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TED@BCG Milan

Angela Wang: How China is changing the future of shopping

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China is a huge laboratory of innovation, says retail expert Angela Wang, and in this lab, everything takes place on people's phones. Five hundred million Chinese consumers -- the equivalent of the combined populations of the US, UK and Germany -- regularly make purchases via mobile platforms, even in brick-and-mortar stores. What will this transformation mean for the future of shopping? Learn more about the new business-as-usual, where everything is ultra-convenient, ultra-flexible and ultra-social.

- Retail expert
BCG's Angela Wang works with a broad range of clients in China on strategy formulation, business development and operational excellence. Full bio

This is my nephew,
00:12
Yuan Yuan.
00:15
He's five years old,
00:16
super adorable.
00:18
I asked him the other day,
00:20
"What would you like
for your birthday this year?"
00:22
He said, "I want to have
a one-way mirror Spider-Man mask."
00:25
I had absolutely no idea
what he was talking about,
00:30
so I said, "Wow, that's really cool,
00:32
but how are you going to get it?"
00:34
He told me, without a blink of his eyes,
00:37
"I'm going to tell my mom
and make a wish before I go to bed.
00:40
My mom will go to shake her mobile phone.
00:44
The next morning, the delivery uncle
will give it to me when I wake up."
00:47
I was about to tease him,
00:53
but suddenly I realized
00:55
he was simply telling me the truth,
00:57
the truth of what shopping
looks like for this generation.
00:59
If you think of it,
for a child like Yuan Yuan,
01:03
shopping is a very different idea
01:07
compared to what
my generation had in mind.
01:09
Shopping is always done on mobile,
01:12
and payment is all virtual.
01:14
A huge shopping revolution
is happening in China right now.
01:18
Shopping behaviors,
and also technology platforms,
01:23
have evolved differently
than elsewhere in the world.
01:27
For instance, e-commerce
in China is soaring.
01:29
It's been growing at twice the speed
of the United States
01:33
and a lot of the growth
is coming from mobile.
01:36
Every month, 500 million consumers
01:39
are buying on mobile phones,
01:44
and to put that into context,
01:46
that is a total population
of the United States,
01:48
UK and Germany combined.
01:51
But it is not just about
the scale of the e-commerce,
01:55
it is the speed of adoption
and the aggregation of the ecosystems.
01:58
It took China less than five years
to become a country of mobile commerce,
02:03
and that is largely because
of the two technology platforms,
02:08
Alibaba and Tencent.
02:13
They own 90 percent of the e-commerce --
02:15
pretty much the whole market --
02:18
85 percent of social media,
02:20
85 percent of internet payment.
02:22
And they also own large volumes
of digital content, video, online movie,
02:25
literature, travel information, gaming.
02:32
When this huge base of mobile shoppers
02:37
meets with aggregated ecosystems,
02:40
chemical reactions happen.
02:42
Today, China is like a huge laboratory
02:44
generating all sorts of experiments.
02:47
You should come to China,
02:50
because here you will get
a glimpse into the future.
02:51
One of the trends I have seen
concerns the spontaneity of shopping.
02:56
Five years ago, in a fashion study,
03:01
we found that on average,
03:03
a Chinese consumer would be buying
five to eight pairs of shoes.
03:05
This number tripled
to reach about 25 pairs of shoes a year.
03:08
Who would need so many pairs of shoes?
03:13
So I asked them,
"What are the reasons you buy?"
03:16
They told me a list of inspirations:
03:19
blogs, celebrity news,
fashion information.
03:22
But really, for many of them,
there was no particular reason to buy.
03:27
They were just browsing
on their mobile site
03:30
and then buying whatever they saw.
03:33
We have observed the same level
of spontaneity in everything,
03:36
from grocery shopping
to buying insurance products.
03:40
But it is not very difficult
to understand if you think about it.
03:46
A lot of the Chinese consumers
are still very new
03:49
in their middle-class
or upper-middle-class lifestyles,
03:52
with a strong desire
to buy everything new,
03:55
new products, new services.
03:58
And with this integrated ecosystem,
04:00
it is so easy for them to buy,
one click after another.
04:03
However, this new shopping behavior
is creating a lot of challenges
04:09
for those once-dominant businesses.
04:14
The owner of a fashion company
told me that he's so frustrated
04:16
because his customers keep complaining
that his products are not new enough.
04:20
Well, for a fashion company,
really bad comment.
04:25
And he already increased the number
of products in each collection.
04:29
It doesn't seem to work.
04:33
So I told him there's something
more important than that.
04:34
You've got to give your consumer
exactly what they want
04:38
when they still want it.
04:41
And he can learn something
from the online apparel players in China.
04:43
These companies, they collect
real consumer feedback
04:48
from mobile sites, from social media,
04:51
and then their designers
will translate this information
04:54
into product ideas,
04:57
and then send them
to microstudios for production.
04:59
These microstudios are really key
in this overall ecosystem,
05:03
because they take small orders,
05:07
30 garments at a time,
05:09
and they can also make
partially customized pieces.
05:11
The fact that all these production designs
05:15
are done locally,
05:19
the whole process, from transporting
to product on shelf or online
05:20
sometimes takes only three to four days.
05:25
That is super fast,
05:27
and that is highly responsive
to what is in and hot on the market.
05:29
And that is giving enormous headaches
to traditional retailers
05:33
who are only thinking
about a few collections a year.
05:37
Then there's a consumer's need
for ultraconvenience.
05:42
A couple of months ago,
I was shopping with a friend in Tokyo.
05:46
We were in the store,
05:49
and there were three to four people
standing in front of us
05:50
at the checkout counter.
05:53
Pretty normal, right?
05:55
But both of us dropped our selection
05:56
and walked away.
05:59
This is how impatient we have become.
06:01
Delivering ultraconvenience
is not just something nice to have.
06:04
It is crucial to make sure
your consumer actually buys.
06:08
And in China, we have learned
06:12
that convenience is really the glue
that will make online shopping
06:14
a behavior and a habit that sticks.
06:18
It is sometimes more effective
than a loyalty program alone.
06:21
Take Hema.
06:25
It's a retail grocery concept
developed by Alibaba.
06:27
They deliver a full basket of products
06:31
from 4,000 SKUs to your doorstep
06:33
within 30 minutes.
06:36
What is amazing is that they deliver
literally everything:
06:38
fruits, vegetables, of course.
06:42
They also deliver live fish
06:45
and also live Alaska king crab.
06:47
Like my friend once told me,
06:50
"It's really my dream coming true.
06:53
Finally, I can impress my mother-in-law
06:54
when she comes to visit me
for dinner unexpectedly."
06:57
(Laughter)
07:00
Well, companies
like Amazon and FreshDirect
07:04
are also experimenting in the same field.
07:06
The fact that Hema
is part of the Alibaba ecosystem
07:09
makes it faster and also
a bit easier to implement.
07:13
For an online grocery player,
07:17
it is very difficult, very costly,
07:19
to deliver a full basket quickly,
07:22
but for Hema, it's got a mobile app,
07:25
it's got mobile payment,
07:27
and also it's built 20 physical stores
in high-density areas in Shanghai.
07:29
These stores are built
to ensure the freshness of the product --
07:35
they actually have
fish tanks in the store --
07:39
and also to give locations
that will enable high-speed delivery.
07:42
I know the question you have on your mind.
07:46
Are they making money?
07:48
Yes, they are making money.
07:50
They are breaking even,
07:51
and what is also amazing
is that the sales revenue per store
07:52
is three to four times higher
than the traditional grocery store,
07:56
and half of the revenue orders
are coming from mobile.
08:00
This is really proof that a consumer,
08:05
if you give them ultraconvenience
that really works in grocery shopping,
08:07
they're going to switch
their shopping behaviors online,
08:11
like, in no time.
08:14
So ultraconvenience and spontaneity,
08:17
that's not the full story.
08:20
The other trend I have seen in China
08:22
is social shopping.
08:24
If you think of social shopping
elsewhere in the world,
08:26
it is a linear process.
08:29
You pick up something on Facebook,
08:31
watch it, and you switch to Amazon
08:33
or brand.com to complete
the shopping journey.
08:36
Clean and simple.
08:39
But in China it is a very different thing.
08:40
On average, a consumer would spend
one hour on their mobile phone shopping.
08:43
That's three times higher
than the United States.
08:48
Where does the stickiness come from?
08:51
What are they actually doing
on this tiny little screen?
08:53
So let me take you
on a mobile shopping journey
08:57
that I usually would be experiencing.
08:59
11pm, yes, that's usually when I shop.
09:03
I was having a chat in a WeChat
chatroom with my friends.
09:06
One of them took out a pack of snack
09:10
and posted the product link
in that chatroom.
09:12
I hate it, because usually
I would just click that link
09:16
and then land on the product page.
09:20
Lots of information, very colorful,
09:22
mind-blowing.
09:24
Watched it and then
a shop assistant came online
09:26
and asked me, "How can I
help you tonight?"
09:29
Of course I bought that pack of snack.
09:32
What is more beautiful is I know
that the next day, around noontime,
09:34
that pack of snack
will be delivered to my office.
09:38
I can eat it and share it
with my colleagues
09:41
and the cost of delivery,
maximum one dollar.
09:44
Just when I was about to leave
that shopping site,
09:48
another screen popped up.
09:51
This time it is the livestreaming
of a grassroots celebrity
09:53
teaching me how to wear
a new color of lipstick.
09:57
I watched for 30 seconds --
very easy to understand --
10:01
and also there is
a shopping link right next to it,
10:04
clicked it, bought it in a few seconds.
10:07
Back to the chatroom.
10:10
The gossiping is still going on.
10:12
Another friend of mine posted the QR code
10:14
of another pack of snack.
10:16
Clicked it, bought it.
10:18
So the whole experience
10:21
is like you're exploring
in an amusement park.
10:22
It is chaotic, it is fun
10:26
and it's even a little bit addictive.
10:29
This is what's happening
when you have this integrated ecosystem.
10:32
Shopping is embedded in social,
10:36
and social is evolving
into a multidimensional experience.
10:39
The integration of ecosystems
reaches a whole new level.
10:44
So does its dominance
in all aspects of our life.
10:48
And of course, there are huge
commercial opportunities behind it.
10:52
A Chinese snack company, Three Squirrels,
10:56
built a half-a-billion-dollar business
in just three years
10:59
by investing in 300 to 500 shop assistants
11:03
who are going to be online
to provide services 24/7.
11:06
In the social media environment,
11:11
they are like your neighborhood friends.
11:13
Even when you are not buying stuff,
11:15
they will be happy to just tell you
a few jokes and make you happy.
11:16
In this integrated ecosystem,
11:21
social media can really redefine
the relationship between brand,
11:23
retailer and consumer.
11:27
These are only fragments
of the massive changes
11:31
I have seen in China.
11:34
In this huge laboratory,
11:36
a lot of experiments
are generated every single day.
11:38
The ecosystems are reforming,
11:43
supply chain distribution,
marketing, product innovation,
11:45
everything.
11:49
Consumers are getting the power
to decide what they want to buy,
11:51
when they want to buy it,
11:55
how they want to buy it,
how they want to social.
11:56
It is now back to business
leaders of the world
11:59
to really open their eyes,
see what's happening in China,
12:03
think about it and take actions.
12:06
Thank you.
12:10
(Applause)
12:11
Massimo Portincaso: Angela,
what you shared with us
12:19
is truly impressive and almost incredible,
12:22
but I think many in the audience
had the same question that I had,
12:24
which is:
12:29
Is this kind of impulsive consumption
12:30
both economically and environmentally
sustainable over the longer term?
12:34
And what is the total price to be paid
12:38
for such an automized
and ultraconvenient retail experience?
12:42
Angela Wang: Yeah.
One thing we have to keep in mind
12:47
is really, we are at the very beginning
of a huge transformation.
12:49
So with this trading up
needs of the consumer,
12:54
together with the evolution
of the ecosystem,
12:57
there are a lot of opportunities
and also challenges.
13:00
So I've seen some early signs
13:04
that the ecosystems
are shifting their focus
13:05
to pay attention
to solve these challenges.
13:08
For example, paying more
consideration to sustainability
13:11
alongside just about speed,
13:15
and also quality over quantity.
13:17
But there are really
no simple answers to these questions.
13:20
That is exactly why
I'm here to tell everyone
13:23
that we need to watch it, study it,
and play a part in this evolution.
13:26
MP: Thank you very much.
13:31
AW: Thank you.
13:33
(Applause)
13:34

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About the speaker:

Angela Wang - Retail expert
BCG's Angela Wang works with a broad range of clients in China on strategy formulation, business development and operational excellence.

Why you should listen

Angela Wang is a core member of The Boston Consulting Group’s retail sector in Greater China. Her projects have included helping a leading Chinese regional retailer develop an omnichannel strategy for its grocery and department store businesses and redesign its organization, processes, and KPIs. She worked with a regional Chinese multiformat retailer on a store portfolio strategy and a roadmap for expanding its department, mall and grocery chains. For the same client, she identified ways to achieve operational excellence and developed 5-year financial forecasts by category.

Wang also evaluated opportunities for a Chinese fashion and apparel retailer to grow in multiple categories, and she recommended a strategy to expand its key brands across a network of stores nationally.

Before joining BCG in 2010, Wang was a senior project manager at Monitor. She also interned at JPMorgan Chase.

More profile about the speaker
Angela Wang | Speaker | TED.com