E. Wong is an entrepreneurial success story about a family of Chinese immigrants who came to Peru in the middle of the nineteenth century. Always innovative, the company has become the largest chain of supermarkets in the country, and was able to survive the dot.com downturn of several years ago. Although only 5% of the Peruvian population was connected to the web when the online bubble burst in 2001, the Wong family managed to transform its business, and sell to Peruvian emigrants to the United States. Its concept threatens companies that send financial remittances: Instead of sending money back home to friends and relatives in Peru, Peruvians abroad now prefer to buy products online that family members need, and have them sent to them.
The founders of this entrepreneurial saga were Erasmo Wong and his wife Ángela, who opened a little shop in a residential neighborhood of Lima. This humble establishment was the seed of an empire that now comprises more than 26 stores, including the E. Wong supermarkets, Metro supermarkets, and Metro Hypermarkets. The company’s eagerness to diversify has led it into very different areas as well. In 2000, the company signed an agreement with McDonald’s to set up a separate restaurant of that chain in each hypermarket. Moreover, E. Wong was the first company to introduce banks into supermarkets in Peru, known as the Money Market. The company has also launched a Frequent Customer Card; a Wong-Visa Credit Card; a Wong Kids Club, which now has more than 100,000 members; a magazine known as Details; a Teleticket system for ordering tickets to shows and events; a day care center for children, and the Gold Book, the biggest publication in the country.
José Mario Álvarez de Novales, professor at the Instituto de Empresa business school, has completed a case study about E. Wong. Álvarez de Novales emphasizes, above all, the expertise that the company has used on the Net. “They began their operations on the Net in 1998 as a center of electronic commerce. But business didn’t go well because of the low penetration of the Internet in Peru and the eventual collapse of the technology bubble,” he says.
Success in Straightening Things Out
When the Wong family first decided to get on the Internet, their venture reflected a desire to “boost traditional business, and project an image of innovation in technology and services,” notes Álvarez de Novales in his study. Their first step was to create a web site where people could buy 1,500 products from its shops. “The site had an attractive visual format, with three-dimensional views of the shops that helped people buy on impulse … The platform was interconnected with the Wong ordering system for speeding up operations and maintaining a base of customer data,” recalls Álvarez de Novales.
These innovations did not enable the company to overcome the collapse of technology or the shortage of Internet access in Peru. In August 2000, many Peruvian companies were not using Peru’s “.com.pe” domain. Although there were some 2,000 URLs with that extension, 51% of them were not functioning at all, and only 39% had some sort of activity. Most sites had barely any interactivity, sloppy graphics, and no videos or 3-D images. Moreover, most were only in Spanish; only 22% offered any content in English.
The low penetration rate of the Net in Peru made it very difficult for electronic commerce to succeed. As Álvarez de Novales emphasizes, “Peru had 1.5 million Internet users among its total population of 27 million. There were 675,000 personal computers, and some 600 online stores, to which users could connect for a charge of about 30 U.S. cents per hour.”
The Wong family decided to redesign its concept, and make it available to the world of immigrants – above all, to Peruvians who lived in the United Status. E. Wong decided to offer immigrants the capability of buying products for those family members who remained in Peru, instead of having to send money to family members through remittance service companies. To achieve that goal, the company made a deal in 2001 with Visa’s Latin American office and with Visanet Perú, the largest Visa company in Peru. That way, “Peruvians who lived overseas could quickly buy Peruvian products without paying surcharges or using intermediaries. They did it, using credit cards over the Internet,” he notes.
This system offered two advantages. First, it saved money, compared with the commissions that remittance companies were charging people. Second, it allowed buyers to choose the specific products that their family members needed to consume. “Many fathers in families that were living abroad preferred this new way of buying, because they could now choose exactly what they wanted to give to their family members. In many cases, this involved sons who had stayed in Peru, and were taking responsibility for their family members. Moreover, it guaranteed that the money was going to be used for necessities, not for alcohol, for example,” explains Álvarez de Novales. E. Wong now provides more than 50,000 different products for purchase online.
When using the local card, the commissions were the same as if people bought directly in Peru, and they were far below commissions charged by remittance companies. “These agencies were charging an average of 20% of the amount transferred, so this meant that the customer was now saving between $15 and $50 on each purchase.”
From Innovation to Building Customer Royalty
Beyond these achievements, the Wong family also decided to find ways to build loyalty among its online customers. First, it made the buying process as simple as possible, and it provided maximum customer service. “The agreement guaranteed that family members would receive well-known products. It speeded up and facilitated the processes for returning or exchanging goods when that was necessary. Moreover, the user did not need to sign up for a membership or obtain a credit line from E. Wong,” explains Álvarez de Novales.
Moreover, the company started using incentives such as prizes and sales coupons to appeal to customers. When buyers ordered and paid by Visa for the second time, for example, they qualified for a lottery that offered three prizes of $1,000 each, or its equivalent in Peruvian currency. In addition, for each purchase, customers receive coupons called Wong Soles, which function like cash when making free purchases in E. Wong and Metro supermarkets. Customers who use their Visa E. Wong to make a purchase in any store in the chain later get back 2% of the price. They also receive 1% of the value of purchases made in any of the 13 million establishments affiliated with Visa in Peru and around the world. The only requirement is that they consume at least 300 Peruvian soles ($92.5 dollars or 76.08 euros), on a cumulative basis.
Customers can finance their purchases over a period of 24 to 36 months when they use the Classic or Gold Visa card, or customers can pay their bills in 24 or 36 fixed installments.
The company is also using first-time purchases as an opportunity to build customer loyalty. In 2004, Wong Interbank Visa’s promotion is a free membership and a welcome coupon worth 20 soles for purchases at E. Wong and Metro. To cash in the coupon, customers have to spend at least 70 soles and pay the difference with their credit card. “E. Wong has taken away business from the remittance companies, and the beneficiary is the bank that issues the Visa card,” notes Álvarez de Novales.
One aspect of E. Wong’s online purchasing system that still needs to be improved is product delivery. “To guarantee customers that delivery has been achieved, E. Wong asked for a signature on the delivery invoice, but some customers considered this step bothersome,” Álvarez de Novales recalls.
A Management Philosophy: Going Against the Tide
Traditionally, E. Wong makes decisions that are contrary to the majority opinion. That explains why they decided to be on the Internet when everything indicated that electronic commerce in Peru was just a fantasy. In its traditional business, the company has been able to get ahead of its competitors by moving against the tide. In his study, Alvarez de Novales cites, as some typical examples: “managing low inventories; giving greater priority to service than to costs; providing a higher level of personalized service; avoiding self-service; maintaining high standards in its products. Moreover, the company stocks some 30,000 products in each store compared with 8,000 products in traditional shops. This means E. Wong had to expand its shops when many companies were maintaining or down-sizing their shops; and E. Wong invested in innovative technology.”
In the case study, Erasmo Wong notes, “We clearly went through some difficult years when we had to devise a suitable policy for inventory [management]. We built excellent relationships with our suppliers that, from the start, created a relationship base on loyalty and trust, and it continues to get stronger.”
During the 1990s, E. Wong began to outpace its competitors, including Gala, Todos, Tia Scala Gigante, and Galax. “Only one company was able to position itself as a competitor in the market – Santa Isabel, which jumped into the game in 1993. In 1997, E. Wong registered sales of $410 million, compared with $177 million at Santa Isabel,” the study notes. Five years later, E. Wong had 6,000 workers. During the last fiscal year, its market share reached 69%.
A great part of this success stems from the company’s constant efforts to guarantee the well-being of its customers. “In Peru, they were the pioneers in home delivery; in not accepting tips; in not charging for wrapping; in accepting returns without sales receipts; in establishing fast check-out; in providing parking lot attendants; in live pianos; in providing free shoe shines, and in using bar codes,” according to the study.
On two occasions, these steps have earned the company the Prize for Creativity in Customer Service. In 1992, Erasmo Wong was also honored as Businessman of the Year by the Peruvian Institute of Business Administration. His Internet venture may be the seed that guarantees E. Wong will remain one of Peru’s five largest companies in the future. For the moment, E. Wong has figured out how to win the battle against the remittance companies. “Its venture is not a major threat to those companies because Peru is a very small country compared with other countries like Mexico,” notes Álvarez de Novales. However, he warns, “It sets the stage for the future. If other companies follow [E. Wong’s] example, this approach can become a big threat to all banks and agencies involved in the remittance business.”