Regarding the future development trend of retail, the dispute among various concepts is in full swing. From the experience of BESTORE as a practitioner, whether it is “new retail”, “borderless retail” or “smart retail”, they all represent the general trend of fifth retail revolution (the former four ones are department stores, supermarkets, chain stores and e-commerce online). For retail companies, what we need to think about is not the correctness of concept and orientation, but what kind of changes you have to make in the future in order to achieve an improvement in retail efficiency, so that you can fight against the adversity.
Why do we need innovation in retail? In fact, we can find the answers in the state level: The report of the 19th National Congress of the Communist Party of China pointed out: “What we now face is the contradiction between unbalanced and inadequate development and the people’s ever-growing needs for a better life.” Liu He, the director of the Office of the Central Leading Group on Financial and Economic Affairs also pointed out at the 2018 World Economic Forum Annual Meeting that “China’s economy has been transitioning from a phase of rapid growth to one of high-quality development; that is, China needs to put more emphasis on structural improvement rather than quantity expansion. Our focus needs to change from ‘Is there enough?’ to ‘Is it good enough?’”. This means that if we describe the demand for consumption upgrades with the language of new retail, it might be like: first, returning to take “people” as the core by understanding and satisfying the higher demands of consumers; second, improving the efficiency by transformation from quantity to quality.
We can just take e-commerce business as an example. Around 2013, the e-commerce platforms still keep benefiting from the PVs. As long as the sources of PVs are ensured, the sales can grow at a very fast speed. In 2012, BESTORE just started its e-commerce business. The revenue of that year reached RMB 12 million yuan, but in 2017, it has accomplished nearly 300 times of rapid growth within five years, which was close to the annual sales BESTORE realized in brick-and-mortar stores for ten years. This is the growth rate that is impossible to achieve by traditional retail approaches. When BESTORE in 2012 decided to spare no pains to invest in the development of online e-commerce, many similar retail enterprises were still waiting to see or discussing whether to transform the businesses. Today, the gap has been clearly enlarged, and even if you spend RMB one billion yuan today in e-commerce, it is impossible recreate the miracle of BESTORE.
To this day, as “When God closes the door for you, he will be sure to open a new window”, the era of benefiting from PVs has been over, but the window of new retail will usher into the space of boundless imagination. The trend of consumption upgrading is becoming a new market orientation, and the daily consumption field is preparing for huge opportunities for business change.
In terms of population group, the digital generation born in the 1980s and 1990s play the main role in the current round of consumption upgrades. Compared with the traditional generation, this group of people has much stronger consumer confidence, broader vision and more mature consumption concepts; as for what kinds of products might get opportunities, the consumption upgrades in the next decade will witness the focus on areas such as food, clothing, culture and entertainment that can enhance happiness. And how do we apply the innovative thinking and tools of retail? I was entrusted by the company to share with the students in the CEIBS new retail camp, which perhaps can give some inspiration to everyone here.
Zhao Gang, Senior Vice President of BESTORE, shared in the new retail camp in Wuhan
“Four things that BESTORE has focused on in the past 12 years”
Since its founding 12 years ago, BESTORE has kept doing four things.
Insight into Consumers
Before the troops move, fodder and provisions go first. At the early stage of BESTORE’s establishment, insight into consumer is a “granary” that empowers us to win. It has not changed until today.
In 2006, Chairman Yang Hongchun opened the first store in the most prosperous Wuhan Plaza business district in Wuhan, with only an area of over 30 square meters by merely selling around 60 kinds of snacks. However, the attentiveness behind such a small store is not small: he led a team to the business district and conducted an investigation for over two months just in order to understand the varieties and tastes that consumers like most. On the other hand, he also travelled around the country to discover and select the products for sale. He has been to hundreds of factories so as to find out how the popular snacks are manufactured. The flight tickets alone cost RMB 100,000 yuan, which is equivalent to one year’s store rent.
Today, 1,500 kinds of snacks sold in the BESTORE are all developed according to the accurate member images obtained from consumers’ big data and prediction of different consumer needs. It can be said that behind every snack, the insights into consumers and research have never been abandoned, but the tools have merely changed. From the traditional research method of manual sampling interview to the application platforms consisting consumers’ big data, higher efficiency and more precise digital operations have been achieved.
Establishment of own product standards and R&D capabilities
When the products gradually become more and more, it is necessary to establish our own product standards and R&D capabilities, which can help the company to position itself well. This is the second thing that BESTORE insists on doing.
At present, BESTORE boasts product R&D and quality control teams of more than 200 people. We are able to research and develop new products every year at the speed like “cell renewal”, formulate physical & chemical and sensory indicators for each snack, and deliver them to the critically evaluated factories for customized production.
Building a whole-process quality control system
In March, 2018, the revolution of quality has been noted in Report on the Work of the Government. Building a whole-process control system that is based on the brand of BESTORE and rooted in quality is the third thing we are committed to.
Judging whether a nut is of good taste or not might be a momentary experience for the consumers, but for BESTORE, it needs to be ensured through dozens of quality control checks.
BESTORE is trying to embed the traceability system in batches during the product packaging process. Taking nuts as an example, by merely scanning the identification code on the package can you not only trace the source of the raw materials, but also the temperature and rain conditions in the growing season. Even the machines and equipment that produce it can be traced back along with operators. Each package of nuts has its own “archive”, and the database is gradually constructed starting from the source control in order to ensure the quality and taste.
Self-built omni-channel terminals and supply chain system
The digital generation forms a brand new community, which manifests much more interaction and participation than their elder generation. The fourth priority of BESTORE is to adhere to the self-built omni-channel terminals and supply chain system, organically integrating the production end and the consumer end so as to firmly ensure the customer experience and their loyalty.
Starting from traditional stores, to e-commerce, social platforms and the layout O2O..., BESTORE has built the most complete omni-channel systems within the snacks industry step by step, which can provide a rich applicable scenarios for new retail. The efficient logistics and customer service systems are constantly bringing better shopping experience to our consumers.
It is worth mentioning that as early as 2008, BESTORE embarked on its information-oriented layout. Chairman Yang Hongchun just invested RMB 10 million yuan (with the profit in that year being only RMB 3 million yuan) to launch the information management system of stores. With the support of powerful information system, it is possible to efficiently manage inventory, dispatch intelligent logistics, and integrate various membership systems, which can even support the exponential growth of BESTORE in the future.
For example, Alibaba has held its first application of Alipay Offline Business at a national scale in March, 2014, which is the predecessor of Alipay’s Double 12 Shopping Festival nowadays. At that time, Alipay had 50 strategic partners throughout the country, and BESTORE had ranked top in terms of transaction amount just upon its participation. This achievement was just resulted from the strong omni-channel information foundation laid in the earlier stage.
From “goods-shops-consumers” to “consumers- goods-shops”
The industry has concluded that the new retail redefines consumers, goods, and shops, with consumers becoming the center.
Indeed, the traditional supply chain system is based on “goods-shops-consumers”, where you need to have products at first, then you sell them, and you conclude with consumer data research after sales. This is the approach to deal with the consumers from traditional generation.
However, as the bonus period brought by PVs has been over, the consumer sector needs to focus on the management of customers rather than PVs control. Through digitalization and customer experience, the whole process is forced to transform and the customer-driven business operation model is thus reshaped. Therefore, the future model should be “consumer-goods-shops”: you need to consider whom the products are sold to in the first place, then subdivide the consumption scenarios, produce different goods according to different scenarios, and determine sales channels according to community’s consumption habits.
During this reform, BESTORE has made some successful attempts. For example, we have crawled more than 2 million customer reviews every month, and use feedback data to develop new products by understanding consumer behaviors and preferences. The afternoon tea series and pregnant women’s snacks just come into being in this way. However, our exploration is far from enough. In terms of this respect, we are still learning from peers and cross-industry counterparts.
Operation guided by customers’ voices
In 2017, we focused on one thing, that is, to satisfy our customers.
Last year, BESTORE achieved more than 350 million visitors through all channels, with an average of nearly one million visits or UVs per day (online is measured by “UV”, while offline is by “person-time”). Based on massive visitor flow, nearly 100 million orders were thus generated throughout the year. The total customer volume data reached 22.25 million, while the entire network reviews data totaled 21.99 million, including complaints, consultations, comments from major e-commerce platforms, and all the information and speech published on social platforms like Weibo and forums.
For us, such information is not only for statistics, but also the key data for important analysis and driving forces of business operations.
Two years ago, we developed a management system for whole-process customer experience, hoping to extract valuable information from customer feedbacks as an opportunity to improve products and services. Based on this data, we have built an internal “customer voice” system. One of the application scenarios is to determine the responsibilities through customer complaints, find and analyze the root cause, and establish a closed-loop management system from discovery of “value from complaints” to the analysis and satisfactory settlement.
For example, in 2017, we dug more than 10 million customer review data, and made targeted improvements to the packaging specifications of 15 SKUs and the taste of 10 SKUs. After the improvement, 18 SKUs witnessed improvement in sales volume, with the average growth rate at 62%. This data shows that improving the product through the customer’s voice is a very valuable solution with a success rate of over 80%.
At present, we have applied such operating models and processes to various sectors such as logistics, services, and marketing activities. We believe that it will produce immeasurable value.
“Six major abilities in the new retail”
On March 29, the Tmall FMCG Division issued a signing board for the “New Retail Strategic Cooperation Pioneer” to BESTORE at the New Retail Strategy Communication Meeting.
The industry has hailed BESTORE as “new retail pioneer”. Qian Hao, a well-known Internet analyst, has interpreted that if we take a look at the competitive landscape of the snack market from new retail’s definition, BESTORE is the only brand that has achieved collaboration between online and offline multi-channels.
Just make a parody of what Issac Newton once said: “BESTORE seems to have been only like a boy playing on the seashore, and diverting himself in now and then finding a smoother pebble or a prettier shell than ordinary, whilst the great ocean of new retail lay all undiscovered before him.” The sails that help us to explore in this ocean consists of six abilities that the group has been building.
Ability 1: Integration ability of membership from omni-channels
BESTORE boasts diversified channels, including platform e-commerce, social e-commerce and offline stores. Therefore, how to integrate the information from multi-channels becomes a huge challenge. Since last year, we have established an in-depth cooperation with Alibaba to integrate all the members’ information, and hope to find more accurate data from the track of consumers’ behaviors by restoring the consumption habits and preferences of the customer groups.
We once thought that we already had enough understanding of consumer preferences, but it was not enough. Our data is confined in the private domain, meaning that our speculation on consumer preferences is merely based on the product data of our own stores, but the consumer’s buying behavior also can be manifested in a wider range of scenarios we are not able to cover. It is easy to draw a hasty conclusion if we only base on our own data. Therefore, when we compare private data in our domain with the data of entire network on Alibaba’s data application platform, there are many unexpected new findings showing up.
Ability 2: Operation ability of single digitalized stores
While the omni-channels come into the full play, there is still room to explore for the operation of single stores. Regarding the digital operation of single stores, I can offer you an example. We are now cooperating with several large platforms to create new applications, among which there is one called “urban heat map”, which is currently on trials by our single stores. This application can import data from the data bank into our CRM system, and then quickly form a consumer heat map by scanning the effective passenger flow within a three-kilometer area around the targeted store as the center.
This new application will bring forth a lot of changes, such as reducing the cost of opening a store. In the past, the choice of where to open a store was mainly based on manual evaluation, which mostly based on the judgment of experience. In order to summarize the rules, we tried to arrange a data research team to do behavior analysis by following an excellent developer who we found to have been awarded every year and boasted a success rate of over 99% in running stores. We hoped that we can achieve some sort of standards and fixed process, but after one year’s effort, it seemed to be almost in vain.
Later on, we tried to run the heat map, and then the problem was solved: we found that the flow of people through data matching was similar to the movement of the best developer, and over 80% of their choices of the site were the same.
Based on the new application, we can also judge the consumers’ movement. For example, a store that maintains about 6,000 members throughout the year can use data banking to find the locations as well as the roadmap of the behaviors of these 6,000 members. Therefore, the store can understand when they will pass by the store in a large amount, which can help the store to determine the best time for promotion and the visiting rate to the store can be thus further increased.
There are many possibilities of the application in the future, such as analyzing the purchase time and pushing the on-demand promotion information.
The purchase of snacks is often an impulsive and random behavior. Therefore, how precision marketing win the heart of the consumers becomes a challenge that needs to be overcome.
Ability 3: Restructure of the retail supply chain system
The aforementioned ideal scenario for the new retail needs to be achieved by reconfiguring the supply chain of products. The core idea of refactoring is to segment the scenarios based on the customers’ needs, then predict the demand, develop the products, integrate the supply chain, and finally deliver and share at the customer level.
Since 2014, we have cooperated with IBM and invested nearly RMB 100 million yuan in background development of big data every year. More than 10 systems, over 30 online and offline platforms, and omni-channel trading information as well as customer data have been integrated into this “super brain”, which helps BESTORE to connect all the links and channels on the supply chain and integrate them into an organic integrity for information exchange.
In addition, we are constantly upgrading hard power. Our newly rebuilt logistics factory “BESTORE No. 1” has been able to achieve automatic distribution, and its second phase will continue to be built and perfected. “BESTORE No. 1” can guarantee accurate delivery and automatic replenishment for 3,000 stores.
In the field of B2C, we are also investing in automatic supply and intelligent systems, which are more complex and challenging. The sales and promotion plan of offline stores is relatively stable, so the accuracy of sales prediction can be high, while the online stores are quite different scenarios due to the much intense and random fluctuations of data. For example, on the International Women’s Day in 2018, we cooperated with Tmall for the promotion. The sales data exceed 300% of what we have forecasted before, which will definitely lead to the problems in the background commodity inventory and stocking, allocation of logistics resource, as well as online consulting service. This uncertainty continues to push us to work for better processes and operations.
Ability 4: Ability to operate with big data
In the new retail era, operational challenges can be categorized under the big data challenges. At present, the server of BESTORE will accumulate more than 1 TB of new data per month, including data of service review, product review, social media, geographical location, mobile application, event registration information, and store transaction information, all contributing to a huge data source.
BESTORE intends to be a technological company that is good at dealing with big data. We build application models based on data sources and continuously develop applications for new scenarios. What we are doing this year is data visualization, which enables automatic visualization of data at each level in the data cockpit, thus reducing the error rate of manual statistics, improving work efficiency, and saving time for the management. Therefore, they will pay more attention to in-depth insight and analysis of the application rather than statistics itself. Through applications of big data, we hope that the background system can achieve higher degree of automation and promote accurate management.
Ability 5: Ability to apply artificial intelligence
The upgrade of new retail’s application scenarios is inseparable from intelligent decision-making and services. Artificial intelligence can reduce retail management experience costs and labor costs. In this year, BESTORE will continue to put the self-service snack counters customized for the office buildings on trial, and understand consumption demands in the office scenario through consumption data from test; thus the data sent back can help to realize the product development based on scenarios. At the same time, we will increase the application of operation and development of intelligent customer service systems to achieve real self-service operation in the future, thus improving efficiency and accuracy of answering customers’ consultations.
Ability 6: Customer-centered organizational structure
The challenge from the organization is actually the biggest challenge in retail innovation: how can it become a customer-centered organization? New technologies, new instruments, and new methods will inevitably require huge changes in the operation of the old organizational system. BESTORE is transforming into a customer-oriented decision-making mechanism. We have to spare no effort to meet with what customers think is good and necessary.
We have been constantly challenging ourselves in the evolution of organizational change, from the shopkeeper’s contracting system to the amoeba model, from the independent self-organizing operation to the group mode of small front desk and large background. The top management has been visiting excellent enterprises for exchanges in the past years, such as the HSTYLE’s group system, Haidilao’s employee authorization mechanism, Haier’s integrating order with personnel, Huawei’s small front-office business system, and the Kidswant’s member business model. “Customer orientation and activated organization” are the most important cores of organizational change. New retail will re-create new scenarios, while the new ones will surely bring about new organizational changes. This is a continuous and dynamic change. We deeply understand that creating a flexible and mobile organization with customers’ demands as the orientation plays the most crucial part.
This is why we have built a customer voice system. When customers think that our products and services are not up to their expectations, it is like a starting gun going off for us, meaning all organizations need to move with the demand and do beyond the expectations of customers. This is how does BESTORE think about the future blueprint about the organization.
The new retail camp, co-sponsored by CEIBS Business Review and Link2e, focuses on annual growth projects for pan-retail innovation practices. Leading business schools, best industry practitioners, new retail experts, and top investment institutions will work together.
Part of the member enterprises in the camp
As a new retail pioneer in the snacks industry, it has created an omni-channel smart store with IBM. It wins the Award of China Best Business Model in the 21st Century.
TCL Kuyou Technology
As TCL’s innovative business, it is the only customer-centered new retail company in the consumer electronics industry that has achieved integration of four networks.
It is a century-old brand and also a new retail pioneer. Its customized glutinous rice dumpling has been selected into the 20 new retail classic cases in AliResearch; its smart restaurant is reputed as the best practice case of Koubei in the year.
It’s the largest retail chain for high-end watches in China, creating a new digitalized watch customer management model with consumers as the core.
It’s the largest brand for children’s story in China. On March 7, 2018, it completed B+ round of financing with RMB 156 million yuan.
It is an Internet-hit restaurant brand that implements differentiate Blue Ocean idea. The founder Liu Feng won the “Innovation Leadership Award for 2017 Chinese Food and Beverage Innovation TOP100”
It has helped the Fortune Global 500 such as L’Oreal Group to carry out digital marketing and won the Silver Award in the 2017 Greater China Agency of the Year for Social Media Service Agency.
It has promoted the membership system in FamilyMart, and helped McDonald’s and Pagoda to implement the digital smart stores. In April 2018, it was granted with A+ round of financing led by GSR Ventures, totaling RMB 40 million yuan.
It has received tens of millions RMB in the A+ round financing led by China Resources Innovation Equity Investment Fund, and is committed to building an application platform for AI technology. It has been selected into the “List of 200 Representative Enterprises of Chinese Artificial Intelligence” issued by iYiou.
It is a new investment institution in the new retail sector, which has invested in a number of high-growth new retailers such as Mr. X, Wonder Health.
The second phase of the new retail camp is about to open. The second phase consists of six tours to benchmarking enterprises, two online content, and four new retail growth services. The camp will visit Alibaba, Hema Supermarket, BESTORE, Haier, Kidswant and other companies.