The tech advancements transforming Hong Kong retail

Ever-changing market dynamics and audience preferences are pushing retailers into a digital-driven world to respond promptly to consumer needs. Though e-payment machines are an increasingly common in-store sight, there are other retail tech trends that will have a longer lasting impact and help businesses stay one step ahead.

Despite the rise of eCommerce, physical stores are not going anywhere. Customers will always want the option of visiting a physical store to try on jeans and dresses rather than buying three different sizes online. Sue Temple, vice president of global consumer insights at Nielsen, sees the trend of shoppers doing smaller, but more shopping trips in general, including online and physical stores. Connecting online and physical store experiences remains a major focus this year.

Shops without shopkeepers

When Amazon launched its Amazon Go to the public last year, the cashier-free store concept was seen as a revolutionary model for the future of retail, enticing the rest of the industry worldwide to play catch up. This year we are likely to witness more movements on smart, automated and cashier-less checkout schemes. Unmanned stores will eventually become ubiquitous in retail.

Hong Kong shoppers had a taste of this kind of smart retail experience during the Chinese New Year. Tencent’s WeChat Pay HK and JOOX collaborated with Sun Hung Kai Properties to open an unmanned shop at the apm mall in January. The 1,000 square foot unmanned shop featured five themed zones offering trendy gaming, Chinese New Year merchandise, limited edition souvenirs, a self-service karaoke station and an AI mechanical arm interactive experience zone.

The highlight of the unmanned store was a digitised consumer journey with more than 1,000 assorted goods in the store embedded with RFID chips. Customers could pick out items they wanted to purchase and then scan the QR code. The RFID system would automatically detect their chosen goods at the store exit, at which point, customers could use the Wechat Pay HK system to settle their transactions and leave.

Tencent’s International Business Group (Tencent IBG) tells Marketing: “The unmanned store has been well-received by shoppers. It is a real-life demonstration for consumers to experience smart retail through a seamless and secure mobile payment solution. We aim to enhance the overall consumer journey, and empower consumers through greater flexibility and convenience as they go about their daily lives.”

In the unmanned store, Tencent’s technologies not only enhanced the consumer experience, but also reduced operation costs for the retailer. It also provided analysable data to allow businesses and marketers to better understand consumer traffic, preferences and behaviour.

Tencent IBG has noticed a number of challenges that traditional retailers are currently face: rising offline operating costs, declining revenue as shoppers move online, and increased consumer demand. At the same time, there are visible opportunities for retailers to drive business efficiency by disrupting old channels, gaining a better understanding of consumers, and exploring new technological possibilities such as facial recognition and voice recognition.

Unmanned stores are all about removing friction and increasing productivity. While the minimisation of time in store has proven particularly effective for some retail categories (such as convenience and groceries) they are not suitable for other categories. Luxury, for instance, relies on the experience and time spent in-store, along with a high-touch service, as part of its value proposition.

Reality bytes

Great customer experiences will come from blending technology with a personal touch. Retailers are continuing to strive towards more personalised experiences with the use of AR and VR tech in their marketing campaigns and consumer journeys.

Recently, L’Oréal Group brand Lancôme partnered with Alibaba Cloud to introduce an AR game to Hong Kong customers. The launch of a seasonal mobile app coincided with the opening of a Lancôme pop-up store in Harbour City. The partnership leveraged Alibaba Cloud’s data, image search and AR technologies with Lancôme’s beauty product lines to create a holistic online-to-offline experience.

Customers could activate and play the AR game on their smartphones from anywhere in the city. Moving their cameras around, they were able to find and capture AR images of Lancôme’s signature beauty products.

“The retail store is no longer simply a place for making a purchase, it is also an entertainment destination.”

Larry Luk, CMO at L’Oréal Group, says, “As a beauty-tech company, L’Oréal combines beauty-tech with integrated marketing plans to drive the ‘retailtainment’ trend. This adds an entertainment element into the traditional retail approach, providing consumers with better interactive experiences.”

Alibaba aims to demonstrate that cloud technology can also be used in offline retail shops, by not only offering innovative ways of engaging consumers, but also showing how Lancôme will better understand customers’ needs by using data analytic tools.

“Lancôme began the Year of the Pig by breaking its daily sales record and achieving double-digit growth in Hong Kong by leveraging AR, Alibaba Cloud’s image search technology and cloud services,” Luk says. “Employing Lancôme as the pilot brand, the Chinese New Year campaign succeeded in creating unique and fun experiences and establishing personalised relationships with consumers.”

The ultimate goal of all these types of innovative and interactive campaigns is to stimulate customers’ interest in the products and drive business growth. Nevertheless, in 2019, retailers may go a step further from AR and VR to the  world of IR (immersive reality).

The potential of IR could be immense. While AR overlays digital content onto an existing physical space and VR transports users into a synthesised 3D world through sight and sound input, IR is a dramatic advancement. It provides an immersion of all five senses (sight, sound, touch, smell and taste) and far more interactivity. Which could, of course, result in far more data.

Consumer soothsayers

While marketers believe collecting big data is enough to understand current consumer behaviour for planning campaigns or business strategies, building accurate predictions of future consumer behaviour may be the game changer.

“A lot of big data looks backwards. It is what happened five minutes ago, an hour ago or last week. Now we are trying to predict what happens next,” Nielsen’s Temple explains.

Shopper behaviour is changing rapidly; a tool that enables retailers to keep up with the speed of change, or even stay ahead of it, will be the key to winning. Temple says: “If we can get quicker at research, we can model more things, more quickly, and we can look forwards not backwards, then the retailers have a real chance to win, to differentiate themselves from competitors, to deliver something the shopper wants.”

After rolling out in 12 markets in 2018, in February 2019, Nielsen’s Smartstore launched in Hong Kong. Smartstore is a digital solution that captures shopper insights in a 3D virtual immersive environment. Respondents will be tested in multiple live scenarios in a variety of custom store formats to gather predictive information. Their shopper experience will provide tracked head, eye and feet movements, alongside 3D heat maps for analysis. The turnaround for results can be as fast as one week.

This solution combines store planning, merchandising and marketing research. Retailers can measure, evaluate and optimise a range of retail concepts on sales and profit, based on how target shoppers react at the moment of truth. The solution allows retailers to measure the effectiveness of point of sale merchandise based on what shoppers “see, think and do”.

Technological advancements help businesses to create better marketing strategies with a better understanding of consumer behaviour, and ultimately, achieve greater business uplift with higher conversion. However, Temple thinks Hong Kong is lagging behind adopting retail tech.

“Digital is not an option anymore, it is not about being a digital marketeer, it is about being a marketeer that embraces all of that, the traditional and the digital, and getting the right mix for your brand, your category and your store.”

This article was produced for the March issue of Marketing Magazine. For more features, and other magazine-exclusive content from this and upcoming issues, you can subscribe to receive your print copy here or can read our digital version in its entirety here.