Tuesday, August 20, 2019

Putting the future in the BASKET

Jun 28. 2019
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By   KWANCHAI RUNGFAPAISARN
THE NATION

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RETAILERS are gearing up to move into a new phase of the industry over the coming decade amid the disruptive forces of technology that are bringing rapid changes in consumer behaviour and lifestyles, industry experts say.

 

Sompong Rungnirattisai, chief executive officer of Tesco Lotus, said that while consumers are changing their behaviour, they continue to demand top quality products with value for money, and a convenient and pleasant shopping experience. 

 “As a result, Tesco Lotus has been focusing on offering great quality products at affordable prices, while working on providing a seamless omni-channel experience, as customers shop and engage with us across multiple platforms from our brick and mortar stores to our online shopping channels, our mobile applications, and our socsial media platforms,” said Sompong.

“As technological advancements continue at warp speed into the next decade and beyond, businesses will need to remain extremely agile in order to cater to these changes in consumer behaviours at a faster pace. For retailers such as Tesco Lotus, our task is to continue to provide great quality products at affordable prices and a great shopping experience anywhere, anytime for our customers.”

Sompong said that another trend that is anticipated by the company – and which will continue to grow over the next decade – is sustainability. More and more consumers will demand that businesses operate responsibly, transparently, and ethically. One important aspect of sustainability for retailers is responsible sourcing of products with respect to the people who work in the value chain, animal welfare and the environment. 

 “Tesco Lotus is working closely with our suppliers and farmers to enhance the sustainability of key products in our customers’ baskets while maintaining affordability for our customers. Packaging will also continue to be an area of focus,” Sompong said.

Tos Chirathivat, executive chairman and CEO of Central Group, said that the retail industry has undergone significant transformation and it will continue to evolve even faster due to technology, data insights and changing consumer lifestyles. Key trends shaping the retail sector are that customers are “more emotional than functional” and massive transformation and collaboration will have to happen in order to remove the boundaries between the retail, payment and logistics industries.

“Central Group positions ourselves as ‘Central of Life’ for all our stakeholders. We continue to revolutionise our platforms in order to create the ‘Central Experience’ that can offer a unique value proposition with a frictionless experience throughout the customer’s journey,” said Tos.

As what kind of transformation will occur more than 10 years out, Lacia Sherlock, IKEA’s deputy retail manager for Thailand, Singapore and the Philippines, said that she thinks that depends on what part of the world you live in. 

“We are here in Southeast Asia. You can’t compare retail habits. We talk of course a lot about this. But we are in Southeast Asia and shopping is like a part time hobby,” she said. “Shopping and seeking out retail destinations are hobbies for the family. So we see that retail will continue to do well in Southeast Asia. But the format will change. It will be a version of brick and click working together. You will see, for example, they were just online, and they’ve gone to a physical presence. So it is the combination of both.

“Brick and click, I believe, is for the future. And our store’s format makes it accessible. We want to show inspiration. So we always want to have a physical platform. And Thailand has a high rate of internet consumption. Thais are also big social media fans. And they like to touch. They want to touch and try before they buy.”

Robert Candelino, CEO of the Unilever Thai Group of Companies, and for Malaysia, Singapore, Myanmar, Laos and Cambodia, said that digitalisation will affect every aspect of life including how we shop in the future. This will likely mean that all retailers will have a digital or e-commerce capability because “it is our expectation that consumers will continue to seek the convenience and efficiency of shopping” - wherever, whenever they want. 

 “The change in retail landscape will be a challenge for everyone, not just one industry or sector. All of us need to recognise the inevitability of a digital future and as such we all have to figure out how to evolve from our legacy models to future-proof models,” Candelino said.

“At Unilever, we are approaching this evolution similar to how we have done for all major changes throughout our long history – by focusing on being the best partner to all our customers, by having great products that are purposeful and add value to people’s lives and by remaining the most preferred employer in Thailand by attracting leaders who want to help shape the future in a positive way.”

Punyapon Tepprasit, chief executive officer of MVP Consultant and a lecturer in MBA industrial management at Ramkhamhaeng University, said that the continuously developed technologies like the Internet of things has changed the world of retail dramatically. This is especially so in the use of online channels to support trade and customer service. Trading through e-commerce has become familiar to consumers over the past years. The volume of purchases from e-commerce has grown steadily. 

 “In the near future, we will see many retail formats, including for e-commerce subscription services. As the consumers need products that match their preferences, they will want direct-to-door service and e-commerce subscriptions are likely to grow significantly. These businesses will deliver the products that consumers or regular customers need every month, or according to the agreed timeframe.

“For example, in the razor business in the United States, marketing is conducted by creating knowledge and understanding about American consumers who have to change their razors every month for cleanliness and safety.”

Punyapon said that e-commerce with a subscription format is growing in the US market, which is the reference market of many countries and is the major retail trend leader in the world. A report by McKinsey & Company found that from 2010, the sales made at such businesses amounted to US$57 million.

Larry Chao, managing director of Chao Group Limited, a consulting agency specialising on organisation change, said that when he thinks about what the retail landscape might look like 10 years from now, he first thinks about how things have changed in the past 10 years. 

 “I know that extrapolating the future from the past is hardly perfect, as certain technologies advance exponentially and new trends emerge, but keeping this perspective does provide a dose of reality on what might really change the industry, rather than the hyped-up changes promised by exciting digital breakthroughs,” Chao said. “To understand future possibilities, we also have to factor in Thai consumer shopping habits.

 “I envision five changes: the first is industry consolidation, followed by gravitation of consumers to either value for money private label or brands and experiences that mean something; the disappearance of plastics and concern for sustainability; outstanding customer service as a real competitive weapon; and lastly, digital disruptions, primarily in operations.”

Regarding consolidation, he said that over the past 10 years, there has been unbridled growth in shopping venues.

“This seems counterintuitive, given that in other markets such as the US, shopping malls have contracted or gone bankrupt, as e-commerce gobbled up market share. But in Thailand, people love their brick-and-motor shopping experience and while they might not always buy in stores, they have not migrated online – yet. 

“But the laws of supply and demand will eventually prevail. We will reach a saturation point where having a Starbucks on every street corner is simply unprofitable. At that point, there will be a culling of retail outlets, and those in the fittest locations and/or those having the most desirable product portfolios will survive.”

Chao said that regarding the gravitation of consumers to either value for money private label or brands and experiences that mean something, consumers are confronted by so many choices,

“They are already beginning to allocate their spending money into two buckets: commodity items and value-added brands. To meet demand for commodity items, retailer will expand their private label business whilst offering consumers exciting brands that mean something. Brands that are sharply targeted and offer consumer value they cherish, not just bells and whistles, will thrive. Brands caught in the middle will be squeezed out by value-added brands and private labels.”

When considering the disappearance of plastics and the concern for sustainability, he said this change is likely to gain momentum as people become more aware of the real damage plastics have caused on the environment.

“At places like Central Chidlom’s Tops Supermarket, cashiers use paper bags to pack groceries every Tuesday. At Central Embassy’s Eathai, sticky rice is now packed in banana leaves instead of small plastic bags. But this is only the tip of the iceberg,” he said.

“There are huge opportunities to eliminate or replace plastics in packaging including shrink wrap. I would not be surprised to see more biodegradable innovative packaging take off within the next 10 years.”

On the customer service front, retailers could seek to make this a competitive weapon, Chao said. 

“Today, in Thailand, human labour is relatively inexpensive, so it is easy to hire 10 less skilled people to do the work that three skilled people could do. This is unsustainable and normally delivers only average service. With wages increasing, retailers will be forced either to automate or, if service is important, hire fewer, better people,” he said. 

“Retail companies will learn that having a lot of inexpensive staff on the floor to interact with customers is not as effective, and often worse, than having a few outstanding salespeople who are knowledgeable, responsible and care about service. Successful retailers will be able to attract and develop really talented professional service people, who know how to deliver outstanding experiences and reduce operating costs at the same time.”

Chao said that, when it comes to digital disruptions in operations, there is no doubt that consumers will continue to be inundated with digital technologies and experiences.

“But if you think about it, how much has digital technology really changed the way you shop? We are flooded with exciting stories of how digital technologies are increasing consumer loyalty, and sales from other countries, but I’m not sure whether they are transferrable to our shopping culture here in Thailand,” he said. 

“Yes, in other countries, Amazon and Alibaba have disrupted the industry with online shopping. There is Tesco Homeplus Virtual Subway Store in South Korea. But as long as factors such as a lack of trust with online transactions or unreliable delivery exist, it will be challenging for digital shopping to gain traction here in Thailand.”

Chao said that one area where technology will continue to have the biggest impact in retail is with the customer experience, particularly in making this as frictionless and as fast as possible.

“For example, retailers will be able to track customers as they move through the store, recording what products they pick up and what they put back on the shelves,” he said. “When they have finished shopping, customers will be able to scan their mobile phones to make the payment on the final basket of goods they have selected. Grabbing customer attention might also become fancier and more exciting.”

 

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