How design can change the retail opportunities in China
China is the worlds second largest retail market behind the US but is predicted to take top spot within the next 3 years. Despite its current economic uncertainty - China's GDP is forecast by its Government to be 7% for 2015, the lowest for 25 years - China has been experiencing rapid evolution in a new economy, providing both challenges and opportunities for retailers.
According to a recent report by Jones Lang LaSalle, over the coming three years, nearly 40 million sqm of shopping mall development is predicted across China. Some 55 new malls are earmarked for Shanghai alone. And a new Metro system in the same City is seeing sub-terrain retailing space becoming highly desirable, especially for the fast-fashion brands.
China's changing consumer
Until recently the most prominent stores in any Chinese mall were reserved for the luxury brands, but this market has become saturated and, with a recent Government ban on luxury corporate 'gifting', has influenced a shift in the shopping habits of the nation.
People now demand more choice at lower prices and as a result International brands such as Zara, H&M and Forever 21 are taking business from top tier luxury names. Added to which, there's an increasing appetite for premium supermarkets, personal care stores and cash and carry formats. This growth and change in shopper behaviour presents opportunities for retail designers as the emphasis focuses more on experience and concept stores, with retailers looking internationally to provide better shopping environments.
Developing a concept for the retail landscape in China
A boom in international travel means Chinese consumers are increasingly savvy about what’s on offer worldwide. There's a trend to rapidly move away from the traditional model of displaying products on simple shelving, to create more immersive 'experiences', reinforcing quality and trust in products through the design of the retail space. Quality and trust because this has historically lacked in Chinese products, so the consumer seeks reassurance from the brand reflected in the 'premiumness' of the retail environment. 'Experiences' because through travel, Chinese consumers have tasted other retail models and now demand similar in their home market.
The franchisee model is expanding fast, with the number of stores for a new brand reaching into the hundreds very quickly, often within 1-2 years. Intuitive retail designers therefore need to ensure that store furniture and unitary design are modular and flexible to cater for cost effective and fast rollouts.
However, stores need to be appropriate to their locale and adjustments may be required if retailers plan to open stores to cover all the different 'Tier' cities. A high quality designed store can be successful in a Tier 1 city, but if the same format opens in Tier 3 City, it's likely to be off-putting to consumers by looking too 'expensive'. Many International retail brands with a presence in China, subscribe to a philosophy of “Look pretty in Tier 1; make money in Tier 2 and 3”.
(Tier cities explained by Nexus Pacific http://nexus-pacific.com/blog/2013/7/9/china-city-tier-system-how-it-works-and-why-its-useful)
Emergence of online / offline retailing
With mobile penetration in China amongst the highest in the world - online now accounts for 11% of total retail sales in China - “Internet plus” or click + collect, has become a popular business topic. Retailers from all sectors are increasingly connecting their physical store to their online shop in an impressive way. Whether a Mother and Baby store, small formats for fast food brands, a boutique supermarket or a mobile phone store, Shopworks Shanghai office are constantly asked to design online-to-offline zones into the overall retail space.
The Chinese love for their smartphones presents an obvious commercial opportunity for retailers. Simple scanning of QR codes - location based marketing backed by beacon technology - via a smartphone, enables quick and convenient mobile payment, seamlessly connecting the online to offline retail offer.
And with Wechat as the essential daily social media tool for Chinese, increasingly this channel is optimised to recruit, engage and convert shoppers by offering free product sampling, digital coupons and food ordering, providing retailers and brands a new way to market and sell products and entice shoppers in-store.
Competition is growing and consumers are becoming more demanding. For Chinese retail brands to succeed against both established domestic retailers and the influx of international players, they need to start by placing a focus on developing a strong brand DNA architecture, as opposed to historically moving straight to the store design. This is where those experienced retail design consultancy's can help ready such retailers for the significant level of competition, gearing them up to survive and thrive in the future.