CB4303 Strategy and Policy Economics

CB4303 Strategy and Policy 2018-2019 Semester A Instructor : Dr. YAN Shipeng Group project report - HKTVmall S03 Group 11 Members: Choi Kam Shing 55046214 Wong Nok Yiu 54987041 Law Kwan Siu 5438776 ...

CB4303 Strategy and Policy 2018-2019 Semester A Instructor : Dr. YAN Shipeng Group project report - HKTVmall S03 Group 11 Members: Choi Kam Shing 55046214 Wong Nok Yiu 54987041 Law Kwan Siu 54387766 Chan Ho Yee 54441984 Table of contents Introduction 3 Company Introduction 4 Company Review 5 External Analysis 5 Porter's five forces model 5 PESTEL analysis 6 Internal Analysis 7 Activities 9 Marketing and sale activities 9 After-sales Services 10 New strategy 11 Recommandation 13 Frontline Aspect 13 Rescaling the pricing 13 Extend the product variety 14 Backoffice Aspect 16 Communication of customer service 16 Deliver Arrangement 17 Reference 18 Appendix 1 19 Introduction With the fast developing online technology and the mutuality of the e-commerce, Hong Kong retail market has converted to “online to offline” era. With the trendy and huge potential e-commerce business, Hong Kong Television Network Limited has established HKTVmall, which is a leading e-commerce platform that sells a wide range of products, from grocery to electronic appliances. Being operated for more than 3-years since the platform launched in February 2015, the e-commerce industry had entered numerous competitors, such as the traditional supermarket Parknshop and Welcome and also small social-enterprise like Zstore; these vendors classified as an online platform that sold grocery, which is similar to HKTV mall. This report will analysis both the external and internal business environment and provide recommendations that address the solution to the mentioned issue. Company Introduction HKTVmall is one of the e-commerce service that operated by the Hong Kong Television Network Limited (HKTV), which provide an online shopping platform that sells lifestyle items, including the grocery item and the electronic appliances, even the travel accessories. As an e-commerce business model emphasis the capacity of “Online to offline”, HKTVmall claims that the operation cost is relatively lower when compared to the traditional supermarket, and with the centralized warehouse, it could benefit the inventory management and enhance the stock controllability. From the customer point of view, HKTVmall also claims that its customer can be advantaged in the high convenience and enjoy the high-quality shopping experience that brought by HKTVmall. However, with the entry of competitors in this highly competitive market, the advantages that brought by HKTVmall seems replicated by its competitors. By sustaining the leading position in the industry, HKTVmall must implement the strategy that provides superior distinguishment that outperforms the benchmark of the market. One of the examples is the merging with Groupon Hong Kong to form an organization HoKo Buy, which is an e-platform that sold coupon and voucher for exchanging a variety of products and services. By the further development and unprecedented potential of the e-commerce market, it is believed HKTVmall will be a major key player in providing diversified online services in Hong Kong e-commerce sector. Company Review 1. External Analysis Porter's five forces model The threat of new entrants is at a medium level since the entry barriers are relatively low. To enter the industry, a prospective new entrant needs only a B2C website. The capital requirements depend on the scale. Indeed, companies can begin with a smaller scale B2C website which requires lower investment. The power of suppliers is at a low level since the switching cost is low. Most of the products are not sold in a physical store, changing the suppliers would in most case equals the changes of pictures and description in the websites. Moreover, the ability of suppliers to charge a high price in the supply-demand relationships low because most people who go B2C website are looking for products with similar functions and they probably would not name a specific brand. The Power of buyers is at a low level. There is a large number of users of the B2C website, and they are unconcentrated. Most users are individual customers that tend to have little communications with each other. Moreover, the units purchased by them each time tend to be small in volume. The threat of substitutes is at a high level since the buyer’s cost of switching to the alternatives is low. A large amount of online shopping websites allows buyers to make price comparison easily. Also, they could straightly go to the physical stores and other various retailers to purchase the products rather than buying online. The rivalry among existing competition is at a medium level. We think that HKTVmall is in the industry structure of oligopoly which there are a few large firms. Also, there will be a 10% annual growth rate of e-commerce industry which is quite stable and the retail e-commerce sales as a percentage of total retail sales are increasing. The rule of thumb of the model indicates that the weaker the five forces, the higher the industry’s profit potential. Therefore, we can conclude that the firms involved in the online retail industry should be quite profitable. However, it is surprising that HKTVmall struggles to make a profit despite having a high power against the consumers and suppliers while facing a general level of competition. PESTEL analysis By using the framework, we can scan, monitor, and evaluate changes and trends in the firm’s microenvironment. However, the business world in these days is characterized by high volatility, uncertainty, complexity, and ambiguity, numerous factors existed and may affect HKTVmall. Therefore, we are trying to identify the significant factors which would turn into threats or opportunities of the company. Let start with sociocultural factors. With the popularity of smartphones and other digital devices, there is a growing trend of the online shopper in not only Hong Kong but also all over the world. A data showed that 85.9% of the mobile population in Hong Kong reported owning a smartphone and 80.2% of the total population said using the internet at least occasionally in 2017. Moreover, There are currently 4.15 million E-Commerce users in Hong Kong, with an additional 1.2 million users expected to be shopping online by 2021. Therefore, as a player of online retail business, HKTVmall should have a large number of potential customers. The second external factor is technology. Big data is a term that describes data containing greater variety, arriving in increasing volumes and with ever-higher velocity. Also, traditional data-processing application software can’t deal with these types of data. Big data is continuously creating new challenges and opportunities for businesses. When it comes to retail and e-commerce, more and more companies invested heavily in big data analytics hardware, software, and services. If companies can successfully implement effective big data technologies, then they can create better shopping experiences boost the customer's satisfaction and generate more sales. For the economic factors, inflation is looming. According to the annual report from the census and statistics department, the Consumer Price Index has routinely increased since 2004 in Hong Kong. This trend may shift shoppers’ behavior which people may be turned away by higher prices, buy fewer items, be more focused on getting things they need. Apart from the inflation, employees are getting more expensive. Recently, the government is trying to increase the statutory minimum wage to HK$37.50 an hour which the rise will add an extra HK$700 million a year to the expenses of the Hong Kong businesses. This factors can put a lot of pressure on HKTVmall. 2. Internal Analysis HKTVmall positions itself in a convenience(in one single order), (high) credibility, competitive price, and product variety characteristics and aims to provide a delightful shopping experience. Resources HKTVmall owns several system which facilitate in managing the whole online market platform: a robust website, that categorise more than 174,000 products and show all products’ photo; ordering system, which helps in handling and combining the order, picking, return, exchange and payment(different payment method provided to convenience customer such as Payme which enhances the payment process for some customer) ; automated warehouse system, which helps in picking and packing the ordered product; logistic and delivery system, which helps in delivering the ordering. HKTVmall aims to provide a joyful shopping experience to customers. Therefore, it offers a delivery service. To guarantee the service, HKTVmall has its logistics and warehouse professionals, a car fleet with 160 cars and 3 temperature cool trucks and 3 warehouses which one of them is a food factory. The resources above can advance HKTVmall in provide an excellent online shopping platform for the customer. However, the services provided are not satisfied. For the powerful website, the loading time of the web is appreciated but there are some things should be improved. First, although there are more than 174,000 products provided on the website and they are from different categories, almost all of them are the brand that can find in the local market. HKTVmall has more than 2,700 partners, and most of them are the brand in the local market that means HKTVmall cannot distinguish itself with the physical store in the Hong Kong Market. Second, although HKTVmall claims it that it provides competitive pricing at lower running cost, the price showing on the web is similar to the physical shop. Third, since there are too many products sell in the HKTVmall, how to categorize product become a big problem. Although people can use the search function to find goods they want, people are difficult to find the good they want in the category. For example, in appendix 1, when we want to see woman perfume from the types, we can only find 2 related product in the first page first two row. The web interface is not user-friendly, especially for the customer who wants to buy good without a specific brand. For the logistic and delivery system, the service provided is not satisfied. HKTVmall claims it is a convenient online platform for every single order so it will provide the delivery and customers can choose the delivery time. However, the distribution does not cover the remote area such as some village in New Territories. Moreover, some customers reflect that the delivery time always not as the promised time and there are missing good problem which causes their inconvenience. Activities Marketing and sale activities HKTVmall provide many marketing or sale event in their web such as some festival sales (e.g. mother’s day); one-day event created by itself(e.g. Japan Food Festival); VIP shopping day every month; Thankful Sale; Credit card Promotion; Combination sales(e.g. buy A product get b product free or buy A product get a discount of B product). The promotion event can attract the customers the consume more. The website promotion can attract the original customers since HKTVmall will send the promotion email to their customer before. Moreover, the Credit card promotion can attract the new customers. HKTVmall cooperates with different credit card company so that if people apply for the credit card, its coupons(usually HKD100) will be provided. With the free delivery for over HKD400 purchase, credit card promotion with the coupon can rouse the interest of now customer to buy more. Besides, on the assigned day some assigned credit will have a discount on buying goods in HKTVmall. It also promotes with Citi Pay so that customers can use the Citi Pay with Point to pay in the purchase in HKTVmall. HKTVmall is the first and only online shop that can use Citi Pay with point and that enhance the Citi card users’ purchase experience. However, the combination sale seems not attractive since the combination is with no relationship. Customer may not spend extra money on the combination sale even there is a discount since the separate product is useless. After-sales Services HKTVmall provides FAQ and a real-time customer service chat box to answer the customer. The FAQ provided in HKTVmall contains various questions and answers and are categories systematically. Customers can know everything such as how to use the web, the payment method, delivery problem. Besides, the real-time customer service chat box (mall cha) can answer customers’ question from 10 am to 8:30 pm by the staff. After the working hour, "mall mall cha" will show some robotic answer which shown in FAQ, but it will sort the related question for the customers first. The FAQ in HKTVmall is systematic, and customers can easily find the answer they want. It is good enough for a new customer to know the purchasing process. For the after sale service, the website will direct the customer to the page of “report product problem” and the refund, exchange, and related problem will process automatically and will solve between 2-3days, which it claims is faster than the regular customer service officer handling. However, the service of ""mall mall cha"" is not satisfied. First, the service time is too short for the OL who can only purchase after work. Many customers complained that the service time of "mall mall cha" is nearly the same with their working time so that they cannot live chat with staff since they cannot use the function after work. Second, even when they can contact the team, the staff change from time to time within a chat, so they need to explain to the new staff again for the same issue. Third, the conversation can only show robotic answers that can found in FAQ after the working hours of "mall mall cha". The chat will not record the problem customer is facing, so the customer needs to ask again in the working hour. Besides, HKTVmall didn't provide customer service hotline which causes some customer feel inconvenience since they cannot know who is handling the problem and cannot find the person who is treating the issue afterward. New strategy Opening Online to Offline store is a new strategy that HKTVmall is doing. There are 35 HKTV O2O shop opened, and 10 of them are in Hong Kong, 8 of them are in Kowloon , and 18 of them are in New Territories. The opening hour of different stores is different. The opening time is about 10:30 am - 12:00 pm and the closing time of all shop is 9 pm. All of them open every day. Customers can order from online and pick up the purchased goods in the O2O shop. They can also buy the products in the O2O shop by the HDTV all app in mobile. The selling points of the O2O shop are that customers can get the purchased product in O2O shop when they have purchase above HKD30 without any delivery fee(free delivery only offer to people who buy above HKD400 online initially) ; an HKD20 HKTVmall coupon will be given if people buy more than HKD400 in O2O shop; the appointed goods can be pick-up in the O2O shop after 7 pm that day if the order is made before 10 am; there are sales associates in the O2O shop to provide 1-to-1 consultation on any queries related to HKTVmall. The promotion offered by HKTVmall can attract new customer base such as housewife since they can go into the O2O shop to buy the products. Also, it provides a new pick-up location for people who live in a remote area so they can get the good from the nearest O2O shop. Moreover, the sales associates can help the people who formerly do not know what to use the HKTVmall app. Other than that, buying good only by HKTVmall app can increase the hit rate of HKTVmall app. However, the payment method of the O2O shop is not user-friendly, since some elderly do not have a smartphone and they cannot buy in O2O shop. Besides, there is no notification when the ordered products have arrived at the designed O2O shop. People can only check the status of the product delivery time by time in the web by themselves to know when to get the products. Also, the O2O shop increases the operating cost of HKTVmall since they need to pay the rental fee. Recommandation For the recommendations for HKTVmall could scale up the business and win the intense competition in the e-commerce industry. By segmenting the issue into two prospects, frontline and back office, this section will focus on improving the currency policy and mechanism of both frontline and back office, in order enhance the customer experience which could attract the customer and enlarge the market share. The final target is to arrange a leading customer experience in the e-commerce sector with a well-controlled costing as well as smoothing the operation of e-commerce business. Frontline Aspect Rescaling the pricing As pricing is the primary concern of the customer, especially to that customer with extremely high pricing sensitivity, reform on the current pricing will be the first step to capture the maximum market share as well as the potential customer. The suggested strategy will offer more discount options regarding the purchase quantity of the product. A discounted price is one of the most common and practical techniques that raised the purchase intention of a consumer, which is the willingness of a consumer to buy a product or not. As the consumer behavior happened in the grocery store are mostly classified as low-commitment consumer behavior, as the product in the store is mostly fast moving consumers goods, which implies that the consumer did not have a high involvement. With offering a discounted price on the products, which can redefine as an additional encouragement and motivation, it could alter the decision of the consumer to choose the product with discount instead of the one without a price cut. According to Mohamed (2016), he pointed out that consumer is more willing to purchase products with price discounts as they believe that they made a rational choice. Also, under the effect of discount price, consumer even buy the brand which they are not a fan of that brand. With such an outcome, it is believed that providing a discounted product could have a high impact on the consumer behavior. Although HKTVmall has offered discounts on selected items, the consumer needs to purchase a large amount of single product to enjoy the discounted price. For example, the consumer needs to buy 24 bottles of Oolong tea at once to enjoy the 40% off discount. For the individual consumer, the required quantity for having the discount price may be too high for them which exceed their preferences. As a result, they may abandon the decision of purchasing that product. To trace this issue, by offering more discount options may help to maximize the preferences of the consumer, and their profit. In specific, HKTVmall can set up the different discounting price once every 4 units of a single item are purchased. Also, the same method can be applied when the consumer purchase product but mix with different favor under the same brand. By developing a flexible and tentative discounting scheme, it could max widen the consumer choice and fulfill their utility simultaneously. Extend the product variety Except offering attractive pricing to the customers, providing a broad range of product to the market is another effective mean for enhancing the purchase experience as well as drawing attention to the potential customer. As in the grocery product sector, the customer often has a relatively low switching cost when comparing to another retail market, which implies that the customer could easily choose to purchase their product from HKTVmall or its competitors such as Welcome, Parknshop and other grocery vendor provide e-commerce service. Currently, HKTVmall has more than 174,000 items on a combined bias in general. In specific, there are approximately 40,000 products in the supermarket category which provides from 2,700 partners. Although the data indicated that supermarket category has a sufficient number of products, however, it is still room for improvement for seizing the attraction of the potential customer as well as maintaining the advantages of being a leading vendor in Hong Kong e-commerce industry. To be specific to implement this suggestion, it is recommended that to replicate the business model of the 759 Store as a goal of the long-term strategy. 759 Store a chain store that sells snacks and groceries that from all over the world, and with its distinguished business model, it bypasses the local distributors and import directly from foreign manufacturers from different countries by introducing a variety of snacks with special favor from Japan and South Korea. As of 30-April 2018, 759 Store has a profit of HKD 456,953,0001, which proofs that 759 remarkable business strategy had gained an enormous business success. By witnessing such a great achievement, it seems that HKTVmall could study to referencing 759 stores that import directly from foreign manufacturers, which could provide diversified products of choice. For the short-run strategy, HKTVmall could establish a strategic partnership with 759 Store. By convincing 759 stores to supply their unique product on the HKTVmall e-platform, which 1 Referenced from 759 Store 2017 Annual Report. Extracted from : http://www.0759.com/doc/art/finance/2018082701/201808270001.pdf could benefit both corporates; HKTVmall could provide more products to the customer while experimenting how the special edition of snack could impact the consumer behavior and estimate the benefit once we adopted 759 store strategy of direct importing from the foreign manufacturer. In contrast, 759 stores can widen their own sales channel from offline to online and evaluating the feasibility of investing their e-commerce platform. Such a partnership could achieve a strategic goal of both companies by serving as a pilot program before transmuting the business model. Backoffice Aspect For the back office, we have two main issues, unsatisfying response from customer service, and underperformed delivery service, which are the after-sales service that is an important indicator of satisfactory of the entire shopping experience. After purchasing in HKTVmall, many customers expressed their bad shopping experience through social media, stating the company’s unsatisfied customer and delivery service. Communication of customer service For instance, HKTVmall customer named Lee has published an angry comment on his personal Facebook page after purchase, expressed his dissatisfaction and unpleasant experience he encountered with engaging in the latest “HKTVmall Summer Giveaway” promotion. According to the description of the mentioned campaign, customers will be entitled to receive a free-of-charge gift voucher once the purchase value exceeds HKD 400. Unfortunately, Lee claimed on the post that after the purchase is recorded, the free-of-charge coffee machine was replaced by a melon instead .He claimed that he had been snubbed by HKTVmall customer service. This issue has been reported by Hong Kong online media, Marketing Interactive, and criticized by the public. For the problem of poor online customer service, the main point is service inconsistency. In specific, each customer is tackled by more than one service officers, causing information distortions and inefficiency. Moreover, there is no online enquire hotline, and robotic answers handle all customers inquiries. To settle these current adverse conditions, in the short run, we suggest HKTVmall to organize one service officer per customer. By doing so, we can keep our service with consistency by a direct one to one service, and settling customers’ questions immediately. Moreover, we recommend that the hotline service hour from 11:00 to 23:00. As most of HKTVmall’s customers shop after works, having nighttime inquiries service would be more convenient for them. For inquiries after 23:00, we can record all customers’ questions and do callbacks to them the next day. We can eliminate systematic robot answers by doing so, and customize service to different customers. In the long run, we suggest the company to provide training on its service officers in handling customers complaints. In concrete, HKTVmall could release and consulted for a standard operation procedure for providing a correspondent solution that related to frequently asked questions and problems. Once the promotion is online, the operation department could release a memo that specific to the latest promotion scheme. Such an arrangement could standardize the reply of the customer service officer, which could avoid the inconsistent message that answered by different staffs. Deliver Arrangement For poor delivery service, three main problems are notified. Customers lost track on their own purchased products; products do not deliver on schedule. From the in-app comments, customers reported that the delivery service that owned by HKTVmall ruined their whole shopping experience and causing them unnecessary inconvenience. While the current issue is the HKTVmall own delivery fleet does not have the sufficient capacity to handle the numerous orders and deliver on time. For tackling this issue, there are mainly two recommendations to fix this issue. The first option is outsourcing. For example, logistics service providers like DHL and SF EXPRESS own overwhelming delivery experience with high-efficiency and reliable logistics network that can deliver the products in a satisfactory and expected level. It is suggested to outsource part of the order which exceeds the delivery volume that can be handled by the own fleet. And the optimal solution will be enlarge the current delivery unit. However, it will incur an additional investment cost, which requires further study and consideration. The second recommendation is about enhancing the delivery operation. For instance, introduce a highly centralized and automatic mechanism, TaoBao uses the barcode to connect track of products and the delivery unit.Customers can check online to notify the status of their product at any time, and the company can have better control of the delivery service. As the company can track their product locations, in the case of late delivery, the company can send messages instantly to customers, for updating them the latest delivery schedule and arrangements. By adding barcodes and sending automatic messages, it provides information to the customer about the status of their product. Eventually, HKTVmall can have better delivery control as well as inventory management, that lead to a reduction on the related costing, but an improvement on the aspect of inventory control. Reference 1. CS Help | HKTVmall Online Shopping. (2018). Retrieved from https://www.HKTVmall.com/hktv/en/cs-help 2. Shamout, M. (2016). The Impact of Promotional Tools on Consumer Buying Behavior in Retail Market. International Journal of Business and Social Science, [online] 7(1), pp.75-85. Available at: https://ijbssnet.com/journals/Vol_7_No_1_January_2016/9.pdf [Accessed 1 Dec. 2018]. 3. CEC International Holdings Limited (27 August 2018) “2017-2018 Annual Results Announcement”, http://www.0759.com/doc/art/finance/2018082701/201808270001.pdf [Accessed 30. Nov 2018]. 4. Consumer Involvement and buying behavior | Types of Consumer Involvement. (2018). Retrieved from https://accountlearning.com/consumer-buying-behavior-types-of-consumer-involvem ent-in-purchasing/ Appendix 1