In our series of blogs, we have looked at how consumer-focused industries has accelerated its adoption of digital technologies to help it survive the global coronavirus pandemic.
Now, as the world gradually comes out of lockdown, we ask what’s next for consumer-oriented companies and their use of digital?
Change through crisis
Over the last three decades, consumer-focused companies in China have been transforming. Today, they are among the leading global innovators and adopters of technology at scale. Change has been steady, from the arrival of western brands as the bell-weather of new ideas and technologies, to the ultra-connected digital stores and supply chains of today. But we also see transformation and technology innovation accelerating in times of crisis. Just look back to 2003 when the SARS outbreak in China caused lockdowns and business disruption, although on a smaller scale than today.
At that time, the crisis boosted the rise of the (then) start-up Alibaba’s Tao Bao, which was to become one of the largest global ecommerce platforms, extending its reach far beyond the Chinese consumer sector. In a similar way, transformation driven by the 2020 COVID-19 outbreak has the potential to spark a very large transformation of consumer-oriented industries.
Pre-COVID-19 – already transforming
So, we can see that China was already reinventing itself. On this journey, another key milestone was the launch of WeChat by Tencent in 2011. This created the basis for fully mobile, seamless, ultra-convenient ‘cashless’ consumer engagement. As in most countries, retailers were re-thinking old store formats as part of an omnichannel strategy, while CPG brands saw the fantastic opportunity of going direct to consumer.
Still prior to the COVID-19 pandemic, the exponential growth of digital promotions (moments) on China’s ecommerce platform saw Alibaba’s annual 11.11 promotional event achieving over € 35B sales in 2019. E-commerce is growing both in volume and in speed: by connecting online and offline in an omnichannel journey (which China calls O2O), it became possible for many consumers in large Chinese cities to take delivery of their purchases anytime, anywhere within 30 minutes of validating their online order.
During COVID-19 – reacting at China Speed
When the coronavirus struck, the country reacted extremely fast. It is interesting to consider this reaction from three perspectives: consumers, companies and the consumer products environment.
Consumers make a massive switch to online
As we saw in an earlier article in this series, consumers were quick to adapt their consumption habits, with a rise in online ordering, home delivery (often touchless), and a contactless store experience. For example, 80% of Starbucks’ orders were made on a smart phone during the lockdown, of which 30% were delivered to the customer, and 50% collected as a takeaway. And it wasn’t just in consumer products and retail that we saw new buying habits. In our article on China’s automotive sector under COVID-19, we learned how live streaming was being used in virtual stores for online car viewing, car selection, car ordering, and even car buying.
Retail companies and brands reacted with extreme agility
Some retailers maximized their synergies between offline and online. As we saw in our article, retailer HEMA’s highly digitalized store increased its home delivery capacity by implementing a resource sharing model with restaurant chains.
The extreme agility of China’s supply chain was a characteristic of the lockdown, made possible by leveraging existing ecommerce capacity. Already used to being stretched during seasonal demand peaks, operations were quickly scaled. High precision demand forecasting helped in the response to the explosion of online shopping. AI was used to leverage new forecasting models as traditional forecasting (predicting the future through the extrapolation of the past) was not applicable in the crisis context. As we saw in our article on China’s supply chain, e-commerce player JD developed an Emergency Resources Information Platform to collect real-time information on emergent resourcing needs from hospitals and communities.
Technology innovation is a feature of the consumer products environment
Companies in China bet hard on technology innovation. Digital innovations that were already under development, or being used at a small scale, were quickly launched and scaled. For example, robotic warehouse solutions rapidly became the backbone of warehouse operations, as described in the supply chain article.
From self-driven delivery vans to the use of data and AI to track and trace everything, as discussed in our article on AI, technology has sat at the heart of China’s response to the pandemic. Product recognition, inventory localization and contact tracing are among the many game-changing digital capabilities we have seen being scaled up. And, with a high impact on privacy and freedom, the net result was to reduce the impact on the economy, as well as human interaction in everyday life, and ultimately the spread of the disease. Shanghai and Beijing came out of lockdown in around 6 to 8 weeks. As we know, COVID-19 outbreaks continue to crop up and we expect AI to remain part of the response.
Post COVID-19 – anticipating what’s next
Although getting back to the new normal, China’s consumer-oriented industries and the retail sector are not yet at full speed. The exceptions to this are the food and beverages category, and sectors where demand has switched from global and travel retail channels to the mainland (like cosmetics and luxury goods).
Already, companies are actively taking advantage of the changes brought by COVID-19, with continued innovation in operations and consumer experience. The digitalization and robotization of operations are accelerating, according to the report from Capgemini Research Institute on Smart Stores. Chinese consumers are more willing to adopt digital technologies than any other country, notably automation in store, as described in our article on touchless retail. Customer engagement through live streaming is a fact of life, while home delivery is becoming the norm, with the expansion of delivery squads and cabinets for contactless delivery of purchases at customer premises.
In this context of continuous transformation and as China’s consumer-oriented industries return to a new kind of normal, there will be big opportunities for global brands and retailers. Looking back on our series of articles produced in response to the COVID-19 crisis, we have identified five levers for seizing these opportunities
- Digital innovation: The new customer expectations of speed and convenience can be met by digital innovations, with the likes of livestreaming, data/AI and online-offline synergies in an omnichannel approach enabling the next wave of growth to be captured.
- Strategic thinking: The accelerated adoption of smart technologies in the short term will need to be supported with a robust digital IT transformation strategy, along with the acquisition of key capabilities in digital customer experience, automated supply chain, data and AI, and deep technology innovation.
- Supply chain resilience: Companies must take a close look at the long-term resilience of their supply chains after the crisis highlighted existing weaknesses, such as lack of stock transparency or over-reliance on one country for key supplies.
- Government intervention: Do not underestimate the impact of a positive regulatory regime and government support in driving digital change, from online hospitals (see our article) to the possibility of drone deliveries at scale.
- Experience: Global brands should leverage their China experience to transform in their home regions. We have already seen Parisian retailer Galerie Lafayette launching live streaming from its store in Paris, similar to that used by China’s museums and automotive sales organizations during the crisis.
This is the start of a revolution – and new consumer behaviors, ideas and innovations will come from Asia. It will spark major changes over the next few years, triggered by technology.
At Capgemini Invent we are already working across a broad base of consumer-focused industries to accelerate this transformation in Asia and globally.
In addition to our blog series, we have produced a number of detailed research notes over the past few months aimed at helping companies assess the impact of the pandemic and adjust to the realities of operating in a post-crisis world.