Hi everyone and welcome back to Happy Hour.Today we have a special guest in our studio. He is the APEC managing partner for consumer and retail sector for one of the world’s largest consulting firms. And he is also a global expert in the field of retail innovation and new retail. Most importantly, he's an old friend of Happy Hour and some of you may recognize his voice. Mr.Yuan, welcome to the studio.

Hi Lulu, thank you for inviting me to your studio.

By the way, I’ve recently seen you on TV, you were talking about new retail.

Yes, this is a program that we have co-produced with第一财经. This is to record the last 5 or 8 years of the new retail changes and innovation, what has happened in the past, and what we think are the challenges today and what will be the future of new retail in China.

Sounds thrilling, but first things first, we hear about new retail,新零售all the time now, so many articles and programs about it, but what exactly is new retail？How is it different from old retail, traditional retail？

Of course, probably a lot of people have heard about this term “new retail” when Jack Ma has raised about a few years ago. So what you have in the traditional retail is where you have a store and you basically then source a lot of products, put that in the store, and wait for a customer to come to your store and you sell the product. That was the old way a retail is done; but the new retail basically moves from the traditional offline store into an online marketplace where you see there are Tmall, Tabao and JD, but also now the traditional retailers or the new retailers are trying to combine these offline stores and the online capabilities to create that online and offline integrated store experience.

Even though we are not the experts, as consumers we lived through all these changes.

Absolutely, I think depending on how many boxes you have at your gate every day, you definitely a consumer of a new retail, a lot of people are.

But what are the driving forces of new retail? So what sort of things are behind it.

Quite a few things, of course consumers are changing today. So what we call this is a digitally enabled consumers. So people are able to just click on any of the apps so that you could have the product delivered to your home. The consumers today have lived basically through the times of the mobile phones watching all those different social media platforms.

So people are online all the time, so consumer change or the digitally enabled consumer is the first driving forces; but then the other driving forces include technology and also the platform players like Tmall, Amazon, they're driving also changes. But they are very importantly to accelerators, so one is really the Covid.

Actually, I’ve heard that like in the UK for example that I know quite well, that during covid, a lot of these stores they really accelerated their online strategy, switching completely online.

Absolutely. I was in fact there living in UK for 9 months when the covid started, so I was observing the streets of London essentially before covid, there was no delivery trucks anywhere you wouldn't be able to see it. but then after 3 or 4 months into the covid, you would see literally on the streets…

filled with快递小哥.

They have a little van, so a little more advanced, right？But that's just telling how fast it is the retailers are able to make the changes so that they are able to serve the needs of today's consumer. But even more importantly, one of the other accelerators that we can foresee is the 5G deployment.

Everything is faster.

So both from a digital experience perspective, but also from a computing power perspective. There's a lot of new things that you could almost imagine that will further accelerate the new retail innovation.

Like earlier on you were asking me if I got many delivery boxes at my door every day, I do actually, like many people.

I can imagine.

I buy almost everything online and I’ve seen new trends, new things popping up every day in new retail. So what are some of the key trends according to your expert opinion.

Right. So there's about like four or five major trends, and there's so many innovations I could only talk a few of the most important ones. The first probably important one is the so called O2O stores.

So online and offline integrate stores, but that still also have multiple different versions of it, so you probably have heard 盒马.So that's one of the first, right？So you could go to experience products in the store, but they could also deliver, in most time you ordered online and deliver to your door, but they were the first to set a standard to deliver within 30 minutes to your home.

In addition to that, you also have a number of other versions like每日优鲜. So this is something that they don't have a physical store, but you can order online, but they are having the product stored somewhere around 3 kilometers away from your home. And so once you order, they also can deliver to your home you know 30 to 45 minutes. It's called前置仓,so it's forward deployed stock, that model.

So instead of buying it from like supermarket...

Instead of having a physical store.

They just have a warehouse.

Yeah, they only have a warehouse sometimes we call it a dark store. So they have a dark store.

People don't go into it.

So that's serving you. But in a lot of the traditional supermarkets they are also going online because you can now order from 美团 and 饿了吗, these platforms. So this is essentially the offline store, the traditional offline store going online. So it's also called a O2O enabled store. That's all the first version, but then in addition to that, a lot of different players go provide本地生活,local service platforms.

Is it like美团,饿了吗?

Exactly. So this is 美团，饿了吗,and JD 京东。

Actually, in one of our TV programs we have interviewed the founder of 京东，达达,and hearing what they are thinking in terms of providing the services that's to connect and to enable all those small retailers in the residential area, in the community. So that's local service platform.

But two of the most important trends in that new retail, one is around the community group buy, you probably have heard about it.

社区团购,community group buy they really took off during the early days of covid, didn't they？Because people couldn't go out, so they had to send someone else.

So that was when they started. But in fact, when they really get attention and when it's really getting hot is everyone including these early startup companies but also include every internet companies like Alibaba invested heavily on实惠团, this is one of the startups, and Tencent and JD have invested heavily on 新盛优选. This is the one of the largest early community group buy player. But in addition to this, 美团and also 滴滴and everyone internet companies were investing in it.

That's usually what happens from a consumer's perspective, usually one big ecosystem or, one big player leads the trend and then all the other major players just jump to follow.

And this is true ,but also people ask why they are so interested in this particular model and why people are in fact, investing to send you a product like一毛钱的青菜,right?

So they give you huge discount, right？It's not a reasonable market price and this is also why the regulators today the government regulators are looking at it because this might indicate unfair market competitions, right？And it's also dangerous to disrupt the whole ecosystem where the traditional wholesale retail models of the grocery. The internet companies wanted to invest this is because they are not seeing it as a part of a grocery retail, it's a part of their traffic build for their internet business for the other businesses.

Traffic就是流量.

Exactly.

Traffic is everything now.

Exactly. But then in addition to this, the final most important form of new retail is social content customers. If you look at all these social media platforms, they are adding a transaction capabilities meaning they are adding a ecommerce capacity attached to the social media platforms.

This social content commerce, does it have something to do with influencers? 就是网红的那种influencer marketing?

Very much so, let's say it's getting very popular 抖音、快手、小视频， and also喜马拉雅 all the social media platforms if you pay attention, each of those platforms are attaching a e-commerce capability to it. So that would allow you to literally at any time, you want to buy something, you could immediately click and then make your order.

I think watching live streaming sessions from all these influencers and then just buy in their live session has become somewhat of a trend for a lot of people.

That is true. So this is a very recent trend over the last 2 years. The thing is typically in the traditional e-commerce platform, this is when you already are thinking of buy something you go on, right?

But in the social media platforms, those are the times you probably have not started thinking about buy certain things, but you might be listening to a certain program or you might be watching something and then you are inspired to buy certain things.

In the past, you would have to go to a separate platform to place your order. But now you could just do it in the same place.

While hearing for example li Jia qi saying Oh my god, buy it and you can just directly buy it.

Correct.

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