Disrupting Tradition: How COVID-19 Spurred a 53-Year Old Retail Group to Fast-Track Their Digital Transformation

Many have observed that physical retailers who failed to properly digitalize their business in the last few year will be the hardest hit by COVID-19. Its apparent that consumer habits are not just changing temporarily, but are most likely to be altered for the long-time. Asian department stores are some of the most notorious laggards in the region and it seems that many may die out as a result of not being able to adjust to the “new normal”.

In the final part of our “Innovating through the Crisis” series of interviews, we spoke with Monica Lee, Director of Digital Innovation at FEDS retail group, to discuss the journey she has taken driving a 53 year old retail group through its digital transformation. FEDS owns 11 department stores in Taiwan and 6 in Mainland China.

Can you introduce yourself and your approach to Digital Transformation at FEDS retail?

As a director and leader of retail sector for digital transformation initiatives in both FEDS and FEG, I’ve learned in order to start the digital transformation journey in a 70 years conglomerate group in Taiwan, you need clear communication in terms of purpose, strategic approaches and tactics. Most of my time in the company is focused on building new ideas of what the future of retail will be.

In terms of our approach, it’s neither the e-commerce model we see in Amazon in the US, or Alibaba in Mainland China. Nor is it the ‘new retail’ malls that we see on the other side of the strait. Most likely we will need to create our own version to reinforce where our strengths are and what our competitive advantages are.

This is not an easy task, and we all know the fact that digital transformation won’t happen overnight. But we have already started to take baby steps to begin the transformation journey and that is the most important thing.

Right now the world is going through the COVID-19 crisis and retailers are struggling to adapt to a world in which consumers are spending most of their time at home. As an innovation expert, what changes have your experienced in this time at FEDS?

We needed a shift in mindset to keep up with digital native competitors as well as traditional competitors in marketplace. Sadly as you can tell right now, the fact is COVID-19 wiped out a large number of brick and mortar businesses, particularly those store who have struggled to demonstrate enough clear value in order to keep customers coming back.

It was during this uncertain period that most of Taiwan’s department stores were faced with a massive shift in shopping habits. Online shopping exploded in popularity as well as a requirement for ‘on-demand’ delivery, meaning that we had to change our strategy.

Before the COVID-19 crisis, digital content creation wasn’t our main focus. But recently it has become our main connection with consumers, and our next step was to expand the diversity of digital content we offered. We had ensure that we can provide a seamless customer experience both in store, online and across Far Eastern Group retail sectors. It’s lucky we started early, way before the crisis. Our A13 store was developed to be a digital mall which will help FEDS transform its business through the adoption of new technologies.

A13 Far Eastern Mall which uses New Rtail
FEDS A13 mall was devised as Taiwan’s first New Retail Mall

Moving from product focus retail to service intensity focus is a new type of retail. We not only have faster access through mobile digital services, but are also able to create a truely seamless experience.

COVID-19 is accelerating our transition to the new world, new habits of shopping are creating major across the consumer landscape. These are developments that are manifesting in the changing demographics, behaviors and expectations that shape the “New Normal” world today and in the future.

What innovation initiatives do yourself have executed at FEDS Retail during this time?

Internally, I initiated structural and strategic shifts in order to build agile team dynamics and accelerate the transformation across the whole group on a daily basis. I championed this in order to empower teams and companies to embrace constantly changes, new innovation. We have concentrated on adopting augmented technology to create better outcomes for our business and individuals the individuals who work here.

Monica Lee

I believe that all these shifts will adopted by our own group soon. This will provide a necessary bridge to our new type of retail, as well as the answers for survival and success in Post-COVID-19 world.

FEDS owns a number of department stores in both Taiwan and Mainland China. What would be your advice to traditional bricks and mortar retailers who are considering and pivot to O2O? What should be the focus of their innovation budges? What technology should they focus on?

Most traditional brick and mortar retailers in Asia, haven’t changed they way they have done business for a long time. Even the rise of eCommerce 10-15 years didn’t really shock them, and in the last 5 years it has become a real threat.

The COVID -19 pandemic and ensuing crisis is something different though, and this is the time that decision makers are really going to have to start thinking about how to make changes and look for revenue stream from different channels,

Therefore, I will recommend them to change their value proposition first, and then consider adopting new technologies. They should be looking for solutions which will help them to connect and engage with their customer quickly in virtual world and accelerate the new retail growth.

It is hard for me to specify any particular technology for them to consider. Every retail and business group have very different stories: Some of them may need to restructure their infra at first, while some of them need to make the workforce shift to another model before they consider adopting new technology.

The technology trends right now are 5G, IoT and AI. So these should definitely be on everyone’s radar. They have to identify what is the purpose, which problem they want to solve, and then decide whether it really is a business problem. After all once you commit to any AI initiatives, they require a great amount of data collection and model training. This means not only a heavy reliance on your AI team (No matter whether in-house or external professionals), but also a large investment in terms of time and budget. If you solve the wrong problem you probably won’t be left with any significant results. Therefore it’s critical to think through the actual business problem and assess what tools you need

Another bit of advice for brands and all consumer-facing industries in a similar situation to us, is to go extensively study what are the new enabling technologies for both consumers and retailers. Also look as much as possible at global expansion opportunities. This should engender more efficient, effective and faster growth, both domestically and globally.

Monica, thanks a lot!

Key Takeaways

  • Its impossible for physical retailers in APAC to ignore the amazing ‘New Retail’ innovations that have become commonplace in Mainland China over the last decade. At the same time, they cannot just straight up copy what is happening there. Any solution has to be tailored for local consumer habits and the retail environment there. Monica did not just look at what Alibaba had been doing, but also spent a lot of time studying Amazon and other trailblazers across the world.
  • Traditional retailers looking to embrace digital transformation need to spend time evaluating what their actual business problem is and what they want their new value proposition to be. AI technologies are expensive in terms of the data, costs and time needed, so its essential to make sure you know what problem you are using the technology for before you start.
  • Rich digital content creation is alien to traditional physical retailers like department stores, but COVID-19 has shown that its the main medium of communication with customers and where investments need to be made.