WHY THIS MATTERS IN BRIEF
The world of retail is changing in all kinds of ways …
His company, Hong Kong Television Network, makes money by leasing space on a virtual mall, HKTVmall, to 4,200 retailers–at the last count–where they can pedal wares directly to consumers in the city. Retailers pay him a flat annual fee, of between HK$15,000 and HK$50,000 depending on the number of products, the equivalent of rent, as well as a fraction of their sales turnover. By contrast, the city’s largest physical mall, Harbour City, packs in about 700 retail stores on two million square feet of crowded floor space.
The allusion to real estate appeals to local consumers long ensconced in a built environment of gleaming malls and pricey shops.
“The online business model is more cost-effective in areas, especially in Hong Kong and Tokyo, where retail rental cost is extremely high,” he says.
Physical malls’ ubiquity and convenient locations in Hong Kong, often situated right next to residents’ neighbourhoods or offices, have been a big draw for local consumers. The thriving physical shopping scene had impeded the growth of online commerce. There was a dearth of local offerings even for the globetrotting young generation, who are attuned to e-shopping on international websites. But in one stroke, the pandemic has rewritten this shopping tradition.
“Covid has forced retailers and suppliers to put more products online, on their e-shops, or on HKTVmall. Businesses started to offer online alternatives. I think that’s what is happening in the past few months. There was no supply in the past, only demand,” he says.
New e-habits, once acquired, may die hard. He says when online shopping becomes a habit, consumers will stick to it, basing his conclusion on the data gleaned from his company’s six-year operations since its switch to e-commerce.
Business had been growing steadily from a low base before Covid: sales turnover tripled in the three full years to 2019 to HK$1.4 billion ($180 million). The pandemic has given it an extra boost, enabling sales to double in 2020 to HK$2.88 billion on a net profit of HK$183.6 million, reversing a loss of HK$289.9 million a year ago.
Hong Kong Television Network saw its share price almost double over the past year to HK$9.14 apiece, giving it a current market capitalization of about $1.1 billion. In January, the company’s market value peaked at $1.9 billion when its stock was trading at HK$16.28. Wong’s 44% stake left him just short of reaching billionaire status.
The reference to television in the company’s name harks back to a previously thwarted aspiration. A self-professed offline shopper at 58, he stumbled onto online shopping six years ago by sheer dint of bad luck. He had built up a full television production studio and a new office building only to find his application for a TV license rejected by the Hong Kong government. He then rejigged the company’s focus to online shopping in an integrated e-commerce service covering the full range, end-to-end, of online purchases.
At its five-story headquarters in a small tech park near downtown Hong Kong, robotic arms help sort out goods in a vast automatic warehouse, converted from the TV production studio, after retailers drop their goods here and before drivers dispatch them through door-to-door delivery.
The company is the city’s largest courier in residential areas, served by its private fleet of more than 350 trucks, including several Isuzu trucks equipped with cold storage to keep frozen fish fresh and chocolate from melting in the tropical heat. They ferry more goods to residential households than DHL or the popular Shenzhen-listed SF Express.
HKTVmall has also opened physical outlets, a version of mom-and-pop stores with bare-wall design, where customers can pick up their orders and purchase fresh produce and frozen food. Grocery items are the only merchandise it owns and sells on its e-shopping platform. Toilet paper and cans of beer and coke are particularly popular.
“Groceries are a critical success factor. If you don’t buy them every day, you will buy them every week. This is what we call a ‘traffic driver.’ Every day, 250,000 people in Hong Kong visit HKTVmall (the website or app). One of the main reasons is because we have groceries. It makes the difference between success and failure,” says Wong, pointing to Amazon’s acquisition of Whole Foods Market and Alibaba’s acquisition of China’s hypermarket operator, Sun Art Retail Group.
He does not plan to roll out any online shopping malls outside of Hong Kong, though. In his view, online retailing is a strictly local affair. Customer behavior is entirely different even in the Chinese-speaking world, from Hong Kong to Taiwan, Macau and Guangdong, he notes.
Wong has set his sights on developing the technology needed to power such malls elsewhere, however. HKTVmall is the first and only online shopping mall he has built. He aspires to erect similar online malls for would-be owners everywhere: to become sort of a virtual real estate developer for global online real estate. He says he has developed the tech know-how in-house by a team of 150 programmers based in Hong Kong and Taiwan. A whole turnkey system is ready to deploy, including AI-powered algorithms and other mechanisms. Think of it as virtual bricks and mortar.
The tech know-how has helped drive down the company’s “fulfilment cost”–the cost of completing a purchase order, including the cost of labor–to 11.8% of total general merchandise expenses, down from 40% five years ago when he first started using AI, robotics, and automation technology. This equates to HK$11.80 for every HK$100 purchase. “This is very extremely low,” he says, adding that, “In Japan and other countries, (e-commerce platforms) are not doing well. Because they don’t have this.”
“We want to help set up online shopping malls for (potential) online landlords. We have the technology to help. We are like an online construction company,” he says. “We can help build an online shopping mall in any country for any businessman anywhere if they want to be an online landlord.”
If there’s one thing that’s bountiful in 2020, it’s video content. The streaming wars are raging, with services churning out enough programming for a lifetime. Meanwhile, social media platforms keep expanding and grabbing more of people’s finite attention. But while consumers have no shortage of content, what’s lacking is an experience that grabs their attention by offering more than just viewing.
The future of commerce belongs to brands and creators who bring commerce and content closer together in a seamless, engaging, and interactive viewing environment. These shoppable video experiences meet the viewers where they are, have the potential to unlock valuable user data, and empower brands to connect with consumers through more meaningful interactions.
The rise of online shopping has forced brick and mortar retailers to develop ways to draw consumers in. From the Dubai Mall’s immersive Candylicious dreamland, to Chicago’s brand new Reserve Roastery experience, retailers worldwide are combining shopping and entertainment to attract younger generations who are expecting more engaging experiences. While this “shoppertainment” trend initially rose as a response to online shopping, the ecommerce world can also take note and apply some of these strategies to the digital landscape.
Major media companies are already leading the charge by leveraging interactive video, particularly within the ad space. For example, Walmart’s streaming service Vudu has been investing in shoppable ads to uplevel their platform’s ecommerce capabilities. This kind of interactive content allows viewers to purchase an ad’s featured products instantly through a pop-up window rather than leaving the video to go through the transaction.
The rise of mobile also plays a role in this new wave of retail-entertainment. Shopping was the fastest-growing mobile segment in 2017 (up 54% year-over-year), followed by entertainment (43%), making smartphones an ideal tool for keeping consumers engaged and putting the power of interactive ecommerce in their hands. Many brands are recognizing this potential and putting a specific focus on mobile. NBCUniversal, for example, is bringing “shoppertainment” to smartphones through shoppable ads powered by mobile-friendly QR codes that allow customers to make purchases with ease.
See shoppable video in action
These new capabilities are more than just shiny bells and whistles. They embody “shoppertainment” at its core, providing engaging experiences that are built into entertainment, but modernized and primed for the online shopper.
People flock to video on social media because platforms like Facebook and Instagram create a native environment where content is continuously served. These outlets give brands an opportunity to market to a captive audience, while video allows marketers to embrace deeper engagement and creativity. However, keeping consumers interested in videos while encouraging transactions can be a difficult balancing act. The most successful content providers are able to seamlessly mesh both elements together into one, unified experience.
ShopStyle, for example, launched YouTube Looks, allowing viewers to click product links directly within a video, rather than in the description box or a separate page that might distract from the content. We’re also seeing this integrated shopping trend on Instagram. Last year, Allbirds released a limited edition collection that was only available for purchase on the app. Meanwhile, commerce platform MikMak launched its Attach functionality, which allows retailers to integrate checkout or shopping cart features directly into in-app product videos.
These native shopping capabilities appeal to consumers who prioritize seamlessness. At the same time, they help brands and influencers retain viewer engagement by keeping the whole experience in one place.
To compete with established OTT giants, brands must amplify their content creation game. As streaming services remain the gold standard for video, industry-adjacent players can gain traction by placing greater investment in original content.
A handful of companies have taken the first step. Foot Locker is investing in video-based ecommerce and content platform NTWRK to create original, episodic content that features exclusive product launches and celebrity appearances. Meanwhile, Alibaba has tapped into streaming platform Bilibili to leverage anime video content and get in front of new audience segments.
And look at WeChat. The app is turning into an ecommerce juggernaut, largely because its “mini-programs” give brands more control over their user interface designs and full access to consumer data analytics. Lifting the veil of viewer habits and insights gives content providers an edge in determining what exactly they put out.
Original, proprietary video creates an opportunity to skip the middleman and reach consumers directly with fresh, data-informed content. Once they’re tuned in, consumers are in a prime position to further engage with a company and make a purchase. Tinder is a great example of a brand that’s adopted this approach to original programming. Its weekly series Swipe Night gives fans a recurring batch of interactive content to keep them entertained on their mobile device and engaged with the brand while remaining in-app.
That is exactly the kind of frictionless interface viewers have come to expect. As brands and creators continue to blur the line between shopping and entertainment — and, in turn, commerce and content — those who create the most seamless experiences will be able to stay ahead of the competition and drive real impact.