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The New Retail Playbook
Shoppers wandering into the Iuiga store at Causeway Point might notice a few things unusual about the homeware brand's first permanent retail space. One is a large interactive screen that displays product information and customer reviews when items with radio-frequency identification (RFID) tags are waved in front of it.
Then there are the posters around the store and staff T-shirts emblazoned with Quick Response (QR) codes on the back, urging shoppers to download the Iuiga app which unlocks more information. Observant shoppers may also notice some customers skipping the queues by scanning their desired items, checking out online and swinging by the checkout counter just to grab a paper bag before sauntering off.
But the biggest difference would be for first-time customers when they reach the head of the physical checkout line, ready to pay. They can use cash, credit card or any payment mode they like, but they need to set up an online Iuiga account before their items are rung up. This way, whether customers shop in-store or on Iuiga's original online platform, the brand remembers their purchase preferences and uses them to fine-tune aspects of its business, from marketing to inventory management.
This is part of a strategy called New Retail, leveraging data from every aspect of a brand to improve the customer experience.
Alibaba founder Jack Ma coined the term back in 2016, calling it "the integration of online, offline, logistics and data across a single value chain". It builds on the idea of omnichannel marketing, a term bandied about since 2010. Simply put, omnichannel marketing involves creating a seamless customer experience across a brand's multiple platforms. It is often urged upon traditional retailers, who are told they need an integrated online presence to reach a bigger audience.
But the New Retail strategy is especially relevant to the other side of the playing field, encouraging online companies to explore physical retail's untapped data opportunities - a move in the opposite direction, as it were, and one which could end up changing the retail landscape itself.
Why do New Retail?
Mr Ma realised his New Retail vision in Alibaba's Hema supermarkets. Hema stores rely heavily on tech-enabled data, a concept which Singaporeans now see replicated in local startup honestbee's habitat supermarket. Customers at Hema outlets use the store's mobile app to access product information and make purchases. Alibaba uses the data to tailor the customers' future interactions with the brand, offering options such as the ability to quickly place another order for the same items to be delivered to their homes.
In Singapore, Iuiga and honestbee are at the forefront of this movement. It is early days yet, but the companies are confident that the New Retail strategy will pay off in the long run.
honestbee, which originated as an online platform offering food delivery, laundry services and personal grocery shoppers, chose to set up a massive physical store called habitat to extend its philosophy of "creating awesome food experiences, online or offline", says habitat managing director Pauline Png.
habitat's tech features are impressive. AutoCheckout enables cashless payment via the honestbee app, and RoboCollect, delivery by robots. Apart from a truly innovative supermarket, habitat also houses food and beverage outlets as well as cooking classes so customers can try recipes, interact with experts and sample new produce.
For honestbee, setting up in a traditional retail space such as a mall would have resulted in huge rental expenses. But habitat operates in a 60,000 square foot space in an industrial building, with approval from the government to run its retail business on the premises. A statement from the Urban Redevelopment Authority (URA) says it was given the approval "to pilot new technologies and innovation for their business in an industrial premise."
honestbee declines to reveal the cost of setting up its store or its sales so far. It says more than 250,000 people have visited habitat since the launch in October 2018.
"NewGen Retail is our take on how we feel retail should be - an innovation in retail technology that inspires more human engagement for a multi-sensory shopping experience," says Ms Png.
Since customers have to scan QR codes from their honestbee accounts in order to enter and shop in habitat, no purchase data is lost - it's as if the offline shoppers are online customers as well.
Both honestbee and Iuiga use the purchase data to recommend and introduce new products and services to customers.
"When the customers scan QR codes (in store), we are able to see which products they're viewing and adding to their wishlists," Iuiga's chief growth officer Jaslyn Chan says.
"And when they buy from (another Iuiga store), we're able to track that and see if they make an online purchase after buying from an offline retail outlet. We would be able to personalise their shopping experience, once we hit critical mass to do in-depth analysis."
Such analysis would ensure that a customer who buys an electric toothbrush in Iuiga's mall outlet will not get an email with a discount for the same item online the next day.
Instead, he might see a promotion for a new brush head about three months later, around the time he should replace it.
While Iuiga is still in the early stages of leveraging the data from its physical stores, Ms Chan says that the stores provide other benefits for the business, outweighing the rental and manpower costs associated with offline retail.
For one thing, the amount of brand exposure from a physical store is hard to replicate, even with a large budget, in the crowded online space. In fact, Iuiga goes so far as to classify its outlets under marketing expenses.
A storefront is, after all, a permanent billboard which advertises the brand's commitment to quality by providing the actual items for customers to check, and directly targets people who tend to shop offline - an important demographic to reach, given that 95 per cent of transactions in Singapore take place offline.
The exposure has boosted online sales, with online revenue doubling after Iuiga opened its pop-up store at SingPost Centre in May 2018, from S$200,000 per month to S$400,000 per month. Iuiga projects that by the time it reaches its target of 10 stores in Singapore by the end of this year, it will draw total revenue of between S$40 million and S$45 million per annum.
For David Jou, CEO and co-founder of Thai e-commerce fashion brand Pomelo, New Retail should ultimately be about solving the pain points of e-commerce and traditional retail.
Pomelo is scheduled to open its first physical store in Singapore in Q2 this year. Mr Jou says it will follow the model used in Pomelo's Thai stores: it will stock some inventory for walk-in customers, but its primary purpose is to serve as a try-on and pick-up location for online customers. Orders placed online can be delivered to the store, where customers try on the pieces and pay for only the ones they take home.
In this way, customers are motivated to go online for the full range of products, and to visit the physical store for the commitment-free try-on experience.
"For us, the important thing is to provide a significantly better experience to the customer by merging the online and offline," says Mr Jou. "Moving customers online is not so much an objective for us, as much as helping people enjoy the benefits of picking up their purchases in-store."
Malls coming on board
Malls are embracing this New Retail strategy and retailers who employ it, as a way to revitalise the local shopping experience. In November 2018, Plaza Singapura launched NomadX (pronounced "nomads"), a concept store for retailers to experiment with omnichannel retail. It offers flexibility with short-term leases and "plug and play" retail units equipped with interactive technologies to encourage product discovery and play, says CapitaLand Retail deputy managing director Chris Chong.
There is also some degree of personalisation in the NomadX shopping experience - check-in stations near the entry points assign customers to one of four tribes after they answer a few questions on their shopping preferences. Each tribe receives a suggested shopping route through the NomadX space, along with product and deal recommendations.
Of the 18 retailers currently operating in NomadX, five are online brands for whom the setup serves as their first physical presence - Style Theory, Teapasar, By Peapods, Révolte and Taobao.
For online behemoth Taobao, the unique challenge of a physical store lies in deciding how to showcase a tiny slice of the billions of products available on its e-commerce platform, says Mickey Xiong, country director for Alibaba Group's Taobao and Tmall in South-east Asia. Its NomadX outlet focuses on bigger-ticket items such as furniture and electric kettles, allowing customers to compare the products before making their purchases online.
"From our experience, shoppers in Singapore appreciate the opportunity to see and interact with products that are available in the virtual world," Ms Xiong says. "We believe the experience offered here can promote their interest in online shopping."
Causeway Point's operator Frasers Centrepoint Trust welcomed Iuiga as a brand that demonstrates synergy between its online and offline stores and taps technology to provide an all-round shopping experience for consumers, says Molly Lim, senior vice-president and head of retail properties at Frasers Property Singapore. Frasers is always on the lookout for new brands and concepts to bring into its malls, she adds.
"By expanding our tenant mix to include a varied mix, including new retail tenants, it allows us to remain relevant and meet our shoppers' demands, including the younger digital-savvy generation."
Another mall operator that has embraced e-commerce brands is Lendlease. Two of its malls, 313@Somerset and Jem, host homegrown fashion label Love, Bonito's physical retail stores; while its upcoming Paya Lebar Quarter mall will house an Iuiga outlet.
"These stores enable malls to reach another audience in the loyal followings of these online brands, as well as bring overall diversity of brands to shoppers," says Jenny Khoo, Lendlease's head of asset operations, Singapore.
"These online merchants have demonstrated (that) the next era in retail will be dependent on creating a differentiated, best-of-both-worlds experience for shoppers, while maintaining the seamless convenience we are now all accustomed to."
As the trend grows, local shoppers will see shopping malls change physically and even become more crowded, retail experts say.
"As more retailers embrace omnichannelling, it will be imperative for landlords to evolve with this transformation," says Letty Lee, executive director of retail services at CBRE Singapore.
"For newly built properties or developments undergoing asset enhancement, landlords could use this opportunity to reconfigure space that is more suited for omnichannelling, by allocating areas for distribution and parcel collection points or even a fulfilment centre. For existing developments, there could be greater flexibility for store configurations to create a more exciting store experience."
Knight Frank's executive director and head of retail Wendy Low expects the retail sector's efficiency on the whole to increase, since big data will make it easier to understand consumer preferences and buying behaviour, and help with better inventory management, logistics and merchandising plans.
"With the online going into the brick and mortar, e-shoppers will be driven back into malls, increasing footfall and overall spending, as shoppers will necessarily move around the mall," Ms Low says. "Shopping malls are no longer just a destination for shopping, but are also now places for friends and family to meet, eat, shop; be entertained and to entertain."
Traditional retailers will have to embrace aspects of New Retail to remain competitive, says Thibault Ricbourg, director at pricing consultancy Simon-Kucher & Partners.
"Most of the innovations that New Retail will bring can be applied by traditional retailers," Mr Ricbourg notes. They include providing product details online for customers to access by scanning product tags, offering smart carts that can help guide shoppers to their desired aisles, and implementing interactive touchscreens and "smart" dressing room mirrors to try on apparel and make-up items virtually.
Is New Retail right for you?
Even as New Retail gains traction in Singapore, companies should not blindly chase a tech-heavy strategy that may not work for everyone, caution other brands that have moved into offline retail from primarily online operations. Costs jump exponentially once physical retail rental figures in the overall business plan.
Instead, decisions should be made based on what is best for the business and its customers - and customers often seek quality human interaction rather than tech solutions in offline retail.
Love, Bonito's two stores in Singapore operate like regular retail outlets, with aspects of New Retail incorporated. Some features include in-store exchanges and returns of online purchases, and interactive screens scattered throughout the store to collect immediate feedback.
Chief commercial officer Dione Song notes that pushing customers to sign up for online accounts would not have worked well for its flagship outlet at 313@Somerset, because of the high volumes of tourist traffic in the mall. Tourists pop into the store for instant gratification, and may be turned off by the hassle of setting up an account.
Love, Bonito plans to add more tech to its stores over the next few months, exploring ways to gather information in areas such as the try-on process, to identify what customers like or dislike about certain pieces. It will also tap purchase data to further personalise and improve individual customer experiences at the offline stores, such as having the stores' style ambassadors suggest what customers might also like, based on their purchase history, just like the website does.
"What we believe is, it's not about tech for tech's sake," Ms Song says. "We see the customer as being platform-agnostic. You don't say, 'Should I go offline-shopping today, or online shopping?' You're going for a brand, you want to purchase something, and we're here to ensure that your experience is seamless."
For furniture retailers like HipVan and Castlery, physical stores just make sense because even loyal online customers want to visualise how the products would fit in their homes and test them out before buying. HipVan's customers are fairly independent, aided by tech like in-store computers and the HipVan app's photo search function - taking a photo of a HipVan product brings up the relevant product information, while photos of furniture from other brands bring up suggestions for similar HipVan items.
But customers still appreciate having retail staff around to handle their queries and feedback.
"Sometimes, the customers may have additional questions that are difficult to ask online, or they're not comfortable asking online. They can ask the staff in-store, and the feedback is filtered back to the online team to update the website," says co-founder and CEO Danny Tan.
Castlery goes one step further, giving customers the option to book an appointment ahead of time so they are guaranteed personal attention. Co-founder Declan Ee notes that Castlery customers are serious buyers and have done most of their research online.
His advice for online brands looking to go omnichannel is to make sure a company is in the right business for it. "If customer and user experience is important to your brand and it helps your revenue, do omnichannel. If not, don't do it because it's the cool thing to do. It's costly, and there are a lot of things you need to consider."
Some negatives include the rental and manpower costs of running a physical store. In addition, the products on display usually need to be unique rather than commoditised, or they may not draw enough sales in a retail environment to justify the additional expense.
Taking on tech to allow for the human touch
For French sporting goods retailer Decathlon, all the tech in the world can't replace the human touch. It has tried just about every New Retail trick in the book so far - from a showroom as its first physical presence in Singapore back in 2014, to small click-and-collect stations, to huge retail outlets equipped with the latest technology, like its Decathlon Singapore Lab in Kallang which opened last month.
Among other things, the Lab has replaced cashiers with self-checkout counters, deployed a robot that takes inventory of the 5,000 square metre store within five to six hours, and installed interactive screens that detect product RFID tags to display additional information, or flip to a mirror mode. To fulfil Decathlon's promise to have online orders delivered or ready for self-collection within two hours, an overhead conveyor belt system lets staff send the ordered items to the packing station without missing a beat as they move around and attend to in-store customers.
These innovations are not meant to take away jobs, but rather to free up staff to focus on providing the human interaction customers seek at a physical store.
"From what we can analyse globally, people really want human relations," communications and marketing leader Laurent Petit said at the Lab's launch.
"We put digitalisation into our stores to allow our team to be more human-oriented. People want to get sports tips, and we know now what the consequence (of good advice) will be on the purchase."
Ultimately, Decathlon uses multiple channels and technologies because it wants to devise the best solutions for shoppers' diverse needs, Nils Swolkien, managing director for Decathlon Singapore, told BT.
"There is a need for an experiential place, to interact with passionate staff and get entertained as a family and in classes. There is also a need for convenience, so you don't need to commute long distances to get the products... Hopefully this will match what Singaporeans need, whether it's a big store or small convenient click-and-collect stores."