The Covid-19 pandemic has reshaped the retail industry forever. Consumers are buying online more than ever before, and when they are shopping in-store, they expect the offline experience to be integrated with the apps and websites they’re using at home. Retailers have not only been forced to respond to growing digital engagement, but also increasing demands for authenticity, sustainability and brands that demonstrate a strong sense of purpose.

“The retail brands who have best survived this rapid transition are those who have proven agile in their response to the growing demand for digital engagement,” says Alice Yip, Head of Consumer and Industrial Markets, Hong Kong, KPMG China, commenting on a recent research report. The report, entitled ‘Retail’s Realignment: The Road Ahead for Omnichannel across the Greater Bay Area,’ offers insight into six key trends that are reshaping retail in China.

Five key China retail trends

Shopping behaviours have changed for good

There have been significant changes to the way consumers shop. Due to the outbreak of Covid-19, there has been a rapid acceleration of the migration of consumers from physical to digital retail channels. KMPG’s report found that since the beginning of the pandemic, 50% of Hong Kong consumers and 59% of those from Greater Bay Area (GBA) cities – e.g., Guangzhou, Shenzhen, and Zhuhai – in mainland China feel more comfortable shopping online.

Consumers have developed new purchasing habits, with many shoppers choosing not to return to physical stores. Around a quarter of the consumers surveyed by KPMG said they could live without physical stores.

“The coronavirus is a catalyst, but it is not the critical factor – the consumer is. They want to change because the online model is significantly superior to the offline model in terms of choice,” says Ricky Wong, vice president and group CEO of HKTVmall.

Consumers expect integrated O2O experiences

An overwhelming majority of consumers expect a seamless transition from in-store to online – 77% of Hong Kong respondents, and 85% of those polled in mainland China’s GBA cities said retailers need to have a better connection between channels to create a seamless customer journey. Convenience is driving the preference for O2O (online to offline) experiences; consumers want to engage with brands across social media, access easy payment methods, and have the option to choose flexible delivery options.

These expectations are highest among Gen-Z consumers. Gen Z is the first generation of consumers to have grown up constantly connected to digital devices, particularly smartphones, and with so many options available at their fingertips, these consumers are putting experience at the centre of their purchasing journey. And the way Gen-Z shops influences the entirety of the retail environment. “Gen-Z consumers are the influencers for other generations,’ says Jessie Qian, Country Sector Head, Consumer & Retail, KPMG China. “[This includes] millennials who want to feel young and active, and parents and grandparents who will make purchases for their Gen-Z children and grandchildren.”

All the above suggests that brands and retailers who forge an online-to-offline solution that encompasses multiple digital points of engagement will enjoy a significant market advantage in the future, particularly in the apparel and personal care and beauty sectors. However, many brands are still behind the curve. Among the retail executives surveyed, less than 50% of businesses were currently adopting strategies that could help them create a more seamless O2O experience.

The coronavirus is a catalyst, but it is not the critical factor – the consumer is. They want to change.

Authenticity + purpose = trust (+ purchases)

The pandemic has sharpened consumers’ focus on health, sustainability and wellbeing. A brand’s authenticity and purpose have become the most important attributes that consumers pay attention to. Since the beginning of the pandemic, 68% of Hong Kong consumers and 65% of those from mainland China GBA cities say they are more conscious of a product’s origin.

Anson Bailey, Head of Consumer & Retail, ASPAC for KPMG China, emphasises that brands are facing an urgent imperative to be more purpose-driven. “We are seeing a perfect storm emerge with investors, bankers, regulators and consumers all calling out for brands and retail groups to become more purpose-led and demonstrate both their societal and green credentials in the communities that we live and work in,” he says.

Brands should also pay attention to how consumers search for product information and develop trust. Among the consumers KPMG surveyed, the most trusted sources of information are the opinions of family and friends, a brand’s website and online user reviews. Mainland Chinese consumers are also more likely to trust the opinions of KOLs and live streamers.

Sourcing, upskilling and reskilling talent remains a key challenge

The KMPG report also reveals that there is widespread concern about the availability of skilled talent, particularly in digital technology-focused areas. For instance, in Hong Kong, there is a current “shortage of talent in e-commerce, digital marketing” according to Plato Wai, General Manager of smart commerce solutions provider Shopline.

IT and systems support, data analytics and research and development as technical areas are also facing significant talent shortages. Sales, marketing and communication roles are also an area of concern. Luckily, research shows that China is set to produce more than four million STEAM graduates over the next five years, providing an essential resource for retailers to address talent shortages and future-proof their businesses. “Corporates need to come together with academia and EdTech providers to upskill and reskill our current workforce… covering the latest coding, AI, data and blockchain skills,” argues Bailey.

Consumers expect brands to deploy technology to speed fulfilment and reduce costs

As consumers become more adept at searching, shopping and paying for goods online, they expect brands to step up their implementation of technologies to make the shopping process faster and more efficient.

Many find online shopping much more convenient and are willing to pay a premium for added-value services, such as the ability to refund or exchange products that are usually non-refundable. However, concerns remain about data security, and about 76% of respondents in KMPG’s survey believe companies provide a moderate, low, or insufficient level of data security.

The future of the retail industry in China

More than two years since the onset of the Covid-19 pandemic, it is clear that consumer spending on online retail channels has greatly accelerated. But beyond that, there is overwhelming evidence that how consumers browse, buy and pay for goods will not go back to the way things were before once the pandemic subsides. Retailers operating in China should keep note of these trends and chart their own courses over the next few years.

Call +44 (0)20 7802 2000 or email enquiries@cbbc.org now to find out how CBBC can help you find the perfect partner or supplier to support the growth of your business in China.

This article was adapted from KMPG, GS1 Hong Kong and HSBC’s 2021 report, ‘Retail’s Realignment: The Road Ahead for Omnichannel across the Greater Bay Area.’

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Like people in countries all over the world, Chinese consumers are concerned about pollution, waste products, and the environment. To varying degrees, these concerns are now translating into greater awareness of the sustainability credentials of brands and, ultimately, purchasing intentions. 

Pressure to change is coming from more than just the consumers themselves. Governments around the world are introducing new regulations regarding how products are produced and what materials can be used. At the same time, Environmental, Social and Corporate Governance (ESG) factors have become a key focus for the investment community. 

 

Given the well-documented need of young people to have as much information as possible about their purchases, companies will not only have to take full responsibility for how their products are made and the conditions under which they are made, but also to tell the story of how all this happens in a transparent way

“Walking the talk on sustainability issues is something that [brands] can no longer afford to ignore. Consumers nowadays have so much more information on the sustainability credentials of products, as well as the companies behind them and their impact on the wider community,” says Anson Bailey, Head of Consumer & Retail, ASPAC, KPMG China, commenting on a recent research report by KPMG and Serai on sustainability in the apparel industry. The report, entitled ‘Moving the needle: Threading a sustainable future for apparel,’ offers insights that can be applied to a wide range of industries. 

How much do Chinese consumers care about sustainability?

Changing consumer attitudes are a major reason why sustainability has risen up the agenda in China for many businesses in the apparel industry and beyond. 

When thinking about what defines sustainable products, Chinese consumers point to factors such as high-quality, durable materials that require little after-care, chemical and pollutant-free products and processes, the use of resource-saving technologies, and the use of recycled materials.

Consumers are increasingly willing to pay more for sustainable products, so it can be potentially lucrative for brands to differentiate themselves in this way. This trend appears to have accelerated during the Covid-19 pandemic, with consumers having taken the opportunity of closed stores and more time at home to reassess their consumption habits. For example, a KPMG study in 2021 found that since the beginning of the pandemic, 68% of Hong Kong consumers and 65% of those from Greater Bay Area cities in mainland China have become more conscious of a product’s origins. According to a 2019 survey by Fashion Summit and KPMG, consumers in Shanghai ranked a brand’s environmental friendliness message higher than any of the other cities surveyed. 

Walking the talk on sustainability issues is something that brands can no longer afford to ignore.
– Anson Bailey, Head of Consumer & Retail, ASPAC, KPMG China

However, there are still differences between the environmental considerations and the actual behaviour of consumers. Cost can be a key obstacle to consumer adoption of sustainable products. The Fashion Summit and KPMG survey found that worldwide, only 13% of people are willing to pay more for sustainable fashion (the figure was slightly higher for consumers in Shanghai at 22%). Nevertheless, research indicates that businesses with higher sustainability scores have a lower cost of capital — savings that can then be passed on to consumers — and according to analysis by KPMG, a sustainable apparel business can expect to have an average increase in their net profit of 1-1.5% for brands, and 1.5-2.5% for suppliers.  

How to create supply chain transparency to build consumer trust in sustainability

Supply chain transparency is increasingly becoming a key part of any industry’s efforts to become more sustainable. It is therefore not surprising that KPMG and Serai’s survey found that executives ranked achieving end-to-end supply chain transparency as the single biggest issue that their company needs to solve in the short to medium-term.

“Consumers are asking more questions about not just where the product was manufactured, but also the raw materials that were used and where these came from. Being 100% transparent will lead to more orders for suppliers,” says Edgar Tung, COO, Esquel Group, quoted in the KPMG/Serai Report. Indeed, a 2021 survey by The Silk Initiative found that ‘supply chain transparency’ was one of the sustainability claims that resonated best with Chinese consumers, ranking far above ‘fair-trade products’ or ‘safe working conditions.’

To start moving towards a sustainable future, companies need to adopt a comprehensive, structured and systematic approach to change. KPMG and Serai’s report suggests that companies take into account five key considerations: 

1. Make sure all stakeholders are on the same page 

To actually achieve sustainable growth, every relevant process, function and relationship in the business should be aligned towards the same clear goal. Business stakeholders across the entire organisation need to be involved in setting enterprise-wide aligned transparency targets. 

2. Create an achievable framework 

Once an overall vision for supply chain transparency has been defined, a strategic framework needs to be designed. A detailed and practical approach to how to achieve the desired goals is also key. For example, data structures and formats need to be drawn up and minimum data requirements set, the type of solutions needed should also be agreed on and potential partnership or outsourcing requirements laid out. 

3. Construct a fact-based supply chain 

Companies should start by gathering information on the origins and network flows of all materials, as well as map out supply chain trading partners and how they work together, to create a detailed picture of the supply chain. Connecting with related parties can be highly impactful in building trust and strengthening relationships across the supply chain, which in turn will facilitate the willingness of stakeholders to share information. 

4. Collect and consolidate key information

The gap between intent and achieving transparency is driven by a lack of access to quality and consistent data. Companies need to identify where and how data is collected – both internally and externally – and create rules for storage/sharing rules so that data can be accessed by all participants of the supply chain. This process should be supported by relevant technologies and tools. 

5. Use data to identify and manage risks 

Consolidated data and clear protocols should give companies the information they need to take concrete actions and manage any risks arising during the process of supply chain transparency. This can be achieved with tools from third-party solution providers or in-house systems. 

The future of sustainable consumption in China

“The COP26 climate summit has highlighted the need for change. Greater transparency means that brands will be held accountable, however, it also opens up opportunities to better manage inventories, introduce more agility, and achieve greater collaboration across the entire supply chain,” says Bailey. 

Like many consumer segments in China, young people are driving increased interest in sustainable products and brands. As Fashion Summit/KPMG’s report ‘Sustainable Fashion: A Survey on Global Perspectives’ concludes, “Given the well-documented need of young people to have as much information as possible about their purchases, companies will not only have to take full responsibility for how their products are made and the conditions under which they are made, but also to tell the story of how all this happens in a transparent way.”

Call +44 (0)20 7802 2000 or email enquiries@cbbc.org now to find out how CBBC’s market research services can help you build knowledge and understanding of the Chinese market prior to investment.

Portions of this article were adapted from KPMG and Serai’s 2021 report, Moving the Needle: Threading a Sustainable Future for Apparel

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Tell me about your role and the path you took to get here. 

I joined KPMG China 17 years ago, immediately after graduating from university. In 2000 I started as a transaction professional, based in Beijing and covering a wide range of sectors. After eight years in this role, I was seconded to work in the global chairman’s office in London, as the executive assistant to KPMG global deputy chairman.

After my return to KPMG China in 2011, I built up a dedicated oil and gas team and assisted the Chinese oil majors in a number of landmark transactions including CNOOC’s [China National Offshore Oil Corporation’s] £11.7 billion acquisition of Nexen in Canada – the largest oil and gas China outbound transaction.

In April 2016, I became the COO of KPMG’s Global China Practice (GCP). GCP helps Chinese companies invest overseas and multinational companies enter or expand in the China market. I manage and coordinate with KPMG’s Local China Practices in over 60 countries.

I was selected for this role mainly because of my transaction background, overseas experience working in the global organisation and my network connections.  My personal attributes of being passionate, willing to meet challenges and open to change also helped me get this role.

Who were your role models and why?

I went to a vocational high school in Beijing where students were trained with job specific skills in order to find jobs after graduation. My English teacher, Ms Hao Youming, always said to us: “everyone can be successful with a strong will and open eyes”. She encouraged me to participate in the college entrance exam gaokao and to take the chance to change. She said, “no matter if you can get in or not, once you have been through it, you will be a much stronger person ready for any challenges in life”. With a year’s preparation, I was enrolled by the University of International Business and Economics, the leading Chinese university in economics, finance and international business. Ms Hao is one of the most important people in my life, she encouraged me to make the most critical decision, which changed the course of my life journey. When I’ve faced difficult situations, I always thought of Ms Hao’s kind and warm eyes, encouraging me to be brave and be myself.

Ms Hao is the founder and the principal of the Beijing Chaoyang Foreign Language School. While she is in her eighties, she is still active in school, encouraging and empowering each student to change and realise their potential.

What challenges have you faced that you think are particular to women and how did you deal with them? 

I recently shared my experiences of being a working woman, and of my career path at a panel event titled: “Women Who Launch”. The event was held on International Women’s Day, in support of the “Be Yourself Champaign”, jointly organised by the British Chamber of Commerce in China, China-Britain Business Council and the British Embassy.

The theme of how to “be yourself”, is a very relevant challenge that women often face. For much of the time, women are told to be “good” and remain in their comfort zone. But I feel it is important to follow your heart, be brave and be open for new challenges.

I started my secondment to KPMG London office in September 2008. It was my first experience of living abroad, and whilst I was full of ambition to gain more overseas transaction experience, the financial world had just collapsed, as the financial crisis took hold.

For the first few months, I wasn’t utilised as much as I could have been, but it was important to me to not waste the secondment opportunity and get to work. Therefore, I actively sought opportunities to assist with proposals, improve my English skills and build my cultural awareness. It was through the “quiet” time that I adapted myself to the new work environment, culture and established my connections.

Then an opportunity came to apply for a role as the executive assistant to the deputy chairman of KPMG International. I thought: why not give it a try. And, after multiple rounds of interviews, I got the job.

During my three years of working at KPMG International, I experienced huge learning curves, working on “out of the box” tasks, from global governance and budgeting to individual global initiatives. Not only that but the language and culture differences and working with senior people around the global network really enabled me to grow.

As a Chinese female, I am by nature a shy and conservative person.  There were many situations where I was amongst the most senior staff in a (majority male) boardroom meeting, yet it was a challenge to consider how I should present myself and how I should contribute to the discussions.

When I look back, it was the most valuable experience for me to get out of my comfort zone, embrace the change and establish my connections with the global network.

While there were moments where I wondered about my career development, I feel grateful and privileged that KPMG provided me with opportunities to move forward and challenge myself.

What do you think the benefits of gender diversity are to business?

I’m proud to tell you that at KPMG China, over 60 percent of our employees are female, and about 40 percent of our partners and directors are female as well.

Staff, especially female colleagues, are always inspired by women in leadership roles. They are interested to hear of their success stories in their careers and their work life balance, and are motivated to follow in their footsteps.

For example, there is a public Wechat platform set up by a female partner from KPMG’s Shanghai office called 开心莫小莫. It has attracted a lot of attention from staff in the Big Four (accountancy firms) and with other young professionals. The postings about the life of accounting firm professionals and women leaders’ lives are very relatable and inspiring.

Gender diversity benefits business from more engaged work forces, strong cultures and improved performance.

What do you hope to see change to make gender diversity possible?

A lot of campaigns and initiatives are focused on big cities such as Beijing, Shanghai, Guangzhou and so on. I think more attention and support should be given to less privileged women in less developed cities.

For example, to provide training, technical and financing support for women entrepreneurs to set up and develop their business. Provide more “people to people dialogue” through the education system to advocate gender diversity and equality in schools, especially in those less developed areas, to give the girls confidence, passion and empowerment to change. 

What advice you would like to share to other women contemplating chasing senior roles in business? 

My advice is to be brave and be yourself.  Always keep interested, remind yourself what you really want to pursue and take actions.

As a career woman and a mother of a teenager, my secret in managing stress is to keep exercising.  Whether it is a work out in the gym, or a short run in the gaps at work, it helps to set myself free, refill with new energy and stay positive.

The post Daisy Shen of KPMG Global shares her journey to leadership and views on gender diversity appeared first on Focus - China Britain Business Council.