These aspects have clear benefits for consumers in terms of rapid delivery, cheaper prices, and convenience, but for companies the benefits are:
- Reaching into untapped markets: new ways of tapping into unpenetrated, offline retail sectors, like groceries and fresh produce, make it likely that retailers can seek growth by monetizing retail channels and pockets of growth that are currently part of unorganized retail markets.
- Much more detailed data on consumer behaviour: bringing consumer demand and ordering online creates a highly valuable flow of customer data that allows firms to understand demand more closely, and adapt product offerings to the market, and more efficiently manage inventory.
And initial data that compares order numbers at one leading new retail format store, Alibaba’s Hema, show a marked advantage compared to two established supermarket chains in China, indicating a strong response from consumers to new formats.
The transition to organized retail being driven by new retail formats that give consumers better experiences and promotes stronger competition is one aspect of China’s ongoing consumer story that has plenty of room to run in the coming years.
This transition, coupled with the strong underpinning outlook for fundamental demand drivers, will present excellent opportunities for investors in the companies that manage the infrastructure, i.e. IT platforms, and deliver the products, i.e. companies in consumer sectors, as China’s consumer story continues.