Retail trading in the digital age

  • Business
  • Saturday, 06 Apr 2019

Small market share: Hashim says the contribution from online retail sales is still minimal in Malaysia

AMIR, a 32-year old fitness buff, used to travel three miles to a mall at the end of every month to purchase his health and weight-lifting supplements.

Unfortunately, more than half of the time, the owner of the particular store would be on some meal or toilet break – sometimes for hours.

And despite operating within the mall, the store owner rarely followed the mall’s operating time and would close the store early whenever he felt like it.

This frustrated Amir, who would then have to travel to an alternative store at another mall far from where he lived, just to purchase his supplements.

It also did not help that Amir worked long and irregular hours and getting to a mall before it closed proved challenging.

Then, one day, Amir decided to look up a local online retail store and discovered that all the supplements and health products he consumed were not only available at the click of a button but they were also cheaper!

Subsequently, for the next two years, Amir has been ordering his health products online – hassle free.

Amir’s situation is not unheard of. Today, many people are resorting to online shopping mainly because of convenience. With this trend growing, are the days of physical malls numbered?

During a presentation at the 12th Malaysian Property Summit 2019 in February, Savills Malaysia head of retail services Murli Menon acknowledged that online retail is creating a structural shift, but added that the bulk of retail sales will still take place in stores.

“We’re seeing a return to a customer-centric approach where engagement and convenience is important, but not the channel of purchase.”

Murli asserted that physical stores will continue to play an important role in the retail segment.

“It’s not a case of brick and mortar versus online. The grocery, beauty, leisure and food and beverage segments are the most defensive to the online migration.”

He also noted that many retailers are offering omni-channel execution options to sell their products.

“Today, two in three retailers share inventory applications across their store and online channels. Retailers are rapidly moving away from multiple channel-specific commerce platforms, from 66% of retailers in 2011 to 44% currently.

“Around 61% of retailers currently use the store as a delivery hub for online orders.”

He added that around 57% of retailers currently have store-specific social media initiatives to engage with customers.

“Around 64% of retailers plan to increase social media usage to encourage two-way communication with customers, while only 24% provide special customer service based on membership levels.”

At its AGM earlier this week, KLCC Property Holdings Bhd (KLCCP) group chief executive officer Datuk Hashim Wahir said the contribution from online retail sales was still minimal in Malaysia.

“Online retail sales is just 4% of total retail sales. However, we (KLCCP) are going digital in order to remain competitive.

“For example, in KLCC, 80% of our retailers can now use (electronic-payment service) Alipay and people still come to the malls. We’re using the technology to make things more convenient, especially convenience in parking. We have also undertaken cashless initiatives via digital.”

KLCCP’s property portfolio includes Suria KLCC, Mandarin Oriental Hotel, Kompleks Dayabumi and Menara Maxis. Going forward, Hashim says physical malls will continue to be relevant.

“I do believe that in the future, it’s the place that will make a difference. At KLCC, we’re undertaking digital advertising to promote what we are selling at the mall. Our annual footfall is 45 million and 50% is from the LRT and that is the reason also why we’re facilitating the MRT, which will help boost future footfall.

“But for us, it’s not just the mall. We also have the park, the Petrosains, the Aquaria and children’s playground, all of which add to the footfall.”

Meanwhile, the International Council of Shopping Centers (ICSC) in its research note “The Halo Effect – How Bricks Impact Clicks,” says physical stores are an essential ingredient to the success of retailers.

“Opening a new physical store in a market results in an average 37% increase in overall traffic to that retailer’s website, compared with web traffic prior to the store’s opening.”

For emerging brands, defined as those less than 10 years old, ICSC says new store openings drive an average 45% increase in web traffic following a store opening.

“For comparison, established retailers experience an average 36% boost in web traffic. On average, the share of web traffic increases 27% within a specific market when a new store opens.”

Additionally, ICSC says an increase of just 5% in the number of physical stores in a single market has a significant benefit on digital engagement and retail web traffic.

“The opposite is also true. Web traffic drops off when retailers close stores. In one retailer’s case, the share of web traffic across the markets where they closed declined up to 77%.

“Markets where retailers have stores perform better on brand health metrics (including awareness, consumer perceptions, and willingness to recommend) compared with national benchmarks,” it says.

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