Outlook for e-commerce in Hong Kong

CEO and Consumer Perspectives

In association with

gs1hk.org kpmg.com/cn Table of contents P. 4 Executive Summary

Hong Kong consumers set to buy into online P. 6 shopping

Are Hong Kong’s CEOs ready and able to meet their P. 20 e-commerce demands?

© 2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. GS1 Hong Kong is the local chapter of GS1®, a not-for-profit, standards orgnaisation. GS1 is a regis-tered trademark of GS1 AISBL. Case Studies Page

Neil Galloway, Dairy Farm International Holdings 14

Luke Grana, GRANA 15

Roger Staeheli, Nespresso 16

CK Pak, Convenience Retail Asia 17

Kent Wong, Chow Tai Fook Jewellery Group 18

Samuel Lau, Kerry Logistics 19

Dr Guy Look, Sa Sa International Holdings 30

Steve Suh, Floship 31

Joseph Phi, LF Logistics 32

Malina Ngai, A.S. Watson Group 33

Jessie Ting, Hong Kong Post 34

Simon Wong Ka Wo, Kampery Group 35

© 2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. GS1 Hong Kong is the local chapter of GS1®, a not-for-profit, standards orgnaisation. GS1 is a regis-tered trademark of GS1 AISBL. About the surveys:

KPMG China and GS1 Hong Kong commissioned YouGov to conduct two surveys.

The first was a survey of 500 consumers in Hong Kong and 500 consumers in mainland China to understand their current and future shopping attitudes and habits, and to pinpoint, from their perspective, the challenges and opportunities in Hong Kong and China for e-commerce and omnichannel business.

The second was a survey of 225 CEOs in Hong Kong to understand their views on the challenges and opportunities in Hong Kong around the adoption of e-commerce and omnichannel business models.

The surveys were conducted during the third quarter of 2016.

© 2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. GS1 Hong Kong is the local chapter of GS1®, a not-for-profit, standards orgnaisation. GS1 is a regis-tered trademark of GS1 AISBL. © 2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. GS1 Hong Kong is the local chapter of GS1®, a not-for-profit, standards orgnaisation. GS1 is a regis-tered trademark of GS1 AISBL. Executive Summary

Compared to their counterparts However, in the last couple of years While the top three growth across the border, to date, shoppers there has been a significant fall in strategies CEOs plan to use in the in Hong Kong have been less keen to demand, from both local and non- coming 12 months are still the go online to buy what they want. local shoppers. Combined with rising tried-and-tested favourites – develop costs and increased competition, new business opportunities, launch Given the city’s high-population this has resulted in over two-fifths new products and cut costs – the density, its large number of easily of Hong Kong CEOs reporting a development of their e-commerce accessible outlets and malls, and its decline in business in the last year, capability now rates just behind fast, reliable transport infrastructure, with some sectors, such as fashion, these. it’s hardly surprising that going to the particularly hard hit. shops is seen as a convenient option. Only one fifth of companies expect When eyeing opportunities in the to earn nothing from e-commerce But while Hong Kong consumers’ field of e-commerce, among the in the coming year and one tenth love affair with the mall and physical biggest doubts CEOs harbour are expect 30 percent or more of their stores doesn’t look set to end, it whether they can find staff with the revenue to come from online sales. could increasingly be tempered by right skill sets and whether they their equally strong affection for can successfully integrate offline When it came to pinpointing a digital mobile and other technology. and online operations without strategy that would play a key role cannibalising existing channels. in their business, the most popular Almost half of Hong Kong consumers choice, selected by a quarter of the now say they plan to make more But pushed by the economic CEOs questioned, was the use of purchases in the next two years via downturn, and pulled by the popular social media and messaging their mobile phones than they have awareness that, in an age of digital platforms for consumer engagement. previously. disruption, if they don’t meet the online demands of new and existing But, in what is possibly a blindspot With storage and distribution costs customers someone else will, more for many Hong Kong bosses relatively high in Hong Kong and, CEOs seem to see the development implementing an omnichannel until recently, a ready supply of of e-commerce and omnichannel strategy, surprisingly few of them – tourists eager to visit their shops, capacities as essential to the survival around one tenth – saw these social local retailers haven’t been under of their business. media and messaging platforms as great pressure to diversify their sales sales channels. channels.

4 Outlook for e-commerce in Hong Kong © 2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. GS1 Hong Kong is the local chapter of GS1®, a not-for-profit, standards orgnaisation. GS1 is a regis-tered trademark of GS1 AISBL. Outlook for e-commerce in Hong Kong 5 © 2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. GS1 Hong Kong is the local chapter of GS1®, a not-for-profit, standards orgnaisation. GS1 is a regis-tered trademark of GS1 AISBL. Hong Kong consumers set to buy into online shopping

Despite being so digitally well-connected, it seems that Hong Kong consumers have embraced the possibilities of e-commerce less enthusiastically than their counterparts in mainland China. There are some differences in terms of geography and, in some places, infrastructure development. But do the trends, and the intentions of Hong Kong’s shoppers, point to a narrowing of this gap and an accelerating engagement with e-commerce in the SAR?

6 Outlook for e-commerce in Hong Kong © 2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. GS1 Hong Kong is the local chapter of GS1®, a not-for-profit, standards orgnaisation. GS1 is a regis-tered trademark of GS1 AISBL. The consumer What was in last year’s shopping basket? purchasing landscape 61 Fashion 71 Let’s first look back at the overall shopping habits of consumers 66 Lifestyle in Hong Kong during the past 68 12 months, and forward to their 30 intentions for the next two years. Sporting goods 41

Their current and anticipated relative 54 spending patterns look to be broadly Food & beverage 68 similar, with variations in a few 40 shopping categories. Entertainment 53 Considerably more consumers in 35 Hong Kong than mainland China Travel 63 spent money on travel last year – 63 percent compared to 35 percent. 48 Home appliances 61 Furthermore, travel was the only category in which more consumers 14 Premium products 25 in Hong Kong said they intended to spend more in the coming two years Beauty & wellness 46 than in the previous 12 months. 49

Compared to last year, significantly Books 39 fewer consumers in Hong Kong plan 46 to buy fashion and lifestyle items in the next two years and the numbers mainland China Hong Kong shopping for premium products also looks set to drop. Whereas, in almost Source: Survey analysis, Hong Kong e-commerce, 2016 every category, the number of mainland Chinese shoppers planning What’s on your shopping list for the next two years? to spend is on the rise. 64 Fashion 65

62 Lifestyle 61

33 Sporting goods 37

53 Food & beverage 64

42 Entertainment 53

41 Travel 71

52 Home appliances 56 17 Premium products 21

46 Beauty & wellness 45

41 Books 39

mainland China Hong Kong

Source: Survey analysis, Hong Kong e-commerce, 2016 Outlook for e-commerce in Hong Kong 7 © 2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. GS1 Hong Kong is the local chapter of GS1®, a not-for-profit, standards orgnaisation. GS1 is a regis-tered trademark of GS1 AISBL. Which channels are With its small geographical area, Again, the travel category stands large number of shopping malls, out, with consumers in Hong consumers currently and well-developed transport Kong equally willing to make travel using infrastructure, shopping in physical purchases from e-commerce stores in Hong Kong is not only platforms, mobile apps or physical Currently online shopping, via a convenient option, it may also stores. e-commerce platforms and mobile negate any possible advantages of apps, is considerably more popular in convenience connected with online mainland China than in Hong Kong. shopping. Where did you shop last year?

Online e-commerce platforms Mobile apps Physical stores

Fashion 59 Fashion 26 Fashion 50 30 11 74

51 25 54 Lifestyle 21 Lifestyle 7 Lifestyle 80

57 30 46 Sporting goods 24 Sporting goods 7 Sporting goods 75

41 29 60 Food & beverage 14 Food & beverage 8 Food & beverage 81

Entertainment 50 Entertainment 45 Entertainment 28 20 19 50

50 39 21 Travel 28 Travel 25 Travel 27

56 28 43 Home appliances 16 Home appliances 8 Home appliances 75

25 22 52 Premium products 10 Premium products 6 Premium products 77

49 26 47 Beauty & wellness 13 Beauty & wellness 7 Beauty & wellness 77

49 26 45 Books 22 Books 10 Books 77

mainland China Hong Kong mainland China Hong Kong mainland China Hong Kong

Source: Survey analysis, Hong Kong e-commerce, 2016

8 Outlook for e-commerce in Hong Kong © 2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. GS1 Hong Kong is the local chapter of GS1®, a not-for-profit, standards orgnaisation. GS1 is a regis-tered trademark of GS1 AISBL. Pointers to an Hong Kong consumers have Research work undertaken by KPMG indicated that in future they plan to Boxwood, the KPMG consultancy omnichannel future use e-commerce more across all team specialising in the delivery of In every category, though sometimes categories, with strongest growth in business transformation, envisages from a low base, Hong Kong sporting goods, beauty and wellness, the penetration of e-commerce shoppers indicate their intention home appliances and lifestyle. levelling out at 25 percent around the globe, ensuring the continuing to increasingly use online retail However, it doesn’t seem like the importance of brick-and-mortar websites and mobile apps over the city’s consumers are planning to stores in some form. next two years. abandon their trips to malls. The More consumers in the city are percentage of Hong Kongers who However, together these results already making their travel purchases say they are intending to buy from underline the growing importance to through online retailers and mobile physical stores over this period looks retailers of adopting an omnichannel apps combined, than via physical to be holding fairly steady across approach. When there is a growing stores, and this trend will only nearly every category. appetite among consumers for intensify. e-commerce, retailers who rely only on physical stores risk missing out on opportunities.

Where did Hong Kong consumers shop for these categories last year and where will they buy in the next 2 years? Online e-commerce platforms Mobile apps Physical stores

Fashion 31 Fashion 14 Fashion 75 25 11 74

Lifestyle 26 Lifestyle 14 Lifestyle 79 18 7 80

Sporting goods 34 Sporting goods 13 Sporting goods 72 20 7 75

Food & beverage 25 Food & beverage 13 Food & beverage 78 18 8 81

Entertainment 32 Entertainment 27 Entertainment 53 27 19 50

Travel 43 Travel 32 Travel 36 42 25 27

Home appliances 27 Home appliances 13 Home appliances 79 17 8 75

Premium products 24 Premium products 8 Premium products 72 18 6 77

Beauty & wellness 30 Beauty & wellness 11 Beauty & wellness 78 20 7 77

Books 26 Books 15 Books 74 21 10 77

Next 2 years Past 12 months Next 2 years Past 12 months Next 2 years Past 12 months

Source: Survey analysis, Hong Kong e-commerce, 2016

Outlook for e-commerce in Hong Kong 9 © 2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. GS1 Hong Kong is the local chapter of GS1®, a not-for-profit, standards orgnaisation. GS1 is a regis-tered trademark of GS1 AISBL. Hong Kong What technology do you plan to use when researching and consumers warm to buying in the next two years? online engagement More online purchase and research Hong Kong retailers who haven’t for brands / products via the 61 yet developed a sophisticated internet online customer engagement and e-commerce strategy probably need More purchases via my mobile to take note of the ways in which 45 local consumers plan to use digital phone technology in the future. Sixty-one percent of them say, in More customised product and the next two years, they intend to 33 make more online purchases and use information the internet to research brands and products, while 31 percent say they will be looking for greater interaction More interaction with brand with brands through the use of social through the use of social media / 31 media and messaging platforms. messaging platforms Despite the high level of penetration of mobile technology in Hong Kong, More personal usage of cloud 28 overall purchases through mobile services channels have lagged behind those made via online retail websites. However, it seems that figure is set to grow, with 45 percent of local Hong Kong consumers saying they intend to buy more via their mobile phone in the next two years. Source: Survey analysis, Hong Kong e-commerce, 2016

10 Outlook for e-commerce in Hong Kong © 2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. GS1 Hong Kong is the local chapter of GS1®, a not-for-profit, standards orgnaisation. GS1 is a regis-tered trademark of GS1 AISBL. Ordering online and How will you shop in the coming two years? collecting themselves

In the next two years, almost a third 32 of surveyed consumers in Hong Shop and pick up in-store 10 Kong are still planning on shopping in stores and carrying home their purchases, while 22 percent intend 22 to order online for home delivery. Order online and deliver to home 44 However, up to a quarter of Hong Kong shoppers say, in the same period, they will ‘click and collect’ 13 – i.e. order online and pick up their Order online and pick up in store 16 purchases in the store, or order online and pick up their goods at a fulfilment point, such as a 13 convenience store. Click and collect 10 These types of services are being offered by a growing number of retailers globally and, if this model is Online search, check out item quality and 12 widely adopted in Hong Kong in the outfit in-store, purchase in-store or on-line future, the ‘click and collect’ option whichever has best offering 13 may be attractive to e-commerce retailers with no brick-and-mortar 8 operation. Shop in-store and deliver to home 8 Given the accessibility of shops in Hong Kong, many time-poor consumers may assume it’s more efficient to collect the products Hong Kong mainland China they’ve bought rather than wait in for a delivery. They may also want to Source: Survey analysis, Hong Kong e-commerce, 2016 ensure they get, first time, what they ordered, and have the opportunity to save on delivery charges. In mainland China, with the distance to stores often greater, twice as many consumers intend to order online for home delivery.

Outlook for e-commerce in Hong Kong 11 © 2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. GS1 Hong Kong is the local chapter of GS1®, a not-for-profit, standards orgnaisation. GS1 is a regis-tered trademark of GS1 AISBL. Trust and consistency The possibility of disappointment and even erodes their trust in the when the delivery is opened was the products, brands and virtual stores, issues around online issue that troubled those surveyed, who ultimately lose a sale. The GS1 shopping more than any other. Forty-seven standards of global unique product percent of consumers in Hong Kong, identification (GTIN) allow products The challenges consumers see in and 56 percent in mainland China, to be accurately identified, listed by shopping online are similar on both said potential discrepancies in sizing standard categories, described by sides of the border. and colour bothered them. A lack of trusted information, and accessed Nevertheless, online shoppers in international standards in the sizing by any device and channel. With Hong Kong are more concerned than of some items of apparel may be the the GTIN, retailers and brands can their counterparts in mainland China cause of some of this sentiment, and, move product smoothly and quickly about complicated or unsatisfactory particularly on the mainland, inaccurate throughout the supply chain via more return and refund policies, and or inconsistent product information. interoperable, efficient data handling processes. GTIN is now a must-have they also worry more about the GS1 is working with industry for major online marketplaces like security of online payments. This participants to address this issue. Alibaba, Amazon, eBay, Google, and may reflect the fact that Hong Kong Anna Lin, the CEO explains – leading retailers like Walmart.” e-commerce is at an earlier stage of “Inconsistent or incorrect product development and shoppers here are information makes finding and buying not as experienced when it comes to products online difficult for consumers. buying online. It confuses and frustrates consumers,

Challenges of Shopping Online

Potential discrepancy of size and colour 47 56

Online payment security 45 31

Complicated / lack of return and refund policy 43 33

Insufficient product information 35 30

Late delivery / no suitable delivery option 32 29

Bad / unresponsive customer service 29 34 Inconsistent search results for information about 20 products 31

Unstable product stock 20 13 19 Too many product sources 27

Technical problems 19 13

Too much information from brand through social media 9 9 7 Lack of interaction with brand through social media 12

Hong Kong mainland China

Source: Survey analysis, Hong Kong e-commerce, 2016

12 Outlook for e-commerce in Hong Kong © 2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. GS1 Hong Kong is the local chapter of GS1®, a not-for-profit, standards orgnaisation. GS1 is a regis-tered trademark of GS1 AISBL. The appeal of cheap delivery fees waived. Another draw for the cost conscious are the special and convenient discounts that may be offered online. e-commerce The second most cited reason for Key attractions of e-commerce for buying online by Hong Kongers, Hong Kong consumers are: it’s is the ability to shop anytime and potential cost savings, convenience, anywhere. This correlates with the and the access offered to overseas above mentioned growth expectation brands and stores. in the mobile-commerce market. The most popular feature is the possibility of having shipping and

Attractions of Shopping Online

50 Waiver of shipping / delivery fee 37

Convenience / ability to shop anytime 47 and anywhere 50

Special discounts offered online 36 36

Ability to purchase from brands / 36 shops overseas 20

Online payments are more secure and 30 convenient 38

Simpler return / refund process 21 29

Better after-sales service / customer 21 support 25

Availability of product tracking 19 information 20

Delivery time estimate is more 14 accurate 13

Limited or special edition products are 13 available online 9

Overnight shipping / delivery is 12 available 18

Hong Kong mainland China

Source: Survey analysis, Hong Kong e-commerce, 2016

Outlook for e-commerce in Hong Kong 13 © 2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. GS1 Hong Kong is the local chapter of GS1®, a not-for-profit, standards orgnaisation. GS1 is a regis-tered trademark of GS1 AISBL. How much more convenient can Hong Kong get? Neil Galloway, Dairy Farm International Holdings “As local consumers evolve, we need so we need to rise to that challenge,” to be responsive to their changing Galloway points out. “However, while requirements and continue to explore there is a lot of excitement around opportunities for reimagining our sales e-commerce, our view is that physical outlets,” he says. stores will still be here for a long time to come, and so we have to continue He adds, Dairy Farm is always looking to execute well in this area. The at innovation around its product ranges experiences online and in-store are very Neil Galloway is Group Finance Director and the consumer experience within its different.” with Dairy Farm International Holdings. stores. Sifting the useful data from the noise Dairy Farm operates some 6,500 stores Another growing challenge is the Galloway says a big question for the across Asia, and employs over 180,000 recruitment of the next generation retail industry is how it can develop a people in its four divisions - Food, of young, talented people for all local more tailored, personalised shopping Health and Beauty, Home Furnishings retailers. Millennials have different experience for its customers? and Restaurants. expectations from employers and the workplace than previous generations “We need to focus on understanding The company’s sales revenue in 2015 and businesses have to adapt to remain how consumers engage with our exceeded US$17 billion. attractive. businesses and brands,” he explains. Market conditions in Hong Kong “As retailers, we must engage with Growth of e-commerce in Hong Kong Galloway senses a downturn in the the consumer and deliver on their Galloway notes how the new and the less tangible, overall mood in Hong expectations — so CRM and loyalty will traditional coexist in the Hong Kong Kong, with a fall in tourist arrivals and be increasingly important.” retail landscape: while mobile phone a downturn in overall retail sales along penetration is ‘very high’ here, so is wet In the future, he says, Dairy Farm with a lack of world class events hosted market penetration. needs to make better use of the in the city, other than the annual Rugby volume of data it has, to build up Sevens. “There’s so much retail convenience in a more complete picture of its Hong Kong already,” he says “Perhaps However, he also believes Hong customers in order to serve them this is a reason why e-commerce has Kongers are resilient and he still thinks better — this will be critical to the taken off more slowly than in other Hong Kong’s entrepreneurial spirit company’s future success. developed markets.” allows it the ability to reinvent itself. “But the challenge is to filter the “We can see some increasing activity Galloway says that when it comes to useful data from the noise. You can in the start-up community getting e-commerce it is important for Dairy get lost in the information.” He more involved in the areas of Fintech, Farm to find the right balance between believes the development of better e-commerce and logistics, and we have meeting consumer needs and ensuring data visualisation tools could be a the benefit of being next to the Pearl a path to profitability. He points to growth area. River Delta Economic Zone.” grocery retailers in the UK and other markets which are believed to be losing One thing is clear — today’s Challenges to be tackled money on every home delivery, as a technology allows retailers to Galloway identifies the imbalance warning on this count. build a highly personalised, between sales growth and cost inflation informed, one- to-one in Hong Kong as a significant challenge, That said, Dairy Farm is still accelerating relationship with their and says property costs are a major its investments in e-commerce. customers, which has raised challenge for all retailers. “Sometimes there is a time lag on the bar significantly on service developments but we recognise He suggests consumers in Hong Kong expectations. It offers a consumers are increasingly looking for are very well informed on a real time great opportunity to build an e-commerce channel, particularly basis, more empowered than before, stronger brand relationships mobile – we are definitely aware we are and are very responsive to promotional but flawless execution will living in a mobile world.” activity. While looking for value for be even more critical for money, they are also looking for product “But we must remember that success. innovation and increasingly concerned consumers want the ability to shop about quality and food safety. how, what, when and where they want,

14 Outlook for e-commerce in Hong Kong © 2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. GS1 Hong Kong is the local chapter of GS1®, a not-for-profit, standards orgnaisation. GS1 is a regis-tered trademark of GS1 AISBL. Online retailing with a personal twist Luke Grana, GRANA grana.com. Crucially, he also managed Room by GRANA’ located in Sheung to reach an agreement for DHL Express Wan, Hong Kong. to be their global shipping partner – an These Fitting Rooms have a two- important step in securing two-day fold purpose: they introduce the international shipping on all online sales. brand to those who have not already Modest launch and swift growth encountered it online; and allow both The brand had its beta launch in April new and existing customers to feel the Luke Grana is the CEO and Founder 2014 – where they debuted a crew fabrics and try on clothes to find the of innovative online fashion retailer, neck t-shirt made of Peruvian pima right fit. Although The Fitting Room GRANA. He, along with Pieter Paul cotton. With mostly word-of-mouth and and pop-ups carry no inventory, the Wittgen (COO and Co-Founder), a minimal digital marketing push, the buying experience is easy for those launched the company in October 2014, duo sold out of their inventory of 2,000 unaccustomed to online shopping, as and have overseen its growth from a t-shirts in three weeks. staff are at hand to help customers order the goods online, on the spot. small startup to an international brand Following this success, GRANA was that ships to twelve countries. GRANA’s fully launched in October 2014. In the Returning customers comprise 50% core aim is to manufacture and sell high- two years since, they have grown from of their sales. Luke attributes this quality clothing at affordable prices, by three people in a 500 sq/ft office, to to quality, pricing, swift delivery and cutting costs encountered by traditional having 50 employees and a 18,000 sq/ attention to customer service – e.g. marketing and distribution chains. ft warehouse. Their month-on-month a personalised handwritten thank you Personal Journey sales growth is running at 15%, and card is included with each delivery and Entrepreneurship has always been in their stock has expanded to include a live chat is available on the website wide range of items from swimwear, Luke Grana’s blood. In the years before Looking at the future minimalist garments, to clothes for he set up GRANA, he was the owner Initially, GRANA experienced most smarter occasions. Fabric choices of a small chain of coffee shops in his sales in Hong Kong where it is still have similarly grown, and now also native Sydney, but a trip to Peru, where strategically headquartered. However, include: Chinese Silk and Silk Georgette he encountered the premium qualities its highest growth market is now in Satin, Japanese Denim and Chambray, of Peruvian pima cotton, changed the USA. The company is planning to French Poplin, Irish Linen, Mongolian the direction of his career. Why, he open their next pop-up showroom Cashmere, Italian Merino and Italian wondered, were products made of this experience in NYC, in an effort to Sensitive. fabric so expensive? He decided to increase their US customer base. devise an online sales strategy, which The public face of GRANA The startup recently attracted aims to cut out the distribution and GRANA has built a ‘fun and cheeky’ Alibaba’s Entrepreneur Fund retail middlemen that drive up the cost social media presence to boost rapport as a new investor, and with of most luxury fashion items. It was with their customers and thus, brand their support, plan to enter the from this idea, that GRANA was born. loyalty. They boast over 23,000 ‘Likes’ mainland China market in 2017. on Facebook, as well as over 24,000 Having no fashion experience, Luke GRANA plans to launch a followers on Instagram, where they spent some time working in high street Chinese language website next interact with their core market of fashion chains, as well as researching year. possible locations for his startup. Hong millennials, in the 25-35 year-old age Kong turned out to be the ideal choice, bracket, in a way that goes beyond just “We’re really excited to have given its business-friendly environment, showcasing their fashion. lead investment support from global connectivity, reputation as a Alibaba and looking forward GRANA has never used traditional logistics and shipping hub, and its tax- to working closely with their marketing e.g. advertising campaigns, free port status, so he moved there in team to enter the mainland but has relied on social media, October 2013, with his life savings of market,” says Luke Grana. digital marketing and word-of-mouth US $200,000. “China consumers have recommendations to increase brand already matured when it awareness to drive conversion. They He quickly joined forces with Wittgen, comes to online shopping have also created over twelve pop- and with his help, and with advice from adoption and we see a lot of ups to date, in Australia, Hong Kong, InvestHK, soon found more strategic potential for the medium-to- Singapore and the USA, with one investors to support the launch of long-term there.” flagship showroom called ‘The Fitting

Outlook for e-commerce in Hong Kong 15 © 2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. GS1 Hong Kong is the local chapter of GS1®, a not-for-profit, standards orgnaisation. GS1 is a regis-tered trademark of GS1 AISBL. Building relationships over coffee Roger Staeheli, Nespresso

Nespresso was founded in Switzerland coffee that was sold at retailers was Offline vs. online in Hong Kong 30 years ago and has had a presence instant coffee. So we decided to Despite Nespresso’s online channel in Hong Kong since 1997. Initially, the retail our own products ourselves. We showing the fastest sales growth, company sold only to businesses, first established the call centre – the Staeheli highlights two main before expanding sales of machines Customer Relationship Centre – and challenges to the development of and roasted and ground coffee then evolved into different channels.” e-commerce in Hong Kong. The first is capsules to the home consumer as convenience. Staeheli says the aim today is to offer a well. Nespresso’s first boutique in consistent experience to the customer, “You want to offer convenience with Hong Kong opened in the ifc mall in whether it’s offline or online. “It’s about e-commerce but the retail landscape in 2006. consistency in the product, price and Hong Kong is already very convenient. Roger Staeheli has been the Country promotion.” Most households are within five to Manager of Nespresso Hong Kong ten minutes travel time to a mall. So Integrated channels and customer and Macau for the past two and a half we offer same-day delivery for online relationships years. He says while retail is more purchases made within a particular The company is very clear on the role important for Nespresso in Hong time frame of the day. The other of each of its channels, he says. Kong than it is in other countries, challenge for Hong Kong is the high e-commerce is the company’s fastest “Retail is very much about delivering cost of distribution.” growing sales channel here. the brand experience. E-commerce is Prospects for Nespresso and for about Nespresso ‘anytime, anywhere’. Nespresso’s omnichannel evolution Hong Kong Trade is focussed on machine sales Though Nespresso, with its global Staeheli points out that despite and is a channel through which we can network of 450 outlets, is part of the the downturn in Hong Kong, recruit new members. The Customer Nestlé Group, Staeheli says it operates retail sales in general are still at Relationship Centre used to be a independently because of its unique historically high levels. But while transactional channel, and today it’s business model. “We have a direct-to- he believes Hong Kong is a city about building relationships.” consumer business model – coffee is of opportunity with the potential sold through our own channels.” Staeheli says if there was such a thing to adapt to new circumstances, as an ‘ideal’ customer relationship it is also a city with some The company has four B2C channels: development process, it would resistance to change. retail, e-commerce, coffee machine see the customer initially recruited trade points, and its Customer “And it may benefit some through Nespresso’s boutique or trade Relationship Centre – a form of call brands to get back to basics channel then transformed into an centre. The B2B division sells to hotels when it comes to focussing e-commerce customer. Subsequently, restaurants, cafes and offices. on customer experience and these customers would be regularly telling the story of the brand.” Nespresso’s sales channel evolution invited back into the boutique to try has been in the opposite direction to new coffee innovations and allow Staeheli says he remains that of many retailers of similar long- Nespresso to engage directly with optimistic about Nespresso’s standing. After initially selling through them. prospects.The company its Customer Relationship Centre, has new strategies and Staeheli says that because, in most Nespresso launched its e-commerce launch plans in place as the cases, customers join the Nespresso channel in 1998, before opening its first popularity and demand for Club to buy coffee , the company is boutique in Paris in 2000. coffee continues to grow able to gain a good understanding of in Hong Kong and Macau. This progression, though, was born the consumer, and therefore tailor out of necessity rather than choice, its marketing campaigns and offer Staeheli explains. “Thirty years ago, personalised experiences.

16 Outlook for e-commerce in Hong Kong © 2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. GS1 Hong Kong is the local chapter of GS1®, a not-for-profit, standards orgnaisation. GS1 is a regis-tered trademark of GS1 AISBL. The convenience of ‘bricks and clicks’ CK Pak, Convenience Retail Asia

CK Pak is the COO of Convenience Retail concept, he explains. This shopping Initially, also, it was female customers Asia, a member of the Fung Group. platform offers products online while who were the biggest spenders on Circle K operates over 400 convenience also providing a safe payment channel FingerShopping.com. stores in Hong Kong, Macau, through its brick-and-mortar retail In the first six months of this year, the Guangzhou, Shenzhen and Zhuhai. The network, along with delivery and after- platform sold more than 21,000 units of first Circle K store was opened in 1985. sales services. This helps to reduce the stock from about 1,500 brands, Pak says, risks from online shopping, he believes. Pak says major consumers among and the total value of the merchandise its target customers are the working Though FingerShopping.com has grown sold has doubled from the same class and students. Members of these in an encouraging way in the three years period last year, as have the number of groupings shop at convenience stores of its existence, given Convenience members. more than three times a week, on Retail Asia’s total sales revenue of nearly Online shopping, offline delivery average. HK$4 billion, the contribution from the Pak points out that on online business is still insignificant, Pak He says the businesses most affected FingerShopping.com, even when adds. by the decrease in the number of customers choose products from individual visitors from China in While he advises companies not to different online shops, they can still recent years, are jewellery, luxury dream of online platforms generating combine all their delivery needs and and cosmetics shops. The retail instant profits, he also warns that choose door-to-door service or self- businesses least affected have been companies which do not adopt an pickup from the convenience stores. fast food restaurants, supermarkets and e-commerce strategy, will regret it in 10 This drives the development of O2O convenience stores, which all provide years’ time. business. daily necessities to local people. Online platform targeting young As customers can choose COD (cash Apart from selling daily consumables, consumers on delivery) and pay the bill at the convenience stores also provide services “Although shopping in Hong Kong is very convenience store, they can skip the like bill payment and the add-value convenient in terms of the number of online payment process and enjoy service for Octopus cards. Serving shops and locations, consumers have peace of mind and hassle-free these needs requires an adequate different characteristics across different shopping. number of stores throughout Hong age ranges,” Pak notes. “The younger “Nowadays, retailers should no Kong. segment tends to enjoy the online world longer use their old experience to more. This has obviously changed their Due to the increasing number of vacant run their business,” Pak says. shopping habits, too.” commercial properties, rental prices have In particular, he adds, Hong dropped in recent years and Pak says He says Circle K’s vision for its online Kong needs to keep pace Circle K has grasped this opportunity to shopping business grew from a desire with the new trend towards open more shops. to meet their changing needs, and the digitalisation of the entire convenience stores in Japan and Korea The “bricks and clicks” route to logistics and payment systems, which established their online platforms gradual growth along with marketing services, long ago, were an inspiration for this Despite planning to open more shops, and not lag behind other development. Pak says this has not stopped Circle countries and, especially, K from developing its online retail FingerShopping.com does not offer mainland cities. business. mainstream products, Pak explains, and Industry and government what he categorises as fast-growing, FingerShopping.com was established need to keep abreast of the high-potential health and skincare in 2013 as a way of combining online to e-commerce trend and help products, make up about 80 percent offline advantages in a “bricks and clicks” companies to survive, he of the platform’s total product value. believes.

Outlook for e-commerce in Hong Kong 17 © 2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. GS1 Hong Kong is the local chapter of GS1®, a not-for-profit, standards orgnaisation. GS1 is a regis-tered trademark of GS1 AISBL. A glittering future for e-commerce? Kent Wong, Chow Tai Fook Jewellery Group

Kent Wong is the Managing Director or Hong Kong, are the millennials, i.e. synergies between online and offline of Hong Kong-listed company Chow the younger generation born in the businesses in the next three to five Tai Fook Jewellery Group. The group 2000s. years. was founded in mainland China in “It is necessary to understand their “Smart+ represents different 1929 and the first Hong Kong Chow Tai habits and preferences. For example, development ideas: ‘S’ stands for Fook jewellery point-of-sale (POS) was young people tend to obtain product sustainability, which means continuous set up in 1939. Currently, the group information via the Internet, and improvements in infrastructure and has more than 2,300 POS in over opinions are shared by word of mouth staff training; ‘M’ stands for men, 500 cities, spanning Greater China, on social media,” he said. which means caring for all stakeholders Singapore, Malaysia, Korea and the US. including customers, suppliers and “As a jeweller, Chow Tai Fook also Wong said the group has its own Chow staff; ‘Art’ represents craftsmanship needs to keep pace with changes, Tai Fook e-Shop and has opened Chow and heredity; ‘+’ means added value adjust our sales strategies, enhance Tai Fook e-tail accounts on various through creative sales platforms personalised services and offer online shopping platforms. The group and innovative customer services uniquely designed products to suit the also collaborates with social platforms to enhance the brand image,” he customers.” to increase its exposure through explained. promotions and publicity that enhance Chow Tai Fook is developing a new The group will continue to use this customer engagement. mobile app which allows three- scheme to provide personalised dimensional pictures of products to Patience with online growth shopping experiences, and be downloaded, so customers can According to the group’s results for the collaborate with business partners choose their favourite design. This not year ending March 2016, the number to develop more effective marketing only enhances service efficiency but of unique daily visitors to the Chow and promotional activities. Smart+ also strengthens communication with Tai Fook e-Shop, along with those initiatives also make use of smart customers. Alternatively, customers accessing its official accounts on devices. The group has adopted can send their own jewellery designs online shopping platforms, exceeded new technologies, such as RFID- to Chow Tai Fook for professional 260,000. Its official accounts on social embedded smart trays, to help mounting. media platforms show that Chow understand customer preferences Tai Fook has more than 2.3 million Online and offline synergies and optimise business strategies followers. For the online purchases of customers in areas such as product life in tier one cities in mainland China, cycles and transaction cycles. Though the value of Chow Tai Fook’s Chow Tai Fook employs specialists retail sales from its e-commerce “Whether in e-commerce or to provide a direct delivery service. business in mainland China has grown physical shops, trust is always Wong said, this helps to convey a by 51 percent in FY 2016, it contributed the most important core value sense of respect to customers who only a 2.3 percent share of the in the jewellery business,” have ordered valuable products. Wong retail sales value of Chow Tai Fook’s Wong said. reiterated the importance of customer Mainland China jewellery business. care during the entire process from In light of this, the group Wong, though, is optimistic about its packaging to after-sales service. considers social media prospects, and his target is to reach a 5 platforms as important percent contribution gradually. In fact, these new developments complementary partners are part of Chow Tai Fook’s mid-term Meeting the demands of younger with whom Chow Tai strategy called ‘Smart+’ initiatives. consumers Fook can collaborate and This strategy aims to leverage on the Wong said Chow Tai Fook’s target share ideas in promoting internet and technology to achieve customers, whether in Mainland China e-commerce.

18 Outlook for e-commerce in Hong Kong © 2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. GS1 Hong Kong is the local chapter of GS1®, a not-for-profit, standards orgnaisation. GS1 is a regis-tered trademark of GS1 AISBL. Online route to future growth Samuel Lau, Kerry Logistics

Samuel Lau is the Executive “Kerry Logistics has acquired some Don’t focus on short-term P/L Director of Kerry Logistics (Hong express companies in Hong Kong and Lau believes companies’ operational Kong). Kerry Logistics have large Asia in the past four to five years. Over strategies will change with the growth and comprehensive distribution and the last two years, we have started to of omnichannel business. logistics hubs in the Greater China and integrate them into our brand Kerry He advises companies to engage with ASEAN regions, as well as a powerful Express, according to their systems e-commerce without initially focussing logistics services network that reaches and their geographical presence, to on making money from it. “The across Asia, is one of the main industry meet our e-commerce development.” supply chain model adopted in the players. In addition, he says, the company plans early stages might be expensive and Lau believes the global economic to strengthen its regional express affect the operational cost,” he says. slowdown, along with sluggish services in Asia in order to capture the “Companies should try to understand demand, has led to stagnant growth growing e-commerce markets in the procedures such as payment, recalls in the logistics and trading sectors. ASEAN region and expand its express and customer journey.” These factors, coupled with the strong network to Indonesia. He explains Lau sees traditional retailers seeking US dollar, have had an adverse impact Kerry Logistics will strive to offer a e-commerce opportunities even on worldwide markets, and he doesn’t range of customised logistics solutions though these may contribute only foresee these markets stabilising until for different partners. “The demand for a small share of overall revenue at 2018. ‘last mile delivery’ from our logistics first. partners is obviously a business Reasons for hope on China growth opportunity”. Unifying supply chain visibility Lau thinks opportunities abound under and standards the Belt and Road Initiative. Though Keen competition within the region Lau says kerrierVISION, Kerry many foreign companies have set up Kerry Express provides ‘last mile Logistics’ proprietary supply chain their logistics facilities in China in the delivery’ services in Hong Kong, visibility platform, is designed to past decade, he does not consider Taiwan, Vietnam, Thailand, Malaysia provide end-to-end visibility to the Chinese logistics market to be and Cambodia. Cross-border and local customers along supply chains. saturated. He also stresses that delivery for small parcels is available for China remains one of the company’s B2B/B2C businesses. He believes a global standard significant contributors of revenue. must be in place to achieve In Bangkok, Lau explains, Kerry interoperability and it must Lau expects e-commerce business Express has set up an automated be more widely publicised to to remain an important part of Kerry sorting centre with numerous make sure it is extensively Logistics’ strategic plans as the global distribution stations on the streets, used. e-commerce market grows steadily. cooperated with a local railway company, and hired motorcyclists and a Capturing the “last mile delivery” courier team to offer person-to-person opportunities (P2P) parcel delivery services. Foreseeing stable growth in the global e-commerce market, Lau says Kerry This local service is very popular and Logistics will strengthen its express business uptake is strong as the capabilities to provide cost-effective operating cost is relatively lower. ‘last mile delivery’ services to an expanding client base.

Outlook for e-commerce in Hong Kong 19 © 2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. GS1 Hong Kong is the local chapter of GS1®, a not-for-profit, standards orgnaisation. GS1 is a regis-tered trademark of GS1 AISBL. Are Hong Kong’s CEOs ready and able to meet their e-commerce demands?

In the face of more testing market conditions, are Hong Kong companies contemplating embracing e-commerce, and an omnichannel approach, more enthusiastically?

20 Outlook for e-commerce in Hong Kong © 2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. GS1 Hong Kong is the local chapter of GS1®, a not-for-profit, standards orgnaisation. GS1 is a regis-tered trademark of GS1 AISBL. Current conditions Impact of economic slowdown on Hong Kong business With companies, particularly retailers, in Hong Kong having Up by more than 10% enjoyed several years of rapid growth they are now facing some global, and Up by 1% - 10% regional, economic headwinds.

Despite this, well over half of the Stayed roughly the same CEOs surveyed, all of whom head up companies with Hong Kong operations, reported they had seen Down by 1% - 10% either business growth or stability in the previous twelve months. Down by more than 10% When looked at through the prism 0% 10% 20% 30% 40% 50% 60% of the role their businesses play in the supply chain, the relative Source: Survey analysis, Hong Kong e-commerce, 2016 performance of traditional retailers and e-commerce companies can be compared. More retailers fared worse in this period than grew or remained stable, while e-commerce companies performed better. This appears to tie in with the consumers shifting interest to engage with more e-commerce channels. In terms of industry sectors, it’s clear companies involved with the production and sale of apparel and accessories have had a testing year, with 60 percent of those questioned reporting a drop in business.

Outlook for e-commerce in Hong Kong 21 © 2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. GS1 Hong Kong is the local chapter of GS1®, a not-for-profit, standards orgnaisation. GS1 is a regis-tered trademark of GS1 AISBL. Falling demand in the If business declined, what did the CEOs of these companies past 12 months identify as the key drivers? A drop in demand, both from Hong Kong consumers and tourists, Declining consumer sentiment in combined with rising costs and Hong Kong levels of competition, were the main reasons cited by the CEOs whose businesses had suffered a decline in Increased costs business. But changing consumer purchasing behaviour and disruption from Increased competition e-commerce models, were also blamed by over 30 and 20 percent for the downturn, respectively. Perhaps unsurprisingly, retailers Decline in tourists identified a decline in tourists and the decline in sentiment in Hong Kong as the top two problems affecting their Changing consumer purchase business, both of which are difficult behaviours for CEOs to fix. More than other parts of the Hong Disruption from e-commerce Kong economy, the fashion and models consumer electronics sectors were in particular hit by changing consumer purchasing behaviour and Market share loss disruption from e-commerce models.

0% 10% 20% 30% 40% 50% 60%

Source: Survey analysis, Hong Kong e-commerce, 2016

22 Outlook for e-commerce in Hong Kong © 2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. GS1 Hong Kong is the local chapter of GS1®, a not-for-profit, standards orgnaisation. GS1 is a regis-tered trademark of GS1 AISBL. Routes to continued If business remained stable or increased, what will the CEOs growth of these companies identify as the key drivers? The CEOs who had seen an uptick in business, or at least no fall, cited New business opportunities three traditional drivers as reasons for their relative success: new product launches; cost efficiencies and; by far the most common of all, new business opportunities. New product launches However, e-commerce was the fourth most quoted reason. Cost efficiencies

E-commerce

Government incentives

Others

0% 10% 20% 30% 40% 50% 60% 0% 10% 20% 30% 40% 50% 60% 70%

Source: Survey analysis, Hong Kong e-commerce, 2016

Outlook for e-commerce in Hong Kong 23 © 2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. GS1 Hong Kong is the local chapter of GS1®, a not-for-profit, standards orgnaisation. GS1 is a regis-tered trademark of GS1 AISBL. A mix of optimists Again, CEOs of companies dealing in apparel and accessories were far and pessimists more gloomy than those in other In terms of the way in which they sectors, with just under 10 percent of viewed their future prospects, the them predicting growth. CEOs were fairly evenly split. Twenty-eight percent foresaw a drop in sales, 34 percent expected to sell more, and 37 percent predicted business would remain roughly the same.

How do you view your company’s prospects in the next 12 months?

Growth in sales by over 10%

Growth in sales by 1% -10%

Stay roughly the same

Decline in sales by 1% -10%

Decline in sales of over by 10%

0% 10% 20% 30% 40%

Source: Survey analysis, Hong Kong e-commerce, 2016

24 Outlook for e-commerce in Hong Kong © 2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. GS1 Hong Kong is the local chapter of GS1®, a not-for-profit, standards orgnaisation. GS1 is a regis-tered trademark of GS1 AISBL. Adding digital to the new business opportunities, companies a boost. Over 30 percent launching new products and cutting said they are going to develop and tool kit costs. apply innovative technologies to increase their competitive edge, and When considering ways to promote Beyond these methods, though, around a quarter said they planned to future growth, the CEOs seem to be significant numbers of the CEOs are become more data-driven in order to looking first and foremost to the tried looking to technology to give their and tested strategies of exploring generate real-time insights.

Hong Kong business growth strategies for the next 12 months

Explore new business areas

Develop / launch new / improved products

Reduce cost structures

Develop and apply innovative technologies to increase your competitive edge

Become more data driven to generate more real time insights

Develop more mobile first strategies, incorporating e-commerce, payments processing, games and other digital goods and services Develop more integrated O2O marketing and fulfilment strategies (online and offline channels)

Geographic expansion of shops

Develop a marketplace platform by directly connecting suppliers and manufacturers with the end buyer i.e. to build a supply chain

Develop structural social media platforms for consumers to search for product opinions and feedback

0% 10% 20% 30% 40% 50% 60%

Source: Survey analysis, Hong Kong e-commerce, 2016

Outlook for e-commerce in Hong Kong 25 © 2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. GS1 Hong Kong is the local chapter of GS1®, a not-for-profit, standards orgnaisation. GS1 is a regis-tered trademark of GS1 AISBL. Looking to customer- Key Hong Kong commerce developments centric success The CEOs surveyed see the Deepening customer loyalty programmes development of customer-centric policies and programmes as key to the future success of Hong Kong Improving consumer journey and companies. user experience Customer relationship management programmes that deepen customer Creating consistent brand loyalty, as well as improvements experience across channels in the consumer journey and user experience, were each specified by Establishing mobile platform and over 50 percent of the respondents. m-commerce The creation of a consistent brand experience – cited by around Enhancing product delivery options 45 percent of CEOs as a key and tactics development – is also likely to ensure a happier customer engagement. Moving to online and e-commerce Interestingly, the establishment of a mobile platform and an m-commerce capability, is ranked next on the list. This fits well with what Hong Kong Enhancing cyber security consumers are looking for in the coming two years and suggests a bright future for mobile technology in Diversifying payment options the world of Hong Kong commerce. Perhaps the important question is for those CEOs who aren’t planning 0% 10% 20% 30% 40% 50% 60% to invest in m-commerce. Will they Source: Survey analysis, Hong Kong e-commerce, 2016 miss out on the opportunity? The KPMG Boxwood report 1 ‘Disruptive Influences’ challenges Disruptors retailers to be relevant in one or more of three areas – namely, convenience, price and experience – or risk becoming irrelevant to customers. The development of a strong e-commerce / m-commerce platform is a key advantage to giving your customers convenience and Value Convenience experience.

Experience

1 Disruptive influences:The three key trends transforming the face of retail.

26 Outlook for e-commerce in Hong Kong © 2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. GS1 Hong Kong is the local chapter of GS1®, a not-for-profit, standards orgnaisation. GS1 is a regis-tered trademark of GS1 AISBL. Digital connections Key digital innovations in Hong Kong to customers The most important ways CEOs see Riding on the popular social media / messaging platform for digital technology being used in Hong consumer engagement Kong, is to better understand and engage with consumers, and also in the building of omnichannel business platforms. Adopting data analytics Engagement via social media and message platforms, understanding through the adoption of data Building omnichannel business analytics, and improvements in platforms the customer experience with the development of an omnichannel model, were each identified by Adopting Internet of Things, between a fifth and a quarter of wires and sensors CEOs as key digital innovations. The figures among traditional retailers and e-commerce companies were even higher. Building up mobile commerce

Adopting cloud computing technologies

0% 10% 20% 30% 0% 10% 20% 30% 40% 50% 60% Source: Survey analysis, Hong Kong e-commerce, 2016

Outlook for e-commerce in Hong Kong 27 © 2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. GS1 Hong Kong is the local chapter of GS1®, a not-for-profit, standards orgnaisation. GS1 is a regis-tered trademark of GS1 AISBL. Missing the chance to Channels used in Hong Kong in omnichannel strategies sell via social media and messaging Online – e-commerce platform platforms? Online – mobile website As shown in the above chart, CEOs in Hong Kong have a growing Mobile app awareness of the importance of popular social media and messaging platforms for consumer engagement. Online – retail website However, it appears that few CEOs view these platforms as a Physical store sales channel in their omnichannel strategy. In China and other parts of the world, there has been a strong WeChat trend toward direct selling through social media. It works particularly Facebook well via smartphones, an integral part of the customers’ lives, and we believe that CEOs should rethink Instagram strategy if they leave this channel out. Google

Other social media apps

Not applicable to my company

0% 10% 20% 30% 40% 50%

Source: Survey analysis, Hong Kong e-commerce, 2016 Revenue from Expected share of HK revenue from e-commerce e-commerce A fifth of the businesses surveyed None / No e-commerce have no e-commerce operation, and this channel accounts for ten percent or less of the revenue earned by About 1% - 10% of total another two fifths of the companies. revenue However, a smaller percentage of CEOs surveyed already have significant revenue streams from About 11% - 20% of total e-commerce. Based on consumer revenue expectations, this percentage should grow in the coming few years. About 21% - 30% of total revenue

Over 30% of total revenue

0% 10% 20% 30% 40% 50%

Source: Survey analysis, Hong Kong e-commerce, 2016 28 Outlook for e-commerce in Hong Kong © 2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. GS1 Hong Kong is the local chapter of GS1®, a not-for-profit, standards orgnaisation. GS1 is a regis-tered trademark of GS1 AISBL. Hesitating over The obstacle they most frequently can businesses afford to wait? If identified is the difficulty in finding customers’ online demands, aren’t a switch to an and hiring staff with the necessary fulfilled by your company someone omnichannel skills, and the integration of offline else may well step in and take those business model and online operations is seen as customers away. problematic by a similar number. Though the prospect of a profitable digital future may be alluring for Many CEOs hesitate, with worries businesses in Hong Kong, the CEOs about online business cannibalising surveyed see challenges in the existing channels. However in the switch to an omnichannel model current age of digital disruption,

Challenges to omnichannel business in Hong Kong

Lack of talent or skills

Bridging the physical and e-commerce world

Measuring the return on investment (ROI)

Establishing processes for linking social media to products

Communication between different digital platforms

Managing inventory well

Promoting product information

Last mile delivery

Unsure about which technologies will deliver the greatest return

Return logistics and refund settlement

Technical problems

Inconsistent search results for data about products

Insufficient government support

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Source: Survey analysis, Hong Kong e-commerce, 2016

Outlook for e-commerce in Hong Kong 29 © 2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. GS1 Hong Kong is the local chapter of GS1®, a not-for-profit, standards orgnaisation. GS1 is a regis-tered trademark of GS1 AISBL. An online business makeover Dr Guy Look, Sa Sa International Holdings

Dr Guy Look is CFO and Executive developing e-commerce is not just to Sa Sa needs to develop several parts Director of Sa Sa International Holdings, offset rental and wage costs.” of its digital infrastructure, he says, the Asia-based chain of cosmetics including its ERP system and its He explains that as tastes and lifestyles stores. Sa Sa International has set up warehouse management and VIP change, especially among China’s over 280 retail stores and consignment systems. younger generation, consumers are not counters across five major areas within necessarily purchasing luxury goods, In addition, it needs to hire IT talent Asia, offering more than 700 different but are looking for life experience, with user interface/user experience retail brands and employing a workforce quality service and a combined O2O (UI/UX) expertise, integrate its online of around 5000. experiences. and offline customer base, and deploy Sasa.com’s sales revenue exceeded a multi-platform order management The impact of ecommerce on bricks- HK$400 million this year, up by 6.2 per system for backend support. and-mortar shops cent from last year and contributed According to Look, Sa Sa plans to invest Such backend systems will give about 5 per cent of the company’s more resources in e-commerce, and customers more shopping options, and total revenue. While retailers in other start to integrate its online and offline a better shopping experience, and in countries see their e-commerce businesses. These changes are driven return increase online traffic. revenue accounting for 10 to 20 per by changes in consumer behavior, cent of sales, Look and his company are Besides allocating more resources to competition from online shopping, high targeting double-digit sales mix for Sa IT training, the company also needs rental costs, difficulties when opening Sa’s online sales, he explains. to enhance its frontline beauty new shops in traditional retail districts, consultants’ sales techniques so Offering a new shopping experience customer loyalty and products that have that, in this O2O era, they can be for consumers low demand or sales volumes. more responsive to customers To meet current commercial challenges “Developing an online shopping with a range of online shopping Hong Kong is expected to face, business is unavoidable,” he explains. experience. Look says Sa Sa has improved its “And online and offline businesses are retail management and is starting to A long-term vision inseparable.” adopt an O2O business mode. This Look suggests the industry is intended to improve customers’ Online shops also create opportunities should have a long-term IT vision shopping experience while also for interaction and, even with the same for investing in technology and capturing the opportunities of cross- customer, you can make more sales, talent through collaboration with border e-commerce. The company has reduce costs and strengthen loyalty, he universities and conducting launched new O2O shops in Shenzhen adds. R&D training to bridge the and Shanghai and by end of the year, IT talent gap. He would also To control costs, Sa Sa has relocated will also have launched a new mainland like to see the government some of its shops to areas of Hong version of its website, as well as a be more supportive through Kong where sales performances are mobile site to increase its web traffic measures such as more free stronger and rents are more reasonable. and conversion rate. trade agreements to facilitate IT ecosystem lags behind cross border e-commerce and “Consumers’ shopping experience, e-commerce development needs supporting the development no matter if it is online or offline, is the “The entire IT ecosystem in Hong Kong of better logistics most important driver in increasing retail is lagging behind and can’t catch up with capabilities and capacity for consumption,” Look says. “However, the city’s e-commerce development e-commerce. with the prevalence of online shopping needs,” Look says. “It is difficult to and the diversification of information recruit experienced IT talent.” through social media, the purpose of

30 Outlook for e-commerce in Hong Kong © 2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. GS1 Hong Kong is the local chapter of GS1®, a not-for-profit, standards orgnaisation. GS1 is a regis-tered trademark of GS1 AISBL. Delivering on digital technology’s possibilities Steve Suh, Floship

Founded in 2015, Floship is an New versus old models container and bust open everything e-commerce logistics company that Suh thinks many logistics companies in there. Instead of one container we provides fulfilment services for online have entrenched infrastructure and think of it as, say, 5,000 orders inside retailers. supply chains and may not have that container. We then say, ‘Why thought through whether they can just don’t we ship 5,000 individual parcels “These services consist of basic scrap that entire model and go with directly from Hong Kong to the end warehousing and storage, pick-pack a more streamlined one that would users in the US, around the EU, in the and shipping,” explains Steve Suh, allow them to ship worldwide direct APAC region, or wherever’.” director and co-founder of Floship. “But from Hong Kong. He believes many where we’re a little different is, we’re He says the revenue generated with companies are afraid to do that sort of focussed on e-commerce. In essence this approach is many hundreds of cost analysis because of what it might we are a technology company.” times greater than that generated by imply in terms of consoldidating to one just handing over the container to the Contrary to many reports, and based or a few hubs, rather than many. logistics and delivery companies in on what he sees on the ground, Suh “When demand is very high and you the destination markets. Floship’s believes Hong Kong has an extremely have a high value product, the express business is focussed on handling active e-commerce market – but shipping costs may be negligible,” Suh this much more lucrative end-to-end consumers are buying from mainland points out. He cites the example of business. e-commerce companies rather than smartphones. With the streamlined local ones. Hong Kong’s e-commerce market model, he suggests, companies When considering the current He also thinks many of the big existing wouldn’t need to worry about robustness of the Hong Kong logistics companies are working within maintaining stock levels in different e-commerce market, Suh points to an outdated model. countries and then selling all that the findings of the internet traffic inventory through. What’s now possible for fulfilment monitoring companies, which companies And cross-border trade is being made show that some of the highest Suh says Floship has developed its an even more attractive proposition. ranked websites in Hong Kong own proprietary system with features Suh cites one example: “This year the are mainland and international and value-added benefits that he US per-parcel duty exemption threshold e-commerce platforms. thinks a traditional fulfilment company has been raised from US$200 to “This means Hong Kongers wouldn’t be able to provide. US$800, which would cover pretty are using these websites a much any product you would want to lot,” he says. “It’s just when “A primary feature is around shipping,” sell online.” he says. “Our clients can choose from people ask if there’s a lot of ten different couriers and we offer Why the logistics industry should be e-commerce activity in Hong ‘smart shipping’ – an optimisation that more bullish Kong, they look at local allows different couriers to be used Suh sees many of the traditional big players and their market for different parcels based on size and logistic companies trying to make share, and conclude there’s dimension.” Hong Kong the gateway for cargo not a lot happening here. going in and out of China by facilitating But they’re not actually This optimisation, he adds, can be the shipping of containers. He checking to see how many done in real time. As well as enabling considers this a mistake. shipments are coming in consumers to track orders online, Suh every day from China to says Floship also uses embedded “They could be shipping hundreds Hong Kong.” packaging technology so the most or thousands of containers but the cost-efficient packaging will be revenue associated with this is limited. selected automatically. What we’re saying is, let’s go into the

Outlook for e-commerce in Hong Kong 31 © 2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. GS1 Hong Kong is the local chapter of GS1®, a not-for-profit, standards orgnaisation. GS1 is a regis-tered trademark of GS1 AISBL. E-commerce drives logistics partnerships Joseph Phi, LF Logistics

Joseph Phi is the President of LF development is both a blessing together a bespoke service that brings Logistics, and is responsible for and a curse; it is only a blessing for out the best in every partner,” he said. managing the logistics, freight, data companies that are quick to pivot. The role of Hong Kong analytics, and supply chain businesses E-commerce is markedly different Phi added that Hong Kong should of the Li & Fung Group. He is the from the traditional brick-and-mortar take concrete steps to reassert its Chairman of GS1 Hong Kong, an business. Order size is smaller. leadership position as Asia’s premier industry-led organization promoting Order frequency is higher. Service supply chain hub. He called for global standards and best practices, requirement is much higher.” collaboration among public and private and is the Director of GS1 Global Phi explained that LF Logistics sectors to develop logistics friendly Management Board. Mr. Phi currently pivoted early, as the firm spotted an policies that facilitate regional and serves as an Adjunct Professor in HK opportunity in providing e-logistics global trade. In the near term, with the University of Science and Technology. service. It noted the ongoing struggle staggering e-commerce growth in Asia, Perfect storm in logistics by most retailers and brand owners it is crucial for Hong Kong to establish Phi highlights low ocean freight rates, on how to integrate their separately linkages with the various free trade a sluggish world economy and strong managed traditional and e-commerce zones in the region (especially China) US dollar as key factors influencing the businesses, and foresaw the imminent to bolster cross-border e-commerce. logistics industry – a ‘perfect storm’, in need of online-offline convergence. This his opinion. This therefore is one of the paved the way for the amalgamation most difficult periods faced by many of its fully developed competency in companies in this industry. piece-picking with a market leading algorithm that optimizes the order However, on a positive note, amidst fulfilment process for both online and challenges there are also opportunities. offline businesses of its customers. Over the last couple of years, LF Through innovation, LF Logistics has logistics has proactively adopted a sustained its strong business growth number of strategies to increase momentum that has bucked the its market share through service market trend, Phi adds. extension and new market entry, as well as improve its productivity through Partnership is key process innovation and automation. Phi In addition, the pace of e-commerce cites its Singapore’s ‘World Gateway’ development has prompted a rethink hub as an example of how LF Logistics of the firm’s business model. To ensure has deployed new technologies to gain a quick response, it has collaborated market share. with property developers, transporters, last-mile delivery providers and other E-commerce explosion partners to leverage the use of their When asked whether many companies assets. are able to capitalize on the recent explosion in e-commerce, he indicated “E-commerce is basically about that depends on how they steer their building a partnership ecosystem to own ships in the wake of the digital create a seamless buying experience revolution. for the final consumers. Over the years, we have successfully stitched “The booming e-commerce

32 Outlook for e-commerce in Hong Kong © 2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. GS1 Hong Kong is the local chapter of GS1®, a not-for-profit, standards orgnaisation. GS1 is a regis-tered trademark of GS1 AISBL. Omnichannel prescription for success Malina Ngai, A.S. Watson Group

Malina Ngai is COO of A.S. Watson that time it has helped increase the “Combined with the fact that Hong Group, the international health value of its customers’ spending, and Kong people are frequent travellers and beauty retailer and member boost their loyalty, as well as aid in the to shopping destinations overseas, of multinational conglomerate CK acquisition of new customers. e-commerce growth in the next few Hutchison Holdings Limited. With a years may continue to be concentrated “For any business to be successful history dating back to 1841, in the past on specific product and service today, one has to be customer centric, 175 years A.S. Watson has transformed categories only,” she adds. that is, make an effort to understand into one of the largest international what adds value to the customer’s Online shopping behaviour across health and beauty retailers in Asia life, and how and when they need that demographics and Europe with 13,000 stores in 25 value added,” she says. Ngai says that for the generation Z markets across Asia and Europe. customers – those aged 20 or younger So, she goes on to explain, if Current commercial challenges – online shopping is a high-growth customers want to browse the Ngai says consumer sentiment segment. company’s products while travelling continues to be stagnant across most to work in the morning, they should “They are more digitally savvy, Asian and European markets which be provided with the necessary less inclined to save money, have A.S. Watson operates in, and this touchpoint. If they want to find A.S. a greater interest in exploring new softness in demand makes it difficult Watson on social media and hear products and experiences, and for top-line growth to catch up with what other customers have to say value the recommendations of their cost inflation. about the company or its products, online friends.” Also online and offline competition is they should be able to. If they want Ngai adds that such behaviour increasingly intense at a time when to order products online at midnight is consistent across countries the expectations of consumers are and pick them up at a store near their and regions. Through developing changing rapidly. workplace, that service should be a greater understanding of provided. “A recovery in mainland tourist this customer segment, and numbers and in their spending is “And if they prefer to walk in a store adjusting their business model unlikely, and the number of non- near home or a destination mall to to attract members of it, mainland visitors is also slightly down,” browse and check out new products, companies can seize these new Ngai says, addressing the Hong Kong we need to provide stores that are opportunities for growth. market, specifically. conveniently located and have a Growth strategies for the comfortable ambience.” She adds that it is very important, in next two years order to generate interest amongst Why the growth of e-commerce is Ngai says A.S. Watson will A.S. Watson’s core customers in the relatively slow in Hong Kong adopt the same growth local market, the business continues Ngai says A.S. Watson’s online sales strategy in Hong Kong as it to introduce a wide variety of new in markets such as the UK, Mainland does globally. products and digital experiences. China and Taiwan are relatively higher “Continuous store network than those in Hong Kong. She believes The e-commerce and omnichannel expansion is fundamental the short distances consumers in business model for brick-and-mortar retail,” Hong Kong have to travel to stores has “Digital used to be a nice-to-have for she explains. “Just as slowed the growth of e-commerce many retailers but now it is necessary importantly, we will in the city. She also notes that a high for survival,” she says. focus our investment in percentage of online sales in Hong technology.” Ngai explains that ‘digital’ has been Kong are generated from cross- border embedded in A.S. Watson’s overall shopping from the mainland and business strategy since 2012, and in countries like Korea, Japan and the US.

Outlook for e-commerce in Hong Kong 33 © 2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. GS1 Hong Kong is the local chapter of GS1®, a not-for-profit, standards orgnaisation. GS1 is a regis-tered trademark of GS1 AISBL. Putting a premium on trust Jessie Ting, Hong Kong Post

Hongkong Post was established over Services for SMEs As the government department 170 years ago, and for most of that Over ninety-eight per cent of the responsible for postal services, she time the services it has offered the companies in Hong Kong are SMEs, says Hongkong Post is a trusted public have been focussed on the and such businesses need to send out intermediary, and its ShopThruPost mass delivery of letters, collaterals and a huge volume of samples, documents online shopping platform enables parcels, the selling of stamps and the and goods to their local and overseas online customers to identify authentic like. partners. products and receive their purchases through a reliable postal network. However, in today’s rapidly changing Ting explains that Hongkong Post will digital world and growth of continue to meet the needs of SMEs “With the ‘HK Trusted Product’ label, e-Commerce, Hongkong Post has by launching new postal solutions and consumers can easily identify reliable evolved by developing new functions products. These include a variety of brands and merchants, and purchase to serve individuals, communities and delivery services, an online posting their products directly.” This label also the commercial sector. platform and an online sales platform, serves to promote “authentic” brands as well as other services to support in the local market, she adds. Jessie Ting was appointed Postmaster online marketing. General of Hongkong Post in October 2011. “To enhance their competitiveness and allow them to achieve maximum E-commerce drives demand for efficiency, we need to provide them delivery services with affordable postal services.” she “In recent years, traditional mail says. has increasingly been replaced by electronic mail,” Ting notes. “Not many Globally networked with some 200 people still write letters and send members of the Universal Postal Christmas cards. With an increasingly Union, Hongkong Post can offer all- competitive and open market, we have round mail tracking services to many broadened the scope of our delivery countries across the world. In addition, services.” the Hong Kong Trade Development Council’s ‘Small Order Zone’ online She says the postal and courier market sales platform has also adopted in Hong Kong is becoming increasingly Hongkong Post’s Speedpost as its competitive as new market players delivery solution. take advantage of the very low market entry threshold. E-commerce and trust “The Internet is an anonymous world,” With e-commerce, in particular, Ting suggests. “In an environment driving the higher demand for delivery without physical stores, it may services, Ting says Hongkong Post be difficult to authenticate online has refined its business objectives to transactions.’ respond to economic and technological developments.

34 Outlook for e-commerce in Hong Kong © 2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. GS1 Hong Kong is the local chapter of GS1®, a not-for-profit, standards orgnaisation. GS1 is a regis-tered trademark of GS1 AISBL. Food for thought for traditional retailers Simon Wong Ka Wo, Kampery Group

Simon Wong Ka Wo, Chairman of lack of funding that would allow them to Rebalancing offline and online Kampery Group, founded his company establish their own online platforms. investment in 1993. The company adopts a one-stop Wong says the cost to his company He suggests even small or old street approach for its import, manufacturing, of opening five stores per year would stores, could make use of the large- wholesale and retail businesses. It be about HK$3 million. However, if scale main-land online retailers’ exports products such as coffee, tea, Kampery only opens one store, the networks and platforms, to promote wine, coffee machines, milk products, remaining budget of HK$2.5 million their unique, traditional and authentic and healthy and organic snacks, and can be used to improve the existing products, even those that are also operates several local brands. The software and further develop its online handmade, online. This could help in- Group has over 2500 sales points and retail and wholesale businesses. crease their exposure and widen their 200 consignment counters located in profit channels. Taking Green Dot Dot, Kampery’s mainland China and Hong Kong, as well organic and health food export, as internationally. Food Suppliers’ Platform wholesale and retail business as an For the last few years, Kampery Group Wong is also the President of the Hong example, Wong says the brand has has invested in the development of its Kong Federation of Restaurants and already acquired 200,000 members own e-commerce platform and online Chairman of the Hong Kong Brand and he expects this number to increase retail businesses, Wong explains. Development Council. steadily. To develop the online side of Customers can shop online for its this business, he has set objectives Technology reduces costs branded products via a 3D simulated to increase, in phases, the number Wong thinks Hong Kong’s traditional supermarket. To keep pace with of members to 700,000 - in, other food and beverage sectors are facing technological innovation, the company words, about 10 percent of Hong challenges from the rising cost of rents, is looking to upgrade this into a virtual Kong’s population. salaries and raw materials, manpower reality supermarket, he adds. shortages and the impact of internet Seeking new online innovations technology on the entire business Wong plans to build a new food platform On a recent business exchange model. for organic and health food suppliers visit to the mainland, Wong says from local and overseas markets. he was intrigued by new mobile With the mindset and behaviour of Whether these suppliers are Kampery’s apps he saw that are targeted consumers constantly changing, he business partners or not, they will be at the food service sector. With believes businesses will be eliminated if able to connect with other suppliers and the opportunities they offer to they don’t adopt advanced technologies. do business with them. reduce costs, he believes some “As many SMEs have excellent heritage of these could transform industry Although the platform is not yet brands, they need to pave the way for business models. available, he says nearly 1,000 suppliers their ‘transformation and upgrade’,” he are ready to register. He believes the One was an ‘order pick-up’ app says. “New technology brings in new platform not only enhances mutual that consumers can use to business models and most importantly, business development, but also reduces place orders with restaurants it reduces operational costs, increases manpower costs and shortens delivery or food stores that can be user-friendliness and efficiency. It will be times, so that fresh organic food can picked up at designated times. more difficult for companies to survive be delivered to hotels and restaurants, if they limit themselves only to street Another was a ‘network in a way that is not only efficient but stores.” delivery’ app, through which also allows the tracing of food origins to a network of restaurants can Survival through online shopping ensure food safety. use designated teams in Wong says the greatest obstacle to the different districts to handle survival of SMEs and restaurants is the food orders and deliveries.

Outlook for e-commerce in Hong Kong 35 © 2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. GS1 Hong Kong is the local chapter of GS1®, a not-for-profit, standards orgnaisation. GS1 is a regis-tered trademark of GS1 AISBL. About KPMG

KPMG China operates in 16 cities across China, with around 10,000 partners and staff in Beijing, Beijing Zhongguancun, Chengdu, Chongqing, Foshan, Fuzhou, Guangzhou, Hangzhou, Nanjing, Qingdao, Shanghai, Shenyang, Shenzhen, Tianjin, Xiamen, Hong Kong SAR and Macau SAR. With a single management structure across all these offices, KPMG China can deploy experienced professionals efficiently, wherever our client is located.

KPMG is a global network of professional services firms providing Audit, Tax and Advisory services. We operate in 155 countries and regions, and have 174,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.

In 1992, KPMG became the first international accounting network to be granted a joint venture licence in mainland China. KPMG China was also the first among the Big Four in mainland China to convert from a joint venture to a special general partnership, as of 1 August 2012. Additionally, the Hong Kong office can trace its origins to 1945. This early commitment to the China market, together with an unwavering focus on quality, has been the foundation for accumulated industry experience, and is reflected in the Chinese member firm’s appointment by some of China’s most prestigious companies.

36 Outlook for e-commerce in Hong Kong © 2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. GS1 Hong Kong is the local chapter of GS1®, a not-for-profit, standards orgnaisation. GS1 is a regis-tered trademark of GS1 AISBL. About GS1 Hong Kong

Founded by the Hong Kong General Chamber of Commerce in 1989, GS1 Hong Kong is the local chapter of GS1®, a not-for-profit, standards organisation that develops and drives adoption of easy-to-implement global standards for business to uniquely identify, accurately capture and automatically share vital information about products, locations and assets. Headquartered in Brussels, Belgium, GS1 has over 110 national chapters in 150 countries.

GS1 Hong Kong’s mission is to enable Hong Kong enterprises to improve the efficiency, safety, and visibility of supply chains across multiple sectors and facilitate commerce connectivity through the provision of global standards and a full spectrum of standards-based solutions and services. GS1 Hong Kong engages with communities of trading partners, industry organisations, government, and technology providers to understand and respond to their business needs through the adoption and implementation of global standards.

Currently, GS1 Hong Kong has over 7,000 corporate members covering close to 20 industries including retail consumer goods, food and food services, healthcare, apparel, logistics as well as information and technology. GS1 Hong Kong continually enhances and rolls out new services and solutions to help our corporate members to embrace new realities, new challenges, and new opportunities.

For more information about GS1 Hong Kong, please visit www.gs1hk.org.

GS1 Hong Kong 22/F., OTB Building, 160 Gloucester Road, Wanchai, Hong Kong Tel : +2861 2819 Fax : +2861 2423

Outlook for e-commerce in Hong Kong 37 © 2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. GS1 Hong Kong is the local chapter of GS1®, a not-for-profit, standards orgnaisation. GS1 is a regis-tered trademark of GS1 AISBL. About YouGov

YouGov is an independent, publicly listed global consumer insight company. We are one of the most recognised and quoted names in research across the UK, Europe and North America – and we are expanding quickly throughout Asia Pacific. We help businesses grow by providing a real-time picture of consumer perception and behaviour, enabling our clients to make rapid, informed decisions.

YouGov provide a range of timely and cost-effective consumer market research tools. Our signature products include BrandIndex – the daily brand perception tracker; Profiles – our segmentation and media planning platform; and Omnibus – the fastest and most cost effective way to obtain trusted consumer opinion from a representative consumer sample.

Visit our website for more details: https://hk.yougov.com/

38 Outlook for e-commerce in Hong Kong © 2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. GS1 Hong Kong is the local chapter of GS1®, a not-for-profit, standards orgnaisation. GS1 is a regis-tered trademark of GS1 AISBL. Outlook for e-commerce in Hong Kong 39 © 2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. GS1 Hong Kong is the local chapter of GS1®, a not-for-profit, standards orgnaisation. GS1 is a regis-tered trademark of GS1 AISBL. Contact KPMG

Jessie Qian Egidio Zarrella Willy Kruh Partner-in-charge, Clients and Innovation Partner Global Chair, Consumer Markets KPMG China Consumer Markets KPMG China +852 2847 5197 +1 416 777 8710 +86 21 2212 2580 [email protected] [email protected] [email protected] Maggie Lee Mark Larson Anson Bailey Head of Capital Markets Global Head of Retail Partner-in-charge, Development +1 312 665 2126 Consumer Markets Hong Kong [email protected] Hong Kong +852 2826 8063 +852 2978 8969 [email protected] Dan Coonan [email protected] Global Executive, Fergal Power Consumer Markets Karmen Yeung Partner, Advisory +44 20 7694 1781 Partner, China Tax KPMG China [email protected] KPMG China +852 2140 2844 +852 2143 8753 [email protected] Elaine Pratt [email protected] Global Marketing, Christoph Zinke Consumer Markets Daniel Hui Partner, Strategy +1 416 777 8195 Principal, China Tax KPMG China [email protected] KPMG China +852 2140 2808 +852 2685 7815 [email protected] [email protected] Torsten Duwenhorst Irene Chu Head of Data & Analytics Partner KPMG China Head of Technology, +852 2140 2231 Media & Telecommunications [email protected] Hong Kong +852 2978 8151 Belle Morton [email protected] Director, Customer Advisory KPMG China Henry Shek +852 2847 5078 National Head of Cyber Security [email protected] Services, Advisory KPMG China Patrick Kirby +852 2143 8799 Director, Advisory [email protected] KPMG China +852 2913 2568 Simon Lee [email protected] Partner, Audit KPMG China +852 2826 8061 [email protected]

40 Outlook for e-commerce in Hong Kong © 2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. GS1 Hong Kong is the local chapter of GS1®, a not-for-profit, standards orgnaisation. GS1 is a regis-tered trademark of GS1 AISBL. Contact GS1

Anna Lin Corinna Fung GS1 Hong Kong GS1 Hong Kong Chief Executive Senior Manager, +852 2863 9700 Corporate Communications [email protected] +852 2863 9787 [email protected] Stephen Lam GS1 Hong Kong Dick Ng Chief Operation Officer GS1 Hong Kong +852 2863 9765 Manager, Industry Engagement - [email protected] Logistics & e-Commerce +852 2863 9779 Joe Ho [email protected] GS1 Hong Kong Head of Customer Development +852 2863 9778 [email protected] Contact YouGov

Patrick Corr Louise Vacher Co-CEO Asia Pacific Consulting Director of Consumer & Hong Kong Retail +852 9026 4049 United Kingdom [email protected] +44 (0) 20 7012 6156 [email protected] Colin Marson Co-CEO Asia Pacific Stephen Harmston Singapore Head of YouGov Reports +65 9383 3819 United Kingdom [email protected] +44 (0) 207 012 6139 [email protected] Piotr JJ Szymanski Regional Director, Asia Pacific Client Acknowledgements Service Writer: John Brennan Hong Kong +852 9383 7918 Contributors: Corinna Fung and [email protected] Anson Bailey Designer: Chan Pui Lam

Outlook for e-commerce in Hong Kong 41 © 2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. GS1 Hong Kong is the local chapter of GS1®, a not-for-profit, standards orgnaisation. GS1 is a regis-tered trademark of GS1 AISBL. KPMG Mainland China

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Publication number: HK-CM16-0001

Publication date: November 2016