Courts wants to be 'organized, independent' retailer

newsmaker Thinking agility, speed in response and empowerment on the shop floor. These are attributes traditional independent specialists have that major retail chain Courts Singapore now wants to execute--but with an organized framework to provide customers much-needed service accountability.

Terry O'Connor, CEO and executive director of Courts Singapore, joined the company in 1993 to head the electrical buying business and has since steered it through various changes in consumer retail.

Under O'Connor's stewardship, Courts' IT business has grown from 2 percent of the company's overall revenues in 1997, to its current 33 percent.

In an interview with ZDNet Asia, the CEO, who holds a Master of Business Administration in retailing and wholesaling from the U.K.'s University of Stirling, discussed the need for "authenticity" and clarity when dealing with consumers in the new social media age.

O'Connor also talked about the necessary risk management policies to better handle customer relationships, as well as the need for Courts to equip its employees with specialist skill sets. This will be necessary for the retail chain to more firmly pit itself against traditional independent retailers, while providing the service assurance that customers may not necessarily get from smaller players.

"At the end of the day, customers know that if we do screw up, we're going to fix it as opposed to trying to avoid the issue," O'Connor explained.

Q: You joined Courts Singapore in 1993 when the Internet was just about to come into play. What were you focusing on to drive the company's electrical business?
O'Connor: IT wasn't the biggest thing on my agenda at that time. I was looking more at home entertainment base and the first priority was to get it sorted and have the store adopt a category-based layout. Progressively over the next few years, we refurbished all of the outlets where we went from being laid out by brand to being laid out by category. This would make it much easier to bring in new products and new concepts because you have a category base to play with.

If I divided a showroom by, say, 25 percent products from Sony, 25 percent Samsung, 25 percent LG and 25 percent Toshiba, then when a new brand comes along, there's no way to merchandize that brand. So, the drawbacks of organizing the store by brands is that you're very slow to change.

That also means you'll be able to adapt to categories changing over the years?
Yeh, absolutely. That made it easier to move into IT, which we did in 1997. At that time, we launched our own brand, the Courts Workstation, and dabbled a bit in the IT space. Initially, we worked with a distributor called Tech Pacific, but later moved into having more direct relationship with the IT vendors.

In 1997, IT was only about 2 percent of our revenues. Now, it's about a third.

When you compare with what it was then, what were some milestones when you look at the IT buying patterns of consumers?
The early business was dominated by desktops, and I guess around 2000 to 2001, we really started to see the emergence of notebooks become a serious force within the market. The overall mobility of consumers seemed to be changing substantially around that time.

More recently, obviously, you've seen the emergence of netbooks and that's starting to stabilize now as people are making more pragmatic decisions around what works best for them in terms of capacity and so on. So the emergence of mobile computing was a milestone.

Along the way, we've used our entry into IT and the computing platform to extend to a broader digital presence. Around 2005, we really started to make a more serious presence in photography, which was previously dominated by photographic specialists. When I look at 2005, our digital camera market share was only around 1 percent. Today, it's around 6 percent and rising, so we've a good grip on the photographic business now as well. More recently in the last year-and-a-half, we've been trying to make a difference in the mobile phone space.

The one area we haven't really cracked, and I don't think any organized chain store has, is games. Unlike the U.S. or U.K. where games are at the heart of the consumer electronics retailer business, there isn't the same level of affinity with consoles here and certainly not the same kind of repeat business on software, which makes games more viable for consumer electronics retailers. I think it's because there's still some element of intellectual property issues, especially within the region. So, this category should be more attractive for consumer retailers than it actually is.

Why do you think that is so?
I think it's more of an external factor, the stay home lifestyle. If you think about the U.K., it gets pretty cold in winter, so there's an element in the way they live their lives and stay home to play games.

In addition, here, the more tech-savvy consumers go straight to playing online games. There's also the accessibility of pirated games around the region and clearly that means from a margins perspective, it becomes less attractive for retailers to get into games.

If you look at the buying habits of today's consumers, I would assume they're more tech-savvy?
Yeh, we do regular surveys of shoppers and the market in general, and when we look at the technology segment of consumers, what we find are that people do take technology products seriously. Tech products, including mobile phones, PSPs, Xbox, desktops, laptops and TVs, are precious to consumers in the modern world. They're a big part of people's feeling of wealth or as an attachment to the modern world.

In a way, some of the other things we sell are more pragmatic. If my fridge breaks down, I will go replace it, but if it doesn't break down, I may not replace it. But in the IT realm, it's more about having the latest model and not waiting until it breaks down. There's also a difference in mindset between the more mature shoppers and younger shoppers. We're finding that the mature shoppers are more pragmatic and buying things they absolutely need for work and to support an executive lifestyle and make things easier. In comparison, younger shoppers are buying things that are more aspirational nd the main form of that is brand.

Any survey finding that surprised you?
There was a stronger element of practicality than we expected. People are very pragmatic about what they buy, and price and value play a significant component. For example, we see a sales dip in the few days just before the IT Show, the PC Show, Comex or Sitex. The market pretty much knows the make and model of the product they want, and have a predatory instinct when it comes to waiting for the right price.

Consumers are now also more social. Any one bad customer experience can now potentially appear on online forums, blogs, Facebook and Twitter. How do you manage this?
I think you just need to engage it. I was talking to other tech retailers and the general view was that if something is said online and you're aware of it, just respond to it and respond to it in an authentic manner with the facts.

It may be an answer that some people like and others don't like, but the point is that anyone observing that conversation will basically see different points of view and different perceptions of the same issue. So, I think authenticity is what matters and we should not shy away from any of these social media.

Does it change the way you manage your customers?
I don't personally think it should because if you feel you're doing the right thing anyway, you should continue to do that. There's just a greater emphasis on the clarity of communication so that product promotions, for instance, are not misconstrued or misinterpreted. So you focus more rigorously on the details, specs and prices.

You also have to put in more focus on risk management when it comes to managing a Web site with 6,000 products on it. We've put in some safeguards on our Web site so that if there is an error, the system is self-correcting. For example, if we usually sell a unit of an item an hour and that suddenly becomes 10 units an hour, there's an intelligence built around the system that drops the product off the site. So, if you get a spike in order that's not promotionally driven, it indicates there's a price error and the product is pulled from the site. Whether it's correct or not, you can still confine it to a small group of customers. There's an in-built risk management so you don't end up with a consumer issue.

The key thing about the behavior of retailers in this day and age is to try to be as authentic as possible, and to try to make sure you have policies and intelligence that are as consumer-friendly as possible. Where you do have a debate or issue around an initiative, just state your view as clearly and succinctly as possible.

When you look at your IT strategy and roadmap, are these the issues you think about?
The most important thing here is the engagement with our suppliers. For example, the latest Samsung range of products that was just released, we saw them in Korea last October and again in January at CES in Las Vegas.

From a shop floor and showroom execution or online strategy, you need to see products as early as possible and engage with the vendors as deeply as possible to understand what the likely winners are. That will allow you to commit to the right inventory and quantity as early as possible and not wait until the products hit the marketplace.

It also gives you the opportunity to test certain concepts with consumers or staff, and gives you the opportunity to run down inventory on a timely basis. If there's any technology coming through, it also allows you to prepare and make the necessary changes in the store format. 3D, for example, will require space and demonstration and the opportunity for customers to test the quality for themselves. If our interest hadn't been piqued in the technology months ago, we might not be as ready as we are today to take advantage of the opportunity.

Is there any bottleneck in this entire ecosystem that IT can help address?
Yes, the right ERP system and more predictive tools. Some of this is not technology driven, it's price point driven. If the price of a product is going to drop, then there's going to be a step up in demand and we'll need the inventory to support this. So it's around demand planning.

The technology is changing fast, so you're trying to predict something that is itself a moving target. So, in this, the predictive technology is probably lacking and will always be lacking. The key is to try and close the gap. A successful retailer is one that's first to leverage technology to run the business.

As Courts' CEO, what is your biggest challenge when you look at the market today?
It's more a question of ensuring you have a continuing pool of talent within the organization that really gets it in terms of what's happening within the consumer and social space. To make sure people skills continue to be upgraded, you have to ensure that new talent comes through the organization and you're attracting the right people to leverage the changes.

You have to bear in mind that to a certain extent, affluence is a hedge. The people buying the bigger notebooks, bigger TVs and SLR cameras are generally not youngsters. They're in the middle-age segment where the consumers are in their 30s and have been [in] the workforce maybe eight years or more. It's not as if you have a drastic need to understand Generation Y in order to do business because the bulk of your sales is still coming from Gen X and the Baby Boomers. So the point is you have a slightly longer roadmap to tap into relationships with younger consumers.

Where do you see the next IT wave heading?
From a retail point of view, I think there'll be more sub-segmentation. We've already seen the flat-panel TV business separating from plasma and LCD, to now plasma, LCD, LED, and there's a high-definition skew going across all of that. And now, 3D is coming in as well. There will be more challenges to how we lay out the store. Similarly, with PCs, we've notebooks of varying specs and usages, we've netbooks, and we've still a reasonable desktop business which is still hanging in there, especially with gamers. And now, you've the emergence of the Apple iPads and tablets. There just seems to be a bit more to do with segmentation.

The challenge is then is to look at how we segment our store, our online offer, our catalog and customer touchpoints to have a fluid infrastructure and quickly respond to changes in the marketplace.

Can your online strategy come into play here?
I think so. I like to see more real-time research. We certainly need to have more frequency to the customer polling and more product and concept testing with consumers and with our own staff.

Do you think with the increasing number of product segments and categories, you might run out of real physical space, and you would then turn to your online site as an extension of the stores and to hold inventory as well?
I think so. If the past has been where the online offer has been smaller than the store-based offer, I think the reverse would be true in future where the online offer is a multiple of what's available in the shops. You can see some retailers now doing that, making an entire back catalog of DVDs available online. We don't have that at the moment. Our online offer is about the same size as our store, but it's very much our plan to grow the former.

How do you see Courts embracing the online strategy then?
The key word in retailing is multi-channel. So it's a case of saying we have the online proposition, the store proposition, and have people able to buy online in a store through kiosks. We have the click-and-collect option so you can buy online and collect in the store. This allows consumers to take advantage of the offer online and pick it up on the way home from work, so they don't have to pay delivery or installation charges.

How is that panning out?
I think it's too early to say but I certainly think it fits with the Singaporean lifestyle because people here actually do like coming to the malls and shopping.

When you look at Courts' tech business, what's been working really well?
Our photography business has been growing and growing very strongly, particularly in dSLRs. We have a workshop-type room built into the store so we hope to run more photography classes. We had our digital camera staff trained by someone who runs a photographer business. When we looked at how a multi-category retailer can make a difference in a market historically dominated by photographic specialists, we thought the best thing [was] to get staff trained by professional photographers. I think innovation in the training space will be a big differentiator.

A lot of the specialist retailers of recent years seem to be getting more generalists. You can see that some stores that were previously focused on one category now seem to be focusing on multiple categories. For us, that's fantastic because if we've the biggest store footprint in terms of square footage, and if we go the opposite way and take the category specialist approach, the market then moves toward us. The challenge then is to get each of our category buyers or specialists to think like a business owner and drive home specialist techniques and expertise within their category and area.

We set ourselves up as an organized retailer, but try to think like an independent in each area.

So, do you see the retailers in Singapore IT malls like Funan and Sim Lim Square as your competition?
No, I don't really see the Funans and Sim Lims as competitors. They're entrepreneurial and know their products, but in some cases the customer practices are a bit suspect. More and more, it's very difficult to run a business that way. You can't have a situation where each customer pays a different price, and some customers get the free gift, while others don't.

As the market becomes more mature, the trend is for people to go to big players, but they want big players that also have the specialist skill sets. So the challenge for us is to make sure we offer the best of the best, and at the end of the day, customers know that if we do screw up, we're going to fix it as opposed to trying to avoid the issue.

What you get with an organized chain store is you get a comfort factor that it's a solid blue chip company which can make mistakes, but has the corporate governance and response to address it and will stand behind its products and brand.

The only thing traditional independent retailers can offer that an organized chain store may find a little more difficult is speed and ability to make decisions on the shop floor. That's what big players like us have to focus on: thinking agility, speed in response, empowerment on the shop floor, and the ability to almost execute like an independent, but with an organized framework.