China’s new retail challenge

Mr Zheng, what is your definition of the second information revolution?
The development of Intelligent Internet is based on Internet of Things technology, with a platform-based intelligent hardware as the carrier. This works in accordance with an agreed communication protocol and data exchange standard, combined with cloud computing and big data applications. It is an “intelligentised” network for information collection, processing, analysis, and application between intelligent terminals, people and cloud services, with high-speed mobility, big data analysis and digging. The comprehensive ability of intelligent sensing and application can penetrate the traditional industry, enhance its service capability, connect with hundreds of industries, and carry on online and offline cross-border marketing.

How does it affect the whole business?
The intelligent Internet has undergone significant changes in its structure, business, commercial model. and basic concepts. Its capacity is far beyond the imagination of traditional Internet. It is not about creating a new industry, but about making the abilities of existing industries far more powerful, thereby influencing the entire business process.

What are the major visible changes in retail?
A typical case in new retail is when Alibaba, a major e-commerce player, invests or acquires offline businesses in a self-operated or joint venture manner. The hidden logic is that the profit space for e-commerce has narrowed, and the cost of developing online customers is increasing. But offline retail potential is endless. These benefits have prompted these companies to develop new retail businesses. The development of new retail formats has become an inevitable trend. 
The main visible changes in retail rely on data-driven, user-centric, online and offline integration. With the popularity of the mobile Internet, consumers can make a purchase on their mobile phone at any time, which drastically changes the consumption habits of domestic consumers since buying can be done anytime and anywhere. As a result, online e-commerce to offline physical store impact is quite strong. In 2019, the new retail revolution entered its third year. Despite changes in the macro environment, the applications of consumer data continue to transform the industry. For the majority of brands, this new form of retail is not only a change in the channel form, but, more importantly, it affects the competitiveness of the consumer goods industry. Products and brands are becoming more important than ever.

This leads us to introduce the O2O integration. Can you tell us more?
 Indeed, new retail can provide customers with a new shopping experience based on big data and new technology, integrating offline and online stores, and getting back to the essence of retail. These combinations have the advantages and disadvantages. Offline has physical venues to support branding, so customers can access and “experience” products, and the retailer can learn more about customers. The weaknesses are the limited availability of space and high operating costs. Online can provide unlimited trading venues, reduce the intermediaries, and open up new opportunities on a broader global scale. Online platforms also benefit from offline experiences to help deliver better products and increase customer traffic.

What are the most significant innovations we can expect?
Nowadays, the clothing industry mainly interacts with consumers in physical stores. However, this kind of interaction is limited by business hours and the location. Some consumers might give up on making a purchase because they cannot find the size or colour they want. This means we lose the opportunity to interact with them and promote sales.
Also, since the consumer analysis did not rely on big data to form a clear understanding of our consumers, we do not have an accurate direction in advertising and new product trend development. Such a waste!
In order to meet our consumer behaviour habits, Cosmo Lady has heavily invested in creating an O2O system that integrates online to offline channels and has Mini Programs on Wechat to provide 24-hour sales.

Can you please give us more details?
When our consumer is in the store, they can scan the product code to view products details and reviews. They can also enjoy the innovative shopping guide mode of the smart fitting room. These innovative solutions allow Cosmo Lady to enhance sales by creating a seamless and interactive shopping experience, even after leaving the store.
Through the Mini Program on WeChat, a Cosmo Lady shopper can learn more about a product and easily place an order with the click of a button. Customer service then efficiently ships the product based on the consumer’s information.
In the future, Cosmo Lady will provide further personalized products and service experiences to consumers through AI and accurate recommendation algorithms. For example, based on consumer insight and sales forecast from big data analysis, Cosmo Lady will launch more trendy styles by optimizing product development and design, and ultimately achieve the goal of reducing costs and increasing profits.

How many outlets do you have in total today and what is the trend?
As a leading brand in China's Lingerie industry, as of December 31, 2018, Cosmo Lady has 7,305 stores, of which 1,406 are company-owned and 5,899 are franchise.
In the future, our key strategy for geographic expansion is opening high-quality stores, which generate higher profit. Meanwhile, Cosmo Lady has actively begun to enter the shopping mall channel.

You have been recently expanding your reach on other product categories, via a cooperation agreement with Fanani (Shanghai) Garments Co., Ltd., and with the Japanese listed company Kimuratan Corporation, for distributing their infant and child apparel line in China. Can we expect more partnerships soon?
It is not out of the question that there will be similar cooperation with other brands or other industries.

And, what about Cosmo Lady’s presence outside China?In 2017, Cosmo Lady entered the high-end consumer market, expanded into shopping malls, shopping centres, and other channels. It also opened onto the international market in Hong Kong (shopping malls), East Asia (Japan), and Southeast Asia (Indonesia, Thailand, the Philippines).

Another key aspect in the very competitive Chinese underwear market is product innovation. Besides seamless and soft wire bras, upright cotton mould cups, tai chi stone cups, and cationic antiseptic sleepwear, what are the latest developments you are working on?
Cosmo Lady continues to strengthen its R&D of new products, its technological innovation, and improve product quality and price in middle and high segments. 
In terms of improving product design and quality, the company carried out supply chain management reorganization by appointing Mr. Tang Asansheng as Chief Technology Officer to upgrade the existing technologies and improve the function and quality of the products. Cosmo Lady also hired French designers and involved American fashion trend expert Mr. Vincent Daudin to improve the design and development of products.
In addition, the company hired leading international consulting firm Roland Berger Enterprise Management (Shanghai) to provide professional advice on the management system and process of the supply chain department. 

Fabrics are crucial to the overall product quality, and the company has already started sourcing fabrics to be used by OEM suppliers. Is this something meant to be continued?
The Group recently signed a strategic investment agreement with eleven intimate apparel product and material suppliers in order to shorten development and production cycles, as well as improve the Group’s ability to respond quickly.

You have announced the launch of O+ brand, derived from the original Ordifen brand. Can you tell us more?
O+ brand is a young brand, designed by an independent French designer. It is a sexy, fashionable, and young line. The 80’s and 90’s target audience attaches great importance to self-development and personal growth; they care about their health and their bodies and like to wear this style of lingerie. It’s a mid-high style brand with a price range between 250 and 450 yuan (approximately 33 to 60 €).
O+ brand has been upgraded to a fashion underwear brand with a sexy French twist. At the moment 17 stores have been opened in Shanghai, Beijing, Shenyang, and Wuhan.