Retailers turn to experiential selling to combat sales slump

Brands are urged to enhance their own mobile platforms in an effort to sustain the connection with customers long after they have left the store.

Experiential retail is gaining ground in Hong Kong as can be seen in French sporting goods brand Decathlon’s 36,000 sf at Sheung Tak Plaza. Upon entry, customers are ushered into a free bicycle workshop space to customise and repair their bikes and enjoy an in-store online catalogue where they can browse up to 13,000 products conveniently. Moreover, the space features daily experience sharing sessions and sports classes with local athletes. The company is taking the shopping experience even further with plans to transform parts of the store into a campsite replicating the famous hiking trails of Hong Kong.

Over at Cheung Kong Center, an augmented reality mirror allows customers to virtually try on cosmetics and other products and see its effects. They can also take photos and share it with their friends.

The adoption of strategies emphasising a unique customer experience is part of larger trend in Hong Kong where brands use virtual reality (VR) and augmented reality (AR) technologies. Against an environment where retail sales have progressively declined since February, retailers are called to adopt these emerging technologies to appeal to these new types of shoppers.

Fading appeal
The decline in Mainland spending is one of the biggest threats to the sector’s future. Once the industry’s main growth engine, consumer sentiment of Mainland tourists have waned in recent months in a reflection of heightening macroeconomic uncertainty.

“The retail market definitely is not very promising, to be quite honest, because China is also trying to regain this market,” Michael Cheng, Asia Pacific and Hong Kong/China consumer markets leader for PwC, told Hong Kong Business.

Although Hong Kong still enjoys the advantage of being a shopping haven due to its duty-free tax policy, China is also stepping up its game. “Most multinational brands [usually] come to Hong Kong as their first step to build their reputation among Chinese consumers, but now some of the retailer brands are going directly to China,” he said, adding that China has also been making it easier for retailers to enter its massive market by reducing consumption tax and value-added tax, lowering the sales tax for some categories, and introducing a new e-commerce law.

Tech-powered retail
Cynthia Ng, director of retail sales at Colliers, advised retailers to tell a brand story; to be more creative, niche and authentic with their product offerings and shop design; and to invest in social media marketing. Terence Chan, senior director of retail at JLL, suggested giving incentives and loyalty programmes to maintain shoppers with benefit, as well as considering consolidation/cost-efficient relocations based on the sales performance of the stores.

Retailers are also advised to invest more on e-commerce, which had been largely ignored for the last decade. In 2019, Statista reported that Hong Kong’s e-commerce market is worth $37.39b with an expected annual growth rate of 7.9%, whilst the average revenue per user is $6,681.8. “Although tourists still come to Hong Kong to shop physically, local retailers need to try to retain the connection with these customers after they have left so that they can continue to give them new messages and different kinds of offers,” said Cheng.

Cheng also said that retailers partner with key opinion leaders (KOL), who wield much influence among their followers. “One of our clients who sells jewelry in China has a product line that did not generate much excitement when it was first launched. But when one KOL promoted the products on her website, the product suddenly sold like crazy,” Cheng said. “That line of marketing strategy is very powerful.”

However, retailers shouldn’t ignore the value of brick-and-mortar stores over e-commerce, as these two go hand-in-hand: brick-and-mortar shops maintain brand exposure whilst e-commerce enhances the shopping experience by forging long-distance connectivity to shoppers as well as nurturing the brand name with the more digital-savvy generation.

Photo from Decathlon Hong Kong Facbook page.