PwC’s Michael Cheng joins the panel of judges at the Retail Asia Awards 2022

He shares trends for retail companies in rebuilding strategies and becoming more resilient.

Three decades of experience in professional assurance specialising in IPO advisory, business and due diligence reviews, asset injections, and M&A activities have made Michael Cheng an industry expert when it comes to consumer markets, serving as PwC’s Asia Pacific, Mainland China and Hong Kong Consumer Markets Leader since 2013, responsible for coordinating practice strategy and service delivery for companies in the Consumer Markets sector of Hong Kong, Mainland China and the Asia Pacific region.

In his role as a judge in the upcoming Retail Asia Awards 2022, Retail Asia traded insights with Michael Cheng on trends, rebuilding strategies to adapt, and enduring the pandemic.

Can you tell us about your experiences as a Consumer Markets Leader? What are the most important experiences that have shaped your career?

Since 2013, I have been Asia Pacific, Mainland China and Hong Kong Consumer Markets Leader at PwC. After I took up this industry role and was invited to join our PwC Global Consumer Markets Industry Sector Council, I started to learn more about my clients’ pain points from a global and regional perspective and was able to leverage my extensive experience in auditing and reviewing retail and consumer-related companies to contribute to the industry and help my clients in exploring different ways of engaging with consumers and overcoming their challenges. This passion has led me to where I am today in my exciting role overseeing the Asia Pacific consumer markets and specialising in IPO advisory, business and due diligence reviews, asset injections and M&A activities in Mainland China and Hong Kong.

As a member of the Hong Kong Retail Management Association’s (HKRMA) Digital Advisory Panel, I have further built up my passion to promote Hong Kong's retail industry and present a unified voice on issues that may affect and help all retailers in Hong Kong. I made a conscious effort to share my voice and experience, and view on trends and outlook of the Hong Kong retail market to retailers and was invited to deliver keynote speeches at a number of public speaking events including HKRMA’s Retail Innovation Conference, and industry sharing organised by InvestHK and the British Chambers of Commerce. I was also invited to be a member of the organising committee for the Retail Asia Conference 2020 and 2021 to provide consultation on themes and content direction, as well as a judge for Retail Asia Awards 2021 and 2022. 

What trends amongst consumers have you seen in the Hong Kong and China and Asia Pacific markets? Will those trends last?

Asia Pacific, including Mainland China and Hong Kong, is home to a robust base of consumers who have shown resilience throughout the pandemic enabling strong economic recovery. 

The ‘store of the future’ will be omnichannel and experience-rich and will integrate the physical and digital worlds. Technology will continue to revolutionise online and physical retail, forcing rapid change and innovation as retail consumers will expect frictionless, tech-enabled experiences now more than ever. Traditional marketing channels will continue to evolve as retailers and manufacturers embrace a direct-to-consumer model. Health and safety concerns will linger for retail.

Conscious consumerism will continue to grow as people seek brands they trust and align with their values. Consumers will gravitate towards purpose-driven brands that are responsive to an array of environmental, social and governance (ESG) concerns. 

Brands will have to articulate meaningful value propositions to win customers and leverage the influence of social media on brand perception and reputation.

The supply chain of the future, in response to pandemic-induced disruptions, will evolve to be more shock-resistant and technology-enabled, making ‘smart’ decisions to self-regulate. Rapidly changing consumer expectations and behaviour are forcing supply chains to be more responsive and transparent. End-to-end visibility will be a fundamental requirement for effective supply chain management whilst digital enablement of the sales journey will be key in evolving the supply chain.

How should retail companies shift their strategies to become more resilient, especially having endured the economic effects of the pandemic?

The pandemic has catalysed the growth of e-commerce in Hong Kong with an upsurge of online shopping activities among local consumers over the past two years. It is fair to say that online shopping in Hong Kong is gradually gaining traction as major brands and shopping platforms are expanding their e-commerce footprints. However, we should not overlook the importance and resilience of brick-and-mortar shops; they are well-positioned to rebound strongly with retail sales recovery and the easing of travel bans and other restrictions in the upcoming months as the Covid-19 situation eventually stabilises. 

In the case of Mainland China, the resurgence of Omicron cases has weighed on consumption growth whilst adding to the e-commerce ecosystem. The recently concluded Two Sessions set forth a modest path for economic growth with a focus on stimulating domestic consumption. The theme of ‘common prosperity’ will prevail in the country’s quest to boost personal incomes through multiple channels and the improved income distribution system. We are likely to see the deepening integration of online and offline consumption, and a new wave of consumption upgrading induced by the shift towards spending on greener products and smart home appliances. 

Looking forward, physical stores will need to provide consumers with experiences and interactions to stay relevant as opposed to solely selling products. Brands that will survive the post-pandemic environment will have a robust online presence and relevant physical setups that revolve around experience. As the online and offline worlds converge, consumers expect, more than ever, to obtain products and services at any time and place. Hence, there is a need to do more to blend physical and digital experiences, as consumers are willing to pay higher premiums for emotional connections. The future of consumption in the post-pandemic era will likely take on a hybrid form, combining the features of both online and offline settings to offer a seamless, unified omnichannel experience for shoppers.

Driven by greater investor demand and stricter regulatory requirements on ESG issues, retailers should take more proactive action to embed ESG goals and ideas into their corporate culture and daily operating activities. Retailers should also strategically invest in sustainability and ESG actions. Examples include proactively driving inclusivity and social impact of new net-zero products and solutions, upskilling and reskilling to enable an inclusive workforce transition, integrating social metrics into reporting and disclosure around net-zero, and incorporating inclusion into policy advocacy efforts.

What is your advice to companies with regards to IPO amidst an unpredictable world economy caused by conflict and the pandemic?

IPO activity in Asia Pacific was relatively muted in 2021 with some regional headwinds impacting the key markets of Mainland China and Hong Kong. Total issuance in the region continued to increase in 2021, up to 1,108 with proceeds increasing to $162bn, driven by technology, healthcare, and consumer discretionary sectors. 

Whilst Mainland China and Hong Kong faced challenges in 2021, South Korea, India and Australia all experienced significant growth. Despite recent financial markets turmoil, geopolitical tensions, and interest rate hikes impacting company valuation, investor confidence in strong brands and the growing number of regional unicorns are expected to lead IPO performance in 2022. 

For many people in developed economies, the pandemic has put more money in their pockets in the form of stimulus checks, fewer dollars spent on travel, and more time to manage investments, thanks to the growth of mobile trading apps and increased work flexibility. The revelation is clear. Retail investors are more likely to invest in consumer-facing brands that they can trust and associate with. For retail companies planning to go public, apart from having strong financial statements, they will also need to be able to tell a compelling brand story, and demonstrate the use of funds towards building brand trust and creating values for their customers. 

As a judge in the Retail Asia Awards, what projects or innovations are you expecting to find amongst the entries? What are your criteria for judging?

It is a great honour for me to be invited again by Retail Asia as one of the judges this year – particularly at a time with the renewed outbreaks in Hong Kong and China presenting an opportunity for innovative ideas and solutions to meet the present challenges. 

Amongst the entries, I expect to see how participants innovatively create their products, especially for product development, when there is an insatiable demand for advanced technologies. Besides, remaining connected with consumers through digital networks regardless of geographical boundaries and time limitation is key to success. Participants will have to differentiate themselves by demonstrating high responsiveness to customer needs and making use of big data to understand customer experience and behaviour. 

Not only do they have to demonstrate high competency across several standard attributes – achievements, challenges and solutions, innovation, and success and impact – I am excited to see how participating companies will go the extra mile to come up with innovative product ideas to take advantage of emerging consumer trends.