After enduring two and a half years of the pandemic, department stores are now entering an era of digital transformation. As a leading department store in Taiwan, Shin Kong Mitsukoshi has maintained a stable market share of 25.64% and is now showing synergy from the digital retail strategies that they’ve been developing in full force. Their target this year is to reach three million members and exceed NT$30 billion with their self-owned payment service: skm pay, which is already the second largest closed-loop payment service.
As the pandemic becomes part of our new norm, President Richard Wu of Shin Kong Mitsukoshi revealed the department store’s next steps: “opening up” their ecosystem and striving for their next milestone of five million members.
During our interview with Richard Wu, he shared that everyone is trying to shake off the pandemic. The most pressing issue is to open up their ecosystem! Shin Kong Mitsukoshi’s unique segmented PH management allows it to have a presence in thirteen different industries covering food, apparel, lifestyle, transportation, sports, and entertainment. To meet the varied demands of its three million members, Shin Kong Mitsukoshi is now trying to expand into travel, art, culture, and even lifestyle services. More specifically, the department store hopes to add new functions through its mobile phone application to offer travel, arts, culture, and exhibition services. In the future, Shin Kong Mitsukoshi also wishes to offer online ticket sales.
Richard Wu emphasized that everyone of all targets and industries are welcomed to form strategic alliances with Shin Kong Mitsukoshi as the department store aims to create a more robust lifestyle ecosystem in all areas, which will enable it to deliver targeted services to their three million customers.
As the department store enters its 32nd year, it has also been working on its digital transformation for over two decades. The mobile digital lifestyle strategy, however, was only truly initiated in 2014 with the launching of Shin Kong Mitsukoshi’s mobile phone application. Wu shared that, in the past eight years, Shin Kong Mitsukoshi has gradually connected 13 industries, over 1,300 brands, and nearly 7,000 stores across its 15 offline locations in Taiwan to cover food, apparel, lifestyle, transportation, sports, and entertainment. The department store has been able to construct its own ecosystem through an online-merge-offline (OMO) approach. The pandemic has further accelerated its digital strategy and, as of right now, Shin Kong Mitsukoshi boasts over 2.85 million members that contribute 85% of its revenue. Its mobile phone application has now been downloaded over two million times and around 30% of users have now registered for skm pay. In the past three years, minimal-contact payments have generated exponential year-on-year growth in skm pay payments. Last year, payments through skm pay reached NT$24.1 billion, and in the first half of this year alone, NT$13 billion. Their goal this year is to reach NT$300 billion.
Competing against E-commerce with Better Services
Richard Wu is very optimistic when it comes to the outlook of Taiwan’s market. He shared that he had concerns about competition from e-commerce draining revenue from physical stores around three years ago, but not anymore. Shin Kong Mitsukoshi now has a robust online presence in addition to its physical stores. Online, they’ve connected five diverse channels: mobile phone application, skm online, member system, and skm eats. The channels provide services from pre-orders, purchasing, gift-giving, and events to even parking or restaurant reservations/ waiting lists at the click of a button. The successful integration of skm pay has allowed them to set ambitious targets for this year as they wish to reach up to NT$32~33.1 billion.
“Our online channels compete by providing better services, not lower prices,” Richard Wu emphasized. They reaped NT$80 billion in revenue last year, of which 85% were from the department store’s 2.85 million members. During sales or other events, that percentage even exceeded 90%. In the past, co-branded cards accounted for an average of 23% of sales. After the launch of in-house memberships, Shin Kong Mitsukoshi has been able to up membership contribution to sales from 30% to 85% in just seven years as they strive for high-end retail services. Richard Wu believes that when the ecosystem opens up, there will be more businesses in other industries or online brands that will have their eye on this ecosystem market.
Richard Wu believes that opening up the ecosystem will increase members and maximize impact, which will further allow the department store to form strategic alliances with other industries and diversify its ecosystem. Richard Wu gave an example of their “Selection Area,” a product of collaborating with KOLs through its app, to exemplify that the future of department stores will no longer be limited to selected brands and physical stores, there is a lot of room for growth online. When asked about how they plan to become a market leader in the retail ecosystem, Richard Wu shared that more strategic alliances are not the answer, it’s about the added value. Department stores have to deliver services that target the demand of their members to create a platform that is great for customers, great for partners, and great for all parties.
Offline-online Integration: 1+1 Can be Greater Than 2
Richard Wu also revealed that Shin Kong Mitsukoshi has set its membership target at five million members and hopes to achieve this as soon as possible. Once the ecosystem has reached five million members, the department store’s next step is to develop retail media. In the past decade, many leading social media giants such as Google, Facebook, Instagram, and LINE have started investing in media. Retail giant Walmart is also working hard to develop its own media business. The pandemic has accelerated changes in our mentalities, and Shin Kong Mitsukoshi will not be the exception. In the future, when it opens up its ecosystem to other industries, the discussion will no longer be limited to physical stores at the department store but events hosted in collaboration with other industries and achieving synergy through offline-online integration to create a synergy that is greater than the sum of its parts.
Commercial Times
by Li Li-Man
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