Fung Group & IBM help retailers test new concepts

Most retailers have heard of Li & Fung, or of the Fung Group. For the few that haven't, the Hong Kong-based company is a leading consumer goods design, development, sourcing and logistics company for major retailers and brands the world over. The company boasts a network of 15,000 suppliers in Asian-Pacific countries, most notably China, Vietnam, and Bangladesh, and recently opened a 1,000,000 sq ft logistics facility in Singapore.

What may be less known is that last year the Fung Group launched the world's first model testing platform in Shanghai in collaboration with IBM, called The Explorium.

The Explorium is basically an exhibition space that features pop-up stores for "member" brands. I had my first look at the concept at the NRF 2016 event last January, where it was featured as part of the IBM booth, and it immediately struck me as a great idea, especially for those companies that want to extend their reach into China – but would like to test their concepts out before first going through the pains associated with the trial-and-error approach to new market growth.

The Explorium in action

With that in mind, I reached out to IBM, who in turn connected me to Simeon Piasecki, the director of the Explorium Omni Lab in Shanghai. When I asked Simeon to illustrate how the Explorium can help retailers, he explained, "what if an American children's toy brand wants to go to China – will it fly? They can test their brand at The Explorium by running real consumers through a mock store. They can challenge their own value proposition, for example, 'do Chinese consumers prefer to buy toys as bundles or as eaches?'" Simeon then went on to describe how one prominent American children's shoe brand wanted to challenge the assumption that the conversion rate goes up if children can try on shoes. The retailer was able to test a "learning environment" that included a "dance game" where dance steps are displayed on a screen and the child gets a positive score for trying it too (and, the experience can be shared on social media!). The test ran for 3-4 months, and the concept was refined in "rapid prototype" fashion (for example, the social media sharing was added later in the process).

Retailers learn about the Explorium Lab via the Fung network, from IBM, or simply by word-of-mouth. To participate, brands are asked pay a membership fee, and that gives them the opportunity to schedule space at the Explorium Lab for any length of time. The Fung Group looks for companies that have a business plan for the Chinese market, and according to Simeon, "have demonstrated a culture of innovation". Once the process is kicked off, the retailer works with Explorium staff to develop the pop-up layout, using "plug and play" technology that is provided by the lab.

Once the pop-up store is established, consumers are invited to come and shop. These consumers can be anyone from the 300 staff members of the lab to about 30,000 "anybody" people. People are screened to be "relevant to the process" (for example, only consumers with children were invited to participate in the shoe store experience). Upon entering the store, each consumer is tagged with an iBeacon – and that's where IBM comes in. IBM analyses real time tracking data to discover things such as dwell time.

Can pureplays play too?

According to Simeon, the lab is "instinctively set up for the store", but a pureplay can also test concepts at the Explorium. The director cited the example of a Hong Kong e-retailer that wanted to test its value proposition before entering the greater Chinese market. In the instance he cited, the challenge was whether the merchandise was packaged properly. It turns out that it wasn't; the retailer discovered that Chinese consumers, fearful of buying fakes, want more pictures and labelling on the packaging.

Good for the goose, good for the gander

The value for retailers seems clear. Mistakes in new markets can be very expensive. The company that I worked for in the 1990s experienced that in a painful way. Just as most retailers are, we were very proud of our brand, and believed that our value was obvious for all to see. But when we aggressively moved into a new market by acquiring a regional – and much loved – chain of stores and then implemented our concept, we took a big hit and eventually exited the market with nary to show for our efforts. If a retailer can avoid that mistake, it's all to the good.

But what's in it for The Fung Group, or for IBM? According the Explorium director, the Fung Group's objectives are threefold: "to work with our brands, to foster a culture of innovation, and to work with real estate on concepts." Clearly, if Fung Group's clients are successful in China, so is the supply chain giant – this is in line with what every retailer knows, that keeping a customer is more cost effective than having to find a new one.

I asked the same question to my host, IBM global director for distribution sector marketing Patricia Waldron. Her answer: IBM seeks to test new technologies such as iBeacons and associated analytics, and thinks of its participation in 'first of its kind' initiatives as a way to extend value to its customers. And finally, IBM also wants to promote innovation.

Final thought

From my point of view, the Explorium offers an exciting and beneficial way for retail brands to "taste and try before they buy" into a new market. Having such a lab to test new concepts is invaluable, because the result should be a more finely tuned (and thus – hopefully – successful) value offer to a new target market. But the next thought that comes to mind is, "why not more?" - why not establish labs around the world in emerging markets in Latin America, Africa, and south-east Asia? Or for that matter, for retailers who want to enter mature markets like North America and western Europe, why not those places as well?

The obvious answer: all it takes is the money and the will. When it comes to the money at least, there is no more expensive a mistake that a retailer can make than one in the "real" marketplace. Consumers have long memories and are quick to reject a bad idea or even a good one if it's poorly implemented.

So then, it's just a question of the will to do it. Any takers?

This article originally appeared on The RSR Research website. It is reproduced with the organisation's permission. 

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