One month ago, Retail in Asia reported U.S. apparel retailer Gap Inc. had sold its Greater China business to local e-commerce company Baozun Inc. The Gap Greater China business will form part of Baozun Brand Management (BBM), a unit of the e-commerce solutions provider designed to leverage the company’s dominant portfolio of technologies at the service of brands, and to engage in longer and deeper relationships with brands.
As a brand e-commerce service partner that helps companies execute their e-commerce strategies in China, not only is this acquisition deemed strategic by many, it also marks a new chapter for both companies. While all eyes are on Gap China, awaiting its next big digital move, Retail in Asia had the opportunity to talk to both Jason Xie, Vice President of IT, Baozun and Victor Liu, Vice President of Baozun Asia. Together we discussed the e-commerce landscape in China, and what acquiring Gap means to the company.
RiA: How is the e-commerce landscape changing in China?
Xie: Based on our observations and past data, the e-commerce landscape in China is growing at an unprecedented rate. China is currently the largest market globally for e-commerce, with more than half of retail sales in the country attributed to e-commerce – and it’s not slowing down any time soon. We know that there’s still immense potential for the market to grow and evolve, especially across social commerce and cross border e-commerce. Specifically, we are also seeing technology innovations and strategic alliances to boost growth in digital commerce, and what acquiring Gap does mean to Baozun.
RiA: What are some insights and trends on e-commerce in China?
Xie: In China, the customer journey has evolved – more retailers and brands are opting for an omnichannel approach that allows them to aggregate data and build a predictive strategy that provides custom product recommendations based on past shopping behaviour. This approach is increasingly becoming a default in the industry, and making sense of big data across platforms will be key for brands to drive the right kind of marketing engagement.
China also has an extremely robust infrastructure and logistical framework in place to service rising customer expectations. In China, one-day or even same-day delivery is the norm. This has pushed more brands to recognise the value of having a cost-effective logistical solution that allows for seamless product shipping and faster delivery times.
Retailers in China are also pioneering alternative ways to market their products, notably adopting live streaming and utilising KOLs (key opinion leaders) and content creators to engage audiences and convert sales. However, as some of these influencers have gotten into trouble with the government in recent times, brands in China have started to take a more blended approach to their influencer strategy. In this case, they are looking into KOC (key opinion customers) and/or creating their own influencers either virtually or via their own staff members.
RiA: What challenges do new players face in the e-commerce industry?
Xie: Some of the most common challenges faced by e-commerce startups are related to logistics and technological implementation. Generally speaking, while the barrier to entry for e-commerce can be lower than traditional industries, sustaining the business growth and scaling effectively requires deep expertise and know-how.
We understand these pain points and our solutions are geared towards addressing them – providing innovative tools that will maximise operational efficiency and accelerate future growth. Our solutions aim to streamline everything from basic day-to-day operations to merchandising, marketing and fulfilment.
RiA: How can retailers avoid these issues while expanding their businesses?
Xie: In the earlier days, it’s important to have the right approach towards leveraging technology and solutions, and not just see them as a catch-all solution. Implementation has to be thoughtful and targeted – using customer feedback to understand pain points in the customer journey or logistical workflow can help retailers find a right approach to streamline processes, allowing them to scale effectively and seamlessly.
Today, it’s impossible to ignore the power of data and the insights it offers. Retailers must recognise the importance of engagement – the key to unlocking this is by plotting out customer journeys and understanding that retail has to be immersive and engaging. To aid this, there are several tools and technologies that can really enhance the customer experience. Business growth and continuity powered by technology is often the key differentiator between retailers.
RiA: How do you plan out a seamless customer journey for brands on their e-commerce platform structure?
Xie: Customers today demand immersive, hassle-free and personalised customer experiences. As a result, retailers need to reimagine what the customer journey looks like for their target demographic so they can stand out from competitors. This is one of the reasons why the demand for omnichannel solutions is growing. Omnichannel solutions provide customers with multiple options when engaging with a retailer, so they can choose whichever platform is more convenient for them.
The customer journey also has to feel seamless from start to finish – from order to check-out – ending with multiple delivery options such as contactless delivery, in-store pickup, or self-service checkouts.
Ultimately, the question retailers have to ask themselves is: how can we use technology to create personalised, memorable experiences for our customers and deliver on our brand promise?
RiA: Could you share some examples of brands that were able to upgrade their digital transformation with a successful omni-channel strategy?
Xie: At Baozun, we provide a suite of omnichannel solutions tailored to support brands and drive their growth. During the pandemic, we supported many global brands by leveraging technology to reach consumers who were home-bound.
Specifically, Baozun developed a remote sales app – Baozun Online-to-Offline (O2O) – to improve brand store sales and revitalise offline inventory. This meant that brands could sync up their online and offline channels during the pandemic and offline store staff could recommend new products to customers through the app. With stores and warehouse closures a common thing during the pandemic, the app minimises the impact of this by identifying and directing new orders to other available stores and warehouses.
Just ten days after launching in March this year, Baozun saw an increased GMV of over 200%, with remote sales accounting for over 30%. This tool allowed us to not only respond flexibly to customer needs but also help them to retain their business during uncertain times.
RiA: How has the Chinese e-commerce industry changed due to the pandemic, and where do you see it going?
Xie: The pandemic and lockdown has allowed for an increasing number of users to be familiarised and conditioned to online shopping. As a result, brands and online marketplaces have had to constantly innovate to connect with and keep home-bound audiences engaged.
The rise of social commerce is another trend that emerged from the shift to digital mediums during the pandemic. Live commerce is one of the key trends that emerged from this rise. A growing trend, live commerce is the combination of entertainment with live shopping via social networks where shoppers can purchase products instantly. Social commerce has been effective in increasing conversions and building loyalty because it is informative, interactive and entertaining. At Baozun, we empower brands to build up their social commerce arm and target their key audiences through technology integration via WeChat mini program, which is most often used by the Chinese. Moving forward, technology will be critical in assisting businesses to adapt to changes and drive long-term, sustainable growth.
RiA: What are the key e-commerce trends you foresee to be booming in 2023?
Xie: Digital commerce is the future, and it is here to stay. At Baozun, we have been fortunate to witness and be a part of the e-commerce revolution for the last 15 years. Considering the pace of technological breakthrough and innovation we are seeing, retail will become increasingly hybrid, experiential and convenient for consumers.
In Southeast Asia, there has been a great demand for omnichannel services. Brands want to provide a consistent experience across all touchpoints, especially with the introduction of new types of commerce that have gained popularity due to the pandemic – like social and live commerce. With a multitude of platforms, culture and behaviours across the region to contend with, brands must streamline their strategies and learn from their local partners to drive growth in 2023.
RiA: What does acquiring Gap mean to Baozun? Should we expect more retail tech breakthroughs in Gap’s China locations in the near future?
Liu: At Baozun, technology is the centre of our strategy, and we believe it drives success when harnessed correctly. We are extremely excited to launch Baozun Brand Management (BBM) to further engage and build deeper relationships with brands. The acquisition of Gap, with its brand equity and significant size in China will help to accelerate our evolution into a technology-driven and omni-channel commerce player. Beyond this, it provides a competitive advantage and effectively bridges the digital commerce/brick-and-mortar gap.
RiA: Should we expect more fashion brand acquisition for the Baozun Brand Management (BBM) in the future?
Liu: The launch of BBM is a strategic extension of our existing core e-commerce services. We have previously dabbled in brand management via minority equity investments and strategic alliances with six other major brands across clothing, accessories, health and beauty – which saw great results this 11.11 with a year-on-year increase of 263%. There is great potential for BBM to become a new avenue for growth and we are excited to see how it will play out.
RiA: What are the future plans for Gap in the next five years?
Liu: We are excited to work with Gap and unlock its growth potential, while achieving closer connections with new and existing customers. We will also continue to innovate and provide customers with a more personalised and service-oriented experience to cater to their evolving needs.