Digitization + Experiencing, A Reform of Traditional Retailing Speaker: Zhu Xi, from Wuhan Department Store Group Co., Ltd., China September, 2013

Digitization + Experiencing, A Reform of Traditional Retailing

Speaker: Zhu Xi, from Wuhan Department Store Group Co., Ltd., China

September, 2013

I. Wuhan Department Store Group Co., Ltd.

II. 2012-China’s E-commerce Year

III. Experiencing Commerce, the Ultimate Way

IV. The Two Technical Trends Are Changing the Retailing Pattern

V. Change Commercial Pattern and Embrace the “All Channels”

单击添加副标题



The proportion of E-commerce sales volume in Chinese retail market will exceed 50% ten years later.

Even if the share of E-commerce just reaches 50%, I will admit defeat and give Ma Yun RMB 0.1 billion.

Developmental Trend of Retail Industry

Digitalization

Traditional Retail Industry

ExperiencingConsumption

The change is a reform for the traditional retailers, and a return to the original

spirit of retailing industry.

Wuhan Department Store Group Co., Ltd.

Great River, Great Lake and Great Wuhan


Wuhan’s GDP was RMB 800.4 billion in 2012, and its gross sales

volume of social consumables was RMB 343.2 billion.


Founded in 1959, Wuhan

Department Store Group Co.,

Ltd. is the largest integrated

commercial enterprise in Hubei

Province and one of the 20

large-scale retail enterprises

that were listed by Ministry of

Commerce as the key

cultivation objects. The

company mainly conducts

operations in shopping mall

and retailing chain

supermarkets.


In 2012, Wuhan Department Store

Group Co., Ltd. had its sales volume

increased by 30% on year-on-year

basis, and its profit by 21%. Its total

sales accounted for 8% of Wuhan’s

total social retailing sales of

commodities.


Analysis by experts in the industry:

1. The growth rate of Chinese macro-economy will slow down

and the E-commerce industry will be further impacted;

2. Housing price will be unaffordable high and RMB will

depreciate domestically.

3. China will intensify anticorruption and advocation of honesty

and cleanness.

4. Rent, labor cost and other related expenses will rise rapidly.

The development of retail industry will become tougher. So to

speak, the traditional retail industry will have no choice but change

itself.

China’s E-commerce Year

2012-China’s E-commerce Year

According to the report issued by CNNIC, in 2012, the transaction of

China’s online shopping totaled RMB 1,259.4 billion with an increase by

67% compared with 2011. China’s online purchasers totaled about 200

million, and the proportion of online shopping increased to 43%.

0

2000

4000

6000

8000

10000

12000

14000

2011 2012

Amount of onl i neshoppi ng

RMB 1259.4 billion

RMB 756.4 billion

2012-China’s E-commerce Year

The turnover on that day

reaches RMB 19.1 billion

yuan;

In 2012, online sales had accounted for 6% of China’s total retailing volumes.

November 11, 2012

The order volume on that

day exceeds 1.5 million; the

order volume in three days

approaches 3 million; the

sales volume increased by

20 times on year-on-year

basis.

Experiencing Commerce, the Ultimate Way

Wuhan Department Store Group Co., Ltd. annotated its

“experiencing commerce” by establishing MALL, which is an

urban complex integrated with top-grade department store,

catering, cinema, sports and leisure, etc. that will provide

consumers with brand-new shopping experience.

1. The change of consumption concepts and behaviors promote the emerging of experiencing commerce.

Shopping Training

Catering

Leisure

Sports

Entertainment

Causes for Experiencing Commerce Emerging


2. The popularity of urban complex brings opportunities for experiencing commerce;

Shopping center is the mostly common platform for experiencing commerce for its architectural design, space quality and business pattern are more easily to be blended with “experience”.


3. The prosperity of E-commerce has the commerce transited to experiencing commercial mode;

E-commerce urges the transition of the physical stores. Basic physical form, corresponding commodity experiencing form and service experiencing form are indispensable for a commercial complex form.


Retailing Enters the Age of Consumer Sovereignty

CEC（ Chief Executive Cu

stomer）

Though customers are not directly

involved in the enterprise, they

intangibly play a more important

role in enterprise’s strategic

direction and market path.


In CEC（ Chief Executive Customer ） era, enterprise should

integrate consumers’ participation into its traditional value

chain and search for, analyze and tap consumers’ data with

technology as the core platform, so as to thoroughly

understand each customer.


Customer = Democratic Party


How retail enterprises can grasp consumers’ heart in the

age of consumer sovereignty?

They should provide “one-to-one” marketing and service

when customers really need them; conducting single-

direction sales promotion to consumers, such as mass

texting and mailing DM, is not service, but disturbance.


How to fulfill “one-to-one” accurate marketing?

It’s essential to develop digitalized retail industry and

digitalize each customer and employee. Through digitalizing

the relationship with each customer, retail enterprise can

establish all-around social relations with consumers via social

network, thus gaining an insight into consumers’ demands.

The Two Technical Trends Are Changing the Retailing Pattern

It’s estimated by American Retail Federation that the gross

retail volume in Chinese market will possibly reach RMB 50

trillion yuan in 10 years, of which 20% will be contributed by

online retail. 10 years later, 80% of the consuming demands of

young people who grow up with the Internet will be satisfied

online.

Online Sales Trend

1. Smart phone enables us to directly obtain almost all

information about all retailing commodities, forces retailers to

keep their price competitiveness and regularly update their

website.

Online Sales Trend

2. Physical shopping are changed by technology.

(1) Interactive “magic mirror”: It can show what one looks like

in the dress (without the need of putting on the dress),

recommend proper ornaments, and point out the direction of

similar products.

Online Sales Trend

(2) Virtual receptionist: It can deal with all relevant matters such as providing discounts via 2D barcodes.

(3) 3D printer: Consumers can use it to create their own products at site, such as towel, ware and clothes.

Reception

Online Sales Trend

Some analysts predicted that physical shopping experiencing will

possibly become completely different from the previous ones. For

example, Gap, Best Buy and other stores will turn into pure experiencing

places and test centers for “touching and feeling” commodities.

Change Commercial Pattern and Embrace the “All Channels”

“All Channels” strategy


aims to establish a unified

360° “customer view”. It is

a kind of shopping

experience that will get

consistency from physical

store, online store, mobile

store and social store at

any time.


Domestic retailers need to integrate various independently-

operated channels existing presently and highly coordinate

them, thus providing consumers with optimal seamless

shopping experience.

How to embrace the “All Channels”

Firstly, return to the retailing spirit, and get integrated with the

internet spirit. Retailing spirit aims to recognize who are the

customers, where they are, what they want to buy, and what

they are talking about.


Secondly, change the concepts of

business district. Internet is like

“avenues” full of consumers’ breaths

and voices as a new popular retail

circle. If we do not foster the idea of

“Internet commercial circle”, we will

be unable to establish real “All

Channels” retail strategy.


Thirdly, establish the consumer-demand-chain centered

organization. Integrate resources and unify online and offline

back-stage services by means of professionals’ retail

experience and spirit.

18 days after his “retirement”,

Ma Yun, Board Chairman of

Alibaba Group, showed up and

incorporated “Cainiao” Network

Corporation, acting as the board

chairman. “Cainiao” Network

aims to establish platform for E-

commerce, logistics and

storage enterprises.

Trend Forecast

As for long-term development of retail industry, it’s necessary to make

reference to foreign operating modes of retail industry, constantly intensify

self-operation, launch self-own brands, customize commodities, organize

direct purchase from sources, realize differential operation, and regain

middlemen’s profits. Self-purchase and self-operation will be the radical

solution for retail industry.

Trend Forecast

Urbanization will set free the great consuming potential.

Consumption in third-tier and fourth-tier markets has become

increasingly mature. The proportion of service industry in economy

will be substantially raised. Urbanization will become the most

powerful engine in the promotion of economic growth and will

create new developmental opportunities for retail industry.

Forecast is prejudgment of matter’s developmental trend that is made

via professional analysis on the matter’s previous and present

developmental status, rather than a guessing “feast” joined by all

citizens. The ability to master future trend will become a decisive

factor in enterprise’s sustainable development.

Trend Forecast

Thank you

Documents

Digitization + Experiencing, A Reform of Traditional Retailing Speaker: Zhu Xi, from Wuhan Department Store Group Co., Ltd., China September, 2013