The Analysis of Strategy Planning in Facilitating Intelligent Shop
(I-shop) through Innovative Information Communication Technology
Applications
Paul T.Y. Tseng, Department of MIS, Tatung University, Taiwan
Chen-Yen Yao, Technology and innovation Management, National Chengchi University, Taiwan
ABSTRACT
This research discusses the strategy of Information Communication Technology (ICT) innovation that applies to
traditional convenient store and commercial presence for value creation and business model transformation in
experienced economy era. This study aims to promote the ICT facilitating the sales of retail service industries and
physical stores. Adopting the information technology in the shop and store where the end users do the physical trade. It
provides the brand-new consuming experience for consumers, improves consumption quality, and stimulates
consumption will and expending of the business. We conduct case study approach to analyze the purpose to implement
innovation of intelligence shop and the design of the ICT applications, and how to adopt the ICT in the site of
commerce presentation at present. Then sum up the innovative strategy applies the ICT to Intelligent Shop
(I-shop).These can help retail business the basic decision of business strategy and business plan to improve the added
value and innovation capability in this information age.
Keyword: Intelligent Shop, Service Innovation, Information Communication Technology (ICT)
INTRODUCTION
In the era that the industrial environment changes very rapidly, innovation has become the most important success
factor for business survival. But with the advancement of science and technology, especially the rapid development of
information and communication technologies (ICT), the ICT also became an important origin for the organization‟s
competitive advantage. So it is a very valuable topic to discuss how to use ICT in the innovation strategy in a bid to
create more added values.
Intelligent shops have become a trend in the world, and Taiwan's convenience stores are also gradually moving
towards the pattern of diversified service. But based on the theory of industry life cycle, current convenience stores will
face 6 big problems when they transfer to intelligent shops with self-service: Location Decisions, Human Resources,
Limited Space, The advent of the e-commerce era, Development of Innovative Business Model, Balance between
Energy Saving and Industrial Value.
This paper makes a comparison among three Taiwan convenience stores in order to learn the development history,
business model and innovation strategy of those stores. After the detail discussion, comparison and analysis, this paper
summarizes the way of how to create competitive advantages and added value as well as the factors key to success for
innovation through using ICT. The reminder of the paper is arranged as follows. Section 2 provides an overview of the
previous literature discussing Intelligent Shop, Service Innovation, value chain and the effects of IT. The research
methods used in this paper are described in Section 3. The case study is then followed by a discussion of key findings
for the research framework with practical implication, and finally conclusions are given.
LITERATURE REVIEW
Intelligent Shop
By using Internet, ICT, hardware and other related technologies supported with management mechanism, the
intelligent shop allows the circulation industry provide a forward-looking and innovative service or business model for
customers. It will also provide an amazing consuming environment through self-serviced and convenient shopping,
which will create a new consuming pattern and upgrade the efficiency of the value chain. The intelligent shop can not
only provide a forward-looking and innovative service, but also create a new business model and derivatives markets.
The new consuming environment supported by ICT will improve the processes, enhance efficiency, control cost and
promote marketing. It will also help the diversification and extension of business with the intelligent operation (see
figure 1). But it still needs the integration of value chain and faces fierce competition. So it is very important to analyze
how to increase the added value and competitive advantage of the intelligent shop.
Figure 1. The concept of Intelligent shop
Service Innovation
1. Definition of Service innovation
Service innovation is defined as a extend conception of the application in the product innovation. Intrinsically,
service innovation is a part of the service that the organization provides to customers and must be adopted by them
(Korsching, and El-Ghamrini, 2003). Innovation is important in services; the past researches have explored the specific
opportunities and risks of service innovation that focuses on the characteristic of the process, and the challenges of
innovation models and functions (Miles, 2000; Chesbrough, 2004). The innovation processes seems to be having the
transformative effect in many service firms that were applying new IT (Miles, 2000). Service innovation can have an
effect on the entire management systems and service production systems of the organization, as well as their features
and effects on the company and the clients (Abramovici and Charensol, 2004).
Successful new service development (NSD) firms have well structured innovation efforts, allocate substantial
resources to their innovation efforts, and share a strong commitment to innovation (Nijssen, Hillebrand, Vermeulen and
Kemp, 2006). These firms display high top management involvement. According to a result, their strategic objectives
focus beyond short-term success and their employees clearly understand the types of new products and services that are
the direction of the organization (Johne, 1993). They tend to align their cultures and systems carefully to their
innovation processes, and provide maximum support to the innovation efforts. And their NSD programs tend to be more
formalized, structured, and proactive compared with their less successful competitors. These successful innovators' new
product and service organizations are complemented by high quality development employees and other resources
(Nijssen, Hillebrand, Vermeulen and Kemp, 2006).
2. Feature of Service innovation
There are many benefits of service innovation. Which innovations should be decided to implement by managers is
not clear. Innovative service offerings are necessary just to maintain the current market share of a firm in some cases
(Victorino, Plaschka, Dev, and Verma, 2005). This phenomenon suggests that some innovations may only raise the cost
of doing business without a significant economic benefit, or preserve current business and without providing a
competitive advantage (Reid and Sandler, 1992). However, firms may induce financial gains and enhance service
differentiation by innovations (Victorino, Plaschka, Dev, and Verma, 2005). To implement innovations which are not
only economically beneficial to the firm but also desired by customers is important for managers (Reid and Sendler,
1992).
Service innovation success factors have been defined in various dimensions. There are two major dimensions are
dealt with: The quality of the service delivery technology; and the composition and contents of the service offer (Riel,
2005).
3. Effect of Information Technology
In 21 century, information technology (IT) has changed quite rapidly. In an organizational context, the role of IT is
the key factor for influencing performance (Lee and Kim, 2006). IT expenditures have a positive affect on
organizational structure and economic performance of a firm, and changed the ways of business enterprise operation
and management (Kim and Davidson, 2004; Huang, Ou, Chen and Lin, 2005). For increasing shareholder value, IT
strategy and investment have become critical factors in aligning and implementing these corporate strategies (Kim and
Davidson, 2004).IT indeed increases opportunities of an enterprise to create the maximum value. It also contributes to
the improvement of organizational performance, creates a competitive advantage and improves the firm‟s productivity
and creates substantial value for consumers (Huang, Ou, Chen and Lin, 2005; Melville, Kraemer and Gurbaxani, 2004;
Porter and Millar, 1985). There are many IT business value that are commonly used to refer to the effect of IT, including
productivity enhancement, competitive advantage, profitability improvement, inventory reduction, cost reduction, and
other measures of performance (Melville, Kraemer and Gurbaxani, 2004)
IT is the essential tool for developing new services and providing effective and convenient services to the
customers (Kim and Davidson, 2004). There is a positive relationship between IT investment and a range of firm
performance variables (Lee and Kim, 2006). It may be a key factor that IT enables a firm to enhance competitive
advantage by improving applications and its bargaining power with suppliers and customers, lowering operating and
processing costs, enhancing product differentiation, changing competitive scope, or increasing barriers to entry (Kim
and Davidson, 2004; Kohli and Devaraj, 2004). IT investment and implementation is highly important for improving
core competencies in firms. If firms invest more in it, their performances may correspondingly increase (Huang, Ou,
Chen and Lin, 2005; Kim and Davidson, 2004; Lee and Kim, 2006).
RESEARCH METHOD
To understand the development of intelligent store in Taiwan, we chose a multiple case study method. .The case
study method can improve understanding of insights appropriately (Yin, 1994). This paper analyzes the history,
development of intelligent stores, innovative services, changes of the value chain and strategy of three major convenient
stores in Taiwan, which are OK Convenient Store (Q-Shop), Hi-Life (Life-ET) and 7-ELEVEn (7-11 ibon), in order to
understand intelligent stores. We contrast findings from each case, and so extracted more broadly explanations.
Background of case companies
Q-Shop, which is a subsidiary of OK Convenient Store, coming from the “Experimental program of promoting
intelligent stores in retail business” carried out by department of commerce, Ministry of Economic Affairs, which is a
part of “Flagship program of technological service” promoted by Executive Yuan. OK Convenient Store opened two
experimental stores, “Q-Shop intelligent and self-service stores”, on Nov. 28, 2007, which are the first intelligent stores
in Taiwan. The main features of these two stores are that they can provide high-quality service and create new
consuming patterns by using high technologies. Both credit card and cash can be used there, which means a big
convenience for consumers.
In the end of 2002, Hi-Life (Life-ET) started a R&D team for Life-ET, and implemented it in May, 2003. It first
deployed equipments in the north of Taiwan and started to deploy all-around in the first season of 2004. In Nov. 2004,
18 months after the implementation, 99% of the stores deployed the equipments. During deployment, the company
developed the manipulation process for employees in the stores and customers, while first introducing a matured
Japanese business „online ticket booking system‟, and then introducing more creative business such as bonus exchange,
fee collection, short-term marketing, etc. Hi-Life paid more attention to bonus exchange, immediately cash on cash card,
downloads of pictures and music for mobile phone and short-term promotion, in order to create a new market. The key
factors that help Life-ET reach break-even point are that it materialized the virtual bonus exchange business, upgraded
the communication platform between banks and consumers to an integrated platform feeding back customers, and built
an interactive marketing network among firms, banks and consumers which broke through the limits of feeding back
customers by banks alone and increased the value of bonus.
7-ELEVEn (7-11 ibon) observed that Japanese convenient stores introduced multimedia service and developed
general platform. Inspired by the successful experience of Japan and promoted by the ongoing increasing demands for
digital service, 7-ELEVEn developed ibon based on the conception of „virtual stores‟. Originally planned to be
launched two years ago, the store was delayed as 7-ELEVEn considered that there may be a low degree of acceptance
for it in Taiwan at that time. After two-year development in cooperation with more than 20 firms, 7-ELEVEn promoted
ibon in August 28, 2006, which is compatible with physical stores not only in appearance, but also in ports of
multifunction service machine with extensibility. Now more than 1000 physical stores have introduced the system and it
is expected that all stores install it in 2007.
Introduction for I-Shop
There are differences among the i-shops developed by OK Convenient Store (Q-Shop), Hi-Life (Life-ET)
and7-ELEVEn (7-11 ibon). This paper will give a simple comparison of them.
OK Convenient Store (Q-Shop) is the first intelligent self-service store in Taiwan, which usually has 5 to 6 Ping
areas. It provides more than 300 kinds of merchandises including commodities, foods, beverages and heath beauty
products. Q shop has creative consuming patterns, which can accept both cash and credit card. When the customer has
any problems, he can press the button of „Staff Service‟ and get help from the serviceman through VOIP system. The
background system of Q-Shop includes automated order management, inventory management, logistics management,
ePOS background management and PDA real-time supply merchandise system. The integrated background system
supports the convenient shopping environment and insures the operation of self-service stores.
Hi-Life has the first multimedia service machine in Taiwan, which was developed by Hi-Life. Hi-Life E-Stores
includes e-Management, e-Service and e-Sale.
The strategy of 7-ELEVEn (7-11 ibon) is introducing compatible ports and machines stage by stage. In the
compatible ports, it first introduced mobile office, fee collection, insurance and tour functions, which can meet the most
common demands of business men and civilians for downloading and printing files, pay for consuming bills,
exchanging bonus and booking theme park tickets. It will introduce booking traffic tickets, digital service and
information service in the following steps and augment the contents of all introduced functions.
The ibon is developed with the cooperation of more than 20 firms. There are serveral functions of ibon including
Mobile office, Fee collection, Tour, Exchange, Insurance, Tickets, Digital, and Information.
Comparison of Functions
Each system has different advantages and disadvantages. The comparison of their function is listed in Table 1.
Table 1. Comparison of Functions
Hi-Life (Life-ET)
7-ELEVEn (7-11 ibon)
OK Convenient Store (Q-shop)
Fee Collection
V
V
X
Tour, Accommodation
V
V
V
Bonus Exchange
V
V
X
Insurance Application
V
V
X
Tickets
V
V
X
Online Shopping
V
X
X
Special Characters
Multimedia Downloading,
Online Shopping
Mobile Office,
Life Information Downloading
Self-service Shopping
Fee collection in Life-ET and ibon includes credit cards, cash cards, fines, mandatory insurance and donations,
while ibon has special characters of paying for shopping and advertisement. Insurance application in Life-ET only
includes automobiles mandatory insurance, while ibon includes tour insurance. Tickets in Life-ET can only buy
pre-paid tickets, while ibon can immediately book seats.
Innovative Service
The following paragraphs analyze the innovative service for each system (listed in Table 1).
OK Convenient Store (Q-shop), “Self-Service Shopping in Physical Stores”: Q shop can accept both cash and
credit card. It provides more than 300 kinds of merchandises. When the customer has an emergency situation, he can
press the „Emergency‟ button and get help from the security center. The security center will talk to the customer through
VOIP in real time and learn the situation through the remote monitoring system. If it is really an emergency situation,
the security will frighten the criminals through speakers and report it to the policeman to deal with the problem.
Hi-Life (Life-ET), “Multimedia Downloading for Mobile Phone”: the customer can download ring tones, desktop
patterns and games onto the mobile phone in real-time through the embedded infrared transmission components or
GPRS. He can also download discount tickets and information. “Online shopping”: the customer can buy merchandises
through the online shopping ports in Life-ET, paying and getting goods at the counter.
7-ELEVEn (7-11 ibon), “Mobile Office”: the customer can print files or pictures saved in memories or ibon by the
multifunction photocopying machine of ibon. He can also save the data transmitted by memories or email in ibon after
scanned. “Life Information Downloading”: the customer can search, download and print the application files of the
government, tour information of sights, clinic files of hospitals and discount tickets in ibon.
Strategy Analysis
The SWOT analysis will show the difference among OK Convenient Store (Q-Shop), Hi-Life (Life-ET) and
7-ELEVEn (7-11 ibon) explicitly, and give inspirations for future improvement and strategies.
OK Convenient Store (Q-Shop) has the most advanced self-service system, which is both a strength and weakness.
Q-Shop has lower rents, human resources cost and an energy-saving feature (Table 2). But it is a challenge for the
business team, because there is no experience for it in Taiwan and the acceptance of customers in Taiwan is still in
questioning, though Japan has successful cases.
Table 2. WOT Analysis for OK Convenient Store(Q-Shop)
Strength
Lower demands for human resource and space in
stores, which can reduce the limits of deploying new
stores and increase the speed of deployment.
Lower cost of rents and human resources, which can
reduce the price and improve the buying inclination.
Automatic system can reduce the mistakes in staff
services.
Weakness
Lack related experience for channels
The acceptance of customer is still in questioning
The saturation of convenient stores in Taiwan will be
the hamper for deploying new stores
Threat
Opportunity
It is a niche for Q-shop‟s low cost business mode in
Taiwan, where the rents and human resource cost
increase fast.
There are some successful cases in Japan for
self-service stores.
The energy-saving feature will be an active driver
for expansion in future, when the environmental
awareness increases continually.
Lack experience for the new business mode, which
will increase the human resource investment and cost
in the initial stage.
The saturation of convenient stores in Taiwan and
lack explicit positioning
The deployment and maintenance for the system is a
challenge for the business team.
Hi-Life (Life-ET) firstly introduced the self-service machine in Taiwan and has cumulated a lot of experiences and
patents. It is also the only one pass the break-even point. But the outmoded machines can not meet the demands of
customers well and the competitors‟ huge resource strength also gives a big pressure to Hi-Life (Table 3).
Table 3. SWOT Analysis for Hi-Life(Life-ET)
Strength
The online shopping can reduce the inventory cost
and increase merchandises items, which can be the
attraction for the customer.
When it is disengaged, it can be an advertisement
media in the store.
Three years have passed since the introduction of
Life-ET, so it has accumulated competitive
experiences and patents.
Threat
The are many competitors providing online shopping
service, which reduces the attraction of Life-ET
The biggest super market, 7-ELEVEn, deployed ibon,
which will be a new competitor for Life-ET.
The renew cost for the system will be a big burden.
Weakness
The system and network have been outmoded and can
not meet the demands of the customer well.
Low waiting time for online shopping
Opportunity
The competitors have few experiences
Though 7-ELEVEn (7-11 ibon) is the latest one who introducing self-service system, it is the biggest supper
market in Taiwan and has the strongest resources. Because of the short history and slow deploying speed, the lack of
experience of new system will not be a worry for ibon (Table 4). Ibon pays more attention to the integration of
information. The cooperation with 20 big firms and more than 2 years developing history make the ibon have advanced
and highly integrated functions, which can reduce the impediment of the deployment. “Information Downloading” and
“Mobile Office” are two innovative functions which can be the strengths of ibon. The strong resource, wide channels
and most stores of 7-ELEVEn, who is the biggest supper market in Taiwan, can be the strongest driver for the
deployment of ibon.
Table 4. SWOT Analysis for 7-ELEVEn (7-11 ibon)
Strength
7-ELEVEn has strong deploying capability, which is
the biggest supper market in Taiwan.
The system is design by itself, so the company has
strong independence in it.
The system and network are the latest, which can
increase the convenience for the customer.
Threat
There are still many flaws needed to be improved,
because it is only half a year since the introduction.
Competitors have far more experience and patents
than ibon.
Weakness
Low deployment speed.
The competitor controls patents, which is hamper for
future development.
No online shopping functions now.
Opportunity
The only system integrating the information service,
which has higher development expectation.
More advanced functions than competitors, because
of the cooperation with 20 firms.
CONCUSION
The service leads the consumption and the experience decides values, while the trends of consumption always
changing. While the consumer has higher acceptance to new technologies and stronger capabilities to use new products,
if the retailer can not meets the trends, it will be a loser in the competition. So the retailer should meet the trends of new
technologies and develop more service functions to increase the convenience and achieve higher and innovative
shopping experiences for the consumers.
Based on the analysis of three cases, this paper summarized:
1. OK Convenient Store (Q-Shop) focuses on the comprehensive automation of service, from promotion, sale,
payment, customer service to back-ground process. It provides brand-new solutions for storefronts and human
resources which are two big problems for convenient stores. It also has an energy-saving feature to meet the
demands of environmental protection in the society. From Figure 11, we can see that Q-shop gives up some
merchandise layouts to increase the efficiency of using space and flexibility, compared with traditional convenient
stores. The high automatic service also can save humane resource and cost.
2. Hi-Life(Life-ET) is the first company in Taiwan, who introduced a self-service system, and it has cumulated more
experience and patents, which are effective competitive tools. The Life-ET is deployed in normal stores, so it
3.
mainly focuses on increasing sales channels and merchandise items. From Figure 11, we can see that life-ET has a
leading position in merchandise diversification, using of space and flexibility. The online shopping function in
Life-ET increases the possibility to sale more merchandises, and reduces the inventory cost and pressure for stocks.
The increase in merchandises items can be an attraction for consumers.
Ibon focuses on the integration of information. The cooperation with 20 big firms and more than 2 years develop
history make the ibon have advanced and highly integrated functions, which can reduce the impediment of the
introduction. “Information Downloading” and “Mobile Office” are two innovative functions which can be the
strengths of ibon. The strong resource, wide channels and numerous stores of 7-ELEVEn, who is the biggest supper
market in Taiwan, can be the strongest driver for the deployment of ibon.
Figure 2. Comparison between three cases and convenient stores
According to the Figure 2, Q-Shop, ibon and Life-ET both have significant difference at efficiency of using space,
automation, and Flexibility. We may focus on these dimensions when consider i-shop development strategy in the
future.
The success factors for service innovation are the quality of delivered services, contents of provided services,
customer participation, customer identification and whether the services meet the conditions and demands of customers.
The customer plays a critical role in the service innovation, so the contents and methods of providing services should
based on the customers needs. So when developing intelligent shops, the firm should focus on these constructions
supported by ICT to provided diversified services. How to link ICT and customer needs among various stores is an
important topic for future research.
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