A.S. Watson’s Move to Invest USD400M in Supply Chain Transformation Has Strengthened its O+O Capabilities and Competitive Position During the Pandemic
- Written by The Bulletin
HONG KONG SAR - Media OutReach - 25 August 2022 - A.S. Watson Group has gained widespread and overwhelming recognition in the retail industry in Asia, winning eight regional and local accolades, including Health & Beauty Retailer of the Year - Asia Award and Omnichannel Strategy of the Year Asia Award, by Retail Asia.
The Group's flagship brand Watsons has also been voted Asia's No.1 Pharmacy/Drugstore Brand by Campaign Asia for 13th consecutive year. Meanwhile, it is recognised as Digital Transformation Pioneer Company by WeChat in Mainland China last year. At the recent interim results announcement of CK Hutchison, parent company of A.S. Watson, the world's largest international health and beauty retailer reported 22% increase in revenue in its Asia operation and 13% in Europe. What's behind the resilience of A.S. Watson in tackling the pandemic challenges in retail in the past two years while gaining in competitive position?
React to Challenges with Laser Focus on People
Malina Ngai, CEO of A.S. Watson (Asia & Europe), reflected on the key lessons learned, "There is no instruction manual for how to lead at a time like the COVID-19 pandemic. We are fortunate that what we believe in - loving our people and customers, and the offline and online (O+O) platform strategy we have been building - plays its most critical role during the crisis."
"We believe in loving and caring for our people. We have 130,000 colleagues globally with majority of them work in our physical stores. From the beginning of the crisis for over 30 months now, we assured them we prioritized our efforts on their health and safety, proactive communications, and provided financial security even during market lockdowns. This has helped to keep our people together to fight the pandemic in high spirits."
As part of the company's focus on people amid the ongoing pandemic challenges, A.S. Watson has strengthened its commitment to inclusion and diversity and sought to expand its understanding of women's needs, so as to improve the lives of its people as well as customers. It has also recently announced its plan to offer 200,000 job opportunities worldwide for young people by 2030, enabling them to gain valuable experience to develop their career in retail.
USD400m Investment in Supply Chain Transformation Pays Off
Since 2012, A.S. Watson Group has been driving its digital transformation with anticipation of evolving customer needs in shopping for health and beauty products. Besides investment in digital technology, retail systems and automation, big data, cloud technology and cyber security, the transformation in building O+O retail supply chain pays off during the pandemic.
Ngai explains, "Supply chain is the backbone for us to deliver seamless O+O customer experience. During the pandemic, we were able to quickly adjust our global operations to handle the surge of online orders through activating fulfilment in over 50%, and pick-up in almost 100% of our 16,000 physical stores network, multiple delivery options with 30-mins delivery being the fastest standard."
"We do not have a crystal ball on a crisis outbreak like the pandemic. But we have a vision a decade ago to build our business into an integrated O+O platform to serve our customers hence we know we need to create a customer-centric supply chain network. We now have a network of close to 90 main warehouses and invested over USD400m in the past decade to transforming planning and demand forecasting tools, capabilities in real-time inventory visibility, improving supply chain productivity and capacities. It enables our agility to operate and pays off during the challenging pandemic period to keep us in business in a competitive way."
Customer Love is an Important KPI in O+O Strategy
In a retail business, how important is customer love, and how can this be measured?
"Like any business, measuring traffic, transactions, conversion, active shoppers, and ultimately sales and profit is a must. But there is more," Ngai continues.
"We've been working to build a lasting and close relationship with our billions of customers who shop with us every year, amongst which 142 million of them are loyalty members. Customers are more emotionally demanding for relevance, care, and personalization, so we need to show them that we understand, we care, and we want to stay connected to them."
"We no longer use traditional mystery shoppers. Why not ask our real customers! We conduct monthly customer survey in all operating markets, called Customer Love Score. The feedback on our O+O experience has improved from 87 to 90.5 out of 100 in the last 3 years. Last year alone we received over 4 million responses from customers who shopped with us offline and online. Over 60% of them rated us 100. We have added Customer Love Score as a KPI in all businesses to reinforce our company purpose to put a smile on our customers' faces today and tomorrow."
Looking ahead, online retailing will continue to stay as part of customers' shopping habit. At the same time, the pandemic underlines the desire among customers for human connection. Physical retail must evolve to serve customers with human touch, friendly services, and interactive experiences of products; while fully integrated with online and relevant digital experiences to provide relevant O+O choice for customers.
"Our focus on further strengthening the O+O platform strategy at A.S. Watson stays solid in the very volatile and complex world. We will further accelerate our supply chain transformation to support our growth, specifically in warehousing capacity and automation technologies, last mile delivery experience, AI in inventory management and demand forecasting. And we are keen to build international partnerships with companies who have expert experience, products and solutions in supply chain."
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