A Case Study in New Retail and Cigarette Marketing

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By TobaccoChina Online

In November 2017, the Site Meeting of China Cigarette Marketing Network Construction was held in Dalian, a coastal city of Liaoning province. More than 170 representatives from the tobacco industry all over China gathered to summarize the work of cigarette network construction and to exchange and share experiences.

Based on the theme “Taking on Operation Mode Transformation to Improve and Promote Cigarette Marketing Network”, the meeting was designed to enhance the construction of a network with new technologies and methods under the new development of Chinese economy.

Cigarette marketing network construction, regarded as the most valuable strategic project of the tobacco industry in China, has played an extremely important and fundamental role in promoting the development of cigarette markets. The retail terminal is a key point influencing the success of the cigarette marketing network. The Chinese tobacco industry has realized that it is time to make changes in the cigarette retail terminal.

The Exploration of “New Retail” by Tobacco Companies

In recent years, the domestic economic situation has been complicated and constantly changing. As downward pressure grows and the turning point in consumer demands for cigarettes came ahead of schedule, a series of issues have been highlighted, such as the changing of market conditions from a tight balance to oversupply, increasing stockpiles, weak cigarette prices, and lower customer profits.

In November 2016, the Opinions on Promoting the Innovation and Transformation of Physical Retail released by the State Council defined a new direction for the development of the physical retail industry. Jingdong and Alibaba, China’s two major e-commerce giants, have set the tone for new retail with Jingdong Convenience Stores and Tmall Small Stores, respectively, aiming to transform offline physical terminals and race to control traditional sales resources.

Confronted with the new trends of retail industry development, how would the Chinese tobacco industry push forward with developing the retail cigarette terminal? The meeting held in Dalian has offered the industry a new insight into the practices of New Retail.

Since 2016, Dalian City Tobacco Company (hereinafter referred to as Dalian Tobacco) in northeast China’s Liaoning Province has actively explored new retail and the development direction of new markets, new platforms. and new terminals, with a view to transform cigarette marketing.

Creating new markets. A standardized and orderly market environment is the basis for advancing the transformation and upgrading of cigarette marketing. Dalian Tobacco has focused on the governance of big retailers, implemented economic policies with administrative procedures, coordinated the marketing department and franchise department, tightened the market “fence”, and created a “skynet”, all of which make it impossible for big retailers who are breaking the laws to hide. As of the end of August 2017, Dalian Tobacco checked 175 wholesalers, completing the check program 100% and winning praise from inside and outside the industry; Dalian Tobacco also pays close attention to the development of price groups. The region now has a total of 942 groups and covers 11,417 customers, with a coverage rate reaching 47%. With the implementation of the above measures, Dalian Tobacco has worked out a healthy and orderly new market environment.

Building a new platform. What drives the change in retail terminals? It is undoubtedly the development of technical means.

From 2016 onwards, Dalian Tobacco has made full use of modern technologies such as cloud computing, big data, and mobile internet to build three new platforms successively: WeChat Business Alliance, a new platform for mobile ordering; New Business Connection, a new platform for terminal management; and Spring Service, a new platform for consumer marketing, gradually building up a modern marketing system for consumers commonly created by the industry, commerce, and retailers.

Up to now, more than 90% of customers in Dalian have joined the WeChat Business Alliance ordering platform, in which nearly 70% of them mainly operate business through WeChat. The New Business Connection terminal management platform offers a standardized quick cashier settlement for 1,050 new modern terminal retail stores in Dalian, meanwhile the acquisition and uploading of sales data and consumer information gets synchronized, providing real-time market sales data for background marketers; in terms of consumer marketing, a total of nearly 53,000 consumers are on Spring Service.

From WeChat Business Alliance to New Business Connection to Spring Service, the closed-loop marketing service system constructed by Dalian Tobacco is becoming an indispensable and important part of the modern cigarette marketing system.

Creating five types of terminals. Since the retail terminal is an important window to brand cultivation, Dalian Tobacco, under the precondition of upholding the franchise system, created five new types of retail terminals: taking the consumer experience as the leading factor to promote the construction of the 4S (sale, show, smoking & survey) direct retail terminal; taking data marketing as the direction to push forward the construction of new modern terminals; taking the form of Spring Convenience to boost the construction of cooperation terminals; taking resource-sharing as the purpose to advance the construction of cooperative terminals; and taking crossover marketing as the highlighted feature to promote the construction of distinctive terminals.

The construction of the five types of terminals is to completely break the format of retail and realize personalized retail, as well as differentiate operations in terms of store planning, product portfolio, retail promotion, store operation, etc., aiming to meet personalized demands for consumers and further enhance the attraction and viability of retail outlets, thus laying a solid foundation for the transformation and upgrading of cigarette marketing.

Through deep integration of data and business logic, Dalian Tobacco has set the prototype of tobacco new retail and cigarette marketing.