If any retailer still doubts the value of adopting a click-and-collect strategy for their online offer, they should take a look at Watsons, owned by Hong Kong-headquartered retail giant AS Watson.
With more than 15,200 stores worldwide, almost half of those bearing the Watsons banner in Southeast Asia, the company has tried and tested the concept in markets with diverse demographic and economic models. It links more than 80 per cent of its physical stores to its own localised online portals.
Many online retailers in Asia who started with traditional brick-and-mortar business models rather than as a pure-play e-commerce business have resisted the click-and-collect model, preferring to fulfil online sales from standalone warehouses or distribution points. But Watsons’ customers can browse its sites online at midnight and pick up the goods in any of its stores the next morning. Any inconvenience from creating in-store space for storing online purchases for collection is well compensated for by the opportunity to sell more goods to customers collecting their online purchases.
“The traffic comes straight to the store,” explains Malina Ngai, AS Watson Group COO. “So on average, 20 to 30 per cent of the shoppers will buy something else.” In some markets, like Taiwan, that rate grows as high as 52 per cent.
Ngai – one of Inside Retail’s Top 50 Innovative Retail Leaders in Hong Kong this year – says the business model which combines physical stores with mobile, website and social media, sits well with the retailer’s core demographic of millennials and younger shoppers. In Asia, 60 per cent of AS Watson Group’s customers are aged under 35. In China, that segment jumps to 80 per cent. “So you know you have to offer those digital options.”
Moreover, Watsons data shows when its loyalty program members shop online and in store, their spending is on average three to four times higher than those who shop only in stores.
The company’s loyalty program, with 135 million members worldwide, represents one of the largest of any retailer’s anywhere in the world. That provides a treasure chest of data, helping the company recognise and understand trends, assess the performance of different promotions, and personalise offers or other marketing communication. And it is clearly working: the health & beauty store network growth is running at 6 per cent, yet sales are growing at 9 per cent.
The sheer scale of loyalty program is astonishing, especially as membership is optional, rather than obligatory as with millennial-focused app-based programs run by the likes of Grab, or Alibaba.
Click-and-collect and the successful loyalty program are just two of the most obvious outcomes of a long-term commitment by AS Watson to embrace technology – and with it, the migration of spending from offline to online.
The success of AS Watson’s business sets an example to every retailer whose business model is based on a bedrock of bricks and mortar. Despite being one of the oldest retail companies in the world, it has evolved in a digital era through planning and foresight. When retail experts in the US and Europe began predicting the internet would spell the end of physical retailing, AS Watson took an opposing approach. Seven years ago it committed US$130 million to investment in technology, laying the foundation for its success as a multichannel retailer in an internet age.
The investment and the relentless growth strategy is paying off. Revenue was up 10 per cent last year and profit increased 9 per cent. “My shareholders expect even more,” he deadpans.
MD Dominic Lai wants people to know that while his company has been around for 178 years, it is a modern company – not another retailer relying on opening new physical stores to maintain growth.
“A few years ago, technology arrived and people said: That’s the end days for retail. But no, we never thought that. We anticipated e-commerce. We anticipated big data,” Lai told Inside Retail Hong Kong.
“But we are not just about e-commerce. We have to connect our customers through digital, social media, mobile, everything. This is what we have done and we will continue to invest in technology.”
“We know how to reach young customers,” adds Lai. “We know how to connect with our customers and we embrace technology.”
In the years ahead, Lai’s vision for AS Watson is succinct: “We will continue to open new stores and at the same time we would like to get more members, more formats and make more investment in technology.”
He is unafraid of any economic downturn.
“Look at [our] business model. We sell essential products. We are not selling watches and jewellery, we are selling essentials. That’s why I use the word resilient to describe our business: we are resilient.”
AS Watson this year added Vietnam to its footprint, taking the number of countries and territories it trades in to 25. Lai says the company is always looking for new markets, but for now is more focused on expanding within the ones it is already in.
“We are international. We plan very prudently. So we went into Vietnam because we realise the customers there already know our brand and the demographics and the market entry strategy was to open the flagship and enable the online. That’s the process by which we look at the international market.”
Ngai points out that the 25 markets AS Watson already trades in represent 32 per cent of the world’s population, “and we only have 15,000 stores”.
“That is why we can still open one store every seven hours.”
With a new-store payback time of less than one year, that strategy is clearly working. “We open, the customers really love us and we get enough sales to get payback within one year.”
AS Watson has 12 retail brands across the globe, of which Watsons is by far the largest, with 7200 stores in Hong Kong, Mainland China, Taiwan, Macau, Thailand, Singapore, Malaysia, the Philippines, Indonesia, Vietnam, Turkey, Russia and Ukraine. Sales last year nudged US$22 billion. Across its banners, the company has some 20 different formats.
“Going forward we will be seeing more and more different models because it is about specialising the offer for the customer needs,” explains Ngai. “It may be [we serve] the same customer, but when the customer goes to a work area they just want to buy wellbeing products, so we have a Watsons Health; and in an area with a lot of young mothers we have a Watsons Baby store; and when they go back to the residential area and want to pick up personal-care products, we have a more regular Watsons store.”
This feature originally appeared in the Inside Retail Hong Kong’s magazine edition, available by subscription in digital or print versions.