---
title: "How Can Traditional Retailers Save Themselves Amid the Wave of Store Closures?"
description: "In the new retail era, the most valuable data is that which is accumulated around customers and products through continuous connection and transactions. Traditional retail enterprises must undergo digital transformation by establishing a digital architecture, digital customers, digital products, and digital operations to achieve precise marketing and improve efficiency."
author: "新经销团队"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2019-01-29"
language: "en"
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# How Can Traditional Retailers Save Themselves Amid the Wave of Store Closures?

> In the new retail era, the most valuable data is that which is accumulated around customers and products through continuous connection and transactions. Traditional retail enterprises must undergo digital transformation by establishing a digital architecture, digital customers, digital products, and digital operations to achieve precise marketing and improve efficiency.

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**What is data?**
For many traditional marketers, data is nothing more than sales, gross profit, net profit, traffic, and average transaction value in various financial statements. However, in the Internet era, the characteristics and value of data are far more complex. The aforementioned data are merely outcome indicators of business performance, or at best, the most basic data.
In the new retail era, truly valuable data is that which is accumulated around customers and products through continuous connection and transactions. Here's an example of data application: You sign up for a membership card at a supermarket, and the store records your phone number. In the past, retailers would push ads to you without knowing if you liked them; from their perspective, the ad was a great deal and very tempting. Now, retailers use your past purchase data—such as consumption time, products, and prices—to analyze your preferences and tendencies through data models, then push ads (including timing, format, content, and activity type) that you will gladly accept. This is precise targeting of target customers through data intelligence.
According to Ms. Liu Xiaoting, an expert in new retail, **the foundation for transformation of traditional retail enterprises lies in establishing data. By connecting with customers and products, they can build digital customers, digital products, and digital scenarios, and then implement digital operations.**
Liu Xiaoting told New Distribution that the current situation for traditional KA (Key Account) stores is increasingly difficult: labor costs are rising, and wages can only go up, not down; marketing activities cannot reach effective customers, relying on location traffic, and it's unclear who comes to the store; whatever suppliers provide, they sell. Store rents remain high, profit margins are thinning, and competitors are increasing...
At the same time, KA retail is essentially labor-intensive, and the education level of frontline retail workers is generally low. Traditional retail enterprises are being hit by Internet companies' "dimensional reduction" attacks. Against this backdrop, traditional retailers must consider transformation, using Internet tools and their own business models to explore digital operations. Although the transformation process will be painful, not changing will only lead to faster death.
**How can traditional KA stores undergo digital transformation?**
At the 2019 New Year marketing course, Liu Xiaoting shared key insights on how traditional retail enterprises should transform. She believes that transformation should follow a "four-step process": **first, digital architecture; second, digital customers; third, digital products; and fourth, digital operations.**
**1. Digital Architecture**
What is digital architecture? **It is a complete digital system that integrates front-end, middle-end, and back-end in real time.** Many traditional retail practitioners equate informatization with digitalization. In practice, they often first implement a cash register system, then a CRM membership system, and then a backend supply chain system. After all information systems are in place, you realize there are many information silos across the business chain.
The author once encountered a chain retail enterprise that implemented a cash register system for financial needs, and around 2015, a membership system to build a membership system. This membership system was independent of the cash register system, with two separate terminal tools in stores. When consumers made purchases, store employees often used only the cash register system for convenience, only using the membership system when customers requested points or membership benefits. Additionally, the membership system was only used when the marketing department planned consumer promotions.
Frankly, digital architecture is not a collection of isolated systems. **When system modules are isolated, true synergy and efficiency cannot be achieved.** For example, during a promotion at a certain time, you don't know which consumer is involved because consumer data is in another system. Inventory, marketing, and consumer data are all in different systems, with no real-time information sharing. When data is not closed-loop, digital operations are fake and cannot truly improve overall business efficiency.
Many enterprises, to save costs or because they have an existing system they don't want to discard or find troublesome, graft onto the old system. This approach won't work. Liu Xiaoting suggests that when enterprises want to transform to digital operations, they must find an information system that can connect the entire business process, not just add systems. **Digital architecture is the underlying infrastructure for business transformation; only a complete system that runs through all business processes can enable the next step of transformation.**
**2. Digital Customers**
With the digital architecture in place, the next step is to redefine customers: The card registration rate in traditional KA stores is generally below 50%, and even for registered consumers, enterprises know little about them—just three things: name, gender, and phone number. Strictly speaking, this information is just a count of consumers for the enterprise.
Liu Xiaoting told New Distribution that redefining customers is mainly reflected in three aspects: **First, establishing membership levels** to identify which consumers contribute to sales and how much. **Second, establishing customer tags**—in addition to basic information like gender, age, and phone, customers should be tagged across different dimensions and depths (as shown below).
Through fact tags, model tags, and prediction tags, a multi-dimensional tag model is established. At the marketing action level, it is divided into horizontal tag modules such as marketing enhancement, user insight, channel optimization, product innovation, and personalized recommendation. In the two-dimensional tag application depth, it further details business levels such as basic user information, user-related information, channel optimization, product innovation, and personalized recommendation. By precisely segmenting consumer profiles, enterprises can more accurately predict the differentiated needs of different consumers, thereby enabling precision marketing. From the model above, a standard digital customer has at least 180 tags in the enterprise system (5x3x3x4=180).
**Third, customer growth management.** Once the membership system and customer tags are in place, enterprises must start operations. For example, for low-level members, design targeted marketing activities based on tags to encourage consumption and upgrade levels to gain corresponding benefits; for low-frequency consumers, how to stimulate repeat purchases, etc. Enterprises need to establish a "customer growth system management platform" to enhance customer value through activities, services, benefits, and other dimensions.
**3. Digital Products**
In traditional stores, products are just simple names, barcodes, inventory counts, and specifications. In the business process, the barcode is the most important identifier, mainly used for POS. In the new retail era, the application of codes on products has changed significantly.
For example, in the payment process, the biggest pain point in offline shopping is long queues. Now, by digitizing products, consumers can scan the product QR code on the shelf via a mini-program to pay. After payment, they just show the verification code at the exit to complete the transaction, greatly saving time and streamlining the process.
Additionally, in the supply chain, by embedding product tags (weight, volume, specifications, etc.) into the code, the backend logistics cost can be accurately determined. For example, if Nongfu Spring provides funding support to a store for a specific activity, the enterprise can use a specific tag of Nongfu Spring to find consumers matching that tag, then push the activity or give coupons, greatly improving the conversion efficiency of promotional spending.
**4. Digital Operations**
Digital operations, beyond customers and products, also involve the reconstruction of the "place." When consumers are in the "place," optimizing customer flow, solving long wait times, and enabling convenient payment all require smart devices to ensure a good shopping experience. Of course, even after consumers leave the offline "place," enterprises should consider how to extend the online "place" to maintain continuous connection with consumers (community integration).
In Liu Xiaoting's view, **behind digital operations is "omni-channel marketing," which uses data to connect the entire consumer journey from awareness, interest, purchase, loyalty, and sharing feedback. Moreover, the data here is real-time, visible, trackable, and optimizable.** Whether it's new retail or digitalization, the ultimate goal is to improve marketing efficiency, reduce costs, and enhance the consumer experience.
After traditional retail enterprises complete the above "four-step digital strategy," their core marketing tactics can be summarized in two sentences: 1. Use hot products to attract traffic and create atmosphere, then follow up offline to earn gross profit; 2. Innovate SKUs to gain incremental sales, and innovate scenarios to achieve profits.
> **Hot products attract traffic and create atmosphere; offline follow-up earns gross profit:** Whether through communities, mini-programs, or official accounts, attract consumers by launching hot products online. Use hot products as a carrier to build awareness and relationships, increase consumer stickiness, and then attract consumers to the store.
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> **Innovate SKUs for incremental sales; innovate scenarios for profits:** Previously, stores sold whatever suppliers provided. When stores clearly know and understand their customers, they know what customers want, and they will proactively seek products, even bypassing suppliers to find manufacturers. Through various scenario innovations, "paint a picture" for consumers to encourage them to buy products not originally planned.
New Distribution will hold the **2019 (5th) FMCG + Internet Conference** during the Chengdu Spring Sugar and Wine Fair from March 16 to 18. This conference will focus on the theme **"Breakthrough"** and engage in in-depth discussions with numerous brand owners, supply chain service providers, distributors, and retailers.
Compared to previous conferences, this summit will be fully upgraded. In addition to original topics like **channel innovation, city distribution logistics, and distributor transformation**, it will add parallel forums on **new marketing cases, IP + FMCG empowerment, community group buying, and innovative retail**. Through three days of ten high-density, high-quality expert sharing sessions, we believe every brand owner and distributor can learn the latest business models, expert insights, and practical methods, finding new tools and approaches for their own breakthrough in 2019, and returning to a path of rapid growth.
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