How can HK physical retailers compete with the convenience of online purchase?

The pandemics impact on behavioural changes is undeniable - especially when it comes to purchase patterns online. However with markets now slowly starting to open and the number of new COVID-19 declining in cities such as Hong Kong, consumers are becoming more comfortable venturing out and buying products from physical stores again. According to the latest figure from the Census and Statistics Department, the value of total retail sales in May 2021, provisionally estimated at HK$29.6 billion, increased by 10.5% compared with the same month in 2020. Of the total retail sales value in May 2021, online sales accounted for 7.4%. The value of online retail sales in that month, provisionally estimated at HK$2.2 billion, increased by 53.1% compared with the same month in 2020.

While online sales and purchases aren't going away anytime soon, it seems that offline channels are once again coming back alive and remain essential to businesses. In a conversation with MARKETING-INTERACTIVE, Xen Chia, strategic marketing director of XGATE, a company specialising in digital marketing, said businesses need to know how to meet the evolving needs of customers if they want to succeed.

Retail marketers looking to capitalise on this evolving purchase trend need to transform their retail sales in several areas.

For example, they need to be quick to launch eCommerce channels using a headless commerce architecture which is the separation of the front end and back end of an ecommerce application. According to Salesforce, this architecture offers brands freedom of expression to build whatever and however they want. Most importantly, it enables brands to enrich the customer experience.

Meanwhile improving customer experience with omnichannel retail, and craft a unique customer journey with personalisation, is also vital, Chia explained.

Chia added that opportunities are abound in Hong Kong’s online and offline retail market with both younger and older consumers embracing new technology very quickly for education, work, ordering meals online, shopping for daily essentials and most notably now, applying for Hong Kong government’s voucher scheme.

How mega retailers are aiding smaller retail SMBs

Many of Hong Kong's retail players, also fall under the SMB segment in the nation.  To offer a more convenient shopping experience for customers, a lot of these retail SMBs have also embraced payment service providers participating in Hong Kong government’s voucher scheme. To do so, they have tied up with notable companies with established payment platforms. 

Octopus for example has a slew of retail partners in its network which are also SMBs. To benefit smaller merchants, the company announced in April that new and eligible merchants would be able to sign up directly with Octopus Card to ease transactions for consumers. Octopus also waived setup cost or rental fee for the merchants. Those who signed up for the Octopus App for Business received a free Octopus Mobile POS and enjoyed a waiver of the bank account fund transfer fee until the completion of the voucher scheme. HKT, operator of Tap & Go, also has provided Tap & Go QR code transaction and installation fee waiver for merchants too.

Meanwhile, AlipayHK launched the “merchant code” for SMEs. With the merchant code sticker, businesses can simply paste the code in the store and they do not need to pay the installation fee and spare additional space for the machine. While WeChat Pay has rolled out a number of promotions to give back the money gained from the voucher scheme to users and merchants. As of 18 July, over 6.1 million residents in Hong Kong have joined the voucher scheme.

Making physical retail attractive again

The rapid growth of eCommerce has spurred brands and marketers to strengthen their digital offerings. But does this shift in behaviour put offline retailers in a precarious situation? 

Freda Ng, chief digital officer of Watsons International and Hong Kong, said that while eCommerce is crucial to a brand’s success, the offline landscape should not be ignored. Since the pandemic in Hong Kong is showing signs of improvement, customers are trickling back to physical store fronts and brands need to combine the strength of their offline and online offerings for a holistic journey. 

Ng explained that the offline plus online strategy (O+O) is the new standard for retail. “O+O is more about creating a seamless integration of offline and online shopping experience, and this can be further elevated if it is powered by big data and AI,” she said.

Ng added that beyond rolling out online content to engage customers on social media in an emotional manner, the company has also strengthened its on-site offerings to welcome them back.

In a survey conducted by Watsons carried out across its over 20 markets, all of more than 22,000 respondents said they would go back to the physical stores for shopping and Hongkongers were no different, while one-third of respondents saying they would even shop more often in stores.

Ng said such responses underlined people’s desire for a human connection which cannot be replaced by technology and digital, and this trend is even more prevalent in health and beauty. "Customers want to touch and feel the texture of skincare products and the true colour of cosmetics, while at the same time getting face-to-face advice from health experts, so offline is still an important part of the purchase experience,” she said.

Ng added that customers also have higher expectations now when they walk into a store “They expect in-store experience to be fun, engaging, and sensual. They want both a human connection and a fun in-store experience, and these have to be highly connected with their digital and social platforms.”

O+O is the future

To please its customers, Watsons is now offering a number of O+O retail technology across its stores in Hong Kong. For example, “WatsonsGO” allows customers to check out and pay through its mobile app so customers do not need to queue at the cashier. Meanwhile, “ColourMe” is an upgraded virtual makeup service that has been launched on Watsons’ apps, leverages AR and even if customers are wearing a mask, they can virtually try on any lipstick. In addition, Watsons has introduced a virtual hair colouring tool in the mobile app to help customers choose the right hair colourants. 

When it comes to building a lasting relationship with customers, Ng said a digitally connected physical store network is easier for customers to shop, while constantly innovating new excitements in the shopping experience, and a team of in-store professionals are the secrets of keeping a long-lasting relationship with customers.

Agreeing to Ng's comment, Chia said, “Consumers are social creatures. We like to interact with other people. Therefore, the offline experience will still be important for retailers as the economy opens up slowly.”

He added that consumer shopping experience will keep evolving and marketers need to adapt to new expectations by delighting customers with a better personalised experience, and dedicated customer services to build loyalty and grow their business. This customer centric approach has become ever more important for offline retail since the pandemic as brands face a whole new level of competition from online business – through their service delivery, competitive pricing and value.

Currently, consumers are redefining how they want to engage brands and online and offline experiences have no option but to converge into an omni-channel retail strategy. This requires a level of sophistication of system integration, data management and campaign orchestration.

"Improvements of omni-channel experience ultimately come from a holistic view of customers made possible with data integration and delivered through solutions such as CRM & loyalty management, marketing automation and business intelligence,” Chia said.

Ng added with customers in Hong Kong spoilt for choices and convenience in both online and offline space, brands must understand and anticipate customer needs. They must explore technological investments, a powerful store network and professional staff to be at the forefront.