Perspective A World with the New Consumer - Jardines · in immersive and innovative experiences. ... Burberry can use multimedia to design their own ... meaning that retailers

A World with the New Consumer

As consumer demands evolve, retailers are adapting to meet the increasing expectations and capitalize on opportunities that could future-proof their businesses. This means that consumers are primed to benefit with more choices, insights and power.

With growth in the retail industry expected to either come from digital or be influenced by it, two emerging trends are changing the way retailers engage with their customers. One is the so-called ‘New Consumer’ with heightened expectations of the shopping experience. The other is omni-channel and adaptive retail, a dual-business model designed to offer customers the same experience wherever and whenever they interact with a brand. Nowhere is the opportunity considered larger than in Asia where 85% of predicted growth in the global middle-class will come from the Region by 2030. Asian retailers are increasingly seeing the potential of these opportunities.

85% of predicted growth

in the global middle-class will

come from the Region by 2030.

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each channel and address deficiencies. An example is India’s largest online grocer, BigBasket, which is opening dozens of collection centres across the country to narrow the distance between farmer, processor-packer and customer.

Leveraging digital capabilities, physical stores are adopting new formats and functions. Some have become interactive meccas where customers engage in immersive and innovative experiences. Shoppers at the London flagship store of luxury fashion house Burberry can use multimedia to design their own trench coat right there in the store.

Other stores are linking to the retailer’s distribution network and serving as distribution and pick-up centres. In Beijing, Tmall Supermarket is piloting same-day delivery service for customers who order online before 11 am. In 2014, Walmart complemented its online channels when it opened its first warehouse offering same-day or scheduled grocery pick-up. Many leading players are re-evaluating their stores and distribution network to identify improvement opportunities.

Building Customer LoyaltyToday’s shoppers expect easy and delightful experiences that are tailored to their lifestyles. Contemporary consumers are also more difficult to predict, increasingly segmented, and are devoted to powerful brands and excellent shopping experiences. To win their loyalty, retailers must not only provide customers with great service, adequate on-hand inventory and clean stores, they must also offer a personalized shopping experience through data-driven applications.

Successful retailers are embracing data and analytics capabilities to enable personalized customer experiences and pricing based on such factors as loyalty, purchase history and demographics. They are applying predictive analytics to provide tailored service offerings and leveraging location-based services to embed themselves within customer lifestyles. The British supermarket chain Waitrose, for example, is letting its customers pick any ten items of their choice and receive a 20% customized loyalty discount on these items every time they shop either in-store or online.

As consumers today are more informed and connected, they also desire a seamless shopping experience across channels – website, mobile, in-store and partners; meaning that retailers face a fundamental shift in the customer/company relationship.

Reaching out through Omni-Channel StrategyThe emergence of digital shopping channels and e-tailers does not mean the end of brick-and-mortar retailers. While high-profile businesses such as RadioShack and Abercrombie & Fitch have reduced significantly their number of physical stores, online brands are setting up ‘shop-in-shop’ stores and large flagships to keep pace in the omni-channel world. Microsoft and Google have established a physical store presence in some markets, suggesting the need for retailers to redefine channel strategies to improve their competitiveness.

While brick-and-mortar stores provide customers with a hands-on and more intimate shopping experience, online and mobile shopping offers the constant access that stores cannot. Retailers are seeing the need to address blind spots inherent to

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Next Wave of DisruptorsOver the past decade, disruptive technologies have been driven by advances in mobile computing, social media and cloud-based services. What was once considered cutting edge, such as the ability to buy an item online and return it in-store, is now expected from any retailer wishing to remain relevant. Five categories of emerging technologies that are disrupting the retail industry today are the Internet of Things (IoT), wearables, cognitive computing and machine learning, digital fabrication and digital payments.

IoT offers significant opportunities to improve efficiencies by connecting and automating elements of existing supply chain, inventory and logistics systems. Running smart stores with connected devices and sensors enables retailers to better understand consumers’ in-store behaviour. The premium chocolate company Godiva has installed smart meters in its stores to count shoppers, aiding in improving staffing levels and measuring interest in displays. Mondelez International, a food and beverage conglomerate, is creating ‘smart shelves’ that capture basic demographic information from customers in checkout lines, where they are offered targeted promotions.

While many consumers are donning intelligent eyeglasses, watches, footwear and apparel, wearables is one category in which business-to-business enterprises are leading the way in adoption. On the retail front, wearable devices equip employees with the technology needed to work better and improve operational efficiency. One large retailer uses a wearable computer that enables in-store and cross-store communication. Among other output, data collected is used for timework studies and to better understand employee interaction patterns.

Evolving software, an influx of big data,

advances in processing power and

the development of cognitive technology is helping machines to make informed 

‘decisions’.

Cognitive computing is dedicated to making computers more user friendly, and machine learning enables systems to emulate the human thought process. For the retail world, it’s all about bringing richer, more personalized experiences to customers. Some retailers are experimenting with virtual dressing rooms and interactive ‘window shopping’. Japanese fashion retailer Uniqlo has piloted ‘Magic Mirror’ technology to let customers virtually change the colours of clothes they’re trying on. At its store in Germany, the sports apparel retailer Adidas created a virtual shopping window where customers can drag products into a shopping bag, download them to their smartphones, and complete the transaction on the company’s e-commerce system. Such processes will anticipate the needs of customers over time as devices become more sophisticated at understanding

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requests. Evolving software, an influx of big data, advances in processing power and the development of cognitive technology is helping machines to make informed ‘decisions’.

With regard to digital fabrication, many retailers and manufacturers are exploring ways to leverage 3D printing to meet individualized demand by deferring production to the latest point possible in the supply chain. Not only can it provide personalized design, it can revolutionize the supply chain by allowing for mass customization without increasing storage and shipping costs. Staples, an American office supplies retailer, has added 3D printing to its copy services, creating everything from phone cases to musical instruments. The adoption of 3D printing is accelerating and poised for massive growth.

Digital is also making a profound transformation in the payments landscape. Consumer use of smartphones as a mobile payments device has increased significantly from 2012 to 2015 — by 24% in the United States. Digital payment solutions can improve retail operations by reducing checkout times and enabling other efficiencies. Concurrently, it opens up the direct-to-consumer channel for manufacturers and allows them to develop insights into consumer behaviour without relying on retailers.

Hongkong Land digital initiativesWhen your shopping mall has tenants representing many of the world’s finest brands in retail, dining and hospitality, there must be an ongoing commitment to driving their business growth through world-class innovation.

Despite the growth in e-commerce, Hongkong Land believes that the major luxury brands that make up the bulk of its tenants will continue to need a physical presence in key locations in support of their market positioning. At LANDMARK, its luxury mixed-use destination in Central District, Hong Kong, Hongkong Land is carrying out major digital initiatives with both retailer and consumer in mind.

A revamp of www.landmark.hk has been one of the first fruits of Hongkong Land’s digital labour, and also the most visible. The upgraded, mobile-enabled LANDMARK website was part of an ambitious brand campaign that covered outdoor, print and digital channels. Current digital projects include early development of a loyalty programme for LANDMARK’s patrons. Data pertaining to shopper spending and redemption behaviour is being collected for a state-of-the-art loyalty programme designed to establish a direct relationship with customers. Hongkong Land is also looking to digitization to enhance the event experience at LANDMARK. By collecting data on customer behaviour now, a fast and efficient online RSVP system will soon be on offer to patrons of selected prestige events.

On the horizon is an upgrade of a people counting system that reveals data such as which areas are prone to congestion and are busiest at certain times of the day. The developer is also applying this upgrade at its large-scale WF CENTRAL project in Beijing. Back in Hong Kong, shoppers and tenants of LANDMARK will soon benefit from new digital services on a relaunched mobile app. A host of other digital-related advancements are planned at these and other mixed-use Hongkong Land properties, ensuring Hongkong Land stays relevant, drives growth and boosts efficiency.

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Future-Proofing Strategies

With technology disrupting value chains in many ways, accurately predicting its impact is considered impossible. The next best thing for retailers hoping to future-proof their business may be through investing in four key areas: strategy, digital operating model, partnerships and culture.

When it comes to strategy, leaders realize they must be in a position to respond quickly to new technologies. That requires closer ties between IT and business functions to ensure that technology investments are aligned to business needs. Knowing when to get out is just as important as knowing when to invest. Not every investment will have a positive impact on the business, of course, which is why more companies are adopting ‘fail fast’ approaches to technology investments.

Under the digital operating model, retailers align all major functional areas – R&D, product development, manufacturing and supply chain – to a common approach in order to deliver strategically required digital capabilities. The supply chain requires more agility to thrive in the digital world with shorter lead times and uncertainty of demand. Li & Fung, a Hong Kong-based consumer goods design, logistics and

Dairy Farm Seizes OpportunitiesAs disruptive forces impact the retail industry, Dairy Farm is embracing challenges and opportunities and adopting a culture of innovation, which includes digital fabrication and digital payment.

Partnering with major technology innovators, Dairy Farm is on a transformational journey to move all of its key buying and supply chain functions onto a common operating model and system. The objective is to understand and serve customers better while operating the company’s retail business more efficiently. As digital transformation and innovation are becoming more integral to Dairy Farm’s core business, the group plans to focus on providing customers with the best in-store experience.

Dairy Farm is also progressing ways of introducing e-commerce initiatives into its operations. Guardian is trialling e-commerce solutions in the Health and Beauty sector in Singapore, while IKEA has launched an e-commerce option in Hong Kong, soon to be followed by Indonesia and Taiwan. Existing e-commerce offerings for Dairy Farm’s supermarket operations are being revamped and a range of e-commerce solutions are being evaluated, such as click and collect. In mainland China, Dairy Farm’s affiliate, Yonghui, has tied-up with internet platform JD.com to complement its store-based activities.

Dairy Farm is active in the area of digital payment. For example, 7-Eleven’s mobile app has allowed the company to enhance its customer offerings and personalized marketing. The recent launch of Apple Pay in Hong Kong also means that customers can use their iPhones to shop seamlessly at any of Dairy Farm’s stores in the territory.

Dairy Farm’s private label team is leveraging 3D printing technologies to streamline the packaging selection and development process. When developing new private label health and beauty products, 3D printing is being used to create different shapes and sizes of containers and bottles to quickly determine the most attractive and appealing products to consumers. This alleviates the wait for manufacturers to go through the plastic moulding process.

A virtual pop-up store operated by Guardian at City Hall mRT station in Singapore.

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distribution company, has in recent years run a series of 3D printing initiatives. In 2013, it carried out Asia’s first in-store 3D printing retail experience at a Toys‘R’Us outlet in Hong Kong, which could save on logistical and storage costs.

Through acquisitions or partnerships with non-traditional players, retailers can disrupt their traditional value chains. Relationships with consumers are proving invaluable with addressing disruption opportunities.

The foundation for a culture of innovation is laid when it is emphasized as a core element of corporate strategy. Providing access to collaboration tools, new technologies and research, as well as incentivizing employees to take a fresh look at their own operations and creative approaches to problem solving, further encourages new approaches that extend well beyond current business practices.

Standalone strategy and operating models are obsolete in modern-day retail because retailers cannot successfully run channels separately. There is general agreement that retailers need to be adaptive and agile in order to capitalize on the disruptions and view them as opportunities to lead in the marketplace.

The foundation for a culture of innovation is laid when it is emphasized as

a core element of corporate strategy.

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