OPINION: Asian retailers embrace multi-channel opportunities

Fifteen years ago, the retail scene in Asia was, in most countries, dominated by traditional wet markets and independent stores run by the nice couple down the street. These outlets provided just about everything the typical shopper needed. Fast forward to today, where increasingly affluent consumers have become more discerning about where they spend their money and have expanded the types of goods they buy. In short, 'one size' shopping no longer works for many consumers, and retailers are adapting to win a bigger share of wallet.

Today’s consumers have multiple shopping needs and different shopping missions. They are willing to take the time to visit a number of retail outlets to fulfill those needs. One way retailers are addressing this need is by moving beyond their core retail outlet concept. For example, Tesco, a major retailer in Thailand, has created smaller venues in the value, supermarkets and convenience channels. 7-Eleven, a major convenience store chain, has expanded into books and bakeries. All of these moves are aimed at driving growth, increasing customer relevance and gaining share of wallet.

Where are consumers going to meet their shopping needs? The wet market remains the destination of choice when it comes to fresh foods. In many cases, visits to the market are part of a daily routine. Hypermarkets are typically a monthly destination, where consumers stock up on essentials, while visits to supermarkets tend to occur weekly. Convenience stores are impulse destinations, places to buy a beverage or food to go. Mini-marts tend to be the places where consumers shop to 'top up' groceries, while shoppers visit personal care stores to meet their increasingly sophisticated needs for health and beauty products

Meeting the changing needs of shoppers doesn’t stop simply at multiple formats. The increasingly connected consumer is connected to the world, is seeking value, wants choice in terms of the product as well as where they can buy those products.  What’s more, traditional retailers are facing increasingly intense competition from agile start-ups who are launching though non-traditional channels such as online, catalogues and TV shopping. 

Changing lifestyles is one factor driving consumers’ migration to multiple and non-traditional formats. As time becomes more precious, people put a premium on convenient solutions that make life easier.  At the same time, technology – particularly mobile – has enabled consumers to hit the internet for a range of activities such as entertainment, socialising and information gathering.  It is only natural that they would like to indulge in one of their favourite hobbies – shopping – online as well.

A look at the online Asian shopper

According to recent Nielsen research, more than 80 per cent of the online population claims to have made an online purchase, with three in five saying they have done so in the past month. In the more developed markets of North Asia, shoppers are the most likely to have made online purchases and the Chinese are fast catching up, as evidenced by the tremendous growth of online shopping site Taobao. Books and clothing are the most popular goods bought online, followed by electronics and travel. Groceries come in at 19 per cent.

While online may be a 'non-traditional' channel, the reason consumers choose to patronise an online commerce site is the same as for brick and mortar stores: habit. Sites that meet consumers’ needs well are well-positioned to win their loyalty and repeated purchases. Online shoppers also make their choice of where to spend their money based on the recommendations of other consumers - good buzz can drive consumers to a site while negative buzz could be catastrophic. 

And lest one think that online shoppers are all young, think again. A fair number of more mature consumers also hit the internet to shop. But there are significant differences in how online shops are used based on consumers’ life stages. A Nielsen survey of Taiwanese females found that older online shoppers liked the convenience and control they have while younger females were looking for more adventurous options and exciting new ideas. 

The three components of the online retail model

It’s relatively simple for a retailer to set up an online commerce site, but it is far more difficult to do it right. There are three critical components that retailers must excel at to be successful in this space:

1. Order interface. How does the consumer connect with the retailer and select what she wants to buy?

What is the customer’s experience with the site like? Is navigation clear? A retailer in Korea has set up its site with a very simple interface that clearly describes the five step process for placing, filling and delivering an order. Another Korean retailer has duplicated the experience of being in an actual store to the web site, including a floor plan with departments clearly marked. Other retailers are bringing their online experience to mobile phone apps. Korea’s largest retailer has focused on developing apps that provide information, promotions and opportunities for group purchasing and links to their online shopping mall.

2. Fulfillment. From where does the retailer pick the product?

Does the retailer use a centralised facility, or pick from stores? One large multi-national picks food from its stores while shipping non-edibles from a centralised warehouse. It also uses its own logistics, maintaining its own fleet of delivery vans. 

3. Delivery. How does the order get to the consumer?

Home delivery tends to be the Achilles heel of the business model. It can be outside the retailer’s control, it's costly and labor intensive and often the source of customer dissatisfaction.  But at least one large retailer is trying to drive profitability and customer satisfaction by developing the drive-through concept. In this model, customers place their orders online and drive to a dedicated store at their requested time to collect their merchandise. 

Retailers are not the only parties selling to consumers online. Increasingly manufacturers themselves are directly selling to shoppers. Given the trend of retailers trying to limit the breadth and depth of product assortment in stores, direct sales by manufacturers make a great deal of sense.

While North Asia has seen the most extensive growth of multichannel shopping, China, and increasingly Southeast Asian countries, are quickly catching up. Retailers have to innovate and adapt to the prevailing market trends to attract a greater share of value-conscious, convenience-seeking shoppers’ wallets.