In 2024, where is the digitalization of China s retail industry going?

Text|Industrialists fight.

Edit|Pi Ye.

On the other side of the strong New Year's flavor, the Spring Festival just passed also provided an excellent sales "stage" for retail enterprises.

According to a big data from Dmall, from the beginning of 2024 to January 12, the overall search volume of alcohol increased by 48% month-on-month, and the sales volume of fresh products increased by more than 30% year-on-year.

Up to now, it can be said that retail enterprises, including supermarkets, are facing the challenge of the annual peak sales period. How can you stand out in this "race"? Or how to better complete the ** and then grasp the ** period? This is a question that all retail companies are trying to solve.

In fact, from a larger point of view, with the changes of China's first-class chain in the current era, such as the decentralized arrangement of people, goods and yards, coupled with the trend of diversification, customization, and time and space fragmentation of consumers at the level of consumer demand, the current challenges faced by retail enterprises not only come from the festival promotion, but also from daily life.

Digitalization is the fundamental way to address these challenges. But how to digitize, and what exactly is the truly effective digital transformation model for retail companies? Where is the node that exerts its value? In the past few years, what can be seen is the attempt and exploration of digitalization by a number of leading retail enterprises, which not only includes simple software access, but also the establishment of a series of retail middle platforms including CRM, OA, CDP, COP and so on.

However, despite this, there are still many problems that need to be solved urgently for the digitalization of China's retail industry, which are stuck in the "throat" of retail enterprises' growth like "fish bones".

Standing at the node in 2024, we try to take stock and observe, where is the digitalization of Chinese retail enterprises? What's next? And for the enterprises and service providers in the midst of it, is today's market an opportunity or a challenge?

1. The invisible "thorn" in a second-tier city, a small and medium-sized supermarket chain called "Hui Life", in the long-term development, more and more feel the revenue ceiling constraints brought by the traditional model, and decisively try to make a breakthrough in digital transformation.

But it's not an easy task.

The most obvious problem is that when the specific solution is implemented, due to its small scale, backward IT infrastructure and weak digital skills of employees, "Hui Life" is completely unable to effectively connect and make full use of the complex system provided by the digital service provider.

Although the solution is powerful, the high implementation and follow-up maintenance costs are beyond the budget of the "Hui Life" supermarket; Moreover, the internal business process of "Hui Life" is relatively simple, and the standardized system of the solution is not customized for its special needs, resulting in some functional redundancy, but the core pain points have not been solved.

In addition, the employees of "Hui Life" have a low degree of acceptance of new technologies, and it is difficult to master new digital tools in a short period of time, so that the utilization rate of the new system is not high after it is launched, and the effect is not ideal.

The end result is that while the service provider offers an industry-leading solution, it is not the best solution for a small retail business like Hui Life. They need digital services that are more relevant to their realities, easy to implement, and cost-effective.

One status quo is that the development of retail digitalization has now been deeply rooted in the bone marrow, and many digital service providers have provided solutions that cover all aspects from chain optimization, omni-channel integration to customer relationship management.

For example, in the process of refined marketing, SaaS service providers such as Youzan and Weimob help enterprises collect, integrate and analyze member data by providing mini programs**, membership management systems and marketing automation tools to achieve precision marketing and service personalization.

For example, in the CRM stage, service providers such as SalesEasy can provide enterprises with more comprehensive CRM solutions. Achieve all-round management of customer relationships, from lead generation, sales follow-up, contract management to after-sales service, and comprehensively improve the sales efficiency and customer satisfaction of enterprises.

Another example is a company like Tencent Qidian, which can accurately grasp customer needs through data analysis capabilities and provide personalized marketing plans for enterprises. It is connected with various enterprise application systems such as CRM and ERP to form a complete enterprise digital ecosystem to help enterprises improve work efficiency and reduce operating costs.

From the current point of view, it can be seen that many digital service providers are constantly trying to solve the problems of digital transformation of the retail industry, and solve special problems in all aspects of retail digitalization (marketing customer acquisition, chain distribution, local retail, etc.). However, as shown in the previous case, not all retail digital solutions on the market today meet the actual needs of retail manufacturers, and not all retail manufacturers can find their own solutions.

According to a global survey conducted by IDC, on average, less than half (about 40%-50%) of the investments invested in digital transformation translate into visible business outcomes. This means that a large portion of digital investments do not immediately yield the desired returns.

The same is true for retail. From the perspective of the market structure of retail information hardware, computer network equipment accounts for the heaviest proportion, accounting for 4567%, followed by POS system equipment, accounting for 1192%, RFID system equipment accounted for 1033%, and other hardware products accounted for 3208%。From the perspective of the retail information software market, the resource management ERP system accounts for the heaviest proportion, accounting for 4427%, followed by ** chain management (SCM) accounting for 1578%, and customer relationship management (CRM) accounted for 1418%, and other software accounted for 2577%。

*: Zhiyan Consulting.

The high proportion reflects the high demand, and the transformation of retail enterprises requires a lot of expenditure from the beginning. As a result, retail companies are often confused and uncertain when choosing digital solutions.

These problems have slowly become an imperceptible "thorn" for retail enterprises and digital manufacturers. Behind it, the bigger inducement comes from the complexity of the retail industry.

That is, different retail enterprises have different business models, scales and demand levels, which makes it difficult for a "one-size-fits-all" digital solution to emerge in the market. That is, the digitalization of the retail industry is not as simple as buying a few software and hardware from offline to online. Rather, it is necessary to "prescribe the right medicine".

2. Retail digitalization, "irreproducible" has always been a very complex industry.

The retail industry includes numerous sub-sectors, such as apparel, electronics, food, cosmetics, etc., each with its own specific product characteristics, chain management, sales strategies, and customer experience. This diversification of tracks and links requires retail solutions to be flexible enough to adapt to the specific needs of different sectors.

In addition, in addition to diversity, there are also regional characteristics. That is, there may be significant differences in consumer needs, consumption habits and purchasing behaviors in different regions. As a result, retail solutions need to take into account regional differences and be able to adapt to the specific market conditions of different regions.

In addition to these environmental factors, in the current digital age, retail is destined to be a fast-changing industry, with market needs and consumer behavior changing rapidly. As a result, retail solutions need to be real-time and able to respond quickly to market changes and changes in consumer demand.

Coupled with the fact that modern consumers are increasingly focused on personalized needs and experiences, they want customized products and services. Retail solutions need to be personalized to meet the specific needs of consumers.

This also makes the problems faced by retail enterprises in digital transformation more complex.

The digitalization of any industry is inseparable from physical equipment and technical facilities. In the retail sector, POS (point-of-sale) systems, self-checkout machines, smart shelves, RFID tags and readers, ESLs, mobile payment terminals, IoT devices, etc., are the infrastructure for retail digitalization. However, unlike other industries, problems such as high hardware investment costs, difficult maintenance, and data security risks in the retail industry are becoming more and more obvious and complex.

In order to better engage with consumers, the transformation and upgrading of online and offline retail channels is also a necessary step. For example, through physical stores, official **, e-commerce platforms, social **, self-owned apps, mini programs and other channels to reach consumers.

In this process, enterprises need to integrate scattered data** to improve cross-channel marketing effectiveness and customer management efficiency. However, it is difficult to connect data between multiple systems, and online and offline data integration and precision marketing have always been a problem. As a result, multi-channel services are not consistent and customer experience is uneven.

In this process, retail manufacturers need to integrate scattered data based on ERP, CRM and other management systems to improve cross-channel marketing effectiveness and customer management efficiency on the premise of protecting customer privacy, which is not an easy task.

Membership management is also a crucial step in the digital transformation of retail. At present, enterprises mainly collect and analyze consumer data through CRM systems, and implement personalized marketing and services. However, in this process, the online of offline members, the opening of the online and offline membership management system, and the distribution of benefits after the opening of the online and offline membership system all need to be solved urgently.

From the current point of view, behind many successful cases of membership management and precision marketing, there are still "harassing" marketing and big data killing, which continue to plague consumers and retail enterprises. For retail businesses, not only do they need high-quality user data, but they also need to protect privacy, while pinpointing customer needs and providing personalized services and offers. These requirements make it difficult for companies to find the right solution.

There is also online and offline distribution. The combination of online and offline means ensuring that products flow smoothly and respond quickly to market demand, whether in physical stores or on e-commerce platforms. The pain points are the difficulties of inventory sharing and real-time synchronization, the optimization of logistics and distribution networks, the efficiency and accuracy of order processing, and how to balance online and offline** strategies to avoid channel conflicts.

In fact, behind these problems, they are inseparable from the ** chain. An efficient chain needs to be based on business relationship management, order processing system, warehouse management system (WMS), transportation management system (TMS), demand tools, real-time inventory monitoring and other software to open up and connect each node, so that the flow of information, business flow, and goods is unimpeded. But in the retail industry, due to the complexity of the fields involved, the ** chain is more complex. And for the retail industry, its digital penetration rate is greatly related to the digital level of each industry, which also means that the digital model of the retail industry's ** chain is more complex and three-dimensional.

In addition, in addition to large enterprises, there are also a number of small and medium-sized enterprises, for which most of them will face problems such as low data quality and lack of effective data analysis tools due to low payment ability, and it is more difficult to collect and provide valuable data for statistics.

The series of the above problems has also jointly catalyzed the modern retail chain model of the new "people, goods and yards" to be difficult to shape.

One interpretation of the digital people, goods and yards is that it means adjusting the product structure, optimizing the shopping environment, and providing a personalized consumer experience according to consumer behavior data. However, the difficulty of data collection and integration makes it impossible for enterprises to accurately grasp the dynamic needs of consumers through BI (business intelligence system), flexibly adjust the layout and function of "field", and quickly respond to market changes to achieve efficient matching of "people", "goods" and "fields".

The underlying foundation determines the superstructure, and many problems in the retail industry have also caused it to become "timid" when new technologies come.

In the past year, the trend of large-scale model technology has swept the world. All fields want to merge with it and redo the track. However, the implementation of a new technology also needs to be built on the basis of digitalization. At present, in the field of customer service and marketing in the retail industry, various manufacturers are constantly making efforts, but for the time being, it has not brought about real productivity changes.

A set of data shows that the speed of implementation of large models in various industries varies significantly, and the two major industries with the most active investment budgets are energy and finance. The main reason is that these two industries have strong data, computing power, and AI foundations. The retail industry, as the most intensive consumer track, did not make the list.

In general, the digitalization of the retail industry has many similarities with many industries, that is, the collection of data, the unpredictable cost return, and the integration between systems, etc., but it is also more difficult than other industries, that is, in addition to the similar difficulties, the greater challenge lies in how to combine the characteristics of the industry to create solutions that not only meet the specificity of business processes but also have efficient operation capabilities, while also focusing on the actual experience and data security of consumers, rather than simply applying a general technical architecture.

It doesn't need a generic answer, but a specific answer.

3. The "universal" retail digital solution, pulling out the "thorn" Starbucks, almost every bustling street, this company will appear. According to the data, up to now, Starbucks has a total of 38,038 stores worldwide, with more than 20,000 international stores, and a net new 816 new stores in the fourth quarter. Among them, there were 326 net new stores in China in the quarter.

With such a large scale, the inherent business mode of the traditional retail industry does not match the rapidly changing market environment and consumer behavior, and this gap needs to be bridged through digital means to achieve efficient operation and sustainable growth.

Starbucks has launched a "Starbucks Rewards Program" to encourage users to sign up and connect to a mobile app. Through this platform, Starbucks is not only able to integrate and analyze member spending data, but also push customized offers and services based on users' preferences. At the same time, a strict privacy policy ensures the security of member information and avoids excessive marketing. So as to do a good job in membership management.

In terms of channels, Starbucks online** and offline stores cooperate with each other, allowing users to purchase goods or redeem points on any channel, achieving an O2O (online and offline integration) model. For example, the function of pre-ordering and picking up in store breaks the service boundary of traditional stores and enhances customer stickiness.

At the same time, the introduction of advanced chain management system to monitor inventory, demand and optimize the process in real time. In addition, combined with big data analysis, the raw material procurement and logistics are finely managed, so as to reduce the impact of uncertainties and ensure the stable and efficient operation of the first chain.

Starbucks uses data analytics to adjust product mix and store layouts to suit consumer preferences at different time periods and geographies. The application of intelligent POS system and Internet of Things technology has also greatly improved the work efficiency of employees, made the service more personalized and flexible, and reconstructed the logic of people, goods and yards.

It can be said that with the help of digital tools and strategies, Starbucks has effectively solved the problems of high cost of offline store transformation, complex personnel training, and online and offline collaboration, and successfully achieved a comprehensive digital transformation from a single physical retail to a seamless connection between online and offline.

In this case, the digital transformation of retail is not a simple integration of online and offline, but a comprehensive upgrade of the entire business process, operating model and profit model.

From the Starbucks case, it is not difficult to see that retail digitalization is different from the past, with new requirements, and for digital service providers, they also need to make changes and seize new opportunities.

Therefore, for digital service providers, it is necessary to provide a full range of services and products.

The first step is to build a close partnership with retail companies to tailor digital solutions to suit them by gaining a deep understanding of their business model, operational needs, and scale. This can not only meet the overall needs of retail enterprises, but also avoid unnecessary waste of resources.

Secondly, in order to make it easier for retail enterprises to implement digital solutions, service providers can provide modular and customizable solutions, so that enterprises can select and adjust the corresponding functional modules according to their own needs, which can not only reduce the difficulty of enterprise implementation, but also improve the adaptability of the solution, taking Tencent Qidian, Antelope and Jingdong U+ as examples, in the specific service process, its service model can now be modularized and customized according to the needs of enterprises to help them build a complete digital link.

In addition, enterprises may encounter technical, personnel, and management difficulties in the process of implementing digital solutions. Digital service providers should provide enterprises with a full range of training and support services to help them successfully navigate the transition period.

In order to ensure that digital solutions can bring real benefits to the enterprise, service providers should advocate a result-oriented implementation strategy to ensure that they can create value for the enterprise through continuous optimization of the solution.

In short, the future retail digital solution should have the characteristics of personalization, intelligence, scenario-based, socialization and ecology to meet the diverse needs of consumers and help enterprises achieve sustainable development. Against this backdrop, digital service providers need to innovate and offer more competitive products and services to adapt to market changes.

Only in this way can the products of digital service providers be more "versatile", and the "balance between supply and demand" can be achieved between retail enterprises and digital service providers, and the "thorn" of digital transformation of the retail industry can be pulled.

Now it is not simply a problem of marketing, nor is it simply a problem of private domain, but a whole process of retail design from CDP (data middle platform) to BA (text analysis) and MA (marketing automation), which includes consulting, but also from data to behavior driven. A marketing business leader told us.

Nowadays, it is not even too much to say that the digital transformation of retail enterprises has become a core element that determines the "life and death" of enterprises, especially for large retail enterprises.

A set of data shows that as of September 2022, the growth rate of online shopping of consumer goods in China is 61%, of which 64% of consumers choose to shop online, 36% choose offline shopping, and 91% choose to shop online and offline at the same time.

In other words, if enterprises cannot carry out digital transformation smoothly and effectively integrate online and offline resources, then they are likely to be eliminated from the market.

In this day and age, consumer spending habits have fundamentally changed. It is more and more inclined to shopping, and for offline physical stores, it is expected to be more convenient and personalized services. If businesses can't meet these needs, they're likely to lose consumers and face an existential crisis.

Digital transformation isn't just about moving from offline to online, or vice versa. It refers to how enterprises can better meet the needs of consumers by using new technologies and new models to achieve business upgrading in the face of fierce market competition. In this process, enterprises need to break the original business model and deeply integrate online and offline channels to achieve global marketing.

The digital transformation of retail enterprises in China is a major challenge to the survival and development of enterprises. Only those companies that can actively respond, be good at innovation, and have the courage to reform can stand out in this transformation and achieve sustainable development. For service providers, retail digitalization is also a difficult but promising industry track, and service providers with full-link data-driven and performance-driven service capabilities will also become the ultimate benefits and win-win winners.

Retail, from the ancient merchant money to the modern digital "people and goods yard", with the blessing of software and AI, is ushering in a new era of change.