Is click-and-mortar the future of China’s retail industry?

On a recent Thursday evening, the young professionals in Shanghai’s city center started rushing to the subway through the Kerry Center shopping mall. When a consumer walked into the cosmetics concept retailer Bonnie & Clyde, a beauty consultant quickly came to greet them and walk the customer through the spacious store and its stand-alone display tables and shelves chocked full of $400 face masks and $125 blushes.  

The cross-border retailer uses the store as a showroom to sell a range of niche foreign brands such as Suqqu from Japan and Chantecaille from France. It is a version of the “try offline, buy online” model that allows consumers to scan a QR code to place orders through a WeChat Mini-Program, which are then delivered in under four hours within Shanghai, and under 24 hours to the rest of China. “We have all of our stock within the free trade zone in Shanghai, and we invest a lot of support into our logistics,” said the concept store’s founder, William Lau.

Merging online and offline operations, click-and-mortar (also referred to as “clicks and bricks”) is an existing trend in omnichannel business models that has been accelerated by Covid-19. While the term refers to an innovative combination of physical and web store marketing in other countries, in China, the model could have a lot more manifestations as mobile-friendly consumers are used to shopping online.  

From emerging contenders like Bonnie & Clyde to market veterans like Burberry and Farfetch, signs point to high-end retail seriously considering the concept, but when is the right time to test the waters with click-and-mortar? And, more importantly, how should brands measure their return-on-investment? Jing Daily spoke to experts about what it really means to make a “digital transformation” and how they can start narrowing this massive issue to make concrete goals.

Luxury e-tailer Farfetch’s recent pop-up community spaces in China offered QR codes for potential consumers to scan, browse, and buy off its website. Photo: Farfetch

What is behind click-and-mortar?

Aside from Bonnie & Clyde, Burberry’s new “social retail” store in Shenzhen, which opened in August, is yet another example of how this concept can materialise in China. It offers a customised WeChat Mini Program so visitors can access store tours and learn about new products. By November 11, over 138,000 visitors experienced the store, according to numbers from the brand’s Mini-Program. In other cases, luxury e-tailer Farfetch’s recent pop-up community spaces in China offered QR codes for potential consumers to scan, browse, and buy off its website.

Click-and-mortar might seem as easy as hiring user-experience designers to create an eye-pleasing interface, but what it requires from a company goes far beyond that. If a brand wants its stores to be fully digital, it will need a thorough facelift on the back-end — or even across its entire organisation, according to Jason Ong, a director at the global consultancy AlixPartners’ Shanghai office.

The interface of the customised WeChat Mini-Program of Burberry’s social retail store.

While developing the concept of click-and-mortar, traditional retailers and digital natives have been facing different issues. “The challenge for a traditional retailer is that products are located in all the stores,” said Phillip Handford, the design director at the architecture consultancy firm Gensler (who previously worked with Burberry’s former chief creative officer and president Christopher Bailey in London). “So, for a traditional retailer to change its business to online is very expensive and risky.”

Handford thinks that his former employer sees the Shenzhen store as an experiment. “Burberry really does experiment with the latest technologies, the latest shopping habits, and the way that social media and KOLs drive exposure and the marketing of brands in China,” he added.  

But China’s digital natives do not exactly make life easy for brands. “Even though you see the physical stores, what’s behind this is community groups that manage a lot of the consumers and fans,” said Lau, who often speaks at conferences on topics about Chinese Gen-Z consumers. “This is what you would call social community management.”

Be clear with the goal and ready when the future arrives

“By 2022, we will see a tipping point in online and offline sales,” said Handford, who has also worked on global stores for Selfridges, Phillip Lim, and Adidas, among many others. “This is when we are going to see 50/50 online versus offline sales, according to E-marketer. So the power of online is really driving things about consumers.”

If a hypothetical luxury client asks Handford how they can start developing ways to test the waters, he said he would start with a series of questions. “What is their objective with a project? Is it driving sales? Is it about offering a real brand transformative experience? Is it all about service? Every client has different needs,” he explained.

In fact, Bonnie & Clyde’s debut started from a need to market cosmetics brands that the concept retailer’s mother company, Ushopal, has helped to operate in China. Lau founded Ushopal in mid-2017, a company that seeks out niche luxury beauty brands from around the world to help them operate in China. “If you were to compare [Bonnie & Clyde] with a traditional channel — the online side is managed by a certain partner, and the offline is managed by another. So you will often see discrepancies with products and communications,” Lau said. “But at Bonnie & Clyde, there are no discrepancies.”

“Even though you see the physical stores, what’s behind this is community groups that manage a lot of the consumers and fans,” said Bonnie & Clyde’s Founder William Lau. Photo: Courtesy of Bonnie & Clyde.

When it comes to return-on-investment (ROI), brands should be clear about what they want before starting a click-and-mortar project. According to AlixPartners’ Ong, progress will be difficult if brands think about click-and-mortar strictly in financial ROI terms. “I think brands need to be very careful about what ROI and metrics they want to get,” Ong said. “For luxury, I think this would almost be like digital marketing. It’s really hard to measure.”

But, he added, for a brand like Burberry, there are many metrics to track. “You can track engagement, the numbers mentioned, the number of followers on your account, and the number of membership sign-ups.”

Yet, when asked how luxury brands should approach this new concept, all of the experts pointed toward a brand’s customer profile. “I know it’s a bit cliche, but the customer is the center of it,” Ong added.