At the rate technology is creating an impact on consumers’ lifestyles, the high-tech shopper is now more the norm than the exception, especially in Asia’s biggest shopping havens. Retailers are respondng fast to meet customer needs.
But even the neighborhood store, the local grocer, and the diner down the block are trying to re-imagine the shopping experience. The next-generation retail store may be just around the corner.
In an interview with Retail In Asia, Kenneth Law, Head of Business Solutions Applications and SI, Fujitsu Hong Kong, provided an overview on the sweeping changes in the retail sector brought on by technology advances.
Retail in Asia (RIA): How is the retail store evolving in the age of digital communications and the massive use of technology in business?
Kenneth Law (KL): Today, mobility and timeliness are the keys to success. We see the rapid adoption of mobile devices such as smartphones and tablets leading to the emergence of strong digital natives, social media and flexible shopping models. People are now used to instant responses and expect more personalized services from their shopping experiences.
Technology innovation now assumes the role in transforming the entire retail environment, into what next-generation retail stores really are. In particular, we see that self-service kiosks and touch-sensitive displays are increasingly popular in the Hong Kong retail market, and gaining in importance with businesses such as restaurants, supermarkets, specialty shops, in providing a seamless and fast paced shopping experience to consumers.
Taking the F&B industry as an example, instead of using print-based signage in restaurant chains, the use of networked digital signage offers dynamic and unified content updates across all outlets, based on marketing needs. This is more efficient and less labor intensive compared to traditional signage printing and reduces the logistics involved in every update. Another example is the adoption of touch-sensitive technology. It can provide interactive food menus for customers on an intuitive user interface. Businesses become more dynamic because of the flexibility offered by the backend system.
Other than this, the increasingly long operation hour or even 24/7 operations among retailers also create a more complex challenge for retailers to manage, especially some legacy systems and applications from various vendors are often available at a retail branch. It becomes critical for retailers to have a standardized and integrated platform to maintain product quality and enhance efficiency.
To ensure businesses keep pace with rising customer demands, retailers can take advantage with technology such as virtualization, cloud computing, big data etc. to upgrade its level of customer services and operation efficiency. By working with an IT services provider, retailers can gradually migrate their services from the traditional business model to a more integrated and managed approach.
RIA: What are the trends shaping the industry? What will the next-generation retail store look like?
KL: (Virtual Store) In the future, almost every product in such stores will be ‘smart’ and even becoming ‘virtual’. Radio Frequency Identification (RFID) technologies have been in place to attach in products for over a decade, but in combination with mobile technologies, they can not only revolutionize the supply chain, but also transform customer payment experience. What’s more, near field communications chips (NFC) will enable smart devices to make payment, and location-based services will enhance better communication and service quality. All these technologies will make the ‘future store’ uniting home and retail stores.
(Personalization) According to a recent survey conducted by National Retail Federation (US), retailers’ websites or online channels eclipsed physical stores as the top channel for marketers (81 percent for brick-and-mortar vs. 86 percent online) for the first time in ten years. Retailers will be investing in areas that provide a personal shopping experience to consumers.
Additionally, more than half (53 percent) of those surveyed say they will specifically focus on web personalization engines, which includes enhancements such as location-based services and tracking methods unique to consumers’ shopping habits. To better serve the mobile-savvy shoppers in their stores, retailers also stated enhancing handheld technologies, such as mobile point-of-sale, will be a core focus for business development. In order to meet with the business demand in IT infrastructure, it is expected that the IT budgets in retail industry will be increased. Retailers who develop the right strategies and approaches to their IT infrastructure will be more competitive than those who do not in the emerging online and mobile retail environment.
For instance, high-end POS terminals that are networked to the back office on the cloud support the CRM initiative by offering customers attractive content related to their checkout items. This set up facilitates cross selling, through suggesting additional items related to customers’ items of interest. At checkout, customers can be offered gift redemptions based on their shopping habits and history, coupled with their accumulated “shopping points” in the “smart IC” membership card. This not only improves customer satisfaction but also help keep track of customer purchase habits for more effective marketing planning.
(Big Data in Retail) Retailers see customer satisfaction as the key conduit to accelerating sales growth, particularly amid declining retention rates and increased fragmentation. Consumer-focused businesses are awash in information on their markets, merchandise, prices, and customers. Retailers have more information available to them than ever before, but have difficulty taking full advantage of their large pools of data, typically millions of transaction level data points, in a systematic way. By adopting big data technology, retailers will be able to better utilize the mass amount of unstructured data by transforming them into useful marketing intelligence. With business analytics tools to process data on a daily basis, retailers can gain a better understanding of the market trends, as well as customer needs.
RIA: How are Asian retailers coping with these changes? How do we compare with other regions of the world?
KL: Realising the huge efficiency that cloud computing can help with retail IT systems and operational issues backend, Asian retailers are positive about moving towards the cloud. They are adopting gradually at the moment since many businesses in APAC region are still at a developing stage. It would take them two to five years to fully upgrade retail legacy systems as it takes time for businesses to become more mature to advance further, according to IDC.
As the economic and financial crisis around the world deepens, emerging Asian markets still hold out more robust potential for growth and expansion than its Western counterparts. With Asia remaining as the main engine of global retail growth, it will drive future adoption of cloud among Asian retailers although adoption pace of retail-specific technology in APAC is still catching up with other regions.
It will not be surprising to see increasing adoption of private cloud, including software-as-a-service (SaaS) and infrastructure-as-a-service (IaaS) which enable retailers to be more responsive in the fast-changing environment. These models de-risk capital investment to retailers while IT service providers to keep up technological changes and emerging capabilities to retailers.
This year, Hallmark, a major US greeting card company partnered with Fujitsu for a complete cloud-based, retail-as-a-service (RaaS) solution for its more than 2,500 independent retailers and corporate stores in the U.S. Hallmark and its independent retailers will use a monthly subscription model to cover a combination of Fujitsu solutions and third-party hardware, software, support, maintenance, and data center hosting services. By creating a single, centralized platform that provides real-time updates on merchandise status, Fujitsu helps Hallmark’s stores and their sales force free from worry of computing systems and focus all their attention on providing great customer service.
RIA: What is the technology best practices that Hong Kong retailers are adopting to create more efficient models?
KL: In Hong Kong, we see a growing trend among retailers operating under longer hours or even 24/7, which create demand for managed services and data centre services to improve their existing operation models. This also leads to the growing emphasis on fast and efficient flow of services. In addition, Hong Kong consumers are tech-savvy, with a high 68.5 percent Internet penetration and high levels of mobile and smartphone penetration. They are used to receive customer services via multiple channels including mobile, Internet etc.
To serve these IT-savvy customers in Hong Kong, local retailers would require a POS a system that enables cash flow or basic operation even if the network suffers a breakdown. The system will help local retailers to integrate all IT services from POS to the Payment System to mobile, and hence create a competitive edge by fulfilling customers’ needs.
Moreover, advancement in technology such as virtualization and cloud computing can help retailer to streamline their operation with enhanced efficiency at a lower cost. While big data solutions can help them better analyse and understand the huge amount of data they process on a daily basis to obtain a better understanding of consumer behaviours, preferences and market trends etc., so that they can be more responsive to market changes and profit from them.
RIA: How can small retailers adapt to this changing technology landscape so they can remain competitive, without necessarily having to shell out huge capital outlay?
KL: One of the major benefits of cloud computing is that it can greatly reduce TCO by up to 35 percent by allowing retailers to shift their cap-ex to op-ex. By re-imagining the traditional workplace and enabling enterprises to shift from cap-ex to op-ex, virtualization removes the heavy burden of hardware investment and unshackles devices from the computing layer. The start up cost would be significantly reduced for small business, as they do not have to invest heavily on IT capital.
In cloud computing, the service provider will be responsible for the maintenance and upgrade of the cloud, retailers only need to subscribe for the service they need for their business, and pay according to their usage.
RIA: IT managed services promise retailers a one-stop-shop service and at the same time reduce cost of delivery and faster time to market for new solutions. How does it work? What are its advantages to both big and small- and medium-sized retailers?
KL: From planning, designing, execution to maintenance, IT managed services provider will evaluate the retailers IT legacy, and tailor-made solutions that best fit the retailers business needs. As a one-stop-shop, the service provider should be vendor-neutral so that the most suitable solutions from various vendors will be available to the clients. IT managed services help enterprises to increase business agility by minimizing risks and reducing costs. Outsourcing management of IT to experts frees up staff to focus on core retail issues and store operation quality and reduces IT management spending.
RIA: What can Fujitsu offer in this space? What is the Fujitsu GlobalSTORE POS Solution?
KL: At Fujitsu, the depth and breadth of managed service includes platform support for mainframe, midrange, point-of-sale, self-checkout, storage, network, kiosk, desktop and mobile computing environments. In particular, Fujitsu’s Store Managed Service is a comprehensive suite of capabilities aimed at delivering the right service levels to meet each retailer’s unique requirements and provides a new level of transparency, predictability and flexibility that traditional approaches just cannot support.
We deliver high-performance, best-of-breed hardware solutions, integrated software applications and multi-vendor lifecycle support services to help retailers around the world deliver on their brand promise and operate more effectively.
GlobalSTORE POS is based on our Fujitsu Retail Suite and enables retailers to easily connect different applications and devices from multiple vendors on various platforms. The result is a complete store system that reduces the costs of integration and helps you provide better customer service.
CEO Talking Shop is the Retail in Asia section devoted to interviews with brand CEOs and retail industry leaders.