STRATEGY MADE SIMPLE

Bricks v Clicks: Showdown in China Retail

 

China offers a valuable source of insight into opportunities and threats in the US market. There is an interesting article in The Economist (Dec 19th) on the continued rise of Huang Jianlin and his ever expanding business empire. From its roots in traditional real estate, his company Dalian Wanda has grown to a $40Bn business and amassed a $25Bn fortune for Mr Huang along the way – putting him jockeying alongside Jack Ma of Alibaba for the title of China’s richest man.

 

These two men in many ways personify the struggle between online and offline (bricks v clicks) sales channels – and strategies available to the “old” business model in the face of the onslaught from the new economy.

 

Huang is diversifying into entertainment (buying AMC cinemas for $2.6Bn in 2012); luxury hotels (billion dollar investments in Chicago, LA, London and Sydney); and building a world’s largest $8Bn move studio complex in Qingdao, China. By integrating entertainment opportunities that you cannot find on Alibaba, even karaoke bars, into his malls he is creating something “worth leaving the house for”. Currently 40% of his mall space is devoted to these types of “experiential consumption” venues (versus 60% traditional shops) and he plans to reverse that ratio.

 

In the malls themselves he is deploying technology to provide micro level geo-positioning and a highly customized, dynamic experience. Shoppers can book parking spaces and conclude purchases on their phones as well as try goods out in real life. They can also choose free home delivery so they don’t need to be burdened with parcels.

 

What is the takeaway here? – Huang's actions here show that the old economy still has a fight left in it, and in fact can thrive with the right strategies. Technology can be leveraged to support that real world, high touch customer relationship just as effectively as supporting the “at a distance” online fulfilment model. By undermining some of the differentiators by offering mobile phone friendly sales (no queues) and free delivery (no carrier bags – unless you choose to) and enriching the experience with restaurants and entertainment, Huang is bringing the fight to Ma by offering an online experience in a more engaging location than in front of a tablet or phone in your home.