Zhang Xin   Associate Professor of Tongji SEM

Source: Jiefang Daily

A few days ago, the traditional American retail chain supermarket “Costco” opened for business in Shanghai welcoming many “early adopters”. For new retail or traditional retail, the only way to win is to do extremely well in becoming “more，faster，better and more economical”.

NOT “foolish people with plenty of money”

Business is the conduct of Commodity Exchange with money as the medium. Whether a product can be traded depends on two factors: a satisfying product and an effective sales channel or platform. The essence of business boils down to “more, faster, better and more economical” commodity trading.

For the enterprises, “more” means that a reasonable positioning brings more customers, while for customers it is the variety of goods and choices. Enterprises should be reasonably positioned to win over more target customers, and at the same time, provide as many commodities and price choices as possible to attract more customers and returned customers.

“Faster” means shortcut and convenient of shopping, delivery, receipt and service in the process of pre-sales, sales and after-sales.

“Better” indicates not only good quality of the product, but also the quality of service. It is a strategic asset of the enterprise that selecting products, self-created brand, product monopoly, authorized sales and the pursuit of humanization is the main approach to ensure the quality of products and services.

For enterprises, “more economical” means to reduce operating and management costs and improve resource utilization efficiency, while for consumers, it means lower product prices and saving money. Research shows that cost performance is an important psychological indicator for consumers to buy goods. However, the pursuit of cheapness does not mean a downgrade of consumption, and consumers are not “foolish people with plenty of money”.

For enterprises, the main way to help consumers save money is to expand the scale of production and operation to reduce the average cost of the unit product, establish a perfect supply chain to control the overall cost, or innovate the profit model and take advantage of other channels to obtain non-operating income to partially offset the operating cost.

Emerging Comercial forms have multiple advantages

In human history, the emergence of merchant class is the third social division of labor after agriculture, animal husbandry and handicraft industry. This social division of labor has improved the specialization of production and labor productivity and become the source of national wealth. In terms of commercial format, it has roughly experienced the evolution process of “traveling vendor- sitting merchant- department store – supermarket – e-commerce – new retail”.

Traveling Vendor is the earliest form of commerce, that is, the peddlers carrying the load on shouder poles to sell goods. This kind of mobile management mode actively delivers goods to the consumers, solving “fast” problem preliminarily.

Sitting Merchant is to sell goods in a fixed place of business. It can make goods “more”, also can guarantee “better”, but difficult to achieve “faster and more economical”.

Department stores retain the form of sitting merchants in the business operation, but realized the “more” revolution. This kind of large-scale retail commercial enterprise manages various goods categories, and can select the goods, control the inventory, establish own brand, thus well solves the problem of “more, better and more economical”. Since the world’s first department store — “Le Bon Marché” born in 1862 in Paris, France, department store gradually became the main form of modern retail business.

The emergence of the supermarket is another revolution of the sitting merchants. This kind of open self – service, self – selection commercial form of sales, on the basis of keeping and promoting the characteristics of “more, better and more economical ” of the the department stores, has preliminary solved the problem of “faster”.

E-commerce is a new type of business that combines commodity display, shopping, payment, logistics and service on the Internet platform. On this basis, the new retail will further apply big data, artificial intelligence and other technologies to deeply integrate online cloud platform services, offline sales experience of physical stores or manufacturers, and modern logistics. This new type of business has the advantages of low operating cost, convenient and fast commodity trading, high efficiency and mass customization. If the quality can be controlled, it is expected that the “more, faster, better and more economical” will be played to the maximum.

Understand and follow “more, faster, better and more economical”

Whether it is new retail or traditional retail, as long as on the basis of “better”, if it  achieves the ultimate in one or two or all in terms of “more”, “faster” and “more economical”, it can be successful in the market.

For example, in the traditional retail industry, on the basis of quality control and paying attention to details of brand image management, some famous clothing stores make consumers feel “value for money” through simplifying product packaging and reducing product cost, thus win the favor of many consumers. Meanwhile, a format that is committed to create the extreme low price and extreme cost-effective like “100 yuan store” achieved success as well. If the advantage of “more” can be increased, “convenience store + cosmeceutical store” may become the final winner of the future small retail market.

Back to “Costco”, it provides a lot of products and services, and the overall product categories remain around 4,000. At the same time, in order to guarantee the quality of goods, save customers’ time and reduce inventory, “Costco” only provide two or three selected “popular styles” in any category of goods. In addition, its after-sales service is also very distinctive, such as changing or refunding without reason, time limitation, or receipt, and all returns are destroyed. Even used, eaten goods, as long as the customer is not satisfied, can be returned at any time.

At present, “Costco” has more than 96 million registered members with more than 90% membership renewal rate. But given factors such as China’s consumer culture, this multinational enterprise will have to adjust in many ways before it can really take root.

Compared with traditional business forms, the healthy development of new retail also depends on the full play of “more, faster, better and more economical”. For example, Hema, the leader in new retail, can be “more, faster and better” without any price advantage. Unmanned retail stores have made innovations in convenience, but they still need to improve the advantages of “more” and “more economical” etc..

Economic theory and practice show that the specific development path of different business forms can be different, but the essential requirements are the same. For consumers, whether new or traditional, “more, faster, better and more economical” explains  good retail. Catching on and following this rule, retailers can activate the market without relying on “Costco” and other catfishs, or “burn money” to do web marketing and create visitor volume.