Olympic hero goes for gold with new re­tail tech­nique to boost sales

China Daily (Canada) - - BUSINESS - By BLOOMBERG

Chi­nese gym­nast Li Ning wowed the world with one of the high­est dou­ble pikes in Olympic history to clinch a third gold medal at the 1984 Los An­ge­les Games. Now a sport­ing goods re­tailer, he is count­ing on another tac­tic to win over shop­pers.

Li is en­tic­ing cus­tomers to his name­sake Li Ning Co stores, where they can look at and try on the latest range of Xiao­qiang bas­ket­ball shoes, and Fu­ri­ous Rider and Rouge Rab­bit run­ners— but not take them home. In­stead, buy­ers are di­rected to the In­ter­net to make pur­chases online.

The Web-only strat­egy, which has gen­er­ated 22 mil­lion yuan ($3.5 mil­lion) in sales dur­ing the first month, may help it re­verse three straight years of losses.

Com­pa­nies from

home ap­pli­ance maker Haier Elec­tron­ics Group Co to cloth­ing pur­veyor Grana have also in­tro­duced the show­room model. Li sees it im­prov­ing in­ven­tory man­age­ment, a com­plex ex­er­cise in China, where there are about 140 cities with more than 1 mil­lion peo­ple.

“In the past, we’d sell flag­ship prod­ucts in phys­i­cal stores,” Li, who founded his re­tail busi­ness in 1990, two years af­ter re­tir­ing from gym­nas­tics, said. “Even when we sell them online now, we have thou­sands of shops to pro­mote the prod­ucts, with only one ware­house be­hind us.”

Dis­tribut­ing goods to online cus­tomers from a sin­gle ware­house cuts stor­age and han­dling costs, re­sult­ing in sav­ings that can be passed to cus­tomers.

It can also man­age­ment, im­prove stock some­thing the com­pany has been work­ing on to boost prof­itabil­ity.

“The show­room ap­proach might be a good way to boost sales inChina in the face of ris­ing rental and la­bor costs, on­go­ing lo­gis­tics is­sues, and the boom in In­ter­net re­tail­ing,” Sun Fangt­ing, a se­nior an­a­lyst with mar­ket re­searcher Euromon­i­tor In­ter­na­tional, said.

The tac­tic may be es­pe­cially help­ful in pen­e­trat­ing smaller cities and ur­ban ar­eas. Online re­tail sales reached $165 bil­lion in China last year, ac­count­ing for al­most a fifth of the global to­tal, ac­cord­ing to Euromon­i­tor.

Haier Elec­tron­ics plans to pro­gres­sively strip in­ven­tory from 3,000 of its 38,000 stores across China, with 125 of these tar­geted to have dis­play-only mer­chan­dise by the end of the year, the com­pany said.

The changes mean

fu­ture shops will fea­ture in­ter­ac­tive, com­puter-sim­u­lated house­hold mod­els that en­able cus­tomers to vi­su­al­ize how prod­ucts will look and fit in their homes.

In re­for­mat­ted stores, sales staff as­sist cus­tomers to make pur­chases online and fa­cil­i­tate their in­ter­ac­tion with de­sign­ers. Goods such as re­frig­er­a­tors and wash­ing ma­chines can also be paid with cash, and de­liv­ered the same way as online-pur­chased prod­ucts.

Re­for­mat­ted stores have recorded a 7 per­cent to 8 per­cent in­crease in sales, Chair­man and CEO Zhou Yun­jie said.

In com­par­i­son, rev­enue from shops yet to be con­verted to online-only has de­clined as much as 20 per­cent, weighed down by an in­dus­try-wide slow­down in home ap­pli­ance sales.

Zhou

said

he

ex­pects

the trans­for­ma­tion of phys­i­cal stores to lower in­ven­tory and staff costs by about 30 per­cent.

“In­te­grat­ing con­ven­tional shops with Haier’s online re­tail busi­ness will pro­vide a bet­ter cus­tomer ex­pe­ri­ence,” Zhou said. “Cus­tomers need to feel and see the prod­ucts.”

Show­rooms make that in­te­gra­tion pos­si­ble.

“The fu­ture is not a lot of stores,” Bruce Rock­owitz, CEO of Global Brands Group Hold­ing Ltd, said. “It’s go­ing to be a fu­ture of show­rooms in key places, and stores that show­case the brands and build the im­age.’’

Grana, a Hong Kong-based online cloth­ing re­tailer, opened a per­ma­nent show­room in the spe­cial ad­min­is­tra­tive re­gion last month, en­abling cus­tomers to try clothes on be­fore buy­ing them.

The com­pany, which ships its brand of gar­ments to eight coun­tries, plans to open show­rooms in Sin­ga­pore, Aus­tralia and the United States next year.

“It’s re­ally mix­ing the best of online and off­line into one show­room con­cept,’’ CEO Luke Grana said. “Com­ing in, they can have fresh lemon­ade and we can talk to them. We can sug­gest styles and they can get their fits right. It’s what you can’t get from just pure online shop­ping.’’

The show­room ap­proach may also suit other ar­eas of re­tail, in­clud­ing home-wares, fur­ni­ture and per­sonal beauty care.

“The whole na­ture of stores as we know it will change,’’ Tim Parker, chair­man of Samsonite In­ter­na­tional SA, said. “(The show­room strat­egy) adds more value to busi­nesses that have to keep very large in­ven­to­ries in the stores.”

The show­room ap­proach might be a goodway to boost sales in China ... boom in In­ter­net re­tail­ing.”

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