New Retail Briefings

“New Retail” is a model for integrating online retail, offline retail and logistics across a single value chain powered by data and technology. The term was coined by Alibaba Group, although many other companies in China and elsewhere are implementing various elements of the model. In this biweekly series, we review the latest trends in New Retail, with a focus on major digital platforms and multichannel retail companies in China.

What’s New in New Retail

Dior Launches a Seasonal Christmas Mini Program on WeChat Dior is offering an online interactive experience for customers through its seasonal Christmas mini program on WeChat, which was launched on November 22. The program hosts a game for users to discover hidden elements in an illustration. More than 151,000 users have participated in the game as of December 9, 2019. The second part of the program is an invitation to visit Dior’s Christmas tree at the Plaza 66 shopping mall in Shanghai, where users can join the offline activities using AR. Dior held its Christmas tree lighting ceremony on the same day of the mini-program’s launch. The installation also showcases the brand’s early-spring 2020 ready-to-wear clothing and accessories pieces and attracted 48,000 visitors in the first week of its opening, according to Chinese media Jing Daily. Dior’s interactive approach to engaging with consumers online also helps to drive traffic to its boutique store at the Plaza 66 shopping mall. [caption id="attachment_101196" align="aligncenter" width="700"] Source: Dior WeChat[/caption]   Christian Louboutin Beauty Opens Its Flagship Store on Alibaba’s Tmall The Parisian beauty house Christian Louboutin Beauty exclusively launched its Tmall Flagship store on December 2. The fashion designer introduced the beauty line in 2012, which features lipsticks, nail lacquer, eye shadow and fragrance. The launch on Tmall marked the cosmetic brand’s official entry into the China market. Louboutin’s Tmall flagship store now offers 10 products, including the full-line assortment of its lipsticks. The brand also launched a special-edition gifting service for the upcoming Christmas period, through which customers can add preserved red roses and custom-made greeting cards to their lipstick purchases. Offering an enhanced shopping experience, the product page provides an augmented-reality try-on function, allowing shoppers to virtually test out different lipstick colors. [caption id="attachment_101197" align="aligncenter" width="700"] Source: Tmall[/caption]   Coresight Research insight: China is fueling the growth of the global beauty industry. Beauty sales in China grew 12.9% in 2018, compared to 4.6% growth in the US, according J.P. Morgan, citing Euromonitor International data. During the 11.11 Global Shopping Festival, out of the 15 brands that achieved over ¥1 billion ($143 million) gross merchandise volume, four were in the beauty category. China’s growing middle class and its younger-generation consumers are more willing to spend on high-quality products, driving the growth of prestige and luxury beauty brands. Tmall is becoming the preferred platform for luxury beauty brands to enter the China market. For example, Tom Ford Beauty launched its Tmall flagship store in April 2019, and Chanel also opened a flagship store on the platform in July 2019, selling its beauty and fragrance lines. Other prestige brands that have launched their beauty lines on Tmall in the previous year include Giorgio Armani, Givenchy and YSL. Alibaba Invests in Milk-Delivery Startup Tianxianpei Alibaba has invested ¥150 million ($21 million) in a 50% stake of Tianxianpei, a milk-delivery platform owned by Chinese dairy-products producer Mengniu Dairy. Mengniu established Tianxianpei in July 2018 under its New Retail department. The platform delivers 25 stock keeping units—including Mengniu’s milk, yoghurt and juice products—to nearly 600 neighborhoods in more than 20 cities in China. To order, consumers can either scan the QR code attached on Tianxianpei’s smart refrigerators or directly purchase through Taobao or Tmall. They can then pick up their orders from the fridge during the designated time by entering an SMS code. Tianxianpei’s online-to-offline model guarantees milk freshness and customer convenience, differentiating it from traditional milk-delivery services. Cold-chain logistics, along with the smart refrigerators, reduce the possibility of milk spoiling during the process. Alibaba has been integrating new services into its New Retail strategy by leveraging its digitalized operating system, supply chain systems, in-store technology and consumer data. The company has not yet announced any further plans for Tianxianpei following its investment. Appendix: New Retail Developments New Retail developments in China are listed in Figure 1. Figure 1. New Retail Developments in China: Last 12 Months [wpdatatable id=46]

Source: Company reports/Coresight Research

Investments and Acquisitions in New Retail To expand New Retail abilities, Alibaba, Tencent and JD.com have invested in logistics firms, online marketplaces, content-creation companies and even brick-and-mortar stores. See selected transactions in the following tables: Figure 2. Alibaba New Retail Investments and Acquisitions: Last 12 Months [wpdatatable id=47]

Source: Company reports/Coresight Research

Figure 3. Tencent New Retail Investments and Acquisitions: Last 12 Months [wpdatatable id=48]

Source: Company reports/Coresight Research

Figure 4. JD.com New Retail Investments and Acquisitions: Last 12 Months [wpdatatable id=49]

Source: Company reports/Coresight Research