Three themes that will reshape the future of APAC retail

Experts from Euromonitor International, Bain & Company, and other industry experts discussed the industry trends and forecasts at the Retail Asia Summit.

As businesses accelerate venturing online, retailers could cater to this potential demand from consumers in the region by ensuring seamlessness on all platforms, according to Euromonitor International.

Hianyang Chan, a senior consultant at Euromonitor International, identified eight themes that will reshape the future store namely: seamlessness, convenience, experiential, personalisation, sustainability, premiumisation, shareable, and community.

But for the APAC, the region that accounts for 40% share of the global retail industry, seamlessness, convenience, and shareable were the themes that will stand out for retailers.

“Seamlessness retailing in this region is no longer defined by bricks and mortar and e-commerce. There has been a growing trend amongst retailers and brands in recent years to offer a unified experience,” Chan said at the Retail Asia Summit.

There may have been a surge in online shopping in the last two years due to the pandemic, but because of convenience, consumers still shopped in-stores for more customer experience and instant access to products, he said.

For shareability, businesses should ‘emotionalise’ their stores by making them social-media-ready to attract digital natives in APAC to their stores.

“This helped to build awareness by allowing consumers that visit the physical stores to take advantage of the visually appealing and shareable spaces and upload content related to the business,” Chan said.

Zara Lightowler, an associate partner at Bain & Company, said loyalty programmes or the “strategy of loving your customers and getting them to love you back” has been important.

Andy Parker, a partner at Innosight, said the disintermediation happening is a time of threat for retailers who are now facing competition from multiple directions.

“But it's also a time of immense opportunity for well-funded new players to seize opportunities with more agility, an immense opportunity for the incumbents to reinvent themselves in the face of this disruption and to make some bold moves,” he said.

With the tech-savvy consumers, retailers are expected to continuously invest in and innovate with digital technologies in various areas ranging from the assessment of product information in-stores to self-checkout features for a more enhanced and seamless customer shopping experience, according to Chan.

Retailers’ recent innovations

Chan said the availability of digital wallets is amongst the features retailer could adopt. Cashless free checkout is also gaining traction as the preferred in-store shopping feature. These services avoid the hassle of checkout queues and making payments.

He added that China is still regarded as the “regional leader” in the retail industry, citing e-commerce giant Alibaba which heavily invested in technologies to create an “integrated retail ecosystem” that merges online, offline, logistics, and payment tools.

“This ecosystem helped retailers to better identify consumers and offer unified and personalised services to their virtual and physical stores, which consequently increases customer loyalty,” he said. “All of these help provide the necessary framework to allow a seamless experience that the Chinese consumer desires and pave the way for tech developments for the region or even global retail industry.” 

FairPrice recognised the emerging trend amongst consumers for convenience by going contactless, by launching an artificial intelligence-enabled unmanned cashless store, said Fairprice Deputy Group CEO Elaine Heng. This was opened at one of their stores in Tampines in Singapore and opened in three more stores in schools.

At the height of the pandemic, the supermarket launched FairPrice on Wheels to bring the store to the doorstep of customers, especially the elderly. They brought their mobile vans equipped with chillers and refrigeration to 11 low-income elderly estates including one hospital where they can have access to fresh essentials.

From 2015 to 2021, Innosight’s Parker said total funding has grown from $33b to $148b or a 20% year-on-year growth. Almost 80% of these fundings are going to new retail platforms and new technologies for supply chain and logistics, Parker said.

Omnichannel is a must

“Consumers keep telling us they want to explore and browse online, but maybe collect in the store or at home and have an easy return journey. So omnichannel will continue to be critical for the success and the differentiation,” Bain & Company’s Lightowler said.

Other businesses have also adopted ways to connect with their consumers, especially during the pandemic. KH Lim, founder and group executive chairman of Senheng Electric, has six dimensions for its omnichannel strategy: offline commerce, online commerce, telemarketing app commerce, mobile app commerce, livestream KOL commerce, and redemption commerce.

At a time when their stores were closed, 1,800 employees of Senheng Electric were working from home. Senheng Electric’s IT engineers developed the telemarketing app to communicate with their customers. The system autoselects 10 leads for every employee to contact and collect orders.

“By using the telemarketing apps, we are getting as high as a 15% conversion rate. It was indeed a secret weapon,” Lim said, adding that they will be improving the system by relying on videos and pre-recorded audio to engage with customers.

Senheng also launched a mobile store in November 2021 and is now getting close to $1m worth of sales monthly. It became a “platform-based model” wherein they invited third-party merchants to onboard the platform.

Thailand’s The Mall Group is present both online and offline. But its customers can reach its staff through other platforms, according to Natee Srirussamee, senior vice president of Digital Retail.

The Mall Group offers Chat & Shop service to its customers as some still needed to discuss or ask for more details about a product despite shopping online. It also has the Live Personal Shopper wherein a staff will do a live stream, walk around the store, and shop for the customers.

It has also entered metaverse by creating its own called Mniverse which will allow existing and potential consumers to engage with brands, as well as connect with their friends.

“We don't think that there'll be a lot of immediate purchase, a transaction in the metaverse but we are looking for Metaverse to be a place where we can engage people with the brand we can create a perception that we are actually in the innovative front of the retail,” he said.

Brick-and-mortar is here to stay

“It's about how we introduce the new ways of shopping to still engage our customers to make stores a destination, one that is more experiential, one of discovery of engagement or exploration,” Fairprice’ Heng said.

FairPrice launched a blended supermarket concept in its VivoCity store, where it allows customers to pick what they want from the store and have it cooked for them.

For the FairPrice Xtra Parkway Parade, they installed a cocktail bar inside the supermarket.

“That’s one part about how we can actually make stores as a destination as a place of emotional bonding for the community as well,” she said.

In the Asia Pacific region, Chan said traditional grocery retailing remains one of the most important channels as it accounts for 27% of the total retail value sales in 2020, compared to 18% globally, indicating that it plays a more important role for consumers in the region that modern grocery retailers like supermarkets and convenience stores.

Whilst the channels were previously less affected by the pandemic, the rise of digitalisation poses a threat to traditional grocery retailing, as e-commerce has seen a compound annual growth rate of more than 23% between 2015 to 2020, and is likely to continue.

“It is vital for traditional grocery retailers to not only incorporate new and innovative digital technologies such as modern digital payment methods, and improvement in fulfilment, but also keeping the personal and sincere customer service that they already offer,” he said, this will contribute to a more seamless shopping experience.

But how will stores evolve? Chan said the rise of the digital era will give two main types of physical retail spaces. The first type is the convenience store which will sell impulse purchases and irregularly purchased convenience goods. Its front- and back-end operations will be supported by technology.

The second type is the experiential store which is suitable for products that require more consideration such as electronics or clothes. Some of these stores may focus on pure functionality such as educating customers on scientific benefits or product attributes.

Other trends that can be expected in stores in the future include check-in before check-out, wherein customers will be identified upon entry through facial scanning, which will enable the store to provide a more tailored experience based on their personal information and shopping history.

Chan said contextual shopping will also be on the rise where products will be tested in various weather, terrain, or lighting conditions that will be emulated by technology, and the experiential ticket entry by creating experiences that will generate new revenue streams.

There will also be community collaborations in which physical places can become a place where consumers and store associates can design and co-create products. This will provide an opportunity for consumers, staff, and local experts to share expertise and work together on circular projects such as repairing or upcycling previously bought items.

Buy now, pay later

Whilst this concept is not new, fintech companies have innovated buy now, pay later (BNPL) scheme which has been generally offered by single merchants.

With the rise of online shopping and new business models, shoppers can avail BNPL 2.0 across multiple retailers and merchants as BNPL providers are app-based, said Bain & Company Associate Partner Willy Chang.

“This has improved overall customer experience… It's a very easy one-tap or a QR code payment system where you can just pay and leave,” Chang said, adding that it has become a lower-cost option for many consumers as interest is offered at least within the first two to three months.

These benefits translate to more sales in the form of higher conversion at checkouts and higher average basket size. In terms of financial risk, Chang said the advent of third-party providers “offsets a lot of the risks in terms of credit risks.”

However, Chang said the adoption of BNPL in Southeast Asia is “extremely nascent.” Citing the Google-Temaske-Bain eConomy Report 2021, he said that Singapore in 2021 has around $300m gross merchandise value, whilst Indonesia was around $4b.

”The online BNPL penetration rate is actually still very, very small. We're optimistic that this growth will continue very strongly in the years ahead because the overall retail span within Southeast Asia will continue to grow very strongly and this penetration will undoubtedly increase as both supply-side and demand-side factors improve adoption as a whole,” he said.

Frederic Tardy, Chief Strategy and Customer Officer at Home Credit, said their company, which offers BNPL services across nine countries, with 140 million consumers, is bringing new kinds of customers to retailers.

He added that Home Credit has the highest approval rate, especially for young customers or the segment between 18 to 25 years old.

“We bring to our partners their untapped segments and clearly, we are boosting their business. We have penetration [rate] with some players, we're getting 15%,” he said.

Meanwhile, Atome, a BNPL provider in Asia, creates an omnichannel experience for shoppers as users can shop online and offline within their merchant network, said Vili Poulain, regional vice president of Strategic Partnership at Atome. Customers can also check out with no interest when buying with Atome.

“We offer an omnichannel experience to the users where the users can shop on Atome mobile app as we have designed our app in a way that it looks like the marketplace, but we do actually drive the consumer to the merchant site,” she said.

Merchants get paid within two to three working days. In case of default payment, merchants do not have liability as Atome will cover the full risk, she said.

Aside from this, Atome said they helped deliver higher ticket size, with an average of 25% increase in average basket size, along with better conversion. They are also bringing in new customers, as well as repeat visits, where 85% of their shoppers return to merchants that offer Atome.

OnTheList, is a members-only flash sale concept that operates both online and offline and works with premium and luxury brands to “solve past season or overstock inventory issues.” Adele Leong, Managing Director SEA and Australia, said Atome is their regional partner.