Estée Lauder Says It Spends Money to Take Risks; P&G Says It Now Sells a Lifestyle...

At an industry summit Alibaba hosted a few days ago, Estée Lauder, P&G, a group of "Taobao brands" and Alibaba's top executives shared their views on e-commerce and on commerce as a whole. We have pulled out the parts worth knowing.

Since September, every business tied to e-commerce has been busy in earnest. Merchants in large numbers have begun planning their biggest promotion of the year, on Singles' Day (Nov. 11): forecasting demand, stocking up, building buzz... A shopping spree that lasts longer than ever before, and may end with shoppers spending more than ever, is almost here.

Before this wave reaches consumers, merchants usually sit through several large briefings and events that Alibaba organizes or takes part in, to learn what China's largest e-commerce platform thinks about that year's buying frenzy.

The "New Online Merchants Summit," held in Hangzhou on Sept. 7-8, was one of them. This year's theme was "New Turning Point, New Models, New Trends." Over a full day of talks, QDaily picked out the following speakers. Their views on e-commerce, and on commerce more broadly, are worth a look.

Zhu Zhenghua, General Manager of E-commerce, Estée Lauder China: We Spend Money and Take Risks for an Entirely New Shopping Experience

If you want to see how torn a foreign consumer goods company can be in China, Estée Lauder may be a good example: several of the group's brands have entered the Chinese market, and it does not want to miss out on the rise of e-commerce.

But how do you balance brand values, sales figures and the customer experience? According to Zhu Zhenghua, it takes enormous amounts of time, energy and money: "Because meetings are held across the whole world, a conference call has 20 people on it: one person talks, 19 listen, and nobody knows who should make the decision. We have to carry on the character of a century-old American house and still satisfy Chinese consumers. Getting from one to the other is extremely hard."

Zhu's job, in effect, is to help brands such as Estée Lauder, Clinique and La Mer rebuild how they sell in an online setting. The biggest challenge, he feels, is that the way the group and its brands have always talked keeps customers at too great a distance.

The first task in this overhaul is to redesign the visuals and the creative work. Many shoppers, for example, see a goldfish tank in La Mer's physical stores. So before La Mer's Tmall flagship store went live, the team spent a long time recreating the goldfish tank online as an H5 web page. It was, of course, expensive.

Estée Lauder also wants a sense of ceremony at the moment the courier hands you your package. Take this La Mer gift set:

"Its box takes 18 production steps, with materials from 8 suppliers, and packing it takes almost 20 minutes. Until the day before launch, the box's design still wasn't final, because we could not get the color of the four corners right. We put endless effort into details like these, but customers can feel that care when the box arrives," Zhu said.

For makeup lines such as Bobbi Brown, Estée Lauder also tried selling a service online for the first time: buy a product and you get free advice on makeup trends and how to apply them. "In Hong Kong, Tokyo and New York, we already see people seeking makeup services for particular occasions, so we hope Chinese consumers can start to understand this model too."

Matthew Price, CEO of P&G Greater China: How to Sell a Lifestyle to China's "Boss"

Matthew Price, who took over as CEO of Greater China nine months ago, said in his talk that the "boss" he must serve in China is a group of young white-collar women who are also expectant mothers. How they shop is far more complex than in the US:

• They use twice as much makeup as American consumers, and at least six products in their daily skincare routine;
• They change their children's diapers 22 times a week and want softer products;
• They routinely use laundry pods and disinfectant made for children;
• 50% of their everyday spending happens online, and they spend more than 2 hours a day on their phones, but they also shop at brick-and-mortar mother-and-baby stores.

Matthew Price, CEO of P&G Greater China

P&G has an internal "Consumer Truth model" that maps the whole journey from a brand first reaching a consumer to finally getting her to buy. In traditional retail, the model has only three stages:

Reaching the consumer (she sees an ad) — the consumer buys the product in a store — the consumer uses the product

In e-commerce, the journey is a bit more complex:

The consumer learns about the product online — browses and buys in an online store — receives the product — uses it and gives feedback

P&G has reworked every stage for the e-commerce era:

• Discovery: It used to buy large amounts of advertising on television, on radio and outdoors; now digital marketing alone lets it find its target audience on e-commerce platforms;
• Purchase: It used to put great weight on getting products onto store shelves, because shelf placement directly drove sales, but that was not cool; now online stores have done away with shelves, so it can tell more stories about each product, or speed up delivery and improve the feel of the packaging;
• Use: It used to be hard to collect feedback after people used a product; now the experiences shoppers share online can also become part of word-of-mouth marketing.

"If P&G used to sell products, and what those products do, then today we are selling a lifestyle," Price said.

Fan Chi, CEO of Koubei: We Will Spend 5 Billion Yuan This Year to Build an Ecosystem With Merchants

Unless you live in Hangzhou, you may never have heard of Koubei. Four years ago, much like Dianping, it ran an online information platform that put listings and reviews for every restaurant on the web, and it also handled in-store payments. But the results were poor, and it eventually faded away.

Only recently did Alibaba and Ant Group revive the brand together, jointly investing 6 billion yuan. Koubei CEO Fan Chi says he has worked out why it failed the first time: first, smartphones were not yet common; second, internet connections were slow; third, physical businesses had no shortage of customers, since people walked in wherever a shop happened to be.

"Restaurants have entered a new stage. Owners are moving from chasing revenue to chasing fans, because in the restaurant business it costs far less to keep an existing customer than to win a new one, especially in O2O (online-to-offline). If every customer a merchant serves is a new one, it will always have to give them that meal at 20% off. So our motto is: every merchant should make money with Koubei."

Fan said that Koubei, like Alibaba, wants to become an ecosystem that draws in merchants, service providers and developers to make money together. "This year we will invest 5 billion yuan in merchants, to help them understand what Koubei is and how to do business on it."

Fang Jianhua, Founder of Inman: "Taobao Brands" Will Open Franchise Stores Offline

Of the many companies that announced plans this year to list on the NEEQ (the "New Third Board"), a group of "Taobao brands," including Inman, Liebo and Handu Yishe, drew particular attention. These, remember, are domestic brands that value-conscious Chinese shoppers built up with real money on e-commerce platforms.

Fang Jianhua, chairman of Huimei Group, Inman's parent company, said that although the company has done well as a "Taobao brand" that grew up online, a huge share of offline sales is still waiting to be won. To get it, Inman launched a plan this year called "Inman+ Thousand Cities, Ten Thousand Stores."

Think of the plan as Xiaomi's "Mi Home" stores copied into the clothing industry: "We are taking Inman's existing 3 million most loyal fans and making them owners of Inman, starting businesses alongside us. At heart, we are in the business of people."

The key is to combine three kinds of business effectively: traditional stores, e-commerce and selling through social media. Fang said Inman will not do what it did online and dictate order volumes and prices to the shop owners who join. Instead, it hopes to draw on their grasp of Inman's style and brand values to help it find target customers offline, so that more people can try the clothes in person.

According to figures from Inman, since "Inman+ Thousand Cities, Ten Thousand Stores" began on May 1 this year, the number of franchise stores has reached almost 100, and the target is 200 by year-end. Five years from now, it hopes to cover 1,000 cities in China with 100,000 stores.

Mao Daqing, Founder of UrWork: We Want to Be the Offline Alibaba

After leaving Vanke, Mao Daqing set out to build UrWork, a Chinese shared office business. In his talk, he spent a full hour describing four "sharing economy" models in real estate that he had seen in the United States:

• Co-working, built on "space + events + services": its leading example, WeWork, not only uses space efficiently but also draws on the companies inside its spaces to bring in a wide range of services, and even investment;
• Integrated office buildings, built on "space + living + community + services": you can do everything in one building, from work to entertainment to daily life, very efficiently, and the money comes from the various rental services within the community;
• Incubators, led by Y Combinator: far from free, they charge three times the rent of an ordinary office building, but their strength is partnerships with large companies and national governments;
• Accelerators, built on "space + ecosystem + service system + investment + back office": the leading example, 500 Startups, uses strong mentors to screen projects and invests in the most cutting-edge projects in every field around the world.

After a presentation that ran badly over time, Mao also gave an update on UrWork: in the five months since its founding, it has signed leases on 36 sites and entered 7 cities.

"We say we are the offline Alibaba, but really it is a platform for a very large number of small businesses. Once we are spread across the country, the number of companies and people will be huge, backed by high-quality service. Real user data will then be pooled together, which is why we also call ourselves a smart office platform."

Zhang Jianfeng, President of Alibaba's Retail Business Group: The Essence of Retail Hasn't Changed; How You Reach Consumers Has

As the head of Alibaba's three main e-commerce platforms, Taobao, Tmall and Juhuasuan, Zhang Jianfeng spent most of his talk walking through this chart of global retail history:

"China's first department store came 48 years after the world's first. Counting from 1984, when ParknShop, owned by the Watsons group, entered mainland China, China had gone 54 years without the supermarket format. Also in 1984, Pierre Cardin opened a store in China; by then China lagged more than 100 years behind the world's first chain store business, America's Great Atlantic & Pacific Tea Company. In the rise of e-commerce, China was only a few years behind the US. In the coming shift to mobile shopping, China has even taken the lead."

He believes the essence of retail, and of commerce, has never changed: put the user at the center, use new technology and new thinking to raise efficiency and cut costs by every possible means, and bring users better products and services. Merchants always wanted to understand their customers and reach them, but "the will was there, the means were not; the technology fell short." In today's era of mobile shopping, the technology is different, and so is the way merchants serve users.

Zhang Yong, CEO of Alibaba Group: Every Business Will Become a Distinctive C2B Online Merchant

In his Sept. 8 talk, Zhang Yong gave an early look at some of the promotions planned for this year's Singles' Day, drawing an enthusiastic response from the audience. But first he spent some time laying out how he sees digital commerce:

For companies that already take reaching consumers online seriously, he said, the era when the internet was merely a bolt-on sales channel is over. Yet because online and offline are now so closely merged, it is also hard for a company to tell where any single sale really came from.

"Why did Alibaba embrace Intime? Why did Alibaba embrace Suning? Because in the end it all comes down to managing customers across every channel, and capturing sales and delivering service across every channel. We say every business will become an online merchant because they will all use this opportunity to overhaul commerce from top to bottom and reshape their retail channels, so that online and offline work together better."

So what will the internet do to commerce over the next five years, or even longer?

One prediction Zhang offered: the issues merchants and consumers discuss today all sit on the consumption side, and the internet's overhaul of commerce has only begun to reach the supply side. Data on online shoppers can be captured, collected and analyzed more easily and turned into productive capacity. That capacity will in the end reshape every part of production.

"The way the internet is now pushing and reshaping the sales supply chain will certainly affect the production supply chain, and entirely new processes for designing and making products will emerge. This is a true C2B (consumer-to-business) shift: pooling the needs of users who share buying habits into one steady source of demand, and then developing, making and selling the products that group needs. Because getting data has become so direct at every step, this overhaul is full of opportunity."