Decoding Tomorrow:
Futurism and Foresights Today

DIGILOGUE: RETAIL INDUSTRY IN ASIA

It should come as no surprise that online retail is booming in Asia - online sales are expected to rise by an average of 20% a year in Asia and by as much as 40% annually in some markets such as Japan on the back of increased online penetration, consumer savviness, rapid improvements in IT systems and an increased consumer willingness to shop online. Taobao Mall, China's ‘e-Bay', experienced a quadrupling of transaction volume in 2010 and now boasts more than 800 m product listings.

So what is the state of digital retail in Asia, and are there any counter-trends in the region?

The digitization of retail has changed the retail game forever resulting in new approachs to technology, interaction, innovation and execution. Music and video rental stores have all but disappeared in our lifetime and many bookstores are following suit. Does this spell the end of the traditional ‘bricks and mortar' store? The answer is yes, and no.

The physical store is wheezing, but not dead.

*Shanghai Subway Consumer Displays and Advertising

The good news is that while traditional retail is facing some serious and sometimes deserving challenges, it will always be a critical part of the consumer experience. Most people do, and will continue to enjoy shopping in the real world. The digital mind craves convenience, immediacy, comparisons and information that runs continuously 24/7/365. Yet the analogue heart wants emotion, inspiration, gratification, connectedness intimacy and meaning.

Hong Kong is a great example of this ‘hi-tech, hi- touch' concept. Even with its high internet penetration at 70% in 2011, concentrated population, and high levels of smartphone penetration, bargain-hunting and hands on shopping remain the preferred method of purchases as the overwhelming majority of shopping continues to be done offline.

In our rush to change business models to react to the digitizing world, too many of us focus on the digital bling and forget the analogue thing. Remember, Amazon, Apple, Facebook and Google, four of the most innovative companies worldwide have all incorporated analogue concepts in their digital business - Ebay has just opened a concept store in NYC while Amazon is rumoured to be opening one in Seattle, Google uses analogue vouchers to promote its digital advertising business and Apple generates more than 20% of its revenues in store.

*Hong Kong Apple Store at IFC

Given the disruptive waves of change, retailers need to address key challenges in order to adapt and stay relevant today and into the next decade.

- As traditional bricks & mortar retailers face an erosion of foot traffic and sales, the economics of the store comes into question more than ever. Retailers need to re-think the role of their store, away from the idea of sales transactions as the primary goal. It's all about brands using the physical store as a vehicle to tell a compelling brand story, personalise the shopping experience and deliver ‘digilogue' experiences that can't be matched online.

- Consumers are becoming are increasingly savvy, skeptical, aware and demanding. With seamless and ubiquitous access to the internet, how will brick-and-mortar retailers find ways to differentiate themselves on more than just price, since they tend to be at a cost disadvantage against pure e-tailers in many product categories?

- Because of the growing market complexity and heightened consumer expectations, retailers must have a strong, dynamic multichannel strategy. With the explosion of touch points and data, in what new ways will you reach shoppers most effectively and deliver the best experience?

Let us look at some examples of retailers in Asia who combine the best of old school with the best of new school.

Situated in HK's Causeway Bay neighbourhood, Eslite isn't another Dymocks or Borders. In fact it is more like a "cultural hub" - the emphasis isn't on easy purchases, but on getting lost in a world of art and books. The store stocks not only a massive book offering with some 230,000 titles over 3 floors but it also a tearoom, coffee bar, wine shop, an extensive selection of designer stationery, wellness products, jewellery, leather goods, music and gifts. Just when we thought the bookstore was dead, Asia's re-invention is an amazing example of what the physical store can do that online stores can't match - offer a 360-degree brand experience in a real-world setting. To date, Eslite's 40 branches have hosted 4,500 cultural activities with 100 million participants.

Home plus, the Korean branch of Tesco, recently launched a series of virtual stores on subway platforms, enabling customers to make purchases using their smartphones while they wait for a train. During the campaign, Home plus online sales increased by 130%, with over 10,000 customers trying the stores.

Shiseido's flagship store offers virtual make-up simulator kiosks, which allow customers to try many different products without actually putting them on, while the upper floors are devoted to experiencing the products, with a photo studio, luxury consultation and treatment suites.

Japanese department store Keio allows elderly consumers to shop with ease with lower shelves, older staff, signage with large fonts and strategically-placed chairs among other things. The store's loyalty card scheme is based on the frequency of visits, rather than the value of purchases.

Adidas has created a concept Runbase store in Tokyo, which offers showers, locker rooms and weekly workshops and events. Customers also have the opportunity to design their own shoes and rent running gear.

In May 2012, Hyundai Home Shopping introduced its new mobile application, ‘H-Codi', a ‘virtual fashion coordination' program using Augmented Reality Technology. Customers can virtually try on or test most products from Hyundai Home Shopping. For example, the camera on smart phones scans customer's face or body, and shows pictures with co-ordinated fashion products such as earrings, neckties and handbags. This service is also available for interior accessories and more; about 70,000 products are available.

To stay relevant, retailers of the future will need to create a unique value proposition with truly exceptional customer service at its core. I believe the correct strategic response to digital disruption is that we must become digilogue - the TRANSLATIONAL, CONVERGENT, AMPLIFYING SWEET SPOT BETWEEN THE DIGITAL AND THE ANALOGUE.

The question facing the retail industry going forward is not "can the store compete?" but "does it have the will, talent and vision to compete?"

Site Visits 2012 - Shanghai, Singapore and Hong Kong

Research by Ware Kuo

Thanks to Trendwatching.com for pan-Asian inspirations.