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Retelling retail: Every customer is a digital customer

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Despite ups and downs, Hong Kong’s retail sector is doing OK. It may not be the glory days of cash-loaded mainland visitors, but things are going well. On the other hand, they’re not going great.

When things are OK, there is less urgency to adapt and transform. To achieve greatness retailers need to focus on understanding and meeting the needs of modern consumers.

Speaking at the 2018 Start Me Up HK Festival, millennial Carson McKelvey, Managing Partner of Hong-Kong-based retail pioneers Tofugear, explained how retailers need to redefine their offer to create a seamless, personalised and connected customer experience.

Retelling retail: Every customer is a digital customer
Speaking at the February’s ‘Retail’s Cutting Edge’ conference, McKelvey highlighted data on the evolution of retail.

A confusing picture

Hong Kong’s retail sector paints a complicated picture. While there has been a rebound in the industry, the image is of a sector that is finding it hard to adjust to the rapid pace of change.

At street level, it can seem that Hong Kong is lagging behind other economies – notably, Mainland China – in redefining the retail experience for modern consumers.

The cautious ‘wait and see’ attitude towards adopting technology and redefining the bricks-and-mortar experience may make sense from an internal business perspective, But consumers perceive a slow pace of change towards a genuinely interconnected retail experience. Both online and offline. And they’re getting impatient.

The risk for retailers is that customers increasingly disengage with brands that seem not to care much about their expectations in the digital age.

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A different perspective

Carson McKelvey is Managing Director of Tofugear, a company specialising in helping businesses create connected retail experiences. A millennial himself, McKelvey understands the pressures on traditional retail as the younger generations become consumers.

Rather than dying, retail is in the process of deep transformation. No one knows for sure what the future looks like, but customer experience design is set for a major overhaul in our city as we shift towards a more seamless and more connected retail environment.

Looking across the boundary, Mainland China is leading a retail revolution. It’s entirely possible never to use cash or go to a physical store.

On top of that, China’s push to become the world leader in AI means they’re setting the agenda in global retail trends.
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The perception gap

Driving these changes is the fast evolving expectations of modern consumers, who are increasingly opting for more convenience and technology-based options. It used to be quite simple to serve customers well. But we can no longer say that. Expectations have diversified. People expect more from their brands and are more likely to shift loyalty if they don’t get what they want and expect.

“Only 1% of customers feel the retail experience is consistent with their needs and wants,” McKelvey explains. “There’s a big gap between what companies think they’re doing and how consumers experience it.”

In fact, the gap is colossal. McKelvey referred to surveys by Forresters and Forbes indicating 84% of retailers feel that their company’s digital maturity is highly sophisticated. 51% admit to struggling with providing a consistent experience across channels.

Missing a trick

Technologies related to eCommerce, mobile payments and AI grab a lot of headlines. But it’s the technology in our pockets where the real opportunities lie.

As McKelvey explains, “There are an estimated 2.3 billion smartphone users worldwide. And in Hong Kong, smartphone penetration is already 170%. But only 24% of businesses have a mobile strategy.”

What’s more, 77% of consumers use their mobile devices in store. But only 5% of businesses are using existing technology. It seems that Hong Kong retailers are missing a trick.

Companies need to understand how their customers are using technology in day to day life, and not only for shopping McKelvey points out.

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A personal connection

Tofugear’s research shows that 85% of consumers buy more when they get a personalised experience from store associates.

“Helping customers in a genuine way creates a pleasant experience,” McKelvey says. “But the reality is that only 13% of retailers are using appropriate tools to enable staff to engage customers in a more personalised way.

A wide range of technology already exists to enhance the physical retail experience. Take, for example, Actimirror.

This Hong Kong IoT business launched a platform using custom-designed apps and built-in sensors. The mirrors display real-time personalised content to shoppers alongside their reflections.

The technology is attractive to fashion and clothing stores but also the hospitality, healthcare and exhibition sectors.

Joining the dots

A joined-up retail experience is not solely about technology. It’s about how the different aspects of the customer experience link to create a seamless and connected service.

For example, the top disappointment for consumers is when the product they want is out of stock. Maybe they don’t have your size, colour or style. If the store doesn’t have it, few of us will wait. And in most cases, we just take our business elsewhere.

But as McKelvey points out, store managers can save around 60% of those sales by arranging for staff to order it for in-store pickup or home delivery. Hong Kong is small, and delivery costs can be low.

It seems so simple, but only 12% of retailers have introduced the processes and tools to do this.

Learn from the experts

So, what lessons can we take from this? As McKelvey points out in his presentation, every customer is already a digital customer. And they want and expect businesses to provide them with these experiences.

By extension, to close the widening gaps between the customer expectation and retail reality means that store owners need to learn from their customers how to become a digital business.

Channels, channels, channels

We’re all using buzzwords like ‘O2O’ and ‘omnichannel’ these days. McKelvey’s perspective is that channels don’t matter. “We’re always talking about omnichannel. More channels, more customers. But it doesn’t work that way.”

“Put the customer at the centre of your business, build your platform around their lives,” McKelvey says.

His experience is that when a business moves from a being pure price competitor to a customer experience competitor, you have more chance to become indispensable to your customers.

Frontline staff play a leading role in achieving this. Customer centricity means providing better service and ensuring sales staff have stronger product knowledge.

Changing cultures and mindsets

“IT budgets are increasing, on average by 21% this year,” McKelvey says, “But 47% of initiatives still come from the top.”

What’s the problem, you ask? It’s that digital teams are not always cross-functional. They think technology first. But real transformation comes from connecting the different aspects of the customer experience.

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“Establish your dream team,” McKelvey urges. “Get your whole team involved. Create cross-functional teams with clear goals. Align KPIs to make your organisation’s vision the same for sales, marketing and tech.”

Innovation is being active, resilient and listening to customers. But in many cases, businesses focus on enhancing their existing offer rather than enabling new ways for customers to interact with their, services and products.

“Customers don’t think in terms of channels or touch points. They don’t care about that,” McKelvey reminds us. It’s for retailers to create an ecosystem that not only enables but enhances the offer.

An equation for success

Tofugear understands that retailers need an equation for success when building a connected retail ecosystem. And we need to teach our customers about our brand and products. Take a look at Apple. “They do a great job of sucking people into their ecosystem. They use their stores to educate people on using and integrating their products into their lives.”

As a millennial, McKelvey feels it’s common sense that the in-store environment is based on a defined customer experience model, combined with educating customers about how to engage and integrate your products and services.

The result is that your brand becomes part of a customer’s lifestyle. It becomes a statement of customers want others to perceive them and what they believe. And the way to achieve this is through a customer-centric, unified and ultimately enjoyable shopping experience. Regardless of the channel.

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