The state of the retail industry in APAC: VISEO experts comment - Part 1

Covid-19, an event that impacts the entire retail sector

APAC is a key market for the retail industry, there is no doubt about it. The recent events in the region – Hong Kong protests and/orCovid-19 have had and continue to have a strong impact on most fashion retailer revenues. In addition multiple bans on travel are increasing the torment as tourists and travelers represent a major part of the fashion retail growth.. This impact can be seen anywhere in APAC now with empty airports and shopping malls in what used to be the fastest growing, vibrant market for retailers.   

Retailers in APAC were already pushed to reinvent their business model and the way they interact with their customers as. The emergence of the e-commerce, and more recently m-commerce, started well before those events. Players who were already well established online were able to differentiate themselves and cut their losses by compensating - at least partially - through their online platform. For others, the trend has become a must:go online now or disappear. The global event we are facing with Covid-19 brings a paradigm shift as the first place the consumer will be looking for a product will now be online through a mobile device. 

Companies need to be more digital 

The current events indeed show that physical stores are first impacted. Digital has become an important way of doing business, even in small territories like Singapore or Hong Kong. Companies such as Lazada are experiencing a huge increase in their sales and the online grocery store Redmart wasn’t even able to deliver properly the unexpected and sudden amount of orders. 

However, the burst of digital commerce (especially on mobile) had started in South East Asia way before this crisis, especially in Indonesia, Thailand or Vietnam (e-commerce has been multiplied by 10 in Indonesia between 2015 and 2018, reaching $ 12 billion, according to e-Conomy SEA 2018), but even in Singapore.  

I would add that digitalisation is not touching retail only: with the Covid-19 crisis, every area of our lives has been digitalised, as it helps reduce contacts between individuals (digital payments, online meetings, webinars, e-learning, e-banking, e-consultation, food delivery, social media,...). The global need for digital is growing critically.

Companies need to know what is the "best value" for a consumer at a specific point in time

The buying trends on e-commerce or m-commerce platforms have shown that consumers follow or are led by influencers. A potential buyer of a product could be put off by a bad review by another buyer or choose to buy a product simply because someone gave it a glowing review.

With the recent spate of events, it is fair to assume that even more consumers have gone online and were of course more focused on specific products. This will probably translate into a greater take up of online commerce after the current situation blows over. With the expected influx, competition for the consumer dollar is going to be tougher as consumers will have more choices and expectedly more discounts will be offered. Logistically, online merchants need to look at more efficient ways and methods to reduce cost and stay competitive.

All-in-all, online retail will grow even more, competition will be tougher, cost needs to be managed and consumer engagement needs to be concise. The term consumer loyalty will be a thing of the past and the merchant able to put forth the best value to the consumer will likely win the business. The key to being ahead of the competition is to figure out what is the ‘best value’ for a consumer at a specific point in time and then having the understanding that tomorrow, thist ‘best value’ is no longer the best value and it has to be re-analyzed to determine what the new best value is. Essentially, it is a matter of understanding how consumers buy and aligning to that understanding. 

How the retail and all their supply chain are impacted

Since a couple of years now, APAC region represents a huge part of the retail industry by the growth of the customers and the numbers of countries, Retailers invested in the region to address the different countries in terms of new products but also in supply chain networks to serve different regulations, languages.... Several points of stocks are necessary to ensure products availability which represents a lot of immobilized capital. 

This current situation impacts the retail and all their supply chain. Sales are decreasing; hence stocks are increasing, purchase orders are delayed until further notice, factories are then impacted too. The ones who have taken the turn of e-commerce and omnichannel are suffering a bit less than the others and customers will chose the ones who did. Forecasts and Planning becomes even more important to assess different scenarios and their impacts. Recovery plans, reallocations of goods or assets (…) can be evaluated to minimize impacts. 

What would be the strategies to focus on? Read the part 2 of the article