CIO Review APAC

Four Transformative Retail Shifts in Southeast Asia

CIO Review APAC | Thursday, November 16, 2023

The retail landscape in Southeast Asia is undergoing a significant transformation marked by four key shifts, and these changes are shaping the future of retail, influencing consumer behaviour and redefining business strategies.

FREMONT, CA: Four major themes are driving major changes in the Southeast Asian retail sector: the rise of small-sized stores, the return of omnichannel strategies, the strategic value of alliances and ecosystems, and the transformative power of artificial intelligence (AI) in retail.

The persistent expansion of small format retailers in the region is highlighted where minimarkets and convenience stores now account for 73 per cent of the contemporary trade retail industry. Three elements that will disrupt small formats are the emergence of competitors, the difficulties that existing players will encounter as a result of their expansion and digital improvements, and a reappraisal of the value and format propositions.

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By leveraging digital channels, sari-sari retailers are adopting digitisation. As for 99 Speedmart, it took ten years to open its first 1,000 stores in Malaysia. However, in just four years, it added another 1,000 locations, reaching its 2,000th store—an average of five store launches every week.

In the Philippines, minimarts are becoming increasingly popular, with 31 per cent of customers viewing them as their primary food source, despite supermarkets still holding a dominant position in the market. While minimarkets and convenience stores account for 9 per cent of the current size of the trade food retail industry, this share is expected to follow the patterns seen in nearby areas. The changing tastes of consumers will likely value ease and closeness over distance when making purchases, changing their preferences to choose local stores over established missions.

Omnichannel

There is a stronger tendency towards internet purchasing in the post-pandemic environment. Online platforms contribute significantly to the sales of major merchants, such as Central Retail in Thailand, which accounts for 18 per cent of overall retail sales. This change results from retailers using social media markets, influencer marketing, short-form films, and other techniques to effectively use digital platforms for awareness and discovery. According to a survey conducted in the Philippines, more than half of Filipinos use online resources to compare prices and learn more about goods and services.

Creating Ecosystem

Retail operations now view digital ecosystems and alliances as a critical source of competitive advantage rather than focusing on individual success. Nearly half of the main merchants in the area are connected to regional conglomerates that operate a variety of industries, which allows them to strategically create digital ecosystems and increase the range of goods and services they offer clients.

Achieving a unified online storefront and ensuring a consistent customer experience was strategically pursued through the merger of two brands. The integration of data from 14 business units allowed for the creation of individualised experiences through algorithmic processes. This approach yielded a remarkable six-fold increase in the overall member base and a five-fold rise in gross merchandise value compared to customers shopping within a single brand. A diverse conglomerate is only sometimes essential to open an ecosystem, underscoring the potential for forming alliances with digital companies to enhance retail footprints and increase traffic.

The Rise of AI

AI is causing a significant change in the retail sector, calling it a catalyst for the retail revolution. Retailers are encouraged to use AI to obtain a competitive edge and improve decision-making processes, as abundant data is available on customers, businesses, and markets. Technology is essential to provide customers with a smooth, customised, and omnichannel experience. Digital leaders who invest 15 per cent more in technology and analytics, especially artificial intelligence (AI), see 1.5 to 2.5 times higher overall shareholder return.

With its ability to simulate apparel that fits every client, GenAI has the potential to completely transform the fashion business by enhancing engagement, improving conversions, and decreasing return rates. Producing fashion design concepts that align with consumer preferences and current trends speeds up product development. Furthermore, GenAI creates a virtual personal stylist that provides customised recommendations, further enhancing a personalised consumer experience. There is a need to explore use cases for GenAI, which stresses the significance of improving people and processes in addition to technology to achieve successful AI outcomes.

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