Fashion, electronic physical stores suffer in e-commerce growth

By AZREEN HANI / Pic By ARIF KARTONO

MORE brick-and-mortar retailers will be hit in the next few years if they fail to adapt to digitalisation as online retailers continue to grow in Malaysia.

Retail data expert, Innergia Labs CEO Vernon Chua, told The Malaysian Reserve (TMR) that consumers have become more accustomed to the convenience and lower costs that e-retailers offer in niche sectors such as clothing and electronic items.

“Fashion, books, electronics are going to struggle, because these items are easier for the people to get online. The concept has been around for the past few years and people are used to cheaper prices, even if they have to wait for a day or two,” Chua told TMR in an interview recently.

He said although Malaysia’s retail expenditure is still at an infancy stage with only 5% compared to China’s 20%, the data has shown that these specific retailers suffer amid e-commerce development.

“What we realised is, we are still in our infancy for retail e-commerce. But, we can already see there’s very specific retailers that suffer amid all these,” Chua explained.

“Fashion, books, electronics, accessories, if they don’t adapt, they will be hard hit especially when the government has expected this sector to grow by 20% of all transactions in the next five years,” he said.

Still, not all is doom and gloom for the brick-and-mortar retailers as lifestyle based malls, convenience stores and local supermarkets are expected to expand and make profit this year.

“The ones that seem to be thriving are the lifestyle-based retailers: Food and beverages, and convenience stores that are positively growing with ready-to-eat (RTE) concept,” he added.

“It is evident with how quickly Japan’s Family Mart grows here. Nowadays, convenience stores are not merely just about providing convenience, but also quick meals for those who are always on the go,” Chua said.

According to him, the concept has proved to be a success in the US and Malaysian retailers have started to embark on the concept as well.

“You can look at MyNews and 7-11. This RTE will be a pulling factor for customers.”

Local supermarkets are also growing compared to foreign counterparts because they have the ability to cater to specific locations, at much lower cost.

“They are and can hyper-localise. Why? Because they know what locals want and the cost is lower. Additionally, they deliver at much better prices compared to foreign players. They focus on far fewer stock keeping units and are very price sensitive,” said Chua.

Real estate economist and data analyst, Erhanfadli Azrai, believes the convenience retail will continue to drive the change in the industry.

“Ten years ago, we saw the rise of supermarkets and shopping centres and over the past two or three years, convenience shopping, online trading and franchising took the centre stage in driving retail trend,” he told TMR in an email reply.

The convenience retail, he said, will become more automated with a lot more emphasis on skilled customer service to increase customer experience.

“Online trading is disrupting the retail industry, especially if the price differential between online and offline is large enough to make you wait two or three days to get the product delivered,” Erhanfadli said.