Despite in many ways favourable macro-environmental conditions, Tesco’s ambitious entrance strategy into the Chinese market eventually failed. At the moment of the case study, Tesco had to merge with a thriving local retailer, completely forsaking its solo brand and having only 20% of the stake in a local brand (Dakhli et al., 2019). However, the situation is not hopeless, as new trends in technology and customer behaviour open possibilities in online retailing.
Future Tesco Operations in the Chinese Retail Market
Marketing-Related Problem Statement
There are several reasons for Tesco’s failure in the Chinese retailing market. According to Dakhli et al. (2019), Tesco’s market entry in 2004 was relatively late, placing it behind its competitors, such as Carrefour and Walmart. Consequently, Tesco could not benefit from the same first-to-enter advantages available to other international retailers. In addition, rising labour and space costs made it much more challenging for low-margin players to secure healthy profits (Dakhli et al., 2019). Finally, Tesco did not manage to create a unique and valuable offer, failing to reach a significant number of customers in its stores despite localisation efforts. Thus, the marketing-related problem, in the case of Tesco deciding to continue its operations, has three facets. Firstly, there is high competition in the emerging Chinese market. Secondly, the labour and space costs raise vital business concerns. Thirdly, there is a need to attract as many Chinese customers as possible.
PESTLE Macro-Environment Analysis
Political
During the past 30 years, China’s economy has changed from a centrally planned system primarily closed to international trade to a more market-oriented economy with a rapidly growing private sector. In terms of regulation of trade, the retail sector in China is not considered a prestigious industry by the Chinese government. It is, thus, not sanctioned like the heavy industry sector (Kardes et al., 2020). Currently, the local governments are changing the shape of traditional street markets and converting them into supermarkets to expand retail networks to the Western provinces of China.
Economic
Despite slowing GDP’s growth rate, consumption will rise due to overall population wage growth. China’s corporate income tax rate is currently 25% (Cai et al., 2018). However, special tax rates are available for companies that make investments in preferred regions and sectors, such as the Western provinces. Due to the majority of the fresh products originating from China, it is imperative to find local suppliers that provide goods according to international quality standards.
Social
The essential prerequisite for growing retail market share is consumer access to the internet, termed internet penetration. In this context, China has one of the highest smartphone use rates (Dakhli et al., 2019). Meanwhile, demographics show that China’s population growth rate is low and is characterised by a small youth group due to the one-child policy introduced by the government. Regarding health awareness, Chinese customers are highly concerned about product safety (Dakhli et al., 2019). In addition, there is a danger of forcing foreign formats onto Chinese customers as it might result in the rejection of foreign retail chains.
Technological
Due to vast territory and poor infrastructure, it is necessary to establish a strategic net of warehouses at specific locations and to leave distribution to a thriving distribution partner with extensive local knowledge. According to Kardes et al. (2020), technological infrastructure shaped by information and communications technologies is critical to retail operations. However, finding suppliers with the required IT capabilities to enter an existing distribution system can be challenging (Lin et al., 2018). In the meantime, Few Chinese households are equipped with a refrigerator. Thus, shopping behaviour will not likely shift quickly to one big weekly shopping trip.
Legal
Various government legislations and policies directly impact the success of foreign companies operating in China. The government’s policies of monopoly control, support of local businesses, and reduction of buyers’ power can limit operation in the sector with such controls as license requirements and limits on access to raw materials (Kardes et al., 2020). In addition, sanctions, higher taxation, and unfavourable policies against subsidies make the expansion of nonlocal retailers more challenging.
Environmental
The Chinese government has decided to abolish plastic bags – an illustration of environmental decision-making which can happen quickly and involve radical shifts. The Chinese government continuously introduced recycling programmes through its National and Social Progress Plan (Wang et al., 2019). Moreover, because of international pressure, China has become more sensitive to the issue of pollution, and there has been a trend towards stricter controls of firms in recent times.
PESTLE Analysis Conclusion
In summary, the rising buyer’s power, albeit occasionally limited, overall favours doing business in China. Therefore, a company specialising in retailing, such as Tesco, has numerous opportunities in the Chinese retail market if it considers online retailing. Most importantly, the trends in growing internet penetration illustrate the new market opportunity windows. In addition, Dakhli et al. (2019) highlight that the traditional brick-and-mortar format would not be efficient since Tesco’s competitors – Carrefour, Walmart, and local enterprises – are already in control of the most profitable physical spaces. Nevertheless, Tesco will be exposed to the legal and regulatory environment that Chinese governmental institutions establish for foreign retailers.
Target Audience
Regarding the question of a target audience, several factors point to Millennials being the best choice. Population dynamics in the years after the one-child policy establishment resulted in the reduction of the youngest population groups, which makes the adult group the majority in China. At the same time, according to economic factors, China’s GDP gradually grows along with the average wage levels, which increases the number of middle-class households. In this context, Millennials can be considered increasingly vital players due to their number and earning potential.
Overall, Millennials tend to be significantly involved with various manifestations of digital technologies. Consequently, according to Dakhli et al. (2020), the retail landscape was transformed mainly by digital literacy, brand consciousness, quality orientation, and overall engagement of this population group. In light of these peculiarities and rising income, Kardes et al. (2020) provide additional insights in favour of this population group. For instance, online shoppers usually have a significantly higher income level. Thus, the growth of the middle class especially contributes to online retailers’ sales. Apart from that, technological literacy and engagement increase the opportunities for consumers to shop with such retailers.
7Ps of a Marketing Mix
In short, Millennials demand high levels of product and service personalisation and diversity. Fortunately, there is a strategic solution that, if successfully executed, is able to address all three dimensions of the given marketing-related problem – competition, lower place and labour costs, and customer attraction. The study by Ho et al. (2022) illustrates the application of live-streaming shopping (LSS) based on various scholarly evidence of its success. The 7P marketing analysis can further showcase the strength of this strategy.
Product
The product element can be defined as the item offered to the market to meet a customer’s need or want (Altay et al., 2022). It must be suited for obtaining, consuming, using, or attracting further customers. In a study based on retail sale experiences, it is stated that the product element refers to product variety and product assortment (Altay et al., 2022). They significantly affect the perceptions and satisfaction of consumers who shop online. Apart from that, most decisions made by online market shopping platforms regarding the product are related to which, how much, and what variety of products will be kept in stock (Altay et al., 2022). Product availability and quality are also considered among the most critical criteria in online grocery shopping.
In online marketing, the key factor for success is a product’s uniqueness. The majority of products sold through social commerce are highly similar (Ho et al., 2022). Consequently, the advantages of the retailers may be perceived if their products are unique, highly functional, practical, and trendy. If the product manages to become the subject of conversation, it will derive the benefits of word-of-mouth marketing and attract further customers’ attention. Conveniently, the LSS platform allows viewers to feel that the products are useful and provide good value for money (Ho et al., 2022). Therefore, products on the LSS platform positively affect customers’ purchase intention.
Price
The price element is the only marketing mix element that generates revenue. Pricing decisions in online sales are as important as traditional pricing decisions (Altay et al., 2022). In addition, there is greater price competition among online sellers, so the importance of standardising prices is critical. The shopping platform’s price images can be changed using price promotions, such as discounts and coupons, increasing the company’s perceived value. In addition, there is little to no physical store rent in online commerce, so the selling price would be lower. E-sellers often propose unique pricing to attract customers, but those who watch live streams can enjoy special discounts and pricing incentives (Ho et al., 2022). Thus, the price offered on LSS has a high probability of being positively associated with customers’ purchase intention.
Promotion
The promotion element demonstrates how a company is committed to communicating its products’ characteristics and persuading target customers to buy their products. A study on online grocery shopping argued that the main criteria regarding promotion are sales promotion, advertising, and public relations (Altay et al., 2022). The promotion element focuses on customer attraction by providing a short-term incentive. To arouse customers’ expectations and curiosity in order to achieve the promotional effect, e-sellers often announce the content of the broadcast and start time in advance. In addition, various interactive games or benefits can be organised during the live stream to enhance customers’ engagement and impulse buying (Ho et al., 2022). Such promotions can attract new followers, making sellers more popular. Therefore, the promotions offered on LSS will likely be positively associated with customers’ purchase intention.
Place
Place element covers the mobile applications for online grocery shopping platforms, including distribution channels. One of the vital features of the place element is maximising the availability of sales channels (Altay et al., 2022). In this context, shopping through a real-time broadcast is much faster than visiting physical stores or using textual communication. Additionally, consumers can interact with other people who are experts in the brands and products. It allows potential buyers to interact with salespersons in real time, inquiring or asking for opinions about the product. Thus, it becomes easier to gain consumers’ trust due to the content of live broadcasts being more authentic (Ho et al., 2022). Furthermore, a live-streaming broadcast provides an entertaining media experience. The live content is more exciting and entertaining because of human interaction, which is a significant advantage of LSS. Therefore, the placement of LSS will be positively associated with customers’ purchase intention.
People
The people element emphasises that employees represent companies against customers. It was argued that miscommunication might endanger all marketing efforts unless responsible employees are adequately trained to communicate with customers (Altay et al., 2022). It is considered an essential marketing mix’s element because service consists of a performance, which cannot be separated from the performer. In this context, attractive endorsers are able to successfully change consumers’ attitudes and beliefs regarding a product, facilitating purchase decisions and participation. Live streamers play the role of promoters of products or brands in LSS (Ho et al., 2022). Many internet celebrities who match the product image can serve as salespersons in LSS, playing a role in service delivery. Their attitude, conversational style, and appearance might influence buyers’ perceptions regarding the product or service and become regular viewers due to the personal charisma of a broadcaster and rapport with the audience.
Streamers are integral in conveying the message by skillfully responding to viewers’ questions, providing product information, making suggestions for purchases and gaining viewers’ trust. With their high popularity and product endorsement, fans will be encouraged to participate in the live broadcasts and even contribute to the show, adding more new topics. Viewers might also learn new product information and accept the celebrity’s recommendation, adjusting their previous perceptions and attitudes accordingly. Thus, the personnel of LSS can be considered to be positively associated with customers’ purchase intention.
Process
The process element determines the method and order of services; it ensures that the value proposition promised to customers is created. A poorly designed process can lead to a slow, useless, low-quality service delivery resulting in customers’ frustration (Altay et al., 2022). In some cases, after customers place an order, their orders may be cancelled as companies are out of stock. Customers can give three types of reactions in this situation. They can accept buying substitute products, change the online shopping platform, or go off the internet. A study reveals that late or incomplete online grocery delivery significantly affects customer satisfaction. In some cases, failure to deliver quickly can cause consumers to abandon their online grocery shopping platform.
Consumer experience is intertwined with the process of service or product delivery. It has been confirmed that the service process design indirectly affects the customers’ perception (Ho et al., 2022). Additionally, past research on online commerce has revealed that factors such as delivery time and ergonomics affect customer satisfaction (Ho et al., 2022). Conversely, failure to secure fast delivery may prompt consumers to abandon an online shopping platform. Therefore, shopping and transaction processes can be considered essential for live-streaming commerce. For example, customers do not need to jump to the webpage to complete the purchase of goods. Consumers perceive convenience, including ease of use and saving time, as the main reason for LSS (Ho et al., 2022). Consequently, the process of LSS will be positively associated with customers’ purchase intention.
Physical Evidence
Physical evidence element in e-commerce is divided into two components: traditional physical and virtual. While the physical environment is represented by delivery points, offline stores, and offices of the company, the virtual environment includes the website or mobile applications of online shopping platforms (Altay et al., 2022). Live streaming shoppers often experience the immersive atmosphere of the shopping environment where the decoration, furnishings and configuration make viewers more engaged in the context. This atmosphere quickly stimulates their attention and enthusiasm for participation. Information about product appearance becomes more accessible to customers (Ho et al., 2022). Furthermore, customers’ experiences are enhanced through various consumption scenarios, such as in-person demonstrations and comprehensive and dynamic product displays that spur enthusiasm and elicit consumer purchases. Viewers are prompted to follow along and place orders when there is a strong buying interest in the live stream room (Ho et al., 2022). In this regard, the environment – physical evidence – of LSS is also positively associated with customers’ purchase intention.
Marketing Research Method
In light of the number of people needed to analyse the effectiveness of the LSS strategy efficiently, the survey proves to be the method with the highest coverage. The respondents can be selected using the convenience sampling method. Through the assistance of live broadcasters, it is possible to approach viewers or customers to invite them to participate in the survey. The respondents will be required to click on an online URL and fill out the questionnaire. In this context, there are three methods available to collect data. First, an invitation to participate in the survey can be posted in the community to inform viewers as they watch the live broadcasts. Second, a link to the survey can be attached to the receipt of customers. This method prevents the post from being obscured by other information and ensures that each customer receives the survey information (Ho et al., 2022). Third, the survey information can be placed in the title or body of the live broadcasts. This way, viewers or customers will access the survey link through the high exposure and the verbal promotion of broadcasters.
Key Marketing Strategy Measurement Metrics
The power of the online medium can influence customers to persuade and convert others into customers, continually use the firm’s offerings, and change or modify their own purchase patterns. In an effort to conceptualise and metricise the customer influence on others, research has contributed two key metrics – customer influence effect (CIE) and customer influence value (CIV) (Kumar, 2018). While the CIE measures the net spread and influence of a message from a particular individual, the CIV calculates the monetary gain or loss realised by a firm that is attributable to a customer through their spread of positive or negative influence (Kumar, 2018). By tracking these two metrics for a company’s social media campaign, it is possible to monitor brand awareness, per increase in return on marketing investment, and changes in sales revenue growth rate. In other words, CIE will serve as a direct indicator of the strategy’s reach, whereas CIV will help capture indirect customer profit contributions to calculate the efficiency of LSS.
References
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