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To see the future, look east
By STORES Contributor on	 February 11, 2019 NRF19
On the final day of NRF 2019: Retail's Big Show, Harlan Bratcher, global business development head for fashion with JD.com, and Rod Sides, vice chairman and U.S. leader of the retail, wholesale and distribution practice at Deloitte, gave a joint presentation.
Sides began by offering some statistics to explain to his listeners just how large, and how rapidly growing, the Chinese retail industry is. Consumer spending has increased 45 percent in the last five years, a rate nearly double that of the United States (24 percent) over the same period.
"What's really driving this rate of increase," he said, "is the presence in China of 415 million millennials." Of this population, he said 57 percent hold at least a bachelor's degree, and 90 percent own a smartphone. "But it's not only millennials," Sides said. "There are currently 700 million internet users in China."
With this he brought on Harlan Bratcher, a one-time Neiman-Marcus personal shopper who is now in charge of the U.S. side of several of its main businesses for JD.com. (JD.com is the largest online retailer in China and one of its largest retailers of any type.) Bratcher prefaced his description of some of the more startling developments in Chinese retail by explaining how China managed to do so much so quickly.
Part of it is the sheer size of the economy; over the last 30 years, China has become a global leader not only in manufacturing but in finance, mining, large-scale construction, electronics, shipping and several other industries.
One reason China is a world leader in mobile capability and digital infrastructure, Bratcher explained, is the advantage of having gotten to skip a few steps. China did not, for example, spend a century building a nationwide copper-wire telephone infrastructure and then have to try to figure out how to replace and maintain it at the same time. "They leapfrogged," Bratcher said. "They went directly from unconnected to mobile to smartphone."
They did somewhat the same thing with mobile payment. It's not true that Chinese didn't carry credit cards — lots of them did and still do — but it was never as widespread as it is in the United States. And now it's fading; China, at least in the major cities, is very close to a cashless society. In some places people don't even need a phone; the store knows who they are through facial recognition, and simply debits a shopper's account for what it sees them take.
Which comes back to shopping, and what's different about it there. One difference has to do with online behavior. The Chinese — or at least many of them — are not in the habit of hopping back and forth from, say, a retail website to a page full of work emails to a social site to yet another retail site. Instead they stay on WeChat, a multipurpose messaging, social media and mobile payments app that currently has 902 million daily active users.
With well over 300 million active users, JD.com is a major competitor of Alibaba's Tmall. JD is also a logistics giant and provides what it calls retail-as-a-service — basically, the entire supply chain, plus an online marketplace — to other merchants. Being good at logistics is extremely important in the Chinese market, Bratcher said, because these consumers are sticklers about people keeping their promise. One such commitment JD makes is the 211 promise, which is now available to 99 percent of the population of China.
What is the 211 promise? If a customer places an order before 11 a.m., they will receive delivery by 11 p.m. the same day. If they place the order after 11 a.m., they'll receive it by 11 a.m. the next day. JD is not perfect, Bratcher said; it only has a 90 percent fulfillment record on the 211 promise.
Another, more recent service, is white-glove delivery, available only in the luxury goods market and only in the top-tier cities. When a customer buys, say, a St. Laurent handbag on JD's luxury platform, in less than two hours a black-suit and white-glove-wearing JD employee will arrive in a black electric car and hand-deliver the purchase to the customer. (Or to the recipient, in the event of a gift purchase.)
Asked what lesson retailers sitting in the audience should take away from all this, Bratcher said, "It's really good to remember the three Ws — what, when and where. Traditional retailers do the 'what' — providing goods the consumer wants — very well. The 'when' and 'where' is something you can do yourself, or there are a lot of big logistics and supply chain companies you can partner with. In Asia, we're a good one."
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