Alicia Tam talks to Jumpstart about her experience opening and running an online store for her primarily-offline family business, Chicks.
Known as the ‘City of Malls,’ Hong Kong is a brick-and-mortar paradise with retail, department, and convenience stores located in every nook and cranny. According to Euromonitor International, Hong Kong has more than 350 department stores, excluding retail and convenience stores, which boils down to one department store every three square kilometers.
Although Hong Kong triggered the ecommerce boom in Mainland China, which is now the largest ecommerce market in the world with a transaction volume of US$1.94 trillion in 2019, the convenience of offline shopping in Hong Kong may account for the slow adoption of ecommerce in this territory. Though one of the most technologically advanced countries, where 92.3% of households have access to Internet (Census and Statistics Department, HKSAR), ecommerce has been slow to pick up.
In an October 2019 article, the South China Morning Post referred to Hongkongers as “the world’s most reluctant online shoppers” following the release of the FIS 2019 Retail Global Payments Report, which found that only 4% of overall retail spending in Hong Kong was conducted online. The global average was 9.7%. Mainland China, by comparison, came in at 24% – the world’s highest.
The nascent business to consumer (B2C) ecommerce market in Hong Kong is valued at US$3.7 billion, with shopping through smartphones accounting for 36% of the market, and is expected to grow at a compound annual growth rate of 10.2% from 2017 to 2021, according to JP Morgan.
In an unexpected silver lining, the global pandemic has catalyzed ecommerce adoption in Hong Kong, as restricted movement orders prompted people to go online to fulfill their daily needs. However, having an online presence is almost mandatory for any business to survive in the Internet Age, and has been since before COVID-19.
Alicia Tam, the fourth-generation business owner of a 67-year-old Hong Kong heritage brand called Chicks, once asked a customer how she found their shop, and the customer replied: “Oh, I just searched online, because nowadays, I just expect you to have an online shop.”
Unlike digital-native clothing brands, Chicks has a decades-long legacy and all the traditional sales processes to go with it. Developing an online presence around the company’s established protocols came with plenty of pain points – but Alicia was ready to take it on.
Pain Point 1: Online store and website development
Following the conversation with her customer, Alicia, who runs the brand with her sister Jennifer Tam, decided to launch Chicks’ online store. In 2017, Alicia spearheaded the launch of the first version of the website, in collaboration with a ecommerce website developer startup. Based on that experience, Alicia cautions that building a website is not as easy as it may seem at first.
She remembers thinking, “Oh, it’s really simple because I’m an online shopper. You just click click, click, and then add it to your basket and check out, how hard can it be?”
It was later that she found out about the various technical aspects of building websites. Her research showed that even the placement of buttons can deeply affect a person’s shopping behavior.
The first pain point arrived after six months, when Alicia wanted to add more functionality to the website, but found herself in search of another trusted vendor, since the startup which helped her launch the website had gone bust.
Though Alicia found another website developer, the problems weren’t over yet. He suggested building a new website from scratch, rather than wasting his time learning the layout of the old website and making upgrades – setting the process back yet again. Learning from this experience led Alicia to one of her key takeaways: to always be able to execute in the long-term.
“It is very important to find a reliable, trusted ecommerce vendor so that they can really work on the website with you in the long-term,” she says.
Pain Point 2: Logistics and deliveries
But technical challenges are just one of the many challenges associated with opening an online store. In Alicia’s experience, having an established offline business does not necessarily help with running an online store.
Being a long-standing Hong Kong brand, Chicks already had an established logistics system in place for its offline stores. However, the existing partners delivered products to the stores in truckloads, making the system unsuitable for fulfilling online orders. In order to get online deliveries up and running, Alicia had to find new logistics partners.
In Hong Kong, where ecommerce is already less popular, if an online store takes too long to deliver, customers find it faster and easier to walk a few minutes to buy from a physical store – one which may or may not be Chicks, given the ubiquity of international fast-fashion brands. Thus, timing was already a critical point of consideration for Chicks’ logistics buildout.
Moreover, in Chicks’ case, there was even greater necessity for one day deliveries, since people did not want to wait for thermal wear – one of the company’s best-selling products – in the winter months.
“You want thermal wear when you want to fight the cold, so you don’t want to wait even for the usual SF Express delivery service, which only takes a few days to deliver – for them, it’s already too slow,” Alicia explains. “They’d rather just walk into our shops or just buy it from our competitor.”
While logistics is costly in most countries around the world, the cost of logistics in Hong Kong is even higher due to the cost of labor and living, especially compared to Mainland China, says Alicia.
Given the nature of the market for Chicks’ thermal wear in winter, Alicia had wanted to introduce same-day/next-day delivery service from the very start, but as these sorts of express services cost almost four times as much as standard delivery, it did not become a viable option until last year. At last, Alicia and Jennifer finally found a logistics partner which was able to carry out same-day and next-day delivery, at a rate just slightly higher than normal deliveries, but feasible for Chicks.
According to GO Logistics and Storage (GOLS) Founder Joe Wong – whose company carries out Chicks’ international order fulfillment – scale and volume is another issue, particularly when deliveries need to be completed in every corner of the city.
“You may have an order radius that can cover literally the entire Hong Kong, from Sheung Shui to Chai Wan, or Aberdeen to Kwun Tong,” Wong explains.
Pain Point 3: Storage and inventory management
Another major problem faced by traditional businesses going online is warehousing and inventory management, and Chicks is still fine tuning its process.
In the beginning, a part of the Chicks warehouse was being used to store the inventory for the online store. The company usually allotted 3 to 6 pieces of each style to this section, causing their online store to constantly run out of stock. With time, Alicia also realized that it was both cost- and space-inefficient to allot a different space for online stock.
Currently, Chicks uses a virtual warehouse on their inventory management platform where the stock for the online store is set aside, and picked up from the main warehouse when orders come in.
Alicia admits that they do oversell on their online store sometimes, meaning that they sometimes receive more orders for a product than they have in stock at the warehouse. To solve this problem, Chicks currently organizes the transfer of stock from its offline stores to the warehouse to fulfill online orders.
“I can’t say we have resolved all the challenges, but we’re continuously improving,” says Alicia.
According to her, the Chicks team is working to build a system that would allow the online orders to be shipped directly from one of the physical stores with stock, cutting down the unnecessary cost of transportation back to warehouse from the stores.
Pain Point 4: Marketing and branding
For Chicks, shooting pictures of products turned out to be one of the costliest challenges associated with the online store. Initially, Chicks sold fashion products that were seasonal – this made the photographs useless after the season was over, and product shoots became a recurring cost.
Since fashion products also have a higher rate of returns, Chicks took its fashion products off the website and focused on products with year-round demand in their online store to reduce the recurring cost of photoshoots.
Apart from trusted vendors, experienced and reliable ecommerce managers who can guide the team are also very important. According to Alicia, hiring an in-house ecommerce manager to work with you from the start is a good investment.
The process flow for ecommerce is completely different in the warehouse, and an ecommerce manager can guide and train existing employees on how to pick and pack items for online orders. Besides, Alicia’s new ecommerce manager has also made suggestions about new features on the website which Alicia would never have thought of on her own, she says.
“You also need someone to design a flow for how you do your accounting and finance. You have to create content for your website, and you have to upload all the content and prepare for the photo shoot,” says Alicia.
“That is really, really labor intensive. So, I think it’s worth having someone with experience to do it with you,” she adds.
Despite all the hurdles, Chicks’ online store is now operating smoother than ever, and has even helped to bring in international sales for the brand. According to Alicia, many native Hong Kong people have migrated to the U.S., Australia, and Canada, yet still have fond memories and brand loyalty for Chicks products. These countries account for the majority of Chicks’ international orders.
In fact, amid lockdowns due to the pandemic, Chicks experienced an increase in international sales on its online store – giving the company an entirely new market which it would previously never have been able to access with a solely offline model.
Chicks’ case is a study in the power of ecommerce. Though sales conversion on ecommerce websites may still be low in Hong Kong, an online shop is often a person’s first point of reference when approaching a brand. Though there were certainly some roadblocks in getting the process up and running, the company is ultimately better off as a result of the sisters’ perseverance.
As Jennifer said during a panel discussion at the Lifestyle Tech Conference on July 9, “It is now time to jumpstart the transition! If you don’t take the first step, you will not know what to improve on, as there is no perfect plan. Test. Learn. Improve. Repeat.”
This article was written in partnership with Chicks.
Header image by chuttersnap on Unsplash.
