Why it matters
China's retail market presents brands with a considerable commercial opportunity. It is the world's second-largest retail market with a share of approximately 21% and it is expected to surpass the USA as the world's first retail market as early as 2021.
- Data from the Chinese retail market show that both online and offline play an important role in evaluation, purchase and the overall consumer decision journey.
- Brand loyalty is less for Chinese consumers born after 1980 than those born after 1990.
- If Chinese cosmetic retailers want to drive brand loyalty, they should focus their efforts, in order of importance, on channel consistency, channel choice and channel familiarity.
Omnichannel retail and brand loyalty in China
China's retail market presents brands with a considerable commercial opportunity. It is the world's second-largest retail market with a share of approximately 21% and it is expected to surpass the USA as the world's first retail market as early as 2021.1
More specifically, the Chinese cosmetics market is currently valued at $19bn and is projected to grow annually by 11.0% (CAGR 2020–2023) to $26bn by 2023 (Figure 1).
In terms of Chinese consumers’ shopping preferences, data from the Chinese retail market show that both online and offline play an important role in evaluation, purchase and the overall consumer decision journey (Figure 2).
This means that informed brands take a more balanced approach to building brand experiences that embraces an omnichannel strategy.
Sephora, the international cosmetics and specialty beauty brand owned by LVMH, is well known for its omnichannel experience which aims to offer the best of both online and offline worlds. It does this by fusing personalised in-store experiences with technology such as magic mirrors, interactive e-commerce screens, virtual artists, mobile applications and WeChat mini-programs. The goal is to provide consumers with a seamless retail shopping experience.
In parallel, data on the Chinese luxury market indicate that:
- Brand loyalty is less for those born post 1980 than those born post 1990; and
- Customers are willing to try new brands, irrespective of generation (Figure 3.)7
This context gives rise to questions around which (if any) omnichannel activities drive loyalty. This paper answers that question. Based on a quantitative study with 279 respondents found that channel choice, channel familiarity and channel consistency drove brand loyalty.
Informed by previous academic studies and commercial research we considered the scope of omnichannel retail as encompassing four activities.
- Channel choice concerns providing consumers with a broad variety of channels so they can shop when, where and how they want, based on their personal preferences and requirements.
- Channel familiarity relates to consumers' awareness of the services and functions available on the various channels and their ability to use them.
- Channel cohesion relates to providing consumers with a consistent brand experience within and between channels
- Channel Consistency entails synchronising marketing across channels.
Brand loyalty in this paper combines attitude loyalty and behavioural loyalty, which means consumers with brand loyalty will show attitudinal preference and repeat purchase intention for a specific retail brand
Data collection, sample and analysis
The data were collected over a two-week period in July 2019 via a survey link posted on WeChat and Weibo. A total of 420 responses were received, which were reduced to a completed sample of 279 after the screening questions (see Appendix for sample details).
Omnichannel marketing and brand loyalty measurement were informed by previously published scales,8 being measured on a five-point scale.9The survey questions (scale items) can be found in the Appendix.
Cronbach’s Alpha was calculated to establish the reliability of the survey questions. Ordinary least squares regression then identified which omni-channel activities had a positive and statistically significant effect on brand loyalty.
The reliability analysis for each omnichannel activity and brand loyalty (see Appendix for data) demonstrated the data were internally consistent.10 In other words, the survey would produce the same or similar results when the same individual retook the survey under the same conditions.
The suitability of the regression model was established11 and this revealed that channel choice, channel familiarity and channel consistency had a positive and statistically significant effect on consumers’ brand loyalty (Table 1).
In terms of the relative influence of the three omnichannel activities on brand loyalty the data revealed that:
- Channel consistency had the largest effect, followed by channel choice and finally channel familiarity;12
- Channel consistency had three times the influence of channel familiarity information; and
- Channel consistency had just over twice the influence of channel choice.
The data indicated channel cohesion did not have a positive or statistically significant effect on brand loyalty.13 Closer inspection of the correlation matrix highlighted how channel cohesion has a positive and statistically significant association with all other omnichannel activities in our model (see Appendix). This indicates that channel cohesion has the potential to contribute, albeit indirectly, to brand loyalty and, therefore, should not be dismissed when considering an omnichannel strategy.
Omni-channel and brand loyalty: Summing up
Our data indicate that if Chinese cosmetic retailers want to drive brand loyalty, they should focus their efforts, in order of importance, on channel consistency, channel choice and channel familiarity.
Table 2 provides some advice and practical examples of how you could apply these insights with a focus on the Chinese cosmetics market.
- I can choose alternative channels for a given service in Sephora.
- I can accomplish preferred tasks through individual channels in Sephora.
- No matter which channel I choose in Sephora, I can get information and help from other channels.
- I am aware of the existence of all available service channels in Sephora.
- I am aware of the differences between service attributes across different channels in Sephora.
- I know how to utilise different channels in Sephora to meet my consumption needs.
- I receive the same response through different channels in Sephora.
- When I interact with one channel, my interactions with other channels are always taken into account.
- The information (such as product/service description, promotional information) is consistent across different channels in Sephora.
- The service feelings are consistent across different channels in Sephora.
- The service images are consistent across different channels in Sephora.
- The service performance is consistent across different channels in Sephora.
- I feel loyal towards Sephora.
- I think I am a loyal consumer to Sephora.
- I am willing to make a repeat purchase at Sephora.
- I prefer to shop at Sephora than other cosmetics retailers.
Reliability analysis (Cronbach’s Alpha)
3. McKinsey China Digital Consumer Trends 2019
4. THE STATE OF THE CHINESE CONSUMER POST-COVID, 15 July 2020, Alizila, available at https://bit.ly/2RDU94F
7. China Luxury Report 2019 How young Chinese consumers are reshaping global luxury, McKinsey, https://mck.co/32GApDH
8. Banerjee, M. (2014). Misalignment and its influence on integration quality in multichannel services. Journal of Service Research, 17(4), pp.460-474.
Beck, N., & Rygl, D. (2015). Categorization of multiple channel retailing in Multi-, Cross-, and Omni‐Channel Retailing for retailers and retailing. Journal of Retailing and Consumer Services, 27, 170-178.
Gilliland, D.I. and Bello, D.C. (2002). Two sides to attitudinal commitment: The effect of calculative and loyalty commitment on enforcement mechanisms in distribution channels. Journal of the Academy of marketing Science, 30(1), pp.24-43.
Li, R., Li, Y., Liu, H., & Huang, Q. (2019, January). Cross-Channel Integration and Customer Retention in Omnichannel Retailing: The Role of Retailer Image and Alternative Attractiveness. In Proceedings of the 52nd Hawaii International Conference on System Sciences.
Oh, L. B., Teo, H. H., & Sambamurthy, V. (2012). The effects of retail channel integration through the use of information technologies on firm performance. Journal of operations management, 30(5), 368-381.
Shen, X.L., Li, Y.J., Sun, Y. and Wang, N. (2018). Channel integration quality, perceived fluency and omni-channel service usage: The moderating roles of internal and external usage experience. Decision Support Systems, 109, pp.61-73.
Sousa, R., & Voss, C. A. (2006). Service quality in multichannel services employing virtual channels. Journal of Service Research, 8(4), 356-371.
9. The scale was anchored 1-strongly disagree to 5-strongly agree
10. All omnichannel items and brand loyalty items were i) above 0.7 to indicate a lack of systematic variation ii) did not exceed 0.9 to indicate item redundancy.
11. The Sig. values of channel choice, channel familiarity and channel consistency were less than 0.05, indicating that there was a relationship affecting brand loyalty (Table 1).
12. This is based on the comparison between statistically significant standardised regression coefficients (Beta). The standardised regression coefficient values of Channel choice, Channel familiarity information and Channel Consistency are 0.207, 0.141 and 0.423, respectively.
13. This conclusion is based on the standardised coefficient value not being statistically significant (Table 1).
14. The scale was anchored 1-strongly disagree to 5-strongly agree.
15. Correlation is significant at the 0.01 level (p<0.01)