COVID-19 has accelerated retail’s transition to a digital future. The Bain & Company survey, The Future of Retail in Asia-Pacific: How to Thrive at High Speed, noted that Asia-Pacific’s growth represents 75% of the world’s retail growth and boasting advanced digital maturity, online sales growth and ecommerce are rising dramatically in the region
The research found that from 2014 to 2019, the compound annual growth rate for Asia-Pacific retail sales was more than quadruple that of the rest of the world.
Online sales growth was nearly double, even though Asia-Pacific e-commerce already started from a higher base (online penetration in the region grew from 9% to 19% between 2014 and 2019, while rising from 6% to 11% elsewhere).
This advanced digital maturity is one reason why Asia-Pacific should remain the industry’s growth engine, as well as its window to the future, and COVID-19 has only accelerated many of the key shifts already underway.
Melanie Sanders, Bain & Company partner and co-author of the report, noted that the current pandemic has sped up disruptions that have impacted the retail sector, but the industry as a whole had already begun its shift towards digital innovation and ecommerce anyway.
“Asia-Pacific markets were able to jump ahead by skipping development stages that the US and Europe once toiled through, allowing them to now be the industry growth engine and leader in all things digital. Other markets should be taking a step back and learning from what’s happening here,” she said.
Bain said there is no single path to a thriving future, yet organizations are prioritizing action in six areas, all of which have been accelerated by COVID-19:
Reinventing their value proposition: Asian consumers led the world in digital adoption and are increasingly balancing dual careers and facing a widening gap is between the rich and poor.
This is translating to growth in convenience offers and formats, online shopping and polarization between value and premium retailers.
Winning digital engagement: Over 70% of e-commerce in Asia will be conducted on the phone (vs. 40% in US) and COVID-19 saw dramatic increases in use of digital channels.
Futureproofing assets and operations: In Asia-Pacific, only retailers in Australia and Japan (and to a lesser extent South Korea) have built out their physical store networks as extensively as their counterparts in the US and Western Europe. The region’s retailers are finding growth enough online and are now unlikely to expand their physical network to anything like Western levels of ubiquity, whilst needing to adapt the role of these stores to support omnichannel needs in fulfilment and as show-rooms.
Mastering the last mile and supply chain resilience: The consumer expectations are rising on fast home delivery, yet Asia’s diversity in terms of urban density, logistics infrastructure, cost of real estate and labour costs mean that last mile fulfilment models cannot be uniform.
Defining their ecosystem destination: The rise of ecosystems in Asia has been further accelerated under COVID-19 as retailers have sought new partnerships to advance their digital capabilities, achieve virtual scale, and respond to accelerated migration to online.
Re-tooling for digital: Retailers have been investing in building new capabilities in advanced analytics and technology to prepare for the changing market landscape and leverage the data assets they have. For many, COVID-19 has pulled forward investments to fast-track the ability to compete in a fast-changing environment.
Retailers that master these imperatives should gain a sustainable edge over rivals.
“The current macro-economic conditions have caused intense and unwavering challenges for some retailers, while others have experienced a period of remarkable results.” said Kanaiya Parekh, Bain & Company expert partner and co-author of the report.
“It’s clear from this research that retailers must immediately focus on developing and implementing strategies which will future-proof their business, including reviewing the role of their stores as well pivoting their operating models to be more agile and data-driven”
