American retailers never cease to amaze me, and it's not just the variety of merchandise, but the juxtaposition of art and science in shopper marketing. From a coordinated path to purchase, inviting display end caps and tactile-experience zones, not a single trick is overlooked to turn a quick trip to the Gap for a $75 pair of jeans into a $200 impulse purchase bonanza.
This year's trip was different as retailers as diverse as luxury boutiques and mass merchandisers asked me to join their loyalty program in exchange for immediate savings. Retail rewards programs have been around for decades, but never before have they seemed so widespread. In the new era of targeted, database marketing, American retailers have learned the value of earning customer loyalty.
Retail in China, by contrast, has still a long way to go, especially in loyalty marketing. Sure, it has also undergone a renaissance in the last decade, but the focus has been more on making a presence and relying on organic growth rather than driving profitability.
Shanghai recently has been been host to new, glistening, international branded stores from brands such as Uniqlo and Apple, built to global standards.
Their hardware, so to speak, is impeccable, but the retailers' software still lags far behind.
Without the right combination, the unfortunate result has been shops devoid of customers inevitably followed by store closures because of soaring rental costs.
With the mistaken belief that China possesses a never-ending supply of new acquisition targets, there continues to be no emphasis on the core 20% of shoppers who make up 80% of the average Chinese retailer's business. Everyone is generally treated equally and promotion win-backs targeted at encouraging return visits are rare.
Retailers rarely collect and maintain proper databases that would help them identify their core customers. Data management continues to be a function of the IT department with marketing rarely going beyond the top-line sales data so consumer-segmentation models rarely get applied.
Besides providing a target and focus, segmenting can help drive a common language between marketing and sales departments that work together to turn the right leads into customers.
Car companies in China such as Ford Motor Co. and BMW are ahead of the game when it comes to target marketing at retail, and it's not just because of the high ticket price of their products. Auto manufacturers in China share a special relationship with their dealers who, unlike their western counterparts, share data openly and work closely together.
Italian luxury-fashion giant Ermenegildo Zegna, now with 57 stores in China, has got retailing down to a science. Zegna effectively integrates its sales and marketing functions by creating common KPIs for everyone in the company, from top management to store sales clerk. There's strong data discipline, with a customer database that's shared by all. Top customers are singled out and given special access to clothing launches before they reach the public. At Zegna, CRM is not just a function within Marketing but the way the company markets its products.
Retail in China has seen a massive transformation, and will continue to expand, but it needs to begin to shift its emphasis to growing store profitability. Proper database marketing and rewarding your most profitable customers is the first step in the right direction.
A 17-year resident of Greater China, Bryce Whitwam is general manager of Wunderman, Shanghai.
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