How to Win in the New World of Retail
Economic revival, social and consumer behaviours and the implications for Asian retail were the focus of an Opening Keynote from James Chang, Chief Executive Officer at Lazada Singapore, at the eTail Asia Virtual Summit in 2021.
The Changing Face of eCommerce
We’ve come a long way since the earliest days of eCommerce in Asia, when platforms consisted of little more than an online phone directory, from which shoppers had to schedule in-person meetings with representatives of their favoured brands. The space has matured considerably in the subsequent years, both in terms of execution and revenue, gaining a significant boost over the past year and a half due to the influence of the pandemic.
Singapore vs. China Pre and Post COVID-19
In terms of pre- and post-COVID-19 market performance, Singapore, being a less mature eCommerce market than China, saw a stronger uplift in eCommerce performance. During the period from 2019 to 2020, retail eCommerce penetration doubled from 6% to 12% of the overall market. However, the largest growth came from electronics and groceries -- from 10% to 17%, and from 7% to 15%, respectively. Within the same period, eCommerce growth in China came principally from health and beauty (from 42% to 54%), especially in health sup-plements and skin care, and from general merchandise (from 42% to 49%). This was largely due to the “stay at home” factor forced by COVID-19 lockdowns and movement restrictions.
There are several reasons for this disparity in performance. First, in comparison to China with its multi-tiered cities and diversity of infrastructure development, the market in Singapore is still relatively immature, and continuing to evolve. So much of the growth in Singapore has been forced through necessity, as organisations lacking maturity online scrambled to keep up with changing consumer behaviour.
Potential for Continued Growth
In a conservative estimate, online retail sales value for Singapore eCommerce is set to rise from its 2020 level of around US $3 billion to almost US $8 billion by 2025 and beyond, with eCommerce penetration improving from 12% to 23% over the same period. And there’s still room for further growth. However,while under-indexed categories such as general merchandise are likely to narrow the gap post-COVID-19 in the short term, establishing enhanced service channels and omni-channel presence will be pivotal for eCommerce in Singapore, going forward to 2025.
Why are more products being sourced online, and why are sales in certain categories of retail being transacted online? In the APAC region as a whole, the vast geography and physical supply chain challenges predispose product search and consumption through digital channels that can overcome these obstacles. Many organisations have poorly developed offline retail footprints, where products that are typically available in metropolitan areas don’t filter down to smaller cities, suburban or rural regions. In such an environment, web sites and mobile apps offer practical solutions for consumers.
eCommerce Penetration by Category
Taking the well-developed eCommerce market in China as a template, and considering the growth in eCommerce penetration between 2019 and 2020, we can highlight a number of factors influencing growth in different retail categories.
In electronics, while mission-driven purchases will continue to be a strong driver for online growth, the need for offline experience such as sales assistance underlines the importance of maintaining an omni-channel presence.
Fashion and accessory buying decisions are typically being made in-store offline, which puts a ceiling of around 40% to 50% growth in online penetration.
In general merchandise too, purchases are heavily influenced by the need for physical touch and feel of products, plus assistance from sales associates. Omni-channel presence is therefore key for online growth.
As with electronics, in the health and beauty market, the need for offline experience such as sales assistance underlines the importance of maintaining an omni-channel presence.
While the situation in groceries varies widely from city to city, decisions are largely being made from home on an ongoing needs basis, requiring enhanced service levels (such as those relating to product freshness and lead time) for further eCommerce penetration.
Driving eCommerce in Future
Driven by the effects of the pandemic, eCommerce today has experienced growth via an organic shift towards online supply adoption and purchasing habits. Particularly in eCommerce markets like Singapore that are still rela-tively undeveloped, evolution of the current ecosystem is required for the next phase of growth. Organisations must prepare themselves to improve and adapt service levels and omni-channel fulfilment strategies to meet the specific needs and buying behaviours of consumers in each retail category.
As the infrastructure develops, and consumers grow more accustomed to the mechanics of purchasing in their favourite categories (and more trusting of the methods of fulfilment and diversity of choice, as more brands come online), then scope for cross-category penetration will also expand.