“O+O is the new standard for retail”

She continued: “Simply, O+O describes how customers shop today. The customer journey almost always involves offline plus online. The traditional strategy of O2O (online to offline or offline to online) from the past generation drove customers from one channel to another. “However, O+O is totally different. It is more about creating an integrated experience to better serve customers’ needs, that enables them to shop across any channel, anytime, anywhere.” Hong Kong-headquartered A.S. Watson is well placed to deliver this vision, with its ownership of more than 16,000 physical stores and over 100 ecommerce platforms across 27 markets in Asia, Europe and the Middle East. The scale of its reach is emphasised by the remarkable 139 million members the retailer has across its digital platforms, giving it a strong base to leverage the O+O model.

Ngai continued: “The motivation behind driving and delivering this new O+O standard is clear, there is no cannibalisation in customers’ spending in physical stores. In fact, the O+O customer spends three times what an instore-only customer spends with us. It’s about creating bigger share of wallet and higher customer lifetime value. “Today, you don’t tell customers what to buy, you can share experience that can solve their pain points in retail, and let them call the shots. So the new O+O operates with the principle to worship the king – that is the customer.” Technology, big data and artificial intelligence are playing an increasingly important role in delivering O+O for A.S Watson, and Ngai said that it has required an organisational cultural change when it comes to managing the business and prioritisation.

“Today, you don’t tell customers what to buy, you can share experience that can solve their pain points in retail, and let them call the shots.”

A.S. Watson is becoming closer to its customers through its digital connectivity, she said, giving an example from China, where customers can seek personalised advice from in-store beauty advisors via Enterprise WeChat and enjoy one-to-one customer service. She explained that the advisor can recommend personalised product offers with the help of an artificial intelligence engine, help order the products from its cloud service MyStore (a WeChat platform tailored for A.S. Watson) and customers can receive product delivery within one hour. The WeChat initiative is a central part of what Ngai describes as a redefinition of the roles of A.S. Watson beauty advisors. “We are trying to allow them to spend less time on administration, more time on customer service. Our store team and beauty advisors have become like our CRM managers too, because they are managing a digital community around the stores.”

Ngai gave the example of one leading A.S. Watson Chinese beauty advisor who is connected to, and personally manages, 2,600 customers online through MyStore. She said: “This is a very, very important part of our O+O strategy and this is the standard that we think going forward will be most needed for retail businesses.” Other major digital initiatives that have been developed include WatsonsGO which allows customers to buy in-store via mobile; Skin Analyser, a device to analyse skin types and offer product recommendations; ColourMe, a virtual make-up system; Virtual Foundation Trial; Endless Aisle, a touchscreen instore service; and Go-In-Store, allowing customers to consult with an in-store beauty or health advisor. Also on the technology front, A.S. Watson has partnered with super-app Grab to help customers in Southeast Asia to get what they need online and have it delivered to their doorsteps in under two hours.

Ngai notes that Watsons’ extensive store network is a critical foundation for making express delivery possible. She said that physical stores will continue to play a significant role in creating “our unique O+O experience”, revealing that A.S. Watson plans to open 1,000 new shops this year. Despite the crisis, A.S. Watson completed the opening of 860 new stores in 2020, and there has been a recent expansion into the Middle East, including three stores opening in Dubai with more planned for Saudi Arabia and Qatar this year. Ngai said that A.S. Watson’s continued faith in physical stores was backed up by research conducted with 22,000 respondents across 20 markets during lockdown last year. “The results were very encouraging,” Ngai said. “100% of respondents said that they would return to physical stores for shopping. The sample covered all generations, including Gen Z, who are known to be the most interested in shopping online. And more than one-third of those surveyed said they will even shop more often in stores.”

She added: “So this is a very interesting aspect which basically underlines people’s desire for human interaction, which sometimes cannot be totally replaced by technology and digital.” Ngai also noted that from one-third of all online orders, customers choose to collect their products in-store. “When they come to our stores, actually 30-50% of them will come in and buy something else. This shows that there is a very interesting role for physical stores as part of the ecosystem for the O+O model.”

She continued: “So we will continue to open new stores, we have a very clear financial model behind it. Whenever it makes sense, if the location is right, and we have the customer profile that we target serving, we will continue to open. I think it is wrong for people to disinvest in physical stores, it’s just about getting better and not having less.” Ngai sent out a defiant message on the future of shopping: “Retail is not dead; it just needs to be better for our customers.”