Byline: Andree Conrad

NEW YORK — Thanks to merchandising and point-of-sale software, Icon Cosmetics is using its prototype store in Hong Kong as a laboratory for market research for Pan-Asian retail expansion.
The cosmetics retailer, based in Hong Kong, is studying behavior and preferences of its regional clientele, who flock to the store to peruse its 10,000-plus stockkeeping units. The intent is to build a database of customer preferences that can be extrapolated across the many countries, cultures and skin types in the Far East, and to ensure proper inventory levels.
“Starting this new operation, we clearly laid out in the business plan that technology would be an integral part of the business to give us a competitive edge,” said Elliott Yuen, Icon’s chief executive officer.
Yuen noted that the merchandising and point-of-sale software optimizes inventory, mines point-of-sale data, monitors relations with more than 200 vendor partners, and handles a multitude of other retail functions in the store’s day-to-day operations. He also said the solution was helping Icon avoid wrong assortments and overstocks, while determining competitive pricing.
More important in the long run, Yuen said, is how the software helps the company deploy its five-year expansion plan.
“The project, from day one, was conceptualized to be a regional business,” Yuen said. The systems were “rather expensive and could only be justified for a future regional business.”
In the process of making the decision, Yuen studied some of the software supplier’s more successful customers, including Estee Lauder, Perfumania, Chanel and Coles-Myer, Australia’s largest retailer.
The way the software worked in these companies made it clear that big was the way to go. “We needed the full range of functions from the beginning,” Yuen said. “The software gave us the ability to do detailed analysis of sales that would allow us to pick out trends from country to country.”
Understanding trends in other countries is fundamental to adding nine or 10 locations in rapid succession over the next year: two in Hong Kong, and additional units in Taiwan, Korea, Singapore, Malaysia and Japan. By 2005, Icon hopes mainland China will be its largest market.
“Once the formula [for the prototype store] is tested and workable, we will replicate it in those countries,” Yuen said. He explained he is using the software to drill down and track the impact that minute changes have on sales of merchandise from Icon’s vendors based in Europe, America and Japan.
To refine the merchandise mix for the new stores, Yuen is enlisting the help of customers, who come from all over the region.
“With the permission of our customers, we are storing the results of their skin tests in their [electronic] folder,” Yuen said. Point-of-sale data automatically feeds into the folder, creating a purchase history for the customer. When aggregated with information from other customers from the same country, this data reveals highly refined regional customer profiles, including preferences in terms of brands and categories of product. “We go well beyond what is known, such as that Singaporean women don’t buy heavy makeup because their climate is too hot, whereas Korean women do, because their climate is cold, and that Japanese women won’t wear perfume,” said Yuen.
In exchange for their cooperation, he said, customers receive loyalty points, also generated automatically by the software. The Web site and in-store kiosk are critical pieces in this project.
“We needed all this technology to bring clicks to the bricks,” Yuen said. “Eventually, we will have Web sites in all the different languages. These will share the same database, with merchandise variations showing country by country.” Icon’s software is from JDA Software Group, Scottsdale, Ariz., and was implemented in conjunction with a point-of-sale system from IBM, Armonk, N.Y.

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