The Retail Race To Stay Relevant
With the spread of e-commerce and a downturn in economic activity, how can brick and mortar retailers encourage consumer spending?
This is no easy time to be a brick and mortar retailer. To what extent has the weak Ringgit and drop in the overall economy affected the retail market in the Klang Valley?
The slowdown in retail spending is indisputable - Last year saw local retailers revising their growth forecasts downwards to 3.0% from 3.5%. Much of it was largely driven by the weak Ringgit. The US’s interest rate hike has caused capital outflows from emerging markets such as Malaysia. The sell-down of Malaysian Government Securities (MGS) and weaker foreign currency reserves were also contributing factors which placed pressure on the Ringgit.
This gave rise to two things – higher business cost due to escalating import expenses and reduced purchasing power. On one front, retailers are facing profit margin compression and on another, there is the subdued consumer spending. We are observing more cautious spending, but the severity differs for each trade category. For instance, the food & beverage category has been impacted less by economic and external factors – it has proven to be resilient so far.
What are Sunway’s strategies in dealing with these challenges? How do you boost foot traffic AND encourage consumer spending?
Today’s malls have moved on from being just functional – lifestyle changes and higher consumers’ expectations demand this. A decade ago, a mall is perceived as a building with impressive architectural features that offers shiny new things for sale.
Malls are no longer primarily for shopping – in lieu of changing times, shoppers especially millennials, are now looking for experiences and memories. At Sunway Malls, we recognise this is an important facet to continue to be relevant. That is why Sunway create malls that serve as hearts and souls of communities – we want our malls to be THE place for people to socialise and have fun together.
This is done by incorporating value-added elements. Efforts include various family-friendly activities such as concerts and art shows to more ‘intimate’ store offerings such as spas and farmer’s markets; all which translate into better footfall and consumer spending.
Of course, mall planning is of utmost importance as well. As described in a research paper titled The Key of Success in Shopping Centers (2012); A shopping centre is a product; one that is developed and managed through the strategic fit of the three composing elements: Location, Customer Mix and Tenant Mix.
Typically before a mall development takes place, a thorough and detailed feasibility study will commence. At Sunway Malls, we conduct many preliminary studies to identify various variables - the surrounding competitiveness, existing retail gaps, catchment size and projected growth, demographic and psychographic profiles of residents and transportation infrastructures, among many.
What essentially happens after identifying the current trends and lifestyle needs of consumers, is the detailed analysis and configuration of the highly-relevant trade mix. Only then, do we proceed with development – this enables Sunway to create a mall which brings value to the surrounding population. Our latest mall, Sunway Velocity has garnered roughly a million footfalls each month since its opening in mid-December 2016.
The Malaysian retail landscape has evolved in the past decade as e-commerce and online retailing becomes more popular. What is your approach to stay relevant in the age of technology disruption?
There is no denying that online retailing and e-commerce are here to stay and they grow increasingly substantial with the passage of time. Nevertheless, online shopping in Malaysia is still in its infancy and there is a lot of latent demand. The Retail Group Malaysia (RGM) reports that online retail sales only account for than 2% of the total sales in Malaysia.
However, according to Euromonitor, Malaysian online retail sales increased from RM1 billion in 2011 to RM2.4 billion in 2016 with an annual growth rate of 18.5%. In contrast, the figure for store-based retail sales was only 3.2%.
The convergence of both online and offline is inevitable - Online shopping is convenient, fast and possibly cheaper while its offline counterpart offers socialisation and engagement of the five senses. At Sunway, we work to leverage on these aspects. One trade category that has been able to harness this social aspect well is the F&B division. More and more people opt to dine or spend time in an eatery based on recommendations on apps like Foursquare and Yelp or through the sharing of experiences and pictures on blogs and social media.
Technology disrupts but it can be equally enabling - technology has enabled malls to deliver and customise experiences like never before. Elements such as virtual reality, Radio Frequency Identification (RFID) and 3D printing have enabled brands to offer unique experiences. Malls that find a way to capitalise on these technological innovations while retaining the ‘human experience’ will continue to be successful.
What do you think the retail experience will look like in 25 years and what do you envision a ‘mall of the future’ to be?
It is a given that technology will play a big part in the running of malls of the future. The shopping experience will be a more seamless as apps and devices on mobile phones provides more options and convenience for shoppers. More retailers will offer online shopping facilities; where consumers who are pressed for time will have the option to browse for products online and drop by the store to try on the goods should they want to. Hence, future retails stores which are more digitally connected might be smaller.
Besides that, mobile or cashless payment systems will most likely take away the need for physical transactions and even long queues at the cash register.
Personalisation will be refined as well by harnessing big data – information on shoppers’ habits, behaviours, preferences and patterns are carefully collected and analysed to create a more personalised experience for each shopper.