Asia's retail sector thrives amidst e-commerce dominance

Sectors such as apparel, accessories, home décor, and furnishing showed signs of recovery.

Asian markets are witnessing a resurgence in the retail sector as shoppers return to stores during holiday seasons amidst the growing dominance of e-commerce, KPMG reported.

“Whilst e-commerce and digital platforms have become more popular in China and Southeast Asia, physical shopping is still an important part of the consumer experience,” the report noted.

“There are signs of recovery across various sectors, from apparel and accessories to home décor and furnishing,” it added.

Globally, the retail sector remains vulnerable to distress and bankruptcies due to rapid changes, volatile consumer behaviour, and high capital costs, especially in times of recession.

The year 2023 witnessed steady growth in retail sales although they lagged behind the year-on-year inflation trend.

Essential items saw growth but sales of discretionary goods and big-ticket items remained subdued. As pandemic support measures eased, inflation and economic uncertainty dampened consumer sentiment, leading to higher prices and a decline in discretionary purchases during the recent holiday season.

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On the supply side, restricted capital availability and tightened fiscal measures have led to a surge in bankruptcies, notably in North America. High post-Covid inventories have increased operating costs, prompting discounts to clear stock.

According to the KPMG Financial Performance Index (FPI), the consumer markets sector's performance dropped to 93.91 in 4Q23 from 94.49 in 3Q23. The holiday season impacted North America and Africa, whilst Europe faced geopolitical challenges. South America and Asia saw declines due to macroeconomic factors. Singapore saw the steepest decline at 9%, while Canada experienced growth at 9%.

Looking ahead, the retail market faces challenges such as liquidity shortages and debt maturities, with certain sub-sectors performing better than others.

Meanwhile, the report also noted emerging trends, including shifts in reactions to bankruptcies, challenges facing Buy Now, Pay Later models, and the rise of AI-driven shopping experiences.

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