Technology is everywhere in modern China. For Western luxury brands this means experimenting with new approaches — especially online and with social media influencers — that most would shun or avoid in other markets. Collaborating so closely with Chinese KOLs and celebrities, depending on some very heavily as direct sales channels would be thought quite risky in other markets, as would putting their merchandise on an e-commerce platform with competing brands that is controlled by another company altogether. But in China, it’s business as usual.
Tech savvy consumers who were born into the digital age are growing older and have certain expectations. Traditional luxury brands that don’t adapt can find themselves quickly replaced by upstart brands with novel offerings. With Millennials doing two-thirds of the luxury spending in China, and with most of the growth in the China luxury market coming from online sales, the need to adapt there is strong.
For example, some already foresee a future where a shopping cart not only knows your name, but also knows exactly what you want and need. Along the way, it tells you stories about each product you’re interested in and plays games with you.
Some might say that something like this goes against luxury’s service proposition, which is expected to be personalized and detailed, but already in a few markets where omnichannel and New Retail approaches are embedded and AI is analyzing data, consumers are starting to feel like the recommendations they get online are more “personal” and better targeted than the ones they get from instore staff.
What is New Retail?
New Retail, a term introduced by Jack Ma in 2016, encompasses many of the aspects of omnichannel and experiential retail and merges online and offline intoan experience. Based on consumer-generated data received in real time, merchants and retailers can quickly adjust their services and tech-enabled devices — and it can feel like they are literally reading your mind. But how?
Here, we explore some of the most popular technologies of New Retail, such as AR (augmented reality), VR (virtual reality), RFID tags (radio frequency identification), AI (artificial intelligence), and finally barcodes.
AR and VR
Two of the most loved technologies, by both consumers and retailers, are AR and VR. They can provide hyper-realistic shopping experiences and give a better overview of a product before it’s purchased.
AR functions to create “magic mirrors” that can be used online and offline. Online, buyers can use different filters to try on various makeup styles, jewelry, or clothing and instantaneously see the results on their phone or computer screen. Physical stores use large digital displays, some life-size, with cameras located in the frame that scan the person standing in front of it. After pressing a button, theycan see themselves on the screen.
These have proved extremely popular in China and beauty brands that use the technology well set themselves apart. In a farsighted move, L’Oréal has acquired ModiFace, an AR technology company, which helped it develop a Mini Program for its Giorgio Armani Beauty brand. L’Oréal launched the first Mini Program on WeChat that lets mobile users try on virtual makeup, and Armani uses AR to let users compare “before and after” looks which they can also share with others.
Hugo Boss also got creative with gamification by using VR in 2017. It launched the “Your Time to Shine” campaign. Headed by two virtual brand ambassadors it called “Bossbots,” it was part treasure hunt, part puzzle, part lookbook, and part membership drive. Users had to find Bossbot parts in a virtual boutique to unveil pieces from their new clothing collection. They had to fill out member cards for a chance to win a real Bossbot, and in the final step of the game, were asked to submit more information to join the brand’s CRM system. They were also able to analyze sharing patterns to establish levels of influence and connections among their fans and customers.
Radio frequency identification is commonly used together with AI and VR to assist magic mirror displays in physical stores. With the help of RFID tags, which can be solid chips or woven into washable fabric, objects can be identified and tracked. Consumers can get information about the price, source, sizes, colors, availability, and other information.
Smart shelves combine RFID tags with barcodes, magnetic stripes, smart cards, voice recognition, and others for automatic identification and data capture (AIDC). This allows retailers to track sales performance, use alternative checkout processes, create cashierless stores, and optimize supply chain management in real time. This way, buyers can always access up to the minute information on any item.
Hong Kong Jeweler Chow Tai Fook has updated to an internet of things (IoT) logistics system that uses RFID tags to enable them to keep track of the status and location of each item in its system and the movement of nearly 60,000 items each day in mainland China.
2019 will be remembered as the year of 5G. The next generation of broadband technology allows faster connections and higher quantities of data. Video and virtual experiences will suddenly be faster and more realistic. It’s the kind of change that could make VR glasses and AR magic mirrors mainstream.
A great example of 5G implementation for shopping is the recent launch of Shanghai Lujiazui Mall L+. It’s a partnership between Huawei, China Mobile, and the China Real Estate Association. Customers can experience 5G HD video calls, see 5G 8K HD videos, and get directions from 5G robots. General Manager of Shanghai Lujiazui, Zhao Qi, said that in addition to providing convenient shopping and rich aesthetic experiences, the technology was also designed to improve operational efficiency and maximize return on investment. It’s not something that brands brag about, but all this tech isn’t just so consumers can have fun. It’s designed to cut costs and maximize profit.
L’Oréal Group merits another mention. This time for its work with Alibaba to launch the world’s first AI-enabled personal skin care app. After uploading three selfies, users receive a report with recommendations for product combinations, skin care advice, and online retail locations. The app also offers in-person consultations for those with more challenging or complex skin conditions. “We’re hoping to be the best in China in terms of AI-assisted communication with our customers. And the experience we’re creating is very personalized. I always say that no matter if it’s search, advertising or something else, it has to be personally relevant. If it’s not personally relevant, it’s a waste of their time.” —Chen Zhang, Chief Technology Officer, JD.com