How New Retail in China Is Changing The Future of Retail

How New Retail in
China is changing
the future of retail
in the world
© 2017 | Prepared by www.chozan.co | The Most Comprehensive Guide to Chinese Social Media
ABOUT
ASHLEY
12 years in China and HK
ChoZan (www.chozan.co)
Alarice International (www.alarice.com.hk)
Forbes, SCMP, China Daily, Hong Kong

Economic Times, WenWeiPo, MingPao Daily,
Jumpstart Magazine
WeChat Expo, General Assembly, The APAC

HR Forum, The Italian Chamber of Commerce,
Paperclip Startup Campus, The Executive
Group
ASHLEY TALKS
Ashley Talks is a free video resource for all
things related to the China market, consumers
and Chinese social media.
BLOG
http://www.ashleytalks.com/
YOUTUBE
Ashley Talks China
China Market
CHINA MARKET
1137 950+
billion No.1 2.5hour million
Dollars (USD) Online retail market Average time spent on Active Chinese social
sales online in 2017 in the world social media per day media users
SALES RETAIL TIME USERS

Source: China e-Business
Research Center (CECRC)
CHINESE CONSUMERS
650 MILLION 8 7.180

NUMBER OF INDIVIDUAL DEVICES
6 5.329
3.829
533 MILLION 4 2.821
NUMBER OF ONLINE SHOPPERS 1.885
2
7.18 TRILLION RMB 0

SALES ONLINE IN 2017 2013 2014 2015 2016 2017
7.18 TRILLION RMB

The per-household disposable income of urban TOTAL VOLUME OF ONLINE TRANSACTIONS IN CHINA
consumers will double between 2010 and 2020, from
Source: China e-Business Research Center (CECRC)
about $4,000 to about $8,000.
6
CHINESE CONSUMERS
AGE OF CHINESE ONLINE CONSUMERS IN 2016
17~36 years old

Take up about two thirds of the total
50%
online consumers.
Post-80s and post-90s are the main
37.5%
age groups
25%
60s
Take up 11.2% of the total online
consumers. 12.5%
They have more money and time,
thus showing great potentials in
online consumptions. 0%
Under 16 17~26 27~36 37~46 Above 47
CHINESE CONSUMERS
1st tier cities 20.7%

13% 2nd tier cities 45.8%
20.7%
3rd tier cities 20.2%
4th tier cities 13.3%
20%
Although consumers from 2nd tier cities earn nearly as much
as those from 1st tier cities, they have rather fewer resources
and options for shopping. They tend to go online shopping to
meet their demands.
45.8%
Compared to 1st tier cities, consumers from 2nd tier cities
also have more free time to do online shopping.
8
WHAT DO THEY BUY
2017Q3Q4 Top 5 Categories Purchased by 2018Q1Q2 Estimated Top 5 Categories

Chinese Shoppers Purchased by Chinese Shoppers
100% 100%
75%
73.9%
75%
59.1% 59%
52.2% 50.8%
50% 50% 43.3%
34.2% 34%
27.7% 26.9%
25% 25%
0% 0%
g
ce
od
ge
l)
od
ce
ge
ge
al
in
in
vi
ra
vi
Fo
ra
Fo
Sm
th
ar
th
De
De
ve
ve
lo
(L
lo
e(
Ba
C
Ba
C
ge
ile
ile
nc
ra
l&
ob
l&
ob
ia
ve
ho
ho
pl
M
Ba
Ap
co
co
Clothing
Al
l&
Al
ld
ho
Mobile Device
ho
co
se
Al
Food
ou
H
Drinks
Household Appliance Source: iResearch, 2017 China shopping Trend Insight
MOBILE PAYMENT
CHINA RETAIL CONSUMPTION VALUE
% of total (BY PAYMENT TYPE)
payments value
100%
CARD PAYMENT 75%

61% 58% 50% 47%
42% 40% 38% 34% 34% 33% 30%
RISE OF INTERNET AND 50%
MOBILE USE
THIRD-PARTY PAYMENT 25%
SOCIAL FINANCE
0%
CASHLESS LIFESTYLE 2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E
Cards Cash Internet Mobile
Source: Better Than Cash Alliance (April 2017)
• The proportion of transaction in cash shrank to slightly over 1/3 in 2016

• Growing importance of cards and digital payments
• UnionPay, Apple Pay, VISA, MasterCard
MOBILE PAYMENT
INCREASING SMARTPHONE USAGE
Smartphone as % of IN CHINA
phones in China
100%
71% 72% 72% 73% 73%

75% 68%
57%
CARD PAYMENT
50% 39%
RISE OF INTERNET AND
MOBILE USE 25%
22%
11%
6%
THIRD-PARTY PAYMENT
0%
SOCIAL FINANCE 2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E
Source: Better Than Cash Alliance (April 2017)

CASHLESS LIFESTYLE
• High Internet and mobile phone usage

751m 724m • Technical support to digital finance
China Internet China Mobile
Users Internet Users • Relatively cheap, full-function smartphones in China
(by June 2017) (by June 2017)
• China’s millennials are active users of mobile phones
Source: CNNIC (August 2017)

MOBILE PAYMENT
MARKET SHARE OF THIRD-PARTY
PAYMENT IN CHINA (Q2 2017)
5.8%
CARD PAYMENT
Alipay
RISE OF INTERNET AND 39.8% 54.5% Tenpay

MOBILE USE Others
THIRD-PARTY PAYMENT
SOCIAL FINANCE Source: iResearch
CASHLESS LIFESTYLE
• Alipay has successfully overcome the lack of trust in China
• Buyers on Taobao can use Alipay instead of cash or cards
• Merchants will not be paid until the customers satisfy with the purchase
• 175 million transactions per day by 2016: 60% of which were done via mobile
phone
MOBILE PAYMENT
MOBILE PAYMENTS BY VALUE
(YEARLY TOTAL MOBILE PAYMENTS)
Billion USD
1800
1350
CARD PAYMENT
RISE OF INTERNET AND

900
MOBILE USE
THIRD-PARTY PAYMENT
450
SOCIAL FINANCE
0
CASHLESS LIFESTYLE
2012 2013 2014 2015 2016
Alipay WeChat Others

Source: Better Than Cash Alliance
• Tenpay payment app is integrated into WeChat: “WeChat Pay” - A digital wallet housed
within the WeChat app and access a variety of payment solutions
• WeChat Pay has captured some of mobile payment market share from Alipay
MOBILE PAYMENT
USERS’ RECEPTION OF THE
CASHLESS LIFESTYLE (BY REGION)
PENETRATION Source: 2017 Mobile Payment in China Report (Tencent, August 2017)
90%
87%
85% 85%
CARD PAYMENT 83%
82.5% 81%
RISE OF INTERNET AND 79%
MOBILE USE
75% 74%
THIRD-PARTY PAYMENT
SOCIAL FINANCE 67.5%
CASHLESS LIFESTYLE
60%
Eastern China Northern China Central China Southern China Southwest China Northwest China Northeast China
Shanghai Beijing Zhengzhou Guangzhou Chongqing Xi’an Shenyang

Nanjing Tianjin Wuhan Shenzhen Chengdu Lanzhou Changchun
Hangzhou Shijiazhuang Changsha Nanning Kunming Ürümqi Harbin
People in the Eastern China region tend to accept a totally cashless life.
s
Overview Of
Core Technologies
ARTIFICIAL
INTELLIEGENCE (AI)
© 2017 | Prepared by www.chozan.co

1 | The Most Comprehensive Guide to Chinese Social Media
OVERVIEW OF AI
Pattern recognition
Technology Machine learning
Category Data mining
Intelligent algorithm
The "Image and Beauty"
research team of the PolyU and
Alibaba Group jointly launch the
world's first "FashionAI Data
Set" .The computer can
accurately understand and
learn the clothing images and
styles, so that to design the
customizable clothes for each
consumer.
APPLICATION FIELDS
ALIBABA TENCENT JD
• E-commerce: Taobao/ Tmall • Content: “Letters every • E-commerce: Search/ User

• Logistics: Cainiao network day”, “QQ music” recommended/ Intelligent
• Financial: Ant financial • Social networking: “Proctor customer service
• Retail service: Unattended retail figure(天天P图）”/WeChat's • Logistics: Drone/ unmanned
store ”For coffee(淘咖啡）” "take a look" function warehouse/ Unmanned vehicles
• Games: Doom /King of • Financial: Intelligent risk
• AI product: Tmall elf X1
Glory（王者荣耀） control and anti-fraud
• Voice intelligent system: • IOT: Intelligent speakers,
Tencent jingle (腾讯叮当） electric doors and Windows,
electronic door locks
VIRTUAL
REALITY(VR)

OVERVIEW OF VR
Hardware: Sufficient calculation speed/ storage space/ transmission rate and endurance
Technical
Image technology: Image recognition technology/ Accurate positioning technology
Support
Data: Acquisition/ storage/ transmission/ analysis
Games: Tencent’s first VR game “Shadow Tracker”
Application Sports broadcast: NextVR has broadcast a NBA game on Samsung Gear VR APP
Fields Film industry: “Mars plan” VR version
Shopping: Taobao VR Buy+, house hunting with VR
CASE STUDY
Taobao VR Buy+
Taobao launched Buy+ VR shopping in 2016 Single’s Day Shopping Festival. Consumer can use VR
technical to shop in seven shops on Taobao. Buy+ offers two options. One is that there is no need for the
panorama mode of VR devices, and the other is the VR mode that can provide the immersive experience.
AUGMENTED
REALITY(AR)

OVERVIEW OF AR
Image registration: interest points/ fiducial markers/ optical flow

Technical
Support Image processing: corner detection/ blob detection/ edge detection/ thresholding
Games: “Pokemon Go”/ “Meng pet big bang”《萌宠⼤大爆炸》
Application Advertising media: McDonald's potato chip box advertising

Area Education: "Magical kaka”’s 3D small white bear
Shopping: L’oreal’s first AR beauty makeup APP
CASE STUDY
Customers stand in front of the

mirror and input several data. 30
seconds to "copy" of a virtual
you to try on more than 100 sets
dressing.
Good Dress (好穿衣）
After the smart fitting, the average length of stay in offline stores increased by at least 14 minutes.
BIG DATA

OVERVIEW OF BIG DATA
Main Outcomes
Collect Big Data: Alibaba /
• Understand and meet customer service
Tencent / Baidu / Huawei / Zte.
requirements
These companies have the
ability to collect big data and • Business process optimization
use it in their marketing. • Improving live
• Improve healthcare and research and
Category development
Start-up big data companies: • Improve sports performance
They rely on big data tools, in • Optimize machine and equipment
response to market demand, performance
bring innovative solutions to the • Improving security and enforcement
market and promote technology • Improve the city
development.
• Financial transactions
http://www.bigdatafinance.tw/
index.php/non-finance/others/
CASE STUDY
Taobao and Tmall

Double 11 Shopping Festival
During the "double 11" , the activity page and the
ordering of goods are all determined by the algorithm.
In the past years double 11, which products could enter the Tmall's double 11 venue was determined
manually. The merchant reported to Tmall the 10 best-selling products and then selected them manually.
After the big data algorithm was introduced, the system judged whether these products were the most
popular explosives based on past sales of the registered products, subdivided industry trends, and
consumer demand, and selected the best products for consumers.
CASE STUDY
Baidu Index is a data sharing platform based on Baidu's massive Internet

users' behavior data.
COMPETITOR ANALYSIS
DEMOGRAPHIC
SOCIAL LISTENING
INDUSTRY LANDSCAPE
BAIDU INDEX
Baidu Index shows that the ofo's search index is lower than Mobike for
90 days.
CASE STUDY
COMPETITOR ANALYSIS
DEMOGRAPHIC
SOCIAL LISTENING
INDUSTRY LANDSCAPE
BAIDU INDEX
Baidu index shows the ranking of search index city of ofo and mobike.
Ofo has the highest search index in Shanghai when mobike has the
highest search index in ShenZhen.
CASE STUDY
COMPETITOR ANALYSIS
DEMOGRAPHIC
SOCIAL LISTENING
INDUSTRY LANDSCAPE
BAIDU INDEX
The trend chart of the media index shows the exposure of the keyword, and the
media index has no direct relationship with the search index, only the number of
news indexed by Baidu news channel.
CASE STUDY
COMPETITOR ANALYSIS
DEMOGRAPHIC
SOCIAL LISTENING
INDUSTRY LANDSCAPE
BAIDU INDEX
Baidu index shows the development trend of live broadcasting industry (based
on users' attention) and market competition of multiple products in the industry.
Social Media
WHY SOCIAL MEDIA
Chinese and Western customers use social media for different purposes
CHINESE USERS WESTERN USERS

• Instant messaging • Instant messaging
• Sharing daily life moments • Connecting with friends
• Looking for purchase • Entertainment
recommendations • Sharing daily life moments
• E-commerce (direct purchasing) • Following the latest news
• Following celebrities
• Following the latest news
• Participating in campaigns
• CRM
• Use an app - mini programs
WHY SOCIAL MEDIA
Social media helps your brand to reach mass audience base and establish brand image.
CRM BRANDING
Understand the need of local Control your brand image and

audience and build up deliver the right message to
connections the market
SALES PRODUCT TESTING

Boost the sales and ensure Test whether the products are
sustainable brand welcome, and make
development necessary adjustment
China’s New Retail
THE NEW 5
The new principles of the Chinese business world
NEW NEW NEW NEW NEW

FINANCE MANUFACTURING RETAIL TECHNOLOGY ENERGY
NEW RETAIL
Online Seamless Offline

world engagement world
Retail as Unified channel Gamification of

Entertainment experience retail experience
NEW RETAIL
POP-UP STORES
• Browsing, shopping tours and virtual fitting

rooms
• Personalization
• Advanced technologies like RFID (radio-
frequency identification) and AR.
• Payments and logistics
NEW RETAIL
Various industries covered:

• Makeups
• Furniture
• Hair salons
• Supermarkets
NEW RETAIL
NEW RETAIL
LST: RETAIL INTEGRATED
• LST (零售通) is designed to help local
neighbourhood convenience stores and mom-

and-pop shops to digitize their businesses.
• For example, It helps to:
• Measure the demographics and
purchasing behaviours of surrounding
customers;
• Predict and recommend the most in-
demand products.
NEW RETAIL
“SEE NOW, BUY NOW”

FASHION SHOWS
• The fashion show is broadcasted on TV as

well as streamed on major e-commerce
platforms.
• Viewers can buy what they see on the runway
directly within the app or on TV by shaking
their mobile devices.
• Consumers can upload photos of themselves
and “try on” outfits in virtual fitting rooms.
NEW RETAIL
GAMIFICATION
• Location-based AR game “Catch the Cat” (捉猫

猫) allows customers to earn discounts and
coupons
• Tmall’s cat mascot featured in thousands of
stores (like Starbucks and KFC) across China.
• Drive customers to physical retail stores via
their mobile device.
NEW RETAIL
DOUBLE 11
SHOPPING FESTIVAL 2017
• Total GMV: over US$ 25.3 billion (168.2 bn RMB).
• Total mobile GMV: about 90% of total GMV
• Orders processed by Alibaba Cloud per second at
peak: 325,000
• Total payment transactions processed by Alipay: over
48 billion
• Payment transactions processed by Alipay per second
at peak: 256,000
• Delivery orders processed by Cainiao: 812 million
UNBOUNDED RETAIL
JD’S UNBOUNDED RETAIL

• Unbounded Consumers • Unbounded Supply Chains
• Unbounded Scenarios • Unbounded Marketing
JD’s “Unbounded Retail” uses an efficient, precise

and safe database to unify the consumer insights
and experiences. For example, coupons released by
JD can be used in the brand’s online JD store,
WeChat stores, as well as offline stores. Consumers’
memberships and corresponding discounts can also
be converted freely online or offline.
UNBOUNDED RETAIL
55.31 TENCENT + JD + VIP

144 million 99.6 million
million Tencent gave the VIP entrance on its
WeChat Wallet interface, and JD will
also access VIP in the main interface
of its mobile phone APP main
interface and WeChat Shopping
entrance.
JD and VIP overlap users in 2017
UNBOUNDED RETAIL
56 million
243 million 289 million
Shopping class application overlapping users 2017
ASHLEY’S CONTACT
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and Chinese social media.
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How New Retail in

Forbes, SCMP, China Daily, Hong Kong

WeChat Expo, General Assembly, The APAC

SALES RETAIL TIME USERS

650 MILLION 8 7.180

7.18 TRILLION RMB 0

7.18 TRILLION RMB

AGE OF CHINESE ONLINE CONSUMERS IN 2016

17~36 years old

Source: China e-Business Research Center (CECRC)

1st tier cities 20.7%

Source: China e-Business Research Center (CECRC)

2017Q3Q4 Top 5 Categories Purchased by 2018Q1Q2 Estimated Top 5 Categories

CARD PAYMENT 75%

THIRD-PARTY PAYMENT 25%

Cards Cash Internet Mobile

Source: Better Than Cash Alliance (April 2017)

• The proportion of transaction in cash shrank to slightly over 1/3 in 2016

71% 72% 72% 73% 73%

Source: Better Than Cash Alliance (April 2017)

• High Internet and mobile phone usage

Source: CNNIC (August 2017)

RISE OF INTERNET AND 39.8% 54.5% Tenpay

SOCIAL FINANCE Source: iResearch

RISE OF INTERNET AND

Alipay WeChat Others

SOCIAL FINANCE 67.5%

Shanghai Beijing Zhengzhou Guangzhou Chongqing Xi’an Shenyang

© 2017 | Prepared by www.chozan.co

Technology Machine learning

Category Data mining

• E-commerce: Taobao/ Tmall • Content: “Letters every • E-commerce: Search/ User

© 2017 | Prepared by www.chozan.co

Games: Tencent’s first VR game “Shadow Tracker”

© 2017 | Prepared by www.chozan.co

Image registration: interest points/ fiducial markers/ optical flow

Games: “Pokemon Go”/ “Meng pet big bang”《萌宠⼤大爆炸》

Application Advertising media: McDonald's potato chip box advertising

Customers stand in front of the

© 2017 | Prepared by www.chozan.co

Taobao and Tmall

Baidu Index is a data sharing platform based on Baidu's massive Internet

CHINESE USERS WESTERN USERS

Understand the need of local Control your brand image and

SALES PRODUCT TESTING

The new principles of the Chinese business world

NEW NEW NEW NEW NEW

Online Seamless Offline

Retail as Unified channel Gamification of

• Browsing, shopping tours and virtual fitting

Various industries covered:

LST: RETAIL INTEGRATED

• LST (零售通) is designed to help local

neighbourhood convenience stores and mom-

“SEE NOW, BUY NOW”

• The fashion show is broadcasted on TV as

• Location-based AR game “Catch the Cat” (捉猫

JD’S UNBOUNDED RETAIL

JD’s “Unbounded Retail” uses an efficient, precise

55.31 TENCENT + JD + VIP

243 million 289 million

Shopping class application overlapping users 2017

OUR GROUP OF Free Resources