In this article, Link chief executive officer George Hongchoy discusses the adoption of omni-channel retail, integrating advantages of each online and offline channel to create better customer experiences, is more crucial than ever amidst a pandemic.
Is the pandemic a curse or a blessing in disguise?
The Internet has evaded every facet of our lives - while few things in life are certain in these unpredictable times, we can count on the Internet in playing a key role in nearly everything that we do. Whether it’s shopping, learning, ordering a meal or banking, the internet is very much a glue that is holding us all conveniently together. This reliance on all things online, has led to the acceleration of a stay-at-home economy, a new way of capturing consumers who might not wish to interact with others and are no longer limited by time, space and geography.
As the COVID-19 pandemic continues to wreak havoc around the world, the stay-at-home economy has become even more pervasive since the enforcement of social distancing measures in various countries has made it difficult for people to leave their homes. White collar workers are being forced to settle into a rthymn of working from home, ordering takeaway and buying groceries online instead of going to supermarkets and eating out, a phenomenon that many have referred to as the “new normal”.
Nonetheless, living with COVID-19 has also made us realise how much we miss our “old” lives. Whenever the number of confirmed cases goes down and the anti-pandemic restrictions are relaxed, people have been seen to flock restaurants with friends and visit shopping malls for a spot of “revenge” shopping. Students look forward to returning to schools while many employees have expressed that they cannot wait to get back to their office desks. After living in a virtual world for a while, real and first-hand experiences seem more valuable than ever. Humans crave interaction and the best ideas are often the result of differing viewpoints coalesced through in-person debate and the sharing of diverse opinions - rarely can this be achieved through a few Zoom calls alone.
As many industries affected by the pandemic are major tenants of shopping malls, online retailing will continue to pose further challenges to shopping mall owners and operators. However, both online and traditional retail have distinct pros and cons, and are not mutually exclusive. This is why some online retailers still see tremendous value in opening physical stores in this age of e-commerce. Instead of excluding each retail channel, the new normal has made it clearer than before that the adoption of omni-channel retail, which integrates the advantages of each retail channel, to create better customer experiences for shoppers is more crucial than ever before.
Omni-channel retail refers to the adoption of a multi-channel approach - both online and offline- from marketing to delivering retail goods and services. A typical customer journey may involve customers first learning about the product details online through a retailer’s website or social media advertising, they will then be drawn to trying on/ testing and ultimately purchasing the product at a physical store or vice versa. This approach to retail makes the best use of the convenience of the internet while exposing shoppers to the physical realm to confirm their decisions, backed by the ability to touch and experience products in-person before finalising their decision. The process also allows retailers to reach target customers more precisely with the use of artificial intelligence (AI) and analysed data.
According to some studies, companies with mature digitalised and intellectualised platforms are less affected by the pandemic, and are therefore more resilient. Since physical experiences are not available in the virtual world, traditional retail - which provides physical in-store experiences to customers - and online retail, are seen to complement each other.
Taking the Food and Beverage industry as an example, as one of the most important tenant clusters for shopping mall operators, the category (excluding food and grocery retail) occupies 30% of Link’s shopping mall portfolio. However, due to various anti-pandemic restrictions and the home-dining trend, the industry has been hard hit in the past half year. Traditional Chinese restaurants, which rely heavily on group diners and the banquet business, have been severely affected. Nearly 70% of Chinese restaurants have had to close temporarily or shorten their operating hours in March when the city was pummelled by a wave of COVID-19 infections. Meanwhile, fast food chains, who historically had an upper hand during economic recessions, also suffered.
In spite of the gloomy situation, takeaway operators, especially the ones that have adopted omni-channel retailing and offer online ordering services, have recorded an increase in sales. To attract more customers and compensate for the loss caused by the dine-in business, many restaurants have started to collaborate with online takeaway platforms or have taken the plunge and launched their own delivery platforms. As a result, omni-channel retailing has thrown a lifeline to the F&B industry during this tumultuous period.
While online takeaway platforms provide much needed convenience to customers, dining out at restaurants remain a preffered option to many, as it provides a break from the monotony of staying-home while also giving people the opportunity to socialise and feel a part of a community. This is proved by the rebound of 80% dine-in business in June during the Father’s Day weekend. The strong resurgence of restaurant vistors further fueling the belief that we are social beings and that after months of staying home, many of us welcomed the opportunity to dine at our favourite restaurants with friends and family.
The move towards online channels has not only affected the F&B industry but also the sales of groceries . Although there is a continuous growth in sales in supermarkets due to increasing demand of eating at home, online retail platforms have thrived even more during the pandemic with record-high sales in groceries. According to a recent research1, more than half of the Hong Kong citizens surveyed saw an increase in time spent browsing online retail platforms during the pandemic, while one third of respondents made more grocery purchases online.
The same survey found that Hong Kong’s online grocery sales increased 73% in Q1, 2020 when compared to the same period last year. Some online retail platforms even recorded a 60% increase in daily orders, and are planning to expand their operations and self-collection points to accommodate this surge. The convenience of online retailing attracted many customers long before the pandemic. Between 2017 and 2019, the proportion of onlines sales in Hong Kong’s total market sales doubled to 2.51%. While this increase seems small, the growth is rapid and alarming to traditional supermarkets and grocery stores. This is a trend that supermarkets cannot ignore, leading to more focus on their own online retailing platforms.
No matter how convenient online retail platforms are, there is no doubt that bricks and mortar retail destinations - especially fresh markets - are irreplaceable to many customers. As the hub of the community, fresh markets play a crucial role, satisfying the demands of the neighbourhood and providing the community with spaces to gather. Shoppers prefer seeing, touching and even smelling produce before buying, and they value the professional advice from the traders. The array of produce displayed at fresh markets play a role in lifting shopper’s moods, through the social interactions it provides with vendors and fellow shoppers. It is due to the many physical touchpoints that fresh markets have been relatively unaffected during the pandemic and are able to continue to thrive. In light of the prevailing business environment, food and grocery retailers may draw reference from the success of Alibaba’s Hema Supermarket in Mainland China, which offers both online and offline options for shoppers to order produce in multiple ways while enjoying the convenience of their delivery service in the comfort of their own home should they wish.
Apart from the abovementioned industries, the education sector has also faced with its own set of challenges, as tutorial and learning centres are required to close temporarily. These businesses have also been threatened by the rise of e-learning platforms, which have a large database of past exam papers and offer one-on-one, cost-effective, exam-oriented learning solutions through communication softwares such as Zoom and Skype.
As competition within the industry accelerates, a suggestion would be for those traditional tutorial and learning centres to adjust their business models by offering supplementary online learning platforms on top of face-to-face classes. However, there is no one-size-fits-all approach for subjects that emphasise interaction and physicality such as music, learning, dancing and drawing. Until tehnology improves to allow for a more robust and realistic virtual reality experience, it will be difficult for such classes to be conducted exclusively online and on a wide scale.
During the pandemic, the Hong Kong Jockey Club also closed its branches and only provided online and telephone betting services. As the total betting amount for horse racing is about the same, we are quite sure that customers have already adapted to new ways of betting, and thus the demand for physical betting remains to be re-assessed. Since many customers still enjoy the excitement of watching live races together at the various branches, demand for these physical branches probably won’t disappear in the immediate term.
To conclude, omni-channel retail is not just a new normal that has emerged during the pandemic, it will also continue to evolve and play a vital role in the way we consume in the future. Traditional retailers should embrace new technologies and their advantages when providing new online solutions to customers. They should also be aware of the risks of online retail, increasing resources to enhance cyber security, and adopt AI technologies for more accurate data analyses. Meanwhile, consideration for how to improve their existing offline services in order to meet customers’ growing expectations will help to provide a win-win solutions for all parties.
1An Ipsos study on the impact of Covid-19 on Hong Kong consumers’ consumption patterns published on 6 April 2020 (https://www.ipsos.com/en-hk/press-release-new-ipsos-study-impact-covid-19-hong-kong-consumers)
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