Touchless Retail: What the Rest of the World could learn from China’s new ways to shop

In our previous blog post of this series, we we looked at the unprecedented speed of digitalization in the Auto sector in China and how that might be ushering in the path to recovery for this industry. This blog discusses how Chinese retailers and brands brought to life a new way of shopping- that can be thought of as Touchless Retail.

Chinese consumers are known for the speed at which they adopt new digital technologies. Even before the lockdown, online ordering and payments, had already become the norm in most large cities.

With the COVID-19 crisis came a new imperative: one that further transformed shopping and buying habits. Pushed by necessity and bringing together innovations that were at various levels of maturity before the lockdown, Chinese retailers and brands brought to life a new way of shopping- that can be thought of as Touchless Retail. This means eliminating or making virtual all possible human touchpoints across the end-to-end customer journey from product selection to delivery at the doorstep:

• Search, evaluation and product selection is completed on a smartphone.
• The order to payment cycle is also completed on smartphone.
• Human intervention in order fulfillment and delivery are reduced to the minimum with the use of robotics and automation.
• Automated drop-off or pick-up stations installed in apartment buildings or local communities prevent human contact at the point of receipt.

Live streaming: The future of product selection?

A “Touchless Retail” customer journey starts with product search and evaluation. During the lockdown, retailers offer their customers innovative online shopping experiences on interactive live streaming platforms and community-based group buying applications.

Live streaming is one of the fastest-evolving e-commerce business models with the highest growth potential. Gross Merchandise Value (GMV) generated from online shopping website Taobao’s live streaming activities was 250 billion Chinese Yuan in 2019. This is forecast to double in 2020. Retailers are carrying out live streaming using mobile apps such as Douyin (Chinese TikTok) and Taobao to sell their products.

Live video broadcasts showcase product features, offer flash discounts and answer customers’ questions on the spot. Key opinion leaders (KOLs) or celebrities interact with the audience and act as powerful online traffic drivers. Customers can see how many people are placing orders on the platform in real time. Prices may fluctuate based on the number of buyers; generating excitement and adding to the gamification of the buying decision. Additionally, customers’ comments (good or bad) are shared live.

And it works! Live streaming shops in China increased by over 700% during the lockdown[1]. The power of showcasing a product and its usage scenarios more than doubled customer traffic on live streaming platforms. New brands in fashion, luxury and cosmetics were quick to ramp up their presence on this new sales channel.

Community-based WeChat offers new options

WeChat groups proved helpful to (partly) compensate for the loss of off-line sales during the crisis. For example, local apparel brand Yinman went from a 600-store physical operation down to just 50 stores but, with the help of its WeChat community, successfully attracted 650,000 new customers during the lockdown. This boosted the sales of the 50 remaining stores by 40% compared to 2019.

During the lockdown, some retailers adapted the concept of WeChat groups to local communities. They created groups to connect with people living in the same neighborhood. They then addressed this population as a single customer segment.  Adopting the practices of global brands, they used the idle time of their store sales staff to promote new products or flash deals and increase conversion. People could place orders directly in the chat groups and orders were delivered directly to the customers’ doors. This enabled these shops to maintain customer engagement and loyalty. They could also adapt their suppliers’ orders and their inventory to the incoming demand. Lastly, the ability to group the deliveries within the same neighborhood allowed them to increase service frequency and keep last-mile delivery costs low.

Cashless payment, of course…

Cashless payment had become a norm in China long before the recent crisis, and its further widespread adoption during the lockdown was on expected lines. Using banknotes was perceived as an infection risk. Together with new online shopping behaviors, cashless payment expanded its adoption rate amongst a more mature demographic. Research from AgeClub indicates that the 41-65-year old age group contributed to 21.2% of new users of live streaming apps. And for some apps, 50% of in-app purchases came from middle-aged and senior people.

Touchless delivery – a new imperative

The most innovative addition in the customer journey is touchless delivery. According to Meituan’s[2] “Touchless Delivery Research Report” published on 12 February, touchless delivery orders made up over 80% of total orders, and more than 66% of users had adopted touchless delivery for every order.

In response to the growing pressure on shipping capacity caused by the demand spike, Alibaba, JD, Meituan and Suning all launched driverless delivery programs to cover services in a 5km radius. JD Logistics was the first to complete a driverless delivery order during the quarantine, in Wuhan on 6 February. Soon, driverless deliveries accounted for over half of their deliveries to Wuhan’s hospitals. Following JD, other retailers adopted similar techniques, such as Suning, which partnered with Carrefour to launch a “same-city-delivery” service in more than 51 cities.

Although driverless delivery had been in operation in China before the crisis (for instance at Haidilao, China’s largest hotpot restaurant chain), its scope was limited. In the context of the lockdown, companies explored more mainstream scenarios that would minimize human interactions. In the Meituan contactless service example, a smart deployment system allocates a received order to a driver and simultaneously sends an idle robot to the pick-up point in the automated distribution center. The delivery robot then carries the item to the waiting zone, where the goods are handed over to a driver or a driverless car. In the process, all human interaction between picking, preparation and handover to shipment has been eliminated.

When it comes to the customer receiving goods, several innovative touchless practices have been implemented. Many communities allocated a room or open space as a large self-service station, generally near the building’s entrance, where delivery agents could drop the goods. End-customers, alerted by a message in the app, could come to pick-up the order, then confirm (still in the app) that the order was complete, close the transaction and release the delivery agent.

In some large compounds or buildings, this “cross-docking” process was difficult to manage due to the volume and frequency of deliveries. Several options were implemented to address this challenge, all inherited from logistics picking systems. For instance, light storage racks were installed at the community entrance, and Meituan even introduced refrigerated smart pick-up cabinets in the largest ones.

Is Touchless Retail here to stay?

Touchless Retail came together during testing times for businesses and customers alike but might very well be ushering in the future of retail.

The importance of live streaming in shopping in China seems a long-term trend. It existed before the crisis, but sharply increased with consumers having more idle time to spend on their smartphones. Its ability to combine the attraction of a well-chosen celebrity influencer (to generate traffic and stickiness), the confidence of your friends’ advice (to facilitate conversion) and the excitement of special offers popping-up in real-time (to boost basket value) makes it a uniquely efficient sales tool.

On the physical logistics side, some of the progress made with automated vehicles might falter in large cities as streets become busy again. But the development of warehouse automation for picking operations and the self-service collection cabinets could well become the norm. In fact, smart cabinets are continuing to spread among large cities and are now expanding to office buildings.

We have seen adoption patterns like this before.  In 2003, the SARS outbreak contributed to the surge of e-commerce adoption in China. For similar reasons, but on a much bigger scale and at a higher level of technology maturity, Touchless Retail might just become China’s new way to shop and pave the way for the rest of the world.

This article was written with the participation of Yongliang Yang, Shan Liu, Angie Zhang and Carol Wang.

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References

[1] TaoBao Livestreaming Monthly report, February 2020
[2] Meituan is a leading company in group-buying, often dubbed as the Yelp of China.