△ Add friend, please note: community group buying registration Based on technological innovation, big data, and interactive experience, new retail will not only become the main force of channels in the future, but also become a core force influencing brand owners. The so-called new retail refers to enterprises relying on the Internet, using big data, artificial intelligence and other technical means to upgrade and transform the production, circulation, and sales processes of goods, and deeply integrate online services, offline experience, and modern logistics. Simply put, new retail is driven by big data, transforming the retail industry through new technological developments and upgraded user experiences. Ma Yun first proposed the term "new retail" in his speech at the Yunqi Conference in October 2016, after which he stopped mentioning "e-commerce" because "e-commerce is just a ferry boat, only moving from one side of the river to the other," replaced by the development of new retail. Although the concept of new retail has only emerged for two years, it has already become a super hot word and has the trend of innovating channels and creating a new era. It is called new retail because the model of new retail has not yet formed a paradigm, and no precise word can summarize it, so "new" is temporarily used to distinguish it from traditional retail. In essence, new retail is still a sales channel, just different from traditional channels. This article, from the perspective of FMCG, combined with the development of new retail in the past two years, discusses what FMCG companies should do in the context of the vigorous development of new retail. Development of China's Channel Models At the beginning of reform and opening up, the main channel model in the Chinese market was counter-style department stores, where salespeople completed product introductions, order taking, and payment collection one-on-one based on customer opinions. Entering the 1990s, goods became abundant, and wholesale markets became the mainstream at that time, with various types of wholesale markets built across the country. Taking food wholesale markets as an example, each province had large wholesale markets, some radiating nationwide, such as Yiwu Market, Beijing Xingfadi, Guangdong Dali, Zhengzhou Huazhong, etc.; there were also wholesale markets radiating to the province and surrounding areas, with basically every provincial capital having a non-staple food wholesale market. Under the wholesale market-led channel model, a good store would affect a brand's sales, and a powerful wholesaler would determine a brand's survival. Around 2000, supermarkets, as the main channel for FMCG, were in full swing in China. With the entry of foreign hypermarkets, supermarkets upgraded to hypermarkets in the larger direction and convenience stores in the smaller direction, with retail formats diversifying, and also seeing the emergence of specialty stores, mother and baby stores, electronics stores, snack food stores, etc. By 2015, the supermarket format entered a mature stage, competition became increasingly fierce, and store closures appeared from time to time in the market. Under the supermarket channel structure, FMCG companies' operations differed from the wholesale market era. Brand owners not only had to make sufficient efforts in brand strategy, product strategy, and media strategy, but the mere operation of stores was complex and numerous, with channel dominance becoming the core concept for every brand owner. Channel driving force became an important force for brand owners. Of course, the e-commerce channel that rose in 2010 also became an important channel force in the market. In each channel transformation process, a batch of brands would rise, and at the same time, a batch would fall. The fundamental reason is that brand owners did not keep up with changes in retail formats. Under the wholesale market channel dominance, entry barriers were low, rules were few, and competition was crude; under the supermarket channel, display vividness, promotion planning, salesperson promotion, price management, and many other aspects differed from wholesale market channel management. Therefore, in the change of channel structure, brand owners also experienced falls and rises. Taking history as a mirror, one can know the rise and fall. The current new retail, characterized by customer interaction, mobile internet, online payment, and retail digitalization, will inevitably become the mainstream retail model in the future. As a new retail format, new retail will inevitably pose greater challenges to FMCG companies' channel management. Functions of Channels Kotler believed: "Marketing channels are not static; new types of wholesale and retail institutions are constantly emerging, and entirely new channel systems are gradually forming." Today's new retail is a new type of retail format, but no matter how new retail changes, its channel functions are complete. Anne T. Coughlan, in her book "Marketing Channels," pointed out that the work of marketing channels includes the execution of 8 marketing flows, emphasizing that these flows often flow along the channel and are completed by different channel members at different points in time. Mainly physical possession flow, ownership flow, ordering flow, payment flow, negotiation flow, financial flow, risk flow, promotion flow, information flow, etc. "You can eliminate or replace members in the channel, but the channel flows these members execute cannot be eliminated." Compared with traditional channels, the channel flow of new retail is prominently reflected in the control of information flow. Under the traditional channel model, consumer information is scattered, and terminals cannot control consumer information. But under the new retail background, based on big data, consumer information is completely mastered by retail terminals; based on consumer profiles, retail terminals will be more stringent in selecting brand owners. In addition, compared with traditional retail, new retail terminals interact more frequently with consumers, and the consumer experience is also different from traditional retail stores. At the same time, the delivery function of new retail has added the function of home delivery. The change in retail delivery methods will bring social and experiential functions, which will be one of the core values of new retail. According to the view of Pei Liang, president of the China Chain Store & Franchise Association, although the current proportion of home delivery business in the top 100 chains is only 1%, it shows an 80% growth rate. It is estimated that in 5 years, home delivery service sales will reach 20%, and in the future, this will be an important support for the growth of physical retail. At the same time, home delivery services pursue convenience, and their target customers are high-end consumers with consumption stratification. Therefore, the home delivery service model is bound to lead consumption upgrades. In traditional hypermarket channels, product display is an extremely important link. Not only normal shelf display, but special display often becomes an important means of product sales, to the extent that major hypermarkets charge special display fees, so FMCG brand owners have to budget for special display expenses every year. In the new retail format, such display methods will become difficult because consumers may not go to the store, and can order and pay on the mobile APP interface, completing the transaction. Traditional product display opportunities disappear, and product sales and new product promotion will lose their advantages in traditional retail terminals. Classification and Characteristics of New Retail Channels New retail channels present diverse and fragmented characteristics. The current new retail channels are simply classified as follows: Third-party APP platforms: JD Daojia, Meituan, Ele.me, etc.; Self-operated APPs: RT-Mart Youxian, Yonghui Life, Tianhong Red Scarf, Suguo Xiaodian, etc.; Empowered small stores: Alibaba Tao Xiaodian, Tencent Smart Xiaodian, Suning Xiaodian, etc.; Closed channels: representatives of three-level distribution system, Yunji, Youzan, Xiaohongshu, etc.; Innovative formats: Hema Fresh, Super Species, Freshism, etc.; WeChat communities: enterprise self-built WeChat business; Institutional malls: Ping An Bank, Agricultural Bank of China, Bank of Communications, etc.; ...... For FMCG companies, they not only need to do well in the current traditional channels, but also need to get involved in the above new retail formats. Each of the above new retail formats has different operating models and different product requirements. Moreover, various new retail formats are in a period of rapid development, with unclear prospects, and operating risks also greatly increase. The operating characteristics of each type of new retail channel are briefly summarized as follows: Third-party APP platforms: Whether JD Daojia, Meituan, or Ele.me, they all empower physical stores with online traffic. The core model is online orders + home delivery; for brand owners, it is necessary to straighten out the relationship between third-party APP management and offline physical stores to smoothly launch sales online. Taking JD Daojia as an example, the product catalog on the page that directs traffic to physical stores is screened by the physical stores themselves. For example, when logging into the JD Daojia APP in Nanning and searching for Southern Black Sesame Paste, you will find that Likelong Jinhu Store has 3 barcodes, but in fact, the Likelong Jinhu Store has 9 Southern Black Sesame Paste barcodes in the store, and the other barcodes are just not listed online. This situation is also very common in other stores. Therefore, to list products online, it is necessary to coordinate with stores to display all products on the JD Daojia APP. Self-operated APPs: At present, domestic NKA stores and LKA stores have launched their own APPs, and many stores even promote their own APPs in stores, encouraging consumers to order online and deliver offline. For the self-operated APPs of existing traditional stores, the primary task is to carry out online product display, product introduction, online promotional activities, etc. Of course, next, it is necessary to participate in new retail promotion and promotion according to the different rules of each store's APP, adapting to local conditions. Empowered small stores: Empowered small stores led by Alibaba, Tencent, JD.com, and Suning are developing rapidly. Each has set grand development goals, with a minimum target of 100,000 stores. Driven by capital, these cross-border new species are developing rapidly. Taking Suning Xiaodian as an example, it had opened 1,400 stores before August 2018. Suning Xiaodian combines on-site light meals, coffee, fresh fruits, and popular snacks and drinks, and can deliver to home. The characteristic of empowered small stores is the integration of multiple formats. For FMCG, the product specifications that can be displayed are limited, generally one or two barcodes per category, similar to current convenience stores. Closed channels: These belong to community marketing channels, selling through relationships on WeChat Moments, with a three-level dividend model. The core of this channel is the design of product price space. Not only must consumers be given a preferential price, but the commissions for the three-level distribution must also be planned in. Innovative formats: Hema Fresh and Super Species are developing strongly. This new retail format integrates on-site cooking and 3-kilometer 30-minute home delivery service, with fresh food, fruits and vegetables, and premium products as the core, with many imported goods, reflecting high-end positioning. If FMCG brands want to enter this channel, they must consider product upgrades and packaging adaptability. Of course, other forms of new retail models have different characteristics and rules, which will not be introduced one by one. FMCG Companies' Response Strategies In response to the channel characteristics of new retail, FMCG companies must actively respond from the inside out to avoid being eliminated in the wave of channel transformation. In terms of strategic direction, they can roughly plan from five aspects to respond to changes in the new retail format. 1. Integrate functions and face the change directly Facing the new retail format, FMCG companies must first attach great importance to it strategically. New retail is a channel revolution, and its operating characteristics and rules will have a great impact on FMCG companies. Generally speaking, without the definition of job functions at the senior level, grassroots business will be at a loss when facing new retail. Therefore, FMCG companies should think about new retail at the marketing strategy level, include new retail marketing in daily management, define positions and responsibilities, and incorporate new retail channel operations into normal job responsibilities. 2. Plan scenario-based products Under the new retail background, traditional brand tension will be somewhat diluted. Based on the influence of community, interaction, and sharing, products need to have clearer personalization attributes and consumption scenarios. Positioning theory clearly points out that a brand should occupy a position in the consumer's mind, and at the same time, a brand represents a category because consumers think in categories and express in categories. New retail should introduce new marketing thinking, that is, Internet thinking. Mr. Liu Chunxiong, in his new book "New Marketing," summarized new marketing into four keywords: scenario, IP, community, and communication. Among them, there is a detailed discussion on the creation of scenario-based products. If you are interested, you can refer to it. In addition, new retail also has different requirements for product packaging and specifications. Different new retail formats have different requirements. To adapt to new retail channel models, corresponding products need to be developed. This is a long-term, gradual, and systematic process, not something that can be achieved overnight. 3. Deeply understand the operating rules of new retail To do well in new retail, there is no one-size-fits-all method; it is a systematic project. New retail itself has many classifications. Even JD Daojia and Meituan, both third-party platform APPs, have different rules. Like operating KA stores, each system has its own rules, such as front-end and back-end gross profit requirements, entry display fee standards, promotional activity requirements, etc. Only by being familiar with the rules and gameplay of each KA store system can business be carried out in a targeted manner. The same is true for new retail, except that new retail is a new thing, with a short development time and no solidified model. Therefore, being well-versed in the gameplay of each new retail system, familiar with the rules of each new retail system, and trying to match them is the key to doing well in new retail. 4. Set phased goals FMCG companies should determine implementation steps and not try to do everything at once. They should determine which new retail systems to do well first based on their own capabilities, strength, financial resources, etc., and formulate standards and norms for doing well in new retail systems, clarify phased goals, and advance according to the goals. The goal setting for new retail promotion should be pragmatic and not blind, because the operating risks of new retail are greater than those of traditional channels. New things need a process of market testing. In 2018 alone, multiple new retail platforms experienced capital chain breaks and were chased by suppliers for debts, such as Sichuan's Yatang Xiaochao and HNA's Zhanghe Tianxia. The work of preventing risks in new retail operations also needs to be highly valued. 5. Train new retail operation teams People are the key factor, and new retail operations are no exception. In the context of the new retail onslaught, FMCG companies should increase training for sales personnel. On the one hand, let sales personnel clearly understand that new retail is the direction of channel transformation; on the other hand, give sales personnel the methods and tools for operating new retail. Although new retail is a new thing and related models have not yet taken shape, it is certain that new retail market operations differ from traditional retail. Sales norms, sales actions, promotion planning, etc. for sales personnel should be clear and clear, and should be improved with changes in new retail. Conclusion It has become a consensus that new retail will become the main force of future channels. Based on technological innovation, big data, and interactive experience, new retail will not only become the main force of channels in the future, but also become a core force influencing brand owners. New retail will drive product upgrades, create new categories, promote customized and personalized goods, and even organize production supply chains, weakening the value of brand owners. For example, Xiaomi Youpin makes brand owners become manufacturers, with Xiaomi Youpin assuming the brand of the goods and having the right to set prices. In short, new retail is a channel revolution that will reshape FMCG companies. Source: New Retail Industry Observation, author: Cheng Fuliang, General Manager of the Paste Business Division of Southern Black Sesame Group. First published in "Sales and Marketing" November 2018 Marketing Edition. Star: New Distribution You won't miss any message! -END-