Leading the way in Online to Offline: Leyou’s Success Story

Corporate Innovation, FMCG, Innovators, New retail



December 17, 2015

Leyou is one of China’s leading speciality retailers and the largest for baby products.  We interviewed Larry Kung, Chief Operating Officer at Leyou. He shares insights about how Leyou uses big data analysis, omnichannel marketing and community interaction to enhance the mothers experience. Leyou : 30 seconds summary 150 physical stores, a catalogue and a web store serving all […]

Leyou is one of China’s leading speciality retailers and the largest for baby products. 

We interviewed Larry Kung, Chief Operating Officer at Leyou. He shares insights about how Leyou uses big data analysis, omnichannel marketing and community interaction to enhance the mothers experience.

Leyou website China mothers e-commerce retail store

Leyou : 30 seconds summary

  • 150 physical stores, a catalogue and a web store serving all of China
  • 300 suppliers from 35 different countries for product diversity
  • Self-developed app to provide product information as well as build a community for mothers : community interaction such as user reviews which are also accessible in-store via Leyou’s app whilst shopping has boosted brand perception and encouraged repeat returns.
  • Omnichannel marketing across its stores, mobile app and online presence to create a strong consistent emotional link with mothers.
  • Use of big data to  better understand and market products to mothers based off various factors like price sensitivities.

Leyou website China mothers e-commerce

Key Information

Year Founded: 1999

Employees: 1001-5000 staff

Funding: Unspecified but it received a second round of funding in July 2007, a cash injection of $11 million from AsiaVest Partners. Later, it received a third round of investment totalling $37 million from AsiaVest Partners and Deutsche Bank, making it the largest investment recipient in China’s baby products.

Users: Pregnant women and mothers of babies and toddlers in China

Market(s): China

Achievements: Revenue surpassed the 100 million yuan mark in 2005.

Analysis: Despite the slowdown in China’s baby industry, the market reached RMB 34 billion (US$5.4 billion) in the top 27 cities in China in the 12 months up to August 8th, 2014. Consumers have grown more selective about the products that they buy which has allowed specialty retailers like Leyou to flourish.

Leyou website China mothers e-commerce

The Interview

Leyou website China mothers e-commerce retail store Larry KungInnovation is Everywhere (“IIEV”): You said in your talk that with the one child policy, the emotion and care of mothers has been delivered through “physical” goods. Can you explain a bit more? How does it impact mothers?

Larry Kung (“LK”): As a result of the one-child policy as practiced in the last two decades in China, nearly all families have six adults, four grandparents and two parents, doting on one single child. As parental disposable income rises and a new generation of consumers come into existence, much of their love for this single child is expressed through better goods and food as provided for the child.

IIEV: Other speakers also told us about a shift in the mind-set of the “post-90s Chinese women” (the speakers from L’Oreal in particular). From a retailer’s perspective, do you see the same change in behaviour with regards to their parenting styles?

LK: Women born in 1990 are turning 25 and entering this child-bearing age.  This is a generation that grew up with the Internet, including buying teenage and young women’s products online.  They are also avid users of social media and much more expressive about their likes and dislikes than the pre-1990 generation.  However, given their bad experience with counterfeits in China with online e-commerce during younger years, we also notice that out of safety concerns, post-90s mothers are more inclined than the post-80s mothers to purchase baby products from specialty retailers rather than online.   This observation is also backed up by Baidu’s recent research.

IIEV: You said that there is a balance between quality and price, what insights can you share on this? Noting the health scandals which have occurred, I guess there is a fierce war between brands, so how do local ones compete? Do foreign brands have a premium? And are they able to use it in terms of marketing?

LK: Because of safety concerns of low-quality goods in China, increasingly mothers are willing to pay a premium for products that are perceived as “safe”; especially for infant formula, baby food, diapers and other categories of goods that are perceived as having an impact on the baby’s health.  For foreign brands in particular, they are often perceived by Chinese consumers as “safer” and/or higher quality, and therefore can command a price premium not enjoyed by local brands.   Foreign brand marketers can leverage this perception and willingness to pay a premium in the marketing of their brands, especially as it relates to the country of origin and its environmental quality, manufacturing capabilities and quality assurance procedures.

IIEV: How do mothers use mobile phones in China? We imagine, from a Western point of view, sprawling and congested cities. Is it the case? Is there a difference between Tier-1 and other cities in terms of behaviour?

LK: Mothers in China are glued to their mobile phone applications just like any Western young women these days.  Whether in (the) subway or walking, shopping or just relaxing, most people are checking their instant messages, product reviews, interacting through social media, watching a video online, or talking to their friends through wireless Internet.

IIEV: What is your mobile strategy? I seem to understand you have an app which has a lot of different features (location of stores, scan of product for traceability, content). How do you also connect to the main Chinese social media such as Weibo or WeChat?
LK: Mobile is the most strategic component of our Internet strategy, not only because mothers are glued to their phones at all times, but also because it gives a physical retailer like us to recapture our customer’s loyalty away from monopolistic and expensive platforms like Alibaba’s T-mall via our own apps, which we can encourage customers to download via our in-store free Wi-Fi services rather than, as in the fixed PC world, paying Alibaba expensive advertising fees in order to get attention on a PC screen. Our apps already help customers track and redeem their loyalty points, find out the closest Leyou store location, purchase and pay for all Leyou products, scan product UPC for detailed information, play with characters on our apparel and other products with the AR (augmented reality) technology, refer a product to a friend or Weibo and WeChat circles, and book Leyou’s marketing activities online.

IIEV: You also shared a lot about “emotion”, how do you create an emotional link with mothers through the different channels? Is there one channel; such as mobile, a better fit for this? 

LK: We find that mothers’ emotion is most attached to us through a continuous experience we provide to them via all channels: stores, mobile and PC.  Stores provide a real physical experience to get to know a brand and product and build an emotion of trust and safety for them.  PC is often used in the office where young mothers often shop during breaks, lunches or before end of day.  On the other hand, mobile apps bridge the gap and provide anywhere access to Leyou.  Consistency throughout each and across all channels reinforces the emotional aspect of our brand building.

IIEV: You talked about Big Data as well, to refine targeting of products and content; can you share a bit more on this as well?
LK: Because 97% of our transactions are tagged with members’ ID information, we can look at the baskets of each consumer and find out a lot of insight about their behaviour, habits, likes and dislikes, and at an aggregate level understand the Chinese mothers’ general preferences and trends.  Simple insights are the linking of the products to the baby’s age, and cross selling thereof.  For example, a basket that shows stage 1 Danone infant milk formula is likely to lead us to promote baby layettes and baby toys to the mother, whereas we should promote toddler toys and apparel to a mother that buys stage 3 infant milk formulas.   We can also find out a lot about each consumer’s price sensitivity based on who buys during promotion and who buys when there is no promotion. Much other insight is also available through other big data analysis.

IIEV: How do you build an omnichannel strategy in China today? What are the main touchpoints of mothers (e.g. mobile in the morning, street in the afternoon, TV at night)?

LK: We deploy the same ERP and CRM systems throughout all channels, with one integrated member ID, SKU systems, etc.  We also provide all stores with Wi-Fi access.  Once the infrastructure is built, then we see consumers interact with our stores during weekends, off hours during the work days, and PC during the office hours, and mobile throughout the day.  The experience and interaction with Leyou is a continuum with consistency.

IIEV: Thank you for your time Larry!