Digitising retail: Merging online and offline to create something new

• The aim is to digitise everything: customers, inventory, products, staff
• Argues that a strong online relationship boosts offline sales

XIADONG Chen (pic) showed the smallest hint of impatience when asked what exactly did he mean when he said there were no more queues in his stores? "All of our Point of Sales (POS) systems are based on the cloud," the CEO of Intime Retail tried to explain - again. "Before, we needed three and half minutes per transaction. Now for the sales lady it's 58 seconds per transaction!"

Chen was trying to explain how his stores make it easier for customers to make a purchase - even if it is by a mere 152 seconds. But it's part of his overarching vision of what it means to digitise a retail store.

Going digital can mean several things and many incarnations of that can be seen in an Intime store. The POS system are actually handheld readers (similar to the wireless credit card terminals in use today) that any salesperson can pick up to check out a purchase; the only time a user needs to line up at a cashier is if they are paying in cash.

There are also robots that wander the shop floor bringing stock from the store room to customers. In another corner a make-up lady is demonstrating the latest product line, except instead of just talking to customers in the shop, she is also being live-streamed to an audience on the Internet (we were told that some of them become celebrities in their own right). Possibly the most mundane was a monitor that you could use as a mirror to virtually try out different shades of lipstick, like an AR selfie screen.

As fascinating as all this is, it’s not quite what Chen was trying to explain.

Chen said that department stores should go beyond being brick and mortar structures to house goods (what he calls an "infrastructure of retail"). Now, technology has made it possible to reach into the hearts (and pockets) of not only those that visit his stores, but also those that might not realise they want to. "We need to centre around the customer's values," he tried to explain. "Then we need to digitise them."

Helping with this work is the Alibaba Group who in 2017 purchased a majority share in Intime for US$2.6 billion. Since then growth has been in the “double digits” and this year during the Alibaba 11.11 Global Festival sale, Chen expected Intime to handle a million transactions.

Explaining the strategy used by Intime to get to that point is something Chen admitted is difficult to do to an international press corps in Mandarin. "I can see you are confused," he said at one point. "Let me make it clearer."

Merging the offline and online

It's all about the customer. It's also about going digital. "Only if we digitise every element can we inject a new driving force to the conventional department stores."

Chen stressed what a job it is to digitise everything: customers, inventory, products, staff. For example, a supermarket has 5,000 SKUs (Stock Keeping Units). In contrast, a department store like Intime has 50 million SKUs— per season. “And there are four seasons a year," reminded Chen.

What does he get for his trouble? Apart from a smoother in-store experience, he also gets direct access to the customer through their app. At this moment, out of 65 Inime stores, 20 have more online customers than offline. Chen is certain this will double next year.

Retailers are also able to use an app to see data like foot traffic, transactions in real-time, and inventory levels. "I have the real-time figures in my cellphone."

But Chen is adamant that apps aren't just another channel to sell or track metrics. "If you think the app is store number 66, you're wrong," he said. "The app is a fundamental element underlying something (else)."

Bring the product to the customer, not the other way round

Instead of thinking that an online presence reduces physical visits to the retail store, Chen believes we should turn the idea around. "(Poor in-store) traffic is not the reason for (poor) sales performance; It is the result."

"Because in a physical store, the payment is the end of a transaction. But for e-commerce, each payment is the beginning of the next."

The key is to use data to understand the customer and then bring them to the products they want and need. Chen said, currently shops categorise goods to make them easy for people to find. "In the future, we will first categorise people and put them into groups.” Already, 40% of Intime's customers browse online first to learn about what they want to buy. "They then come to the store to have a shopping experience."

The next step after this is something Chen calls "New Manufacturing". "New manufacturing integrates front-end shoppers' data on numbers (which then) drives customisation in the supply chain," he explained. The goal is to reduce wastage by not making invalid or ineffective inventory in the first place. “In the apparel industry, (this number is) 20%, based on our response."

A strong tech partner

Clearly Chen believes Intime is forging ahead in going digital, and he is the first to admit that a strong technology partner is paramount, obviously pointing to benefits that come with having a company like Alibaba invest in you.

But Alibaba wants to use its expertise and offer similar services to small retailers in China, the so-called "Mom and Pop stores" through a retail-management platform called Ling Shou Tong (LST). It is offered for free to retail shops in return for the stores allowing Alibaba to use them as fulfilment-and-delivery centres, and - this is the clincher - sharing data on their customers' habits.

The app is Big Data in the hands of an independent shopkeeper. It recommends what goods are likely to be popular based on analytics, and then also allows you to order from Alibaba's warehouses. Alibaba gives training on how to decorate the storefront to attract their customers' demographic.

Would Malaysian kedai runcit retailers benefit from such a scheme? Michael Kang, SME Association of Malaysia national president, would welcome them, "We don't have a company like Alibaba (here)."

He shares that in Malaysia, efforts to digitise SMEs have mainly been driven by bodies such as SME Corp and MDEC, neither of whom can play the role of a technology partner to an ambitious SME. Similarly, offerings like Digi’s recently lauched ‘Business Experts” programmes look more consultative than implementation.

Chen says that companies can begin by simply digitising what information they may have, laying the groundwork for a future partner. Being a brick-and-mortar store is no longer an excuse to wait-and-see.

"We are more like an internet technology company (now)," said Chen. "In the future, all companies will be like internet technology companies."