The Boom of E-Commerce: What Does It Mean for Traditional Retailers?

Driven by the boom of digital developments and rapidly growing middle class within the region, e-Commerce in the major SEA countries have, without a doubt, becomes pivotal in driving the GDP growth in the region.

This is on a continued upward trend, with a projected burgeoning growth rate by 16-fold between 2015 and 2025 to reach $88 billion in GMV, according to a 2016 research conducted jointly by Google and Temasek Holdings.

With the shift in retail consumption gravitating towards the online sphere, and a recent spate of well-known international brands like BCBG Max Azria, Abercrombie & Fitch shuttering their stores, does it loom the end for the brick-and-mortar retail spaces?

Probably not.

US-based Bonobos.com, who started out as a pure-play retailer specializing in menswear, opened its and first physical “Guide shop” after five years and has intentions of expanding them further to 100 retail locations by 2020, despite trends of diminishing footfall in malls. These “Guide shops” serves to provide a one-to-one attention to each customer, allowing them to physically peruse the assortment to find the perfect fit. Defying traditional retail concept, customers actually place their orders in-store and have their purchases delivered to them for free.

This is exemplary of the “New Retail” omni-channel model that Jack Ma, founder of Alibaba Group advocated, that is, the integration of online presence with an offline experience, driven by a logistics network along a single value chain. Using data on each customer’s unique consumption behaviour, it gives the “New Retailers” a leverage on their customers overall shopping experience at specific touch point. Take for instance, one of the values from which an offline retail store gains from its online platform could be from the click-through rates gathered and then putting together the most visually appealing product to front their display windows.

Realizing that there still exist demands for physical stores to satisfy customers’ desire to see, feel and touch a product, pure-play retailers are well-aware of their limitations in this aspect. Thus, the motivation for them to venture into physical retail stores to engage them throughout their route to purchase.

Knowing that most offline consumptions today started with the initial stage of product discovery journey online; even the most established brands, who are still operating in the traditional retail model, needs to be wary that retail as we know it - is becoming obsolete. With constant bombardment of advertisements and easy accessibility of information, consumers are more sophisticated now than ever. The purpose of a retail store becomes radically different from that served ten years ago. Therefore, it is imperative for brands to engage in experiential marketing with aims to create novel experiences, one that would evoke the emotions of their targeted consumers to develop a relationship with the brand.

In conclusion, there is a need for brands to reinvent and modernize their businesses to beyond just selling the product. The concept of having an engaging retail experience is now their new product, a principle that brands today would have to urgently address in order to survive the era of retail disruption.