Omnichannel retail is the path to profit

Sellers should harness both online and physical channels, says Ace Hardware Philippines.

Retailers should adopt an omnichannel strategy where physical and online store channels are completely integrated and their distinctions blurred, offering customers a seamless shopping experience, according to Ace Hardware Philippines’  top official.

Business must balance profitability and the need to meet the demands of customers, who now expect faster service, more convenience, and more product choices across multiple channels, Ace Hardware President Bernard Ong told the Retail Asia Forum 2024.

“Essentially, consumers are everywhere and they want everything, which sounds good, but it’s very hard to [satisfy them],” he pointed out.

Filipino consumers demand convenience, reliable products, and accessible locations. But for retailers, providing all of these comes at a cost that consumers are not always willing to cover, Ong said.

Six of 10 Filipino consumers want to shop both online and in-store, showing the importance of an integrated omni-channel experience, according to a study by KPMG and GS1 released in June.

Ong said retailers must make tough choices about where to invest their resources. “We have to make choices; we cannot be everything to everyone," he said, adding that whilst online channels are important, they can be challenging.

He noted that Ace Hardware could lose 50% of its online sales if it did not offer free shipping vouchers. “It's just that they somehow expect it.”

To address these challenges, Ong pushed a hybrid retail model that leverages the strengths of both online and physical stores.

He cited the example of IKEA in the US, where it started operations online and later expanded to pop-ups and large stores. 

"They started out purely online,” Ong said. “Then they said ‘We cannot offer experience,’ which is what the physical retailer does, so they set up pop-ups and small showrooms.” IKEA entered the market late to design stores tailored for today’s consumers.

“If you have no store, what should your next store look like?” Ong asked, urging retailers to rethink the role of physical stores, which are supposed to have the advantage of quick customer satisfaction and trust.

Ong also talked about logistical hurdles in the Philippine retail market.  “The big challenge here is if you actually do your economic costing right, it’s hard to make money in the Visayas and Mindanao if you’re a national player, mainly because of shipping costs and complexity.”

He added that inefficient ports and other logistical issues complicate the process, making it crucial for retailers to rethink their approach.

Finding and keeping talent

Despite these challenges, Ong remains optimistic about the opportunities if retailers can adapt to the changing consumer landscape. Retailers should also simplify operations and localize supply chains to mitigate risks, he said.

“You have to assume a disaster is happening,” he said, pointing to natural disasters such as Typhoon Rai, which ravaged the Southeast Asian nation in December 2021, leaving Cebu in central Philippines without power and basic services for a month.

Another issue Philippine retailers face is attracting and keeping talent.  [It’s a challenge where to find them, how to keep them, and how to get their skill level up… It's hard,” Ong said.

He said many retailers lose top talent to industries such as hospitality and business process outsourcing, which both offer higher pay and more flexible working conditions.

“We pay less than other sectors that are competing for the same talent,” he said. ”Even if we pay minimum wage, we pay less than the other sectors that are competing for the same challenge, for the same talent.”

Ong cited the need to simplify tasks, encourage multitasking, and offer a clear career progression to help retain employees.