Meatballs' journey to digitalization

Smarter Digital City 2.0 commissioned by Google Hong Kong in October indicated that the pace of digitization of local SMEs is not fast enough to keep up with the market demand. Only half of Hong Kong’s SMEs currently see digital as a fundamental part of their business. The road to digitization of a half-century-old traditional company is littered with difficulties. However, Pius Chan chose to initiate innovation of his family business, Tai Po Chun Hing Beef Ball in early 2007.

Pius Chan took over the family business and boost its digitalization in the past decade.

Mr Chan recalled the daily scene when he took over the family business in 2007, "there’s no computer in the company at all." All of the staff made decisions only based on their experience or "guessing" in another word when dealing with plenty of orders every day. No record of order amounts and prices could be referred to. Mr Chan, who worked at the sales department of a listed company for 10 years, determined to digitalized the business and introduced the first management system software to the company. The tight budget restricted his choices on systems. Defects were found in the first system which cost $10000. Though Mr Chan had to invest another $50000 into a new system, significant changes happened.

At first, there was some resistance to the system from the senior staff who used to work for Pius’s Father, notwithstanding, it was not due to their mistrust of the new technology. "They worried about their dominance in the company being threatened," Chan said. Time is the best proof. After the employees tried to accept the change, they, in turn, started relying on the technology. When talking about the implement of digitalization on every aspect of management, Chan indicated that digitalization work with almost every function of business, only human resource management is an exception. "Human warmth is indispensable for handling the relationship with employees. Other companies may request to stalk the staff who need to work outside office by GPS but I would not," Chan said.

Office of Chun Hing located in Fo Tan.

Quality of products is the top priority of business in Chan's eyes, so production planning is the most favored function in the process of digitalization. For example, temperature control of product ingredients is significant in the meatball production process. External data such as weather and temperature records are also used to predict the sales of their products as the demand of their product varies from season to season. Digitalization is the only way to handle the ‘First In, First Out’ inventory strategy and traceability of food ingredients to ensure the quality and safety of the huge amount of products. Chan thinks that the risk of over-buy without digitalization exceed the cost increase of human resources on data process by far.

The original store of Chun Hong located in Tai Po.
Customers shop at the store in the evening.

Physical stores is the last step of this 10-year journey of digitalization. Formerly, they used to count the cash kept in a drawer by hand after the shop closes every day. Until 2010, a cash register system was introduced to the stores. “Not only the senior staff, I also had once refused to accept the new technology, digital payment,” Chan said frankly. In the beginning, he declined to install the Octopus payment system to avoid the extra cost on commission fee. However then, he heard his friend, who was a dim sum seller, attained significant sales increase with the Octopus system and decided to give it a try in 2014. The response of customers was surprisingly good.

With the positive experience in digital payment, Chun Hing installed a credit card payment system last year for large amount payment of prime grade products such as choice beef. Google Pay and Apple Pay have introduced to their stores successively afterwards. Mr Chan indicated that at the moment only Octopus payment is not restricted by the stability of internet connection, but he expected that the superiority of Octopus payment would fade out along with the development of the Internet.

Customer Mr. Cheung purchased by cash this time but appreciated the digital payment methods provided.

One of the customers, Mr Cheung paid for the meatballs with cash at the Tai Po store. “I’m not sure whether Chun Hing accepts credit card payment, but Octopus card is good enough for me.”

Digital marketing has become the best partner of SME in the last decade. Budget and target group are freely adjusted. The circulation of messages by shares online can be even more powerful than a traditional advertisement. “We were never able to advertise their brand on the mainstream platforms like newspaper or TV but now they "manage to use the small knife to cut down a big tree, thanks to the popularization of all kinds of digital gadgets,” he said. Chan tried to outsource the social media management but finally switched to in-house. He realised that immediacy of publishing is more crucial than excellence in content regarding effectiveness, especially for the borrowed interest promotions.

Digitalisation is of importance to expanding the business. For example, the barcode on product packaging is the threshold for the brand to enter supermarkets. Other than cooperation with the chained stores, Chun Hing needs to keep in close touch with the other major group of customers, the restaurants. For the sake of flexibility, they are used to communicate by WhatsApp at present. In the future, Mr Chan hopes to launch an app for those purchasing representatives who make the daily order when getting off work at 3am in order to collect data systematically.

Mr Chan believed that the digitalisation of Chun Hing has nothing to do with his past working experience. “When you are in a management position, you will want to have those data naturally,” he explained. Although digitalization is more difficult for SMEs, which have limited capital to achieve, the benefits could be more substantial to SMEs, Mr Chan noted. As for the SMEs which have a high reputation like big corporations in taking a lead in their fields, they should make good use of digitalization to differentiate themselves from competitors and aim at the potential target group.

《The Young Financial Post 新報人財經》



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