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Taking Stock: IT spending lagging behind retail growth – Retail in Asia

Retail in Asia

In Trends

Taking Stock: IT spending lagging behind retail growth

Thanks to the influx of mainland tourists, Hong Kong’s retail industry has experienced unprecedented growth in the past few years. The Hong Kong Census and Statistic Department shows the city’s retail sales in 2012 reached HKD445 billion (USD57.3 billion), a 9.8 percent growth from the previous year.

Despite this impressive business growth, many local retailers continue to struggle with skyrocketing rent and fierce competition from international brands as they get a foothold in Hong Kong.

“Most mainland shoppers are impulsive buyers, so prime locations and appealing store design are critical to capture their business,” said PM Lai, chairman of the Hong Kong Retail Technology Industry Association (HKRTIA). “Retailers are forced to spend substantially on rent and storefront design, thus investment in IT is relatively low.”

Research firm Gartner stated that IT spending among Hong Kong retailers is expected to reach USD1.2 billion in 2013, representing a y-o-y growth of 3.6 percent — a much lower growth rate when compared to overall retail growth.

“But the business outlook is alarming,” said Francis Wong, associate director, information technology, at local apparel retailer Bossini. “We are seeing promotions and discounts everywhere and it’s not a good sign for retailers.”

Along with rental-cost pressure, international brands are entering the market and snatching local talent. Wong said his company’s storefront workforce has dropped by almost 20 percent.

To help its staff, particularly those at the storefront to reduce workload and increase efficiency, Wong said Bossini is turning towards mobility.

Optimize with mobility and BI

“Mobility will be our major focus in 2013,” he said. “Devices are becoming so affordable that every staff member has his or her own. We hope to leverage this trend to optimize storefront operation.”

The company recently set up wi-fi connections at all its retail stores so that storefront staff can use mobile apps for business. Mobile apps that bring product information and stock status to the staff’s fingertips are expected to enhance customer service, as well as reduce pressure from point-of-sale (POS) terminals.

Apart from helping storefront staff, Bossini also developed a mobile app to provide management with real-time sales data for monitoring business performance.

“We launched this app about three months ago and it’s been very popular,” said Wong. “Many managers check sales data constantly and they’ve started to discover trends that weren’t seen previously.”

Bossini has also been leveraging business intelligence to manage replenishment. “It’s important to fill each store with sufficient stock of products in the correct sizes and colors,” he said. “BI tools provide insight that helps us ensure we can meet customers’ needs and won’t have to send the unsold items back to the warehouse.”

Bossini also launched an online retail channel last year, and is distributing its products through popular online retail stores like Tmall in China and Yahoo in Taiwan.

From bricks to clicks
To optimize the operation of its online retail channel, Bossini uses cloud computing. Wong said massive amount of images are required for its online channel and cloud storage serves as an ideal platform for managing and archiving them.

Bossini is not the only retailer developing an online channel. Lai from HKRTIA said that soaring rental costs are driving more mid-size retailers towards online sales.

“It’s an ideal platform to build its brand and reach a wider spectrum of customers,” said Lai, “but the upcoming challenge lies in bridging these channels to create a consistent experience.”

Taking Stock is Retail In Asia’s fortnightly column dedicated to showcasing opinions from experts in the retail industry.