Department stores in China have been having a hard time. More than half experienced a sales decline from 2011 to 2016, according to an industry survey.
Intime Retail (Group) Company, while still making money, started to smell the danger.
Noticing the shrinking market size, falling industry employee numbers and growing competition from e-commerce, Intime decided it had to change.
That’s good, but to go about that exactly?
Well, how about a partnership with the biggest rival, Alibaba!
Two years ago, Intime and Alibaba began working closely together. In January this year, Alibaba spent HK$29.6 billion to take Intime private, which was then delisted from the Hong Kong bourse.
Chen Xiaodong, chief executive of Intime, says Alibaba’s big data technology has helped transform the department store operator since the tie-up.
So, what is the first step of change?
Asked this question, Chen offered this response: “A retailer should go back to being what it is supposed to be — a retailer.”
What most department stores are doing now is not retailing, but property leasing, Chen noted.
They only care about getting the rents, and are not paying enough attention to whether the shops serve the needs of the neighborhood.
“It may have worked 20 years ago but not today,” said Chen.
Using big data to get a grip on consumers
Employing Alibaba’s big data skills, and data collected by Alibaba’s numerous units including Tmall, Alipay and Alibaba Cloud, Intime can now accurately analyze consumers’ habits in a 10-kilometer periphery of its department stores.
Such data can map out the family structure, average age, and consumption power of the shoppers within the periphery.
Chen said the analysis can help the company determine the right type and size of shops in a department store, the kind of products and brands a shop should offer, as well as the number of items from each brand.
The adoption of Alipay as a payment method also helped grow its database.
Shortening the supply chain
Another key initiative after teaming up with Alibaba is to go back to the basics, which is to offer a good price to customers.
Intime Retail achieved this by shortening the supply chain.
Instead of relying on layers of distributors, the retailer now deals with the manufacturers directly.
Big data also helped Intime to be more precise in identifying what to order and how much to order. Reduced surplus stocks ended up saving the company money, which can be passed on as discounts to customers.
Being able to offer the same price, whether it is online and offline, boosted sales and traffic of its physical network substantially.
If customers discover any discrepancy, Chen says they can call him to get a refund any time.
Adoption of face recognition technology
To better serve the customers, Intime is experimenting with a new technology — face recognition, with help from Alibaba.
When a customer walks into an Intime store, machines can instantly recognize that customer’s preferences and pass the information to sales staff so that they can make more relevant product suggestions.
There is also a WiFi identification technology that can quickly identify a member customer and help the retailer automatically send product recommendations based on the member’s past purchases.
Asked about the prospects of traditional retailers in the e-commerce era, Chen says the stores will find the going tough unless they have knowledge of new online retail models and exposure to data analytic tools.
This article appeared in the September 2017 issue of the Hong Kong Economic Journal Monthly
Translation by Jonathan Chong
[Chinese version 中文版]
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