From a small drip in retailers’ revenue, electronic and mobile commerce have slowly crept up the earnings pie, prompting many retailers to quickly embrace the opportunities opening up in the digital frontier.
China’s Single’s Day shopping festival on 11 November, which netted USD5.7 billion in a 24-hour online shopping frenzy, is proof that online and mobile shopping are gaining huge ground in Asia. Even in emerging markets, e-commerce holds big promise. The Jakarta Post recently reported that according to experts, Indonesia might reach 19 million e-commerce transactions worth a total IDRtrillion (USD478 million) this year. In India, the government is reportedly working on a foreign direct investment (FDI) policy on e-commerce.
Yet big, state-of the art shopping malls and flagship stores of global brands are also sprouting everywhere in the region, adding spark to the retail space.
As the holiday shopping season nears, many industry players are asking: is technology the Grinch who will steal Christmas or is it Santa Claus who will bring back the sizzle of retail shopping?
In an email interview with RetailTech Innovation, Lachlan Gyde, the newly appointed head of EC Harris’ Retail Asset Performance in Southeast Asia, shared his insights on the interesting developments shaping the Asian retail industry.
With more than two decades of real estate experience including 13 years in Asia, Lachlan has worked with international retailers and funds across the region. Before joining EC Harris, he was Regional Director of the Asset Management team of Grosvenor and has worked with a number of significant portfolios including Parkside Plaza in Shanghai. He also spent two years as the Director of Retail Development on the Marina Bay Sands scheme in Singapore where he helped develop the master plan for the casino around the retail, food, beverage and entertainment offerings.
In his new role at EC Harris, Gyde will lead the consultancy firm’s work with shopping centre investors, operators and developers in a range of markets including Singapore, Malaysia, Vietnam and Indonesia.
RetailTech Innovation (RTI): Given the growing popularity of online shopping and m-commerce, what is your outlook for shopping mall development in Southeast Asia?
Lachlan Gyde (LG): Provided people still seek social interaction and engagement then malls will remain as a key shopping and socializing platform. Online sales have definitely grown and will continue to do so in the future which will prompt mall owners to adapt. But not all malls will be affected in the same way. For example, food based community malls will be more immune to online sales drift than say a high street fashion mall. The nature of the product and the ease of online purchase is a determinate in the ‘bricks vs. clicks’ sales war.
What this means for Southeast Asia is a difficult question to answer as the retail market and online capabilities are at different levels in different countries across the regions. For example Singapore and Hong Kong have world-class shopping malls, excellent tenant selection, advanced internet infrastructure and web-savvy populations. As a result, the consumers in these two countries get the best of both worlds and have the choice to buy online or in malls and it would appear they embrace both formats.
Other countries within the Southeast Asia region have poor quality shopping malls and limited online capabilities meaning that most shopping is done in markets or in main street stores. So neither the shopping mall nor online option is dominant.
China is an interesting country to study in this respect as good quality shopping malls are becoming more prevalent and the population is very tech-aware. China may offer keys to how online shopping and malls will evolve and coexist. Jack Ma’s China online businesses, Taobao and T-Mall, are very innovative and recently chalked up extraordinarily high sales of RMB35b (USD5.75b) in a 24 hour period on 11 November, China Singles’ Day. The question that malls owners should ponder is: Does Taobao understand and market to the customer better than they do?
However, as is always the case with any retail format, it is always about the ‘customer.’ The adage that the ‘customer is king’ has never been truer. If a retailer fails to deliver what the customer is seeking, then it is more than likely that business or mall will fail. Currently it appears the customer is seeking a dual experience of ‘bricks and clicks’ forcing online businesses to establish retail outlets and retailers and mall owners to become more innovative in their approach to digital marketing and sales platforms.
Not all malls and businesses (both traditional and online) will survive the competition and market evolution. It is in its early days and we are guaranteed to see a lot of innovation in the dynamic retail market.
RTI: How should mall developers and retailers approach the growing phenomenon of omni-channel retail and show rooming? Is the prospect still good for physical stores? What will the next-generation retail store look like?
LG: The questions developers and retailers need to ask themselves is how omni-channel, show rooming, online sales etc. will impact their business; how can they profit from these channels and what are the risks of not entering the digital sales age? There is no ‘one-size-fits-all solution.’ Some retailers will not feel the impact of online sales and therefore stick with a traditional ‘bricks’ approach. Likewise, mall owners will make decisions based on their business model, customer base, estimated sales loss, etc.
Mall owners and developers must actively look at ways to embrace these new sales channels in a manner that complements their mall offer. An example of this is Westfield’s new initiative ‘Searchable Mall’ which aims to better connect the digital shopper and their physical malls. This type of thinking goes beyond the norm of most malls where a website and connection to its Facebook page is the extent of the digital strategy.
Retailers that identify the Web as a means to promote their brand image and capture online sales have been fast movers and innovative. In particular, the fast fashion brands such as Zara, H&M, Mango, etc. have been very successful in their online strategies and have experienced strong online sales growth. These retailers still continue to roll out new stores in the region, suggesting that the online platforms and traditional shops are complementary and crucial to a successful retailing platform. Interestingly, retailer shopping bags have been used to advertise their online sales website.
The retail shop of the future will continue to evolve to meet customers’ needs. It is likely that advancements will be in the areas of shopper engagement and entertainment and ways to reduce stock levels and storage space, thus reducing floor space and rental. Fashion brands are already looking at ways to bring technology into the ‘bricks’ shopping experience.
RTI: Are online and mobile channels really a competitor of the traditional store? In what ways are they complementary?
LG: On the surface, the traditional stores and online channels would seem to be complementary as they all aim to improve the customer experience, improve access to product information and provide several different ways to purchase goods and services.
However, I imagine, the ‘real’ answer to this question depends on which part of the retail industry you are from and how successful you are at combining the platforms.
A mall owner may say the two platforms are competitors, as sales lost to online channels usually means less income for shops in their mall thus restricting the ability to grow rent or capture sales turnover.
A ‘traditional’ retailer will take a view depending on their ability to launch a successful online presence and generate sales through it. An ‘online’ retailer with no traditional store presence will see them as competing as per Jack Ma’s viewpoint.
The retailing industry has been around for a long time and has evolved through many challenges, of which the online vs. traditional store debate is the latest one. Ultimately, businesses will find the course that best suits them and their products and thrive or disappear as has always been the case.
RTI: As Internet and mobile penetration grew in Southeast Asia, the profile of today’s shoppers in most Southeast Asian countries have also changed, often preferring to use their gadgets and smart devices in aid of shopping and other purchase decisions. How should mall and store developers design or equip their stores so they can provide the best shopping experience for today’s shoppers?
LG: The profile of shoppers constantly changes in many ways not just their propensity to access mobile technology. As stated previously, the key driver of retail is the customer. For a mall owner and retailer, the best way to plan and evolve their mall is to understand their customers through ongoing research and engagement. The shopper’s age, spending patterns, family makeup, income and other things will have a larger impact on the design of a mall and a shop than their access to gadgets and devices. For example, the most tech-advanced mall will fail if the customer base in the primary catchment is not satisfied with the tenancy mix, price points and service levels available. It is important not to lose sight of ALL the key drivers of retail.
But in saying that, technology is becoming more noticeable in malls and shops. The appropriate level of technology? Again, the answer lies with the target customers’ requirements and aspirations. Whether bricks or clicks, it is all about the customer.
RTI: What is your vision for your team in Southeast Asia? What difference can you provide for your clients?
LG: EC Harris understands the key drivers of income and value creation in shopping malls. This knowledge combined with internationally-experienced personnel means we are ideally placed to advise and deliver maximum returns to mall owners and developers on their assets.
Placing emphasis on understanding the customer and delivering a format and design compatible with their wants and needs while interpreting their aspirational requirements guarantees a sustainable offering that will remain relevant in the long term.
The work we have done in recent years with clients across Asia Pacific has seen EC Harris develop a reputation as a premium solutions provider when it comes to developing successful shopping malls.
RTI: Which of the countries in Southeast Asia do you see a lot of potential for retail development. What are the opportunities for retailers and property developers in these markets?
LG: There is potential in all countries across Southeast Asia for successful retail development. No two countries are alike in terms of development, economic conditions, customer profile, etc. Therefore, different strategies will be required on a country by country basis. Currently, it is possible to see retail developers in all Southeast Asian countries becoming successful.
Interest in the retail sector remains high with significant capital allocation. A company’s risk appetite and required returns ultimately determines which countries meet their investment strategies.
Taking Stock is Retail in Asia’s fortnightly column dedicated to showcasing opinions from experts in the retail industry.