China retail: a crucible of competitive innovation

China Retail App

Earlier this week it was announced that China now has over 800 million Internet users – more than the population of every other county on the planet except for India. That represents a penetration rate of 57.7% according to the China Internet Network Information Center. Over 98% of the users go online with a smart phone; 566 million use mobile payments.

In other words, the internet has become so pervasive that the establishment of new service companies like Luckin that leverage the smart phone and the supporting IoT and logistics ecosystem has become the norm rather than the exception. Achieving massive scale at lightning speed has never been easier – though by the same token this also means that competition has never been fiercer. Intense battles for dominance of mundane market segments will rage. The rapid rate of change will mean that not even the strongest incumbents will be safe. The only question is where the next major battlefields will be.

China Retail

I’ll leave China unicorn hunting for others who are much better connected to the zeitgeist than I am. I’m more interested in looking at how this transformation is playing out in different vertical segments including retail, education, transportation, and industrial.

Among these segments, retail is certainly the most visible thanks to the high population density in urban areas that makes the roll-out of new businesses fast and scalable. Consumers are eager to try out new products and services, and the multiple courier services provided by companies like makes offering home and office deliveries a default rather than an option.

China Retail

Add in the aggressive expansion strategies that major platform players such as Alibaba are implementing to merge online and bricks-and-mortar operations into highly-integrated O2O services that will not just serve but also anticipate consumer needs, and you have a crucible of competitive innovation bubbling away at greater levels of intensity than anywhere else in the world.

For Chinese consumers this will mean better products and more convenient services than they’ve ever enjoyed before. As for the rest of the world, I’m sure that the teeming streets of China’s major cities will provide a similar source of inspiration as the cafés of Italy did for Howard Schultz when he set about building Starbucks.

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