Retail stores have taken a hit with the expanding public zeal for online shopping, but they are fighting back.
The one advantage bricks-and-mortar merchants have in wooing customers is the experience they can offer, allowing would-be buyers to touch, operate, try on or examine fine details of goods before making a purchase. In addition, they may offer a setting decorated to make it very pleasant indeed to shop.
Amid the convergence of online and offline retailing, new opportunities arise for targeting and interacting with customers.
One example is fast-food chain KFC's collaboration with NetEase's popular role-playing mobile game Onmyoji, using augmented reality and location-based technologies.
NetEase developed an exclusive "KFC Boss" for Onmyoji players. It activates only when users play the game in KFC-selected restaurants. Players can also invite friends to join them.
The idea has been a hit with young customers. Three million Onmyoji special meal boxes sold out in nine days.
An estimated 55 percent of Onmyoji players are aged between 18 and 30, and nearly half live in China's largest cities, which dovetails nicely with KFC's primary target customers.
Steven Li, Yum China senior vice president and KFC China marketing head, told Shanghai Daily that the company wants to keep its food brand young and alive to attract a new generation of customers.
"New technology and creative activities help bring consumers to our outlets around the country," he said. "It keeps us stay close to millennial customers."
KFC's proprietary smartphone application has been downloaded 30 million times. After customers use their mobiles to pay at KFC stores, they can choose to enroll in KFC's membership program.
The system allows the food merchant to track purchasing patterns and behavior, creating opportunities to target different groups with specific marketing campaigns.
"We have very strong know-how in customer retailing, and new technology enables us to combine our creativity with online resources," Li said.
Jane Lin-Baden, chief executive officer of digital marketing agency Isobar Asia Pacific, said brick-and-mortar merchants still have some way to go in improving the environment of their outlets to make them appeal more to consumers. Clothing retailers, for example, are coming up with innovative changing rooms for people to try on apparel.
"The retail industry needs to build distinctive and impressive shopping environments that enhance the experience of potential buyers," she said.
The "shopping experience" is as important as new products, and creating mood is as important as styling new designs, she noted.
BabyNes, a Swiss product of infant formula in capsules, similar to Nestlé's Nespresso, opened its first shop in downtown Shanghai after a year of sales through domestic channels such as import supermarkets. It also launched a presence on Alibaba's Tmall site last year.
The physical store is beneficial in presenting the product to parents who may be a bit dubious about how a baby formula dispenser works. More stores will be opened in selective locations in Beijing and Shanghai.
Daniel Blarer, global head of Wyeth's BabyNes Nutrition System, said offline versus online is not an either-or choice for the company. It wants to use the offline store model to create more face-to-face, personalized service.
"We have been gathering customer feedback to plow back into our research and development process," he said. "We have made the second-generation baby formula dispenser more user-friendly and smaller in size."
According to a Mintel survey earlier this year, nearly two-thirds of Chinese consumers said they like to see products in person before making any purchase. Aided by well-trained sales staff, a store can give them the sense that they are important and are receiving the best value for their money.
The Mintel survey also found that in-store promotions are an effective way to generate reviews and recommendations, both in the store and in online buzz.
Payment tools and digital capabilities offered by e-commerce giants are driving synergies between online and offline retail channels.
Jenny Yuan, customer development director at Wyeth Nutrition China, said this month's Singles Day will be the first time the company combines online and offline marketing.
Consumers purchasing from offline retailers, such as baby and maternity specialty shops, can scan QR codes and receive cash coupons, enjoying the same discount as those who buy from Wyeth's online store on Tmall.
Wyeth's Illuma series, which usually costs about twice as much as other imported infant formula, also debuted on Tmall earlier this year.