The changing shape of retail

  • SME
  • Saturday, 18 Jan 2020


RETAILERS will need to rethink their business models with the advent of digital disruption and consumers’ growing preference for online shopping.

According to research firm Euromonitor International, e-commerce is expected to be the largest sales channel by 2021, accounting for 16% of global retail sales. In absolute growth terms, retail sales through e-commerce will grow faster than sales through stores over the next five years.

Nonetheless, physical stores will remain a key part of the retail landscape, provided they evolve and embrace the digital revolution. This means that retailers must adapt and explore other ways to make their physical space relevant to the consumers.

Note that in the local market, a growing number of businesses that started off online are now moving into brick-and-mortar stores as they serve a key purpose in building brands. Increasingly, these stores will become a platform for customers to interact with the products and will offer a better means of discovery and experience.

“All of these connections help to strengthen the relationship between the brand and consumer, ” says head of retailing Michelle Grant.

This further highlights the need for retailers to look into multiple solutions to enhance the in-store shopping experience.

Grant says retailers are using technology to solve customer pain points such as improving the check-out experience with scan-and-go to reduce queues.

Stores are also becoming a hub of sorts in catering to the rising e-commerce trend. They are becoming fulfillment centres for online orders or offer pick-up counters and accept online returns.

Additionally, the use of data has enabled retailers to have a better grasp of their inventory and provide better customer experience.

She observes that new store formats are also coming to life, like cashier-less stores, inventory-less stores – where stores focus more on services rather than selling products – and small-format stores.

But Grant also notes that certain models of physical stores could perform better than others, and these are mostly value-based retailers, including discounters, variety stores and warehouse clubs.

“So people will still go to the stores for various reasons and one of the main ones is that they will spend time at the stores to receive a good deal, ” says Grant.

However, she cautions retailers to be aware of the different retail landscapes they are in to better prepare their expansion plans. This is because the digital disruption taking place in the retail industry is not evenly distributed around the world.

By 2023, Euromonitor estimates that e-commerce penetration in the North America and Asia Pacific regions will lead the pack at over 20%. Within Asia Pacific, South Korea is expected to have an e-commerce penetration rate of 37%, followed by China at 35%. Malaysia is projected to have a penetration rate of 12%.

In terms of market size, however, China is estimated to have a significant US$1 trillion (RM4.05 trillion) e-commerce market by 2023, with South Korea at a distant second with US$133bil. Malaysia’s market size is expected to hit US$8bil.

The research company also notes that within e-commerce, there are other digital disruptions happening, such as the shift to mobile commerce and the possible rise of voice-led commerce.

“Thanks to the rise in mobile devices, there are new types of competitors in the retail space, like super-apps. They started with e-hailing and messaging and expanded their services to keep consumers spending within the app.

“The five broad verticals that super apps often play in are utility, financial, lifestyle, retail and communication. Some have their own e-commerce offerings or will partner with other players to offer such services. Social media apps are also moving to the retail space by directing traffic from ads to stores to complete the transaction within the app itself, ” says Grant.

The growing popularity of online marketplaces also adds to the competitive retail landscape.

With more than half the world becoming connected to the Internet, e-commerce is becoming an important channel for retailing.

But for sure, there is still a space for physical stores to thrive as retailers adjust their business models and leverage technology to offer consumers a unique shopping experience.

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