Retail Transformers

Singapore’s retail market continues to face pressures. Vacancy rates at malls crept up last quarter, and retail sales growth has been driven mainly by sales at petrol service stations.

07 Sep 2017

retail transformers
Singapore’s retail market continues to face pressures. Vacancy rates at malls crept up last quarter, and retail sales growth has been driven mainly by sales at petrol service stations.

The retail industry is one of the most disrupted by technology for both retailers as well as landlords. It still grapples with the ever growing e-commerce market which includes online retail shops, food delivery apps to self-service vending machines. Frankly, in my humble view, technology becomes a disruptor only when one fails to keep up. When one is in line with technology, it is likely an enabler.

More than meets the eye

The retail business is also no doubt a visual business. There is a strong emphasis on product placement, retail shop frontage and now internet visibility. The world wide web allows the widest marketing audience, and internet usage and smart phone utilization have been growing at rapid paces, especially in South East Asia where the population remains young and getting more affluent. All you need is an internet connection to get your product out to your consumers; the need to touch and feel some of the products before transacting may not be required any more. Nonetheless, some might still argue that there remain certain retail trades which still require the traditional brick and mortar stores; especially those trades that require the physical need to obtain the right fit and sizing e.g. furnishing goods and designer fashion.

Generally speaking, most modern day consumers do not necessarily segregate their shopping between going online or offline. The three key considerations should be quality of product and service, the value of the product and the speed of gratification on receiving the product. Simply, there is no point in purchasing a cheaper product online if the delivery takes days. At the same time, there are many online retailers currently in the market, each offering a range of products with different delivery modes and speeds.

Enter the Prime

On Thursday July 27th 2017, Prime Now landed on Singapore’s shores, the first market in South East Asia that Amazon has launched the product. The e-commerce giant Amazon offers a wide range of products from groceries to consumer electronics. While this range of services is not new - Alibaba-backed Lazada had earlier this year launched its LiveUp loyalty programme connecting its consumers to key partners including Netflix, RedMart, Uber and UberEats - Prime Now took the speed of gratification factor further with a bold offering of delivering its products to one's doorstep in just two hours. And Singaporeans responded. They downloaded the app in quick time; as a result, Amazon Prime Now was the most downloaded app on the Apple App Store on the day of the launch. And they stress-tested its 2-hour delivery promise.

Singapore consumers are known to latch on to new offerings in the retail market very quickly, often egged on by first time promotional rebates, strong herd instincts or driven just by the fear of missing out. This is illustrated by the “selling out” sales of MacDonald’s’ Nasi Lemak burger and LiHo bubble teas. The biggest irony of all from this episode is that while Prime Now seems to be the biggest disruptor to most traditional retail stores and to even some e-commerce stores, when challenged with a torrent of orders, Prime Now service resorted to relying on the most disrupted transportation service, by booking taxis on top of tapping freelance drivers to make deliveries.

Revenge of the Fallen

Not necessarily revenge, but the question now is will the euphoria of Prime Now continue? Especially when the promotions and novelty cease. Singapore, after all, is a very accessible island, with food courts and supermarkets typically within a stone’s throw away. Do we really need a 2-hour delivery when we just need a more reliable delivery timeline? The market really needs a more reliable and shorter delivery time frame; we all hate it we are made to wait for your furniture delivery when it is expected on a Saturday from 12pm to 5 pm and eventually turns up at 5.50 pm. Sometimes, having a reliable planned delivery option is what consumers need given that there is a likelihood that most home occupants are busy at work. Hence, there is a strong need to improve our “last mile” delivery logistics market, should retailers adopt e-commerce as part of their strategy.

While data seems to indicate otherwise, I am a strong believer that physical retail is pretty much alive. It is just that both retailers and landlords need to constantly work on improving customer’s experience as well as adopt technology to harness data, to eventually curate and provide the client a rich omni-channel experience. After all, while technology provides the best sound systems and the clearest high definition pictures, it cannot replace the experiential feeling one feels at a concert or a live football game. An online marketplace of Amazon’s depth would certainly put pressure on both online and offline retailers. Amazon is often able to offer competitive pricing due to its scale, cost of operations, algorithms and other factors. So, if retailers can’t compete on diversity of products or price, what remains is innovative offerings or a softer touch, such as service or interactivity with customers.

The retail industry should transform and roll out.

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