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Watch and Learn: Emerging Markets, Experimental Technologies and the Customer Experience

May 16, 2018

Retailers concerned about the future of customer experience should be paying close attention to emerging markets, whose quick embrace of new technology offers mature market brands a unique chance to watch, learn and implement change – with little risk.

Jacob Younan, Associate Director, Global Solutions, LoyaltyOne

 

Keeping a retail business competitive, particularly at scale, has always been fraught with risks and difficult decisions. Today, many of those decisions center on customer experience (CX): a space that has been shaken profoundly in recent years by the accelerated arrival of powerful back-end and consumer-facing technologies, and the changing lifestyles of large swaths of customers. In response, retailers are grappling with how to better serve customers whose standards for fast, convenient, personal and novel shopping experiences are evolving quickly.

In mature retail markets like the U.S., U.K. and Canada, this has led to major players gradually introducing mobile and other technologies into their in-store strategies, looking at major format changes and evolving how they stand apart from competitors. Elsewhere, these shifts are happening even faster.

In many emerging markets, particularly China, deep mobile penetration, rapid technology experimentation and capable competitors with rabid expansion appetites (Baidu, Alibaba and Tencent) are forcing retailers to adapt quickly, often leapfrogging the legacy tech of their developed market contemporaries entirely.

This is great news for those of us in mature markets. While the forces at play in China can feel foreign, retailers there are making many of the same choices about CX, but tackling them more aggressively by necessity. That rapid rate of change can offer a range of information about the best path forward for your CX initiatives. Here are a few ways you can watch and learn right now.   

 

Observe (or get involved) and learn

Thanks to how quickly emerging markets are embracing new technology mature market retailers need to acknowledge that they are not always on the bleeding edge of their respective industries. This position does have some benefits, namely that some other marketer or merchandiser, in a noncompetitive market, is taking the risk first. Ironically, the companies that have been studying North American and European retailers for decades are themselves now ripe for observation.

In China alone, we are seeing live market examples of local brands and familiar American companies piloting new tech, like the KFC and Alibaba spin-off Ant Financial, which is trialing a facial recognition payment system. This test was executed in just a single store in Hangzhou, but imagine a test in the metro area with over 20 million people. When roll-outs happen, they happen at massive scale. This is not to say similarly aggressive roll-outs are advisable in somewhere like California today, only that emerging markets often test at a scale mature markets can’t or choose not to.

Whether it’s the introduction of in-store facial recognition capabilities, a new form of biometric payment or the use of digital price tags that change minute-to-minute, keep an eye out for comparable foreign retailers trialing the same initiatives you’re considering. Find a local advisor who can report to you straight from the market, or, if you’re particularly invested in the outcome, seek out a direct partnership so you can contribute and shape the experiment outside your market. You may not be incentivized to try it at home, but others certainly are.

 

Prepare to be bold

For years emerging markets have been focused on attracting new customers, but as market saturation nears, they’re now grappling with the additional complexities of retention. According to a recent report from LoyaltyOne, “CX: Intention vs. Impact," which surveyed retailers and customers from the U.S., U.K., Canada, China and Brazil, 80 percent of companies operating in Brazil and China have a “primary focus on customer retention rather than acquiring new customers,” versus 61 percent in mature markets. The embrace of mobile technology is frequently at the heart of this shift, with many brands prioritizing mobile-centric in-store experiences that harness wow factor and stress convenience to distinguish themselves from the competition.

Brands like Alibaba are investing in mobile more deeply than anyone. Every product in their recently acquired and redesigned Hema chain of grocery stores is integrated into the store’s mobile app, allowing customers to instantly browse product facts, see real-time deals and receive product recommendations based on their Alibaba.com account behavior. They are even offering 30-minute delivery for customers who don’t want to come into the new stores. Did I mention scale? They intend to open 30 more Beijing stores in 2018 alone.

Scaling to the “mobile everything” stage this year may not be a reality for many mature market retailers, but the speed and size of the bet Alibaba is making won’t be contained to emerging markets for long. U.S. retailers are already anticipating a similar future, arming themselves for the evolution of Whole Foods with Amazon. If you’re in the U.S., you can’t justify ignoring how every major Chinese supermarket is reacting to Hema — it’s a free simulation.

 

A new urban/premium approach

Urbanization is a major factor in China, with tens of millions of consumers living in densely populated cities. Retail brands in the region are rapidly changing how they can best reach those shoppers, experimenting with everything from pricing and in-store technology to a complete rework of store design. Major players like RT-Mart, Carrefour and Vanguard are quickly transforming their conventional hypermarket format to bring mini-marts and/or convenience stores much closer to consumers. These high-quality, small-format stores require expert assortment and demand forecasting given limited shelf space — how Chinese brands are meeting these challenges can be valuable to American, Canadian or U.K. counterparts looking to better serve their customers in major cities.

Emerging market retailers in China are also emphasizing premium and experiential shopping as an area for sales growth, as the middle class continues to accumulate disposable income. To do this, they’re developing sub-brands that offer premium or exotic products and experiences that their target customers will find valuable, like Yonghui, which recently introduced a retailer/restaurant hybrid concept.   

Adapting your CX to meet the changing demands of consumers is a must for any retailer looking to survive going forward, and harnessing the constantly evolving new technologies at your disposal will be at the heart of the process. That said, implementing every new idea, technology or strategy isn’t a wise option. Fortunately, emerging market retailers’ willingness to test and learn from the latest innovations in real time offers others the chance to minimize their risk in advance of making similar investments. If you’re interested in staying ahead of your competition at home, it’s time to start paying attention elsewhere.

 

Download full CX Intention vs. Impact report here : http://go.loyalty.com/l/223662/2018-03-20/66wjm

 

Want to learn more about how to put these insights into action?
Contact Jacob at jyounan@loyalty.com