Many brick-and-mortar retailers see digital channels and e-commerce as an extension of their traditional business. But calls for better customer experience and demand for seamless experience are making this approach challenging.
Just ask Pricerite. The company built a successful business selling cost-effective, customizable furniture for Hong Kong consumers. It carved a local niche by facing off other retail giants like IKEA.
Success bred demand, and the retailer extended its portfolio with more affordable options. The firm also flirted with e-commerce and digital platforms to capture online demand.
It was not enough. Translating brand loyalty across offline and online channels was proving to be difficult. It was also facing intense competition from popular retail platforms and renewed efforts by other furniture specialists. It knew that it needed a different strategy.
FITCH, brand and retail consultancy offered one that turned Pricerite’s current business model upside down. Instead of creating a single brand that tries to be all, its strategy looked to develop several brands that met the diverse needs of its different consumer segment across all channels.
“We started with the individual needs of the customers. Before, Pricerite was trying to stretch its core brand too far to meet too many needs,” Jonathan Cummings, the Chairman and Group Business Director of FITCH said.
FITCH also removed any distinction between the online and offline business.
“Consumers do not differentiate physical and digital. So, retailers are realizing that you cannot have an e-commerce business that is separate from the physical business," Cummings said.
Pricerite bought into the new strategy. It became Cash Retail Management Group (CRMG) Holding Limited, a multi-brand retailer. The Pricerite brand itself became a business under the Group, along with two new brands: SECO and Galleon.
FITCH repositioned Pricerite as a micro-apartment specialist, taking advantage of the boom in small apartments in Hong Kong. It also extended the store experience by offering an augmented reality and virtual reality app. Consumers can use the app to visualize the products in their homes, improving overall brand engagement.
The new SECO targeted the green-conscious, capturing a new growing consumer segment. It offers consumers furniture and other products that are designed with environmentally-friendly materials.
Meanwhile, Galleon added a global flair to the furniture buying experience. A new store layout allows customers to experience diverse home styles from different parts of the world and choose one that best meets their tastes.
The PHD Model
FITCH’s PHD model underpins Pricerite’s entire new strategy. Standing for Physical, Human and Digital, the model, does not draw distinctions between the digital and physical worlds.
“FITCH, through the PHD model, is trying to help retailers to reach out to the masses in a highly personalized way, regardless whether they are on digital or physical,” Cummings said.
FITCH’s approach also differs from others in one significant aspect – human inclusion, which is the “H” in PHD.
“Over the last decades, technology has started to play a role in retail. There is a lot of excitement around the role of technology in the physical workplace. It is fair to say that the role of humans, the ‘H' bit, that fell away by the wayside,” Cummings said.
PHD allowed Pricerite to get personal with its customers and tailor their experiences for individual tastes.
“To cater for some major changes on our customers shopping behavior and preferences, such as shopping across different channels to make a single purchase decision and ‘mobile first’ to obtain additional information, we have enhanced our omnichannel retailing by deeply integrating online / offline channels with latest technologies such as AR/VR, QR Code, Mobile Payment and Big Data Analytics to provide customers a more personalized and seamless shopping experience," Dr. Bankee Kwan, Chairman of CRMG and Pricerite said.
Cummings noted that this approach harks back to the days when the “mom and pop” shops in a town knew the individual tastes of their customers. “But they could not scale and were not able to compete on price with larger retailers,” he said.
Large retailers could not tailor each experience to the individual needs, so they decided to segment. Digital technologies, especially data analytics, is changing this and driving models like PHD.
“Historically, companies used to segment and then build strategies around each one. Technology now allows retailers to treat every customer as an individual based on known behaviors and other data. It gets better over time with more data,” Cummings said.
Cummings believes it is an exciting time to be a retailer. But he urged retailers not to lose sight on the role of technology.
“Technology needs to be an enabler, not a driver. Instead of looking at a technology and wondering what you can do as a retailer, you need to start at the level of service you are looking to offer and then look at the technologies in the market to achieve it,” he said.