China is showing the way for the future of physical stores The "new retail" concept is shaping the market in more ways than one

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Vision is important.

It no secret that in the retail world shops are closing. Physical stores are in decline and because of poor sales, they are forced to close. Such moves were done by giants like Walmart and Macy’s in the United States and by Marks and Spencer in the UK. Also another big chain of shops Toys “R” Us is closing for good.

The elephant in the room in this case is e-commerce. For the US e-commerce accounted for 13% of total 2017 retail transactions, mainly spurred by Amazon. But the comparison with China is mind blowing. The answer came from Alibaba with its “Singles Day” making $25.3BN in 24 hours.

But even though these incredible numbers would point to an expansion in the online market, Chinese companies are also investing the offline sector. Giant Xiaomi opened in 2017 more than 200 stores in China and another 130 stores overseas. The CEO of Xiaomi used a term for this strategy as “new retail”.

The term was coined by founder of Alibaba Jack Ma in 2016 in a letter to shareholders: “Pure e-commerce will be reduced to a traditional business and replaced by the concept of new retail -the integration of online, offline, logistics and data across a single value-chain.”

The company named Hema which uses Alibaba technology and operates in the fresh food supermarkets sector is the best example of the above put into application. Meaning that customers can search for product information in store by scanning a product code, place order for home delivery (within a 3 km radius), make the payment and even cook the fresh food in store all via the Hema app.

Of course analytics of data is the core of this philosophy. Hema knows everything that it needs about its customers like phone numbers, payment and purchase history, adresses etc. Company reports show that they are making three to five times the sales of other supermarkets. To this end Hema is one of the best example of the new retail concept of driving customers to buy via the internet and also have the in-store experience.

Alibaba is not the only company in China that makes new investments and strategies. JD.com which is the second biggest e-commerce company in the country opened in 2018 the first offline high-tech supermarket 7Fresh in Beijing. Also Tencent has dabbled with investments in the sector and opened an unmanned shop, We Life, in January 2018.

The concept of new retail also extends to clothing and also gaming for winning prizes both offline and online in various shops such as KFC or Starbucks. For example the game Pokémon Go gave such prizes and users could redeem them at their leisure in specific shops.

The physical store is still ever present and it is not a question if it will disappear but rather how it will be integrated in technology and how the vision of each company utilizes both the online and offline aspect.

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