China’s retail market has seen huge shifts in consumer preferences and buying habits over the past decade, a trend which has only accelerated in the past few years. To cope with the changes, retailers are rushing into the high-end market and integrating on- and offline retail experiences into a seamless package, selling experiences and quality of life rather than goods.
New retail boosts the high-end retail market
The e-commerce segment of China’s consumer electronics market is trending towards saturation, forcing changes to retail patterns. Online retailers are increasingly venturing offline as well, breaking the barriers between the two and developing an “all-channel” sales strategy, ushering in a new era for retail.
Consumers, under the influence of this new retail paradigm, are also shifting from consumption based on the need to consume for personal development, from standard consumer goods to the provision of customized services. This trend, moving away from material needs and towards personal ones, means that the future of China’s consumer electronics market can be summed up with: higher prices for higher quality and personalized service.
According to data gathered by GfK, China’s offline retail sales rose 7.0% year-on-year in the twelve months trailing July 2017, and high-end retail markets grew by 8.1%, accounting for 18% of the market. In the same timeframe, online retail sales rose by 39.8%, with high-end retail rising by 51.9% to account for 14% of the market. This indicates that high-end retail still makes up a higher portion of offline purchases than online, but its online segment is growing rapidly.
High-end retail should focus on differentiated services
To meet the needs of a changing market, retailers should not only integrate on- and offline sales channels and shift to high-end merchandise, but also consider the high-quality services which can be added onto such goods. In the high-end market, retailers should improve product development, displays, and customer service to provide consumers with a better experience.
In the regional high-end retail market, major retailers have kept pace with changes in consumption patterns, shifting from the sale of goods to the sale of lifestyles and experiences.
For example, when Sundan updated its flagship store on Suzhou Times Square, it’s interior design scheme used woods and natural tones to give the store a warm and people-oriented feeling. At the same time, it scrapped its “suggested purchase” guides and let the consumer take control of the shopping experience. The addition of a rest and leisure area in the store pushed the idea of the quality of life to the forefront of the consumer experience.
Customization and differentiation are the future of high-end retail
As the online retail market exhausts the supply of low-hanging fruit and the battle to attract traffic brings increasing costs, the newest issue retailers face is trying to entice consumers back to offline modes of commerce.
Sundan’s drive to differentiate the shopping experience and service quality at its flagship store highlights this trend and points the way forward for high-end retail. In the future, high-end retailers will focus on high-end goods and services both, seeking to differentiate themselves on the basis of service and experience, not just price, to position themselves in the future high-end retail market.