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Introduction

*Among the many consequences for retail stemming from the Covid-19 pandemic, which we are exploring at length, a major one is the international tourism crash and the closure of China, which historically steadily contributed to department store companies’ growth in the past years. Even considering the recent closures taking place in Shanghai, Beijing and other Chinese cities, the business has flourished domestically for the past 2 years in China and the acceleration of retail digitization has also taken place there. The road seems to be still very bumpy, but there is definitively a light at the end of the tunnel. What can we learn from what took place in China and are there lessons to have in mind? To answer this question, we interviewed two specialists from Mobile Now Group and Clientela.

Mobile Now Group, founded in 2009, is a development studio with a focus on digital experiences, products, and platforms. With offices in Shanghai, Hangzhou, and Changsha, in addition to their Singapore office, they have a commanding understanding of the Chinese market and its evolution. They have worked on more than 100 projects with leading companies in the world such as Richemont, Cartier, IWC, Montblanc, Sephora, DFS, Hennessy, Lane Crawford, Shiseido, NARS, SMCP, La Samaritaine, and others.

Clientela, a software company based in New York founded in 2010, has developed a complete suite of acquisition, clienteling and retail operations for stores, in order to cater to customers’ needs through an optimal experience, while maximizing efficiency and profitability for retailers. They have developed solutions for several leading global brands, such as Cartier, Benefit Cosmetics, Marc Jacobs, Chloé, MaxMara, and Carolina Herrera, and they have led a pilot project with IADS member Magasin du Nord in Denmark.

Mobile Now and Clientela partnered in 2020 realizing that retail clients needed a global clienteling approach that brings together two important approaches:*

• The maturity and knowledge of global clienteling best practices,
• The specificity of the Chinese digital ecosystem, especially in mobility, social commerce, and O2O commerce.

We interviewed Thomas Meyer, co-founder of Mobile Now, and Arnaud Barbelet, COO and partner at Clientela. Thomas spent 20+ years in Asia (14 in China) and most of his career in tech and mobile development before co-creating Mobile Now Group 12 years ago, with experiences at Wunderman, OgilvyOne, and WPP among others. Arnaud has 18+ years of experience in start-up development centred on customer approach and understanding. He brings a complementary eye to what’s going on in China and helps draw conclusions for retailers from other regions.

IADS – With your combined experience, what are the key learnings and innovations that you noted over the past years in China? What should the rest of the world be aware of?

TM, Mobile Now - Social commerce, and how it became central for Chinese department stores and international brands, is on top of my mind and especially WeChat. Many players are operating in social commerce: Douyin (equivalent of TikTok), Little Red Book… They all work a bit differently and most of them are in reality engagement and branding platforms. For me, WeChat stands out from the crowd.

WeChat has a multilayer spectrum:

• There, brands can build their apps (Miniprograms) hosting the whole product catalogue, acting like websites or native apps we know in the West. In addition, these Miniprograms include WeChat Pay and easy user identification.
• It is at the same time a livechat platform, used by brands and sales associates for anything: pre-sales, sales and after sales, making appointments in stores and reserving products.
• It also offers retailers a wide range of analytic data, through WeCom (a professional sister app) to track KPIs and perform additional analyses.

Not all brands have jumped onto WeChat online-to-offline (o2o) commerce and in some way, this is what seems to differentiate losers from winners in China. For customers, the possibility to use WeChat customer service and Miniprograms now make a difference between good and bad service.

AB, Clientela – For me, international department stores willing to attract Chinese shoppers once the pandemic restrictions end have no choice but to invest in WeChat or other significant national super apps (such as Kakao for Koreans or Line for Japanese customers). However, China has crafted this business model, we see WeChat as a sort of digital lab for social o2o commerce. The Korean and Japanese examples show that this model might very well happen in other countries as well (for instance, India).

IADS – Thomas, e-commerce in China is extremely different, and much more competitive, than in other markets. How have Chinese department stores adapted to the digital ecosystem and what were their main innovation points?

TM, Mobile Now - E-commerce in China is a completely different ecosystem, and structural changes are constantly happening, which complexifies the picture. The way the different platforms work changes over time, which can be disorientating for outsiders.

For instance, many brands heavily invested in Alibaba’s TMall without taking a broader look at the whole ecosystem, and forgot to build brand awareness and engagement prior to these heavy investments.

To avoid this, WeChat really stands out as a Swiss Army knife: it is at the same time a platform for brands, their omnichannel commerce enabler, bridging online to offline and vice versa. By acting as a DTC platform for brands, WeChat has been central for Chinese department stores, and probably for others located outside the country and who wanted to catch the train.

In any case, investments need to be made step by step, and with thorough due diligence: WeChat is not the only option. For instance, when it comes to dynamic marketing and engagement, Douyin, Weibo or Little Red Book (aka XiaoHongxu) are adequate platforms for social PR and Communications teams and agencies. To make a parallel, this is more or less the difference between Facebook and Instagram outside China.

IADS - What is your understanding of the Chinese customers’ expectations now that they have everything available at home at the same price (Hainan…)? How have they evolved?

TM, Mobile Now - Hainan has indeed gone through an amazing development for home-based Duty-Free business in China in the past couple of years. But this situation may not last, as Chinese consumers can’t wait to also be able to travel again internationally.

Many brands are still cheaper to buy in Europe, US or Australia than in Hainan due to other costs than taxes or pricing policy differences. And Chinese consumers know very well that brands are usually cheaper in their original market andoffer more choice and improved experience.

Once the restrictions stop, we believe, and analysts do so as well, that the Chinese will be heavily travelling again.

AB, Clientela – Actually we expect a massive revenge travelling and shopping behaviour to take place. As the Chinese have waited a long time for this to happen, they are comparatively richer than prior to the pandemic, they have more savings, and prices are higher in China (even in Hainan) than in most international brands’ home countries. So, we expect a wake-up call and surprise revenge shopping spree.

IADS - How can department stores in the rest of the world prepare to welcome Chinese tourists again? To what extent are we talking about a shift in terms of the offer, store experience, or anything else?

AB, Clientela –The Covid-19 pandemic took marketing and IT departments by surprise as they had to identify and set up new digital solutions quickly, such as e-consultations and masterclasses, but also with queuing and online booking solutions. Department stores can’t afford to make any new mistakes, especially by waiting for Chinese tourists to ask employees to install WeChat. By “install WeChat” I mean to set up a new technical environment, teach sales associates how to use it and define new business flows to collect data, better prepare boutiques visits and provide results.

In addition, there is a trend for department stores to differentiate themselves according to the audience they want to serve (international travellers vs local crowds, such as La Samaritaine vs. Le Bon Marché, or Les Galeries Lafayette Haussmann vs. Champs-Élysées in Paris) and we expect it to continue.

This positioning differentiation (international vs local) will be paramount in defining traffic generation strategies, leading to strategic decisions to make. International travelers-focused stores will probably double down on Chinese tourists once they are back, and will need to re-activate and refresh their plans very quickly.

For us, the key steps to efficiently preparing the Chinese travelers’ return are:

• Brand awareness and reputation,
• Chinese focused product/brand assortment and overall experience,
• Chinese-speaking sales staff and consultants,
• Mastering Chinese platforms and delivering above expectations on omnichannel and clienteling services, (and that’s clearly WeChat first and foremost, but also other social media platforms as well) to optimise their customer experience and journey. This is paramount as it naturally drives word of mouth, creating a virtuous circle.

IADS – And what about international department stores’ digital tools and ecosystem?

AB, Clientela – It is important for department stores not to miss the Chinese revenge shopping spree we expect to happen eventually. This is why Clientela and The Mobile Group have teamed up to help our partner clients, mono brands, and department stores to be ready to welcome Chinese customers.

They use WeChat to prepare for their trip, book their shopping experience, pay, reserve products, share with friends, and ask questions to the Sales Associates they are bonded with. They expect a truly o2o shopping experience. Like what they have at home. It is crucial for department stores to be ready for that. And like in China, there will be international winners and losers.

IADS - What would be needed which is not yet implemented outside China?

AB, Clientela – Provide a differentiated and relevant experience including a product catalogue, Customer Service, the ability to reserve products, book their shopping visit and enjoy their VIP experience with other perks and services. They come with very high expectations. The trip is like the realisation of the dream, and the risks of disappointing them are therefore very high.

TM, Mobile Now – Such an approach based on WeChat will help customers to ensure a direct connection with Chinese-speaking sales associates. In turn, sales associates and retailers will have access to tools helping them to better manage this customer flow, help them, and know them or track them in a more efficient manner.

IADS - Can we expect Chinese tourism to be the same kind of fuel for growth for department stores as it used to be in the past? And how can it be combined with local customers that have been (successfully) courted for the past 2.5 years?

AB, Clientela – Eventually, borders will reopen, and I am personally convinced that the return of Chinese travellers will totally and positively surprise flagship retail and related tourism business. I think it is clearly going to be even stronger than before.

TM, Mobile Now – Of course, the tricky topic is to define the nature of the Chinese tourists who will come back. But keep in mind that change is constant in China and during the 14 years I spent in China I have been surprised every year to see how fast decisions could be made, right from the top, and how impactful they can actually be for business. When I talk to Chinese friends, I hear how eager they are to travel back across the world (Europe included, of course) and I personally believe this will happen sooner than most people think.

Credits: IADS (Selvane Mohandas du Ménil)