Funan retailers branch out virtually, but still believe in brick-and-mortar stores

Funan DigitaLife Mall closes for renovations this month, and while some retailers at the IT and electronics hub have indicated they are moving operations online, at least two players said they are sticking with brick-and-mortar stores.

One of them is AddOn Systems, which has been at Funan for as long as the mall has existed. This connection will come to an end when AddOn moves to Bugis Junction after the mall closes.

The company sells laptops of various brands such as ASUS and Dell, and also provides IT services to consumer and corporate clients. While acknowledging the growth of e-commerce and the fading relevance of IT hubs such as Funan, AddOn’s sales and marketing director Constantia Ang said she believes physical stores offer an experience to customers that cannot be replicated.

“E-commerce is only a part of the whole buying cycle,” said Ms Ang. “I think human beings still need a human touch … A human-to-machine touch is too cold.”

She added: “We do feel that a warm body interaction with customers is still important, and having the customer experience and feel what they are buying is also an important factor.”

Ms Ang said some of the challenges facing her company include manpower issues and changing customer dynamics, which she said have evolved from customers having to negotiate in-person when the business first started, to the availability of information online today. And these challenges come amid a soft retail market, she added.

A recent retail report by PricewaterhouseCoopers found that 60 per cent of Singaporeans surveyed shop online at least once a month.

The report also showed that categories such as music, computer games, software and some categories of consumer electronics are popular items people buy online, with a common reason cited for shopping online being cheaper prices.

Given the explosion of e-commerce, Mr Charles Loh, who is PwC’s Southeast Asia Consumer and Industrial Products Consulting Lead, said the role of brick-and-mortar stores will change.

“For the traditional retailers today, they need to engage and to be always on, and to reach out to the consumers on the e-commerce, as well as providing the experience – the physical experience when the consumer comes to the store.

“The role of the store will change into more like an experience centre, where consumers can come in and experience the goods and the services, and feel the differentiation that they are trying to sell.”

Mr Loh added that retailers think about how to challenge their current business models. “I think rather than looking at disruption, perhaps they should embrace e-commerce and digital into their business strategies and models. And that will help them move along as consumer consumption behaviours changes.”

Funan’s anchor tenant Challenger waded into the e-commerce scene by launching Hachi.Tech in April this year. In one month, its revenue grew by 70 per cent. But Challenger said that despite offering free delivery for orders above S$88, around half of its customers chose to collect their orders from its stores.

Challenger’s chief marketing officer Loo Pei Fen said this reflects the importance of maintaining a physical presence to complement its online operations.

“For us it’s more important to disrupt ourselves,” said Ms Loo. “Yes, we have a very comfortable brick-and-mortar business model, but our operating model needs to evolve to what our consumers want.

“If our consumers want to shop online, there is no reason (we should) just stick to our old business model. We have to change and evolve, plus we have to be able to encourage our customers to come to shop with us online again.”

Source : Channel NewsAsia – 6 Jun 2016

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