A research paper published this month by Kantar has highlighted that grocery shoppers in China are some of the least loyal in the world. Whilst the research explores deep analysis to try to explain the reasons why, I believe there are three key things that modern trade retailers in China could do to improve the loyalty of their shoppers:
1. STOP FOCUSSING ON PRICE ALONE
Yes, the Chinese are incredibly value conscious. But this is culturally ingrained and so is simply a hygiene factor for success in this market. The major grocery retailers, however, appear to only focus/ communicate this aspect of their proposition. But low prices alone cannot drive loyalty if everyone is following the same strategy.
2. ENHANCE THE SHOPPING EXPERIENCE
Very little attention is paid to the shopping environment and the training of store staff in China. But low prices result in low margins making it very difficult for retailers to invest in the soft stuff that can enhance the shopping experience and so make someone leave the store having enjoyed a positive experience and with the intention of returning again. Whilst the International brands have the best global credentials to be able to own this space, they are also faced with shareholder pressure for profitability that may reduce their ability to implement these initiatives. Best Buy is a clear example of an international retailer who tried, and ultimately failed, to sustain an enhanced customer shopping experience in China for these reasons. Unfortunately, it appears that it may not yet be economically viable to "Surprise and Delight" shoppers in China.
3. STAND FOR SOMETHING THAT PEOPLE CARE ABOUT
The retailers need to become more shopper-centric, and this could be achieved by simply listening to their shoppers. If they were to ask shoppers in China what the single most important factor was in their choice of groceries, the answer would almost certainly be food safety/quality. However, no retailer has yet been brave enough to make this their stated mission.
With China's ineffective quality standards enforcement, a "food quality" brand positioning would certainly be very difficult to deliver. But maybe Private Label could become this differentiator?
Currently, Private Label is virtually non-existent in China, arguably because no retailer has sufficiently invested in their brand to make any product bearing that brand name credible. But perhaps the answer in China is to approach Private Label not as a low cost option, but as a premium option. Tesco Finest in the UK is an example of how high levels of consumer trust in the Tesco brand name enabled the creation of a super-premium range of products selling at prices higher than the established brands. A secondary benefit of the Tesco Finest launch was a halo effect, further enhancing the consumer perception of the Tesco brand.
If Tesco (or any other retailer in China) was able to launch a marketing-supported premium private label brand that guaranteed 100% control of the supply chain from farm to shelf, and therefore of the quality of the product, they would most likely kill three birds with one stone:
• They would credibly be able to position themselves as China's highest quality grocery retailer
• They would secure a meaningful differentiation that would be very difficult for competitors to quickly copy
• They would enhance their profitablity through the sale of higher margin goods, enabling them to invest in the previously unaffordable soft stuff
I don't mean to take anything away from the obvious rigour that has gone into Kantar's (very interesting) research paper. But like many things in China, the answer to the issue may not be that complex. But, as with almost everything in China, actually taking the necessary steps to address and resolve the issue may prove very difficult.
