategies for retail by encouraging business management innovation, organizational renewal, and improvement of consumer experience and remedying a disadvantages of the retail industry to increase competitiveness.

3.Integration of industries to facilitate cooperation between different areas, and to integrate internal and external commerce to build a new paradigm for the retail industry


From this information, we can define the meaning of New Retail.


What is New Retail? A retail business model that integrates online e-commerce, offline stores, and logistics systems. Through the New Retail system, enterprises can meet the diversified demands of customers and improve operational efficiency.


Why They Turn To New Retail

Why will all online e-commerce and offline retail enterprises turn their business models to New Retail ?


The growth rate of online e-commerce markets has slowed considerably.    


Online e-commerce markets have not stopped growing yet, but have already reached a saturation point. It is usually thought that saturation is the main reason for the transformation of business and operational models to New Retail.


Bad customer service experiences in the e-commerce market    


Faster shopping, easier pickups, and lower prices are the three key words representing China’s online e-commerce services. We can buy everything online, everywhere, and at any time. An improved logistics system and internet service helps us to receive ordered goods more quickly and easily. The convenience of online e-commerce and lower prices makes online shopping more attractive.


However there is a serious flaw in consumer confidence. The sale of imitation brand goods has plagued China for years. The US Office of the Trade Representative has added Taobao, small seller platform owned and operated by China’s e-commerce giant Alibaba, back on to a list of platforms suspected of selling counterfeit goods. Alibaba itself was on the list in 2012.

China is the world’s largest e-commerce market, but they have lost customer trust in selling platforms and in goods sold on their websites. According to they way China’s economy has grown, it led a greater number of consumers to believe that quality is more important than price.


▍The last opportunity for offilne retail enterprises

In the last few years, e-commerce has grown rapidly, while at the same time, the offline retail market has plunged into the dark ages.    


According to the Shanghai Bailian Group Co., Ltd. Annual Report, the operating income and net profit of The Bailian Group fell annually over as many as 13 consecutive quarters. Can you imagine how difficult managing a company would be for others when even the largest enterprise finds it difficult?


Operating income of The Bailian Group

2014 : 5,190 million Chinese yuan

2015 : 4,920 million Chinese yuan

2016 : 4,700 million Chinese yuan


So, in sum, the New Retail is not a third retail business model that did not exist as an alternative to those formed by market demands of online and offline retail companies.


What Will Happen ?

▍New Retail Is Changing Customers          


A perceptible change in the retail industry is the appearance of New Retail chain stores represented by Bingo Box and Baixian Go. The most noticeable difference between these and original retail store is the introduction of the latest technological advances such as unmanned systems. However, This is only a part of the changes.


Online and offline retail will be consolidated, and the boundaries between the two markets will disappear. The offline store will be transformed into a place where customers can experience goods and services in a complex cultural facility and resting space. The customer will pay for services and the venue, not for the product.


▍New Retail Is Changing Enterprises    


The three keys of New Retail are Big Data, artificial intelligence, and network systems. It is often said that the greatest strength of the Alibaba Group is Big Data that is collected from Alibaba, Taobao, Tmal, and Cainiao, and is stored and processed in Alibaba’s database.


All online and offline stores generate data every millisecond of every day. But the problem is that offline retail enterprises don’t have an ability to integrate and analyze this data. If they could use the online e-commerce platform data analysis system, what could happen? 


Enterprises could build a network system connecting product, stock, shipping center, supply chain, and consumer information.They could both base marketing strategy on Big Data and realize savings in storage and operations.


Actually, many enterprises already use ESL(Electronic Shelf Label) and RFID(Radio Frequency Identification), leading to New Retail markets. An electronic shelf label (ESL) system is used by retailers for displaying product pricing on shelves. A communications network allows the price display to be automatically updated whenever a product price is changed. Automated ESL systems reduce pricing management labor costs, improve pricing accuracy, and allow dynamic pricing. ESL also has a lower probability of error when it changes prices. It’s -lower than 0.00001%.


New Retail And A Fresh Food

The biggest sector in unsatisfied online demand was the purchase of fresh food. Thus, it is quite natural that New Retail, which combines online and offline markets, would be a logical alternative.


Research reports released by JD(京东) shows that fresh food in the Chinese e-commerce market has grown robustly in recent years. Office workers, aged 25–36, accounted for almost half of total consumers.    



However, the purchase percentage of fresh food is much lower than other products. Why? Logistical requirements are more stringent to ensure product quality, especially when it comes to delivering fresh food all across China.


New retail stores are a good alternative to meet customer demand. Companies like Hema and Riso have capital and resources to build their own logistics networks based on their own product supply chain. This helps improve logistic efficiency and reduce costs, while offering delivery service for customers.


New Retail, Is it an innovation?    


Opinions diverge greatly on this issue. Some have great expectations for this new innovation, and others say that it’s nothing but window dressing.


In China, where mobile shopping and O2O services are well developed, there is no significant change in the consumer side in the New Retail industry. Although Tmall in Hangzhou Intime, west of the city, created a new retail experience, releasing an AR batch show eye scan, virtual makeup mirror, and a virtual fitting room, with cross-screen interactive technology. However, it is no exaggeration to say that it offers no change that customers can see in everyday life.


From the first, the New Retail market was not formed with the hope of creating innovation, There is already online shopping connected to different regions and consumers who live there. You can buy everything, even foreign goods, through online e-commerce with one click. With improvement of the logistics system, companies established an international distribution system. Thus, online e-commerce services became a link between sales demand and purchase demand. Then how about New Retail ?


New Retail has become a link between purchasing behavior and the consumer’s life. The consumer’s main demand shifted from price to value of goods and unsatisfactory experiences with online e-commerce platforms. Online and offline retail companies also had some misgivings about future developments.


The New Retail market has emerged to resolve consumer complaints and company concerns that have not been resolved by a single market. In the New Retail market, consumers will pay for everything related with to their lives, including time, venues, and services.


Depending on your own perspective, the market may seem like an illusion or a new innovation. I just hope that we don’t blame the New Retail market that just begun to grow.

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