Hong Kong Department Stores builds an online e-commerce community

To read a Finnish version of this case study, please click here.

Founded in 1989, Oy Hong Kong Import Ltd owns and operates 22 Hong Kong Department Stores across southern Finland. Its stores sell a vast range of local, international and own-brand merchandise – gardening, tools, outdoor equipment, homeware, electronics and appliances, accessories and toys. It employs more than 600 people.

A targeted online strategy

To complement its physical department stores, Hong Kong wanted to introduce a new online sales channel. However, instead of creating a single online store that would mimic the physical stores, the company decided to take a more targeted approach.

“One of the most important elements of online sales is creating a reputation for being a specialist supplier,” explains Miika Malinen, eCommerce Director. “If people want a certain type of product, they tend to visit sites that specialise in that type of product because they expect a specialist to offer a wider range of better-quality products. We decided that the best strategy was to create a number of specialist sites for the main product categories we sell, and focus on building up communities of users who would help us to develop them.”

Sourcing help from enthusiasts

Finland has a number of very enthusiastic online fishing communities, and Hong Kong decided that its fishing equipment business would be an ideal candidate for the first of its new online stores.

“Fishermen are fantastic customers because they are very knowledgeable about the equipment they buy and use, and they are prepared to share their expertise with others,” says Miika Malinen. “We decided to go to two of the largest online fishing communities in Finland and enlist 100 people from each. These 200 fishermen would be given user accounts for our new store a couple of months before it was launched. We would ask them to explore the store and the product catalogue, and use the social networking features of the site to help us improve it.”

Creating a technology platform

To make this strategy viable, Hong Kong needed a technology platform that could provide sophisticated social networking features as well as the more standard e-commerce functionality. Miika Malinen’s team selected IBM WebSphere Commerce as the core of the solution, and chose software from Heiler and Bazaarvoice to provide rich product information and manage customer reviews and ratings. In addition, the solution would use IBM Coremetrics to provide analytics, Adobe Scene7 for imaging, and eCircle for email marketing.

“We were one of the first companies in Finland to bring all these products together into a single solution,” says Miika Malinen. “We wanted to ensure that the technology would live up to the vision that we and our customers had for the new store, so we needed a really expert partner to help us develop and implement the site.

“We chose Descom because our team had previous experience of working with them, and we were impressed with their expertise in e-commerce solutions. They did an excellent job of translating our concept into a technical solution, including all the integration with our back-end systems, and they will continue to provide application management and development services as we go forward.”

A successful launch

With the technology in place, Hong Kong went ahead with its recruitment of its fishing community, and introduced them to the new kalastus.hongkong.fi fishing site a couple of months before it launched.

“The response was incredible – they wrote over 3,000 product reviews in one month and gave us lots of valuable feedback on how they wanted the site to look and behave,” says Miika Malinen. “They even corrected spelling mistakes in the product descriptions! As a result, when we launched the site we were able to provide a rich user experience from day one.”

Enhanced sales analytics

Following the launch, IBM Digital Analytics has helped the company to gain a deeper understanding of customer activity on the site. This solution is provided on a software-as-a-service (SaaS) basis, and provides new insight into shopping behaviours.

“For example, we have discovered that the conversion rate for customers who read reviews is 250 percent higher than that of customer who don’t,” comments Miika Malinen. “This really shows the value of the 3,000 reviews that our fishermen wrote for us before we launched – it seems that a favourable review is one of the key factors in turning a browser into a buyer.”

Going forward, Hong Kong will expand its use of IBM Coremetrics to enhance its cross-selling and up-selling capabilities.

“We are very keen to introduce the Intelligent Offer feature, which uses the ‘wisdom of the crowd’ combined with personal order history to suggest other products that a shopper might be interested in,” says Miika Malinen. “We just need to wait a few months until we have enough sales data to create an accurate statistical model, and then the solution will start to create links between products automatically. This will save us considerable time, and also give us greater insight into the kinds of products that sell best together.”

The company is also considering using IBM Coremetrics to analyse the customer-generated reviews and ratings in the Bazaarvoice system and gain more insight into what customers are saying about Hong Kong and its products.

Smarter Commerce boosts sales across all channels

In the six months since the online store launched, it has continued to outsell the fishing departments in Hong Kong’s physical stores – but that is not the whole story. Sales in the physical stores have not declined; in fact, they have increased.

“The whole concept of having highly focused online stores was that it would help us build a reputation as a specialist in specific product categories,” says Miika Malinen. “The results show that this has been a complete success: raising awareness of our expertise in fishing equipment online has actually brought more people into the fishing departments of our stores. So instead of cannibalizing trade from our existing outlets, we have actually helped their sales to grow.”

A targeted e-commerce website is not only a sales channel; it is also a marketing tool. By establishing itself as a haven for some of the most active online fishing communities in Finland, the site serves as an advertisement for Hong Kong’s expertise in this market sector. By integrating sales and marketing in this way, Hong Kong has adopted a strategy that aligns perfectly with IBM’s Smarter Commerce philosophy.

Looking to the future

Buoyed by the success of this first project, Hong Kong is now in the process of developing a second online store – this time focusing on DIY products. Again, the company is seeking help from existing online communities to create a richer user experience.

“The great thing about the solution we’ve built is that it gives us a template that we can customize and redeploy many times over. Instead of building the DIY store from scratch, we can re-use many of the components we built for the fishing store. Moreover, although the look-and-feel of the sites will be quite different, the back-end systems are exactly the same – so we can manage customer orders and deliveries consistently, whatever site they come from.”

About Descom

Descom is a Finnish IBM Business Partner that specialises in e-commerce, electronic work environments, social networking, process management and integration solutions, built on software from the IBM WebSphere, Lotus and Smarter Commerce portfolios. Descom also works closely with other IBM Business Partners such as Heiler to harness best-of-breed technologies that add further value to the solutions it creates for its clients.