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Digitalising consumerism

Samantha Chiew
Samantha Chiew8/7/2020 07:00 AM GMT+08  • 17 min read
Digitalising consumerism
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Covid-19 is forcing F&B and retailers to step up their online presence. In a parallel move, consumers — even the older ones — are taking to online shopping more actively than ever before

In the past years, malls were a common place for people to head to for food, retail therapy, as well as entertainment. But the Covid-19 pandemic has changed all that.

During Singapore’s “circuit breaker” period to slow the local transmission of Covid-19, the once-crowded malls became ghost towns with hardly any shops open. Only those deemed “essential businesses”, such as certain food outlets and supermarkets, were allowed to stay open. And even then, the food outlets were open for takeaway or delivery only, and supermarkets often saw long queues as shoppers emptied the shelves of essential goods. People were also advised to stay home and head out only when absolutely necessary.

Malls were empty and essential goods were often sold out at supermarkets during the circuit breaker

With businesses eager to reach out to consumers and people wanting to get their dose of retail therapy, both business owners and consumers have turned to the internet.

Although Singapore is well into Phase Two of the reopening and safe distancing measures have been relaxed, a new norm has formed as people have gotten used to the convenience of buying goods online. The transformation, already underway, has been accelerated by the pandemic.

According to a survey conducted by financial literacy platform SingSaver in June, 70% of Singaporeans are likely to purchase groceries and other essentials online even after the pandemic dies down. Interestingly, more than half of respondents (53%) aged 54 and above — not the most naturally digitally-savvy demographic — agree with this.

“The pandemic has clearly provided Singaporeans with the impetus and time to gain familiarity and comfort with more online services,” says Prashant Aggarwal, interim country manager of SingSaver. “It’s interesting to see how this has been the catalyst many needed for adoption, given that the majority intend to keep using these digital tools beyond the pandemic.”

In another affirmation of the trend, data from United Overseas Bank (UOB) shows that online grocery shopping done using UOB cards grew by 78% from January to May, compared with the same period in 2019. Similarly, UOB customers made 66% more food orders online and 41% more e-commerce transactions from January to May compared with the same period in 2019.

Going online

With many businesses undergoing digitalisation, will it become a permanent fixture?

A study by Workday, a global leader in enterprise technology for human resources and finance, found that almost half (48%) of Singapore organisations have accelerated their digital transformation plans as a result of the pandemic, while 38% have slowed down. But all organisations surveyed (100%) see digital transformation as a priority, with 94% using digital technologies to execute their business continuity plans.

Owing to a lack of digital agility, about 71% have struggled to make changes to their financial plans for the year, with 63% unable to realign their organisational structures.

In terms of people and processes, over half (56%) of organisations have been unable to track their people’s skillsets to form special task forces in response to the pandemic, and 44% were not able to manage new approval and business processes.

When asked which areas of their business were hit the hardest, Singaporean organisations identified supply chains (44%), sales (42%) and the workplace (40%).

A shortfall of digital skills has proven to be a significant barrier for organisations to faring better with digital agility amid this pandemic. An alarming 52% of organisations say that less than half of their people are equipped with digital skills and capabilities.

The Singapore government has long been encouraging all businesses, regardless of sector and size, to digitalise, as part of its plan to build a Smart Nation. Now, more than ever, Covid-19 has shown that in order for businesses to stay relevant amid a socially distant community, they have to go digital. But Singapore also recognises that digitalising a whole business in such a short time is no easy task. Hence, the government has come up with several initiatives and programmes to help these businesses.

S Iswaran, Minister of Communications and Information, pointed out in June that local SMEs have stepped up their digitalisation efforts this year, leveraging on government grants and initiatives to do so.

This year, the Productivity Solutions Grant (PSG) — which provides subsidies of up to 80% for SMEs that adopt digital solutions pre-approved by the Infocomm Media Development Authority (IMDA) — has helped over 3,500 SMEs in the F&B and retail sectors, which are deemed to be some of the worst-hit sectors by Covid-19. This number is double than that of last year.

In a June 4 media release, Tan Kiat How, who was then CEO of Singapore’s Infocomm Media Development Agency (IMDA), said: “Covid-19 is a wake-up call that going digital is not an option — it is an imperative. But we recognise that some segments, especially our seniors and hawkers, may experience challenges doing so. We understand and empathise with their challenges, and we will spare no effort to help close the digitalisation gap for them.”

To this end, IMDA has created a team to help Singaporean businesses go digital. It has launched the Digital Resilience Bonus (DRB) to encourage enterprises to invest in digital transformation. Eligible enterprises will be able to receive the DRB on top of existing support for them to adopt digital solutions, e-payments and e-invoicing.

The F&B and retail industries were the first to receive help from this. Eligible food services and retail enterprises that adopt pre-defined categories of solutions will receive cash payouts of up to $10,000. These enterprises must adopt the solutions by June 30, 2021, to qualify for the payout.

The Singapore government has shown that it is supportive of F&B businesses going digital. But extreme times call for extreme measures, and many other organisations have come up with ways to ensure that no business is not left out in Singapore’s race to digitalisation.

“Many SMEs embarking on a business transformation journey find it daunting, given their lack of knowledge on where or how to start. This is why at The FinLab, our approach is to first guide our start-ups and SMEs through an holistic evaluation of their business’ key challenges and needs,” says Pauline Sim, co-head of UOB’s The FinLab.

The FinLab launched The FinLab Online this year, with the aim to give Asean business owners and entrepreneurs access to its business transformation programmes, as well as to create a community for SMEs and start-ups to share their knowledge with one another.

Food delivery became popular during the circuit breaker period

Traditionally, UOB has claimed a strong presence providing banking services to SMEs. It fully intends to maintain the relationship even as SMEs, including those in retail and F&B, move from offline to online. UOB has recently partnered Getz to help F&B businesses retain more income from every online food order they take.

Under the collaboration, F&B merchants using Getz’s food delivery solution will only need only to pay transaction fees capped at a maximum of 4% of their online sales — a discount of up to 50% from Getz’s usual rates. In addition, F&B businesses will be able to receive the revenue from their online orders in just two business days — helping to alleviate cash flow pressures further.

And since cash flow is one of the major issues that SMEs face during this period, UOB has introduced initiatives to help its SME clients get access to funds easily and in a timely manner.

“To help our clients ease their cash flow pressures, we allocated $3 billion in relief assistance so that companies, including those in the F&B and retail sector, have the option to re-work their principal repayments and to service only their loan,” says Mervyn Koh, UOB’s country head of business banking Singapore.

Strategic partners

Getting financial help is one thing, but when it comes to actually bringing the business online and getting it running, there are several third-party applications, tools and platforms that have paved the way towards a new norm for consumers.

One example is Oddle, a tool to help restaurants manage and grow their food businesses online by allowing the restaurants to customise their own ordering page. Unlike food delivery platforms such as FoodPanda, Deliveroo and GrabFood, Oddle only helps to manage the ordering system and does not provide the additional delivery service.

Although the food delivery platforms can easily put restaurants’ menus online and reach out to consumers, their costs were too high. This caused some 600 restaurant owners to come together to petition the platforms to lower their commissions, which during the peak of the pandemic increased to 30%. In an open letter to the platforms, the petitioners said: “Nobody has ever liked the rates imposed on us but we tolerated them because in the not-so-distant past, the money from your sales didn’t form a core pillar of our revenue streams.”

That was when Oddle started to flourish.

“When the circuit breaker was announced in Singapore, we saw a 50% surge in signups by restaurants using Oddle compared to pre-pandemic times, leading us to onboard 500 new restaurants in April alone,” Jonathan Lim, founder and CEO of Oddle, tells The Edge Singapore.

Lim used to run restaurants himself, and he found the existing online platforms, especially those providing delivery services, too expensive. Hence, he started Oddle in 2014 to democratise online ordering for restaurants and to address the market gap for affordable online delivery systems.

With Oddle, business owners need not pay any set-up costs. Instead, a 10% commission fee is charged per order, which covers payment gateway and customer support costs. This model enables restaurants to interface directly with their customers and maintain full control over their delivery fees — whether by using their own drivers or Oddle’s logistics partners.

“Furthering our mission to support and grow the F&B industry, we launched Oddle Eats, an online food directory which consumers can use to browse hundreds of Oddle restaurants in one place, discover new and interesting restaurants, and then click through to the restaurant’s own website to order,” says Lim.

Meanwhile, restaurant booking and deals app Chope evolved during the circuit breaker to provide a delivery service to its restaurant clients. Chope partnered taxi and private hire drivers to help the restaurants conduct the deliveries. That way, it offers both drivers and restaurant owners some means of supplementary income.

Restaurants have opened for dine-in during Phase Two

Although Phase Two has seen many dining in restaurants again, there are still a large number of those who prefer dining at home. Citing its reservation data, Chope’s founder and CEO Arrif Ziaudeen observes that there was pent-up demand for dining in.

“While reservations are back up, there is still room for further growth. Our reservation and delivery numbers tell us that there are still people who would prefer to dine at home. We will be here in this space as long as restaurants find value in us providing this [delivery] technology and service for them, he says.

Ziaudeen also noted that the F&B industry has learned a lot from the Covid-19 pandemic — do not put all your eggs in one basket. “The industry is coming out of this understanding the importance of diversification to create multiple or alternative revenue streams to be able to pivot quickly and cater to different situations and measures,” he adds.

Deal app Fave has also stepped up to help its merchants. “We have launched a couple of digitisation initiatives and campaigns within Singapore, some independent and some partnered with the government, to ensure that no businesses, no matter how small or new to digital platforms, slip between the cracks,” Ng Aik-Phong, managing director of Fave Singapore, tells The Edge Singapore.

To help merchants with their cash flow issues, Fave partnered Facebook and Instagram to promote its eCards service via social media. Fave’s eCards allows its merchant partners to pre-sell digital in-store credit to consumers online and generate critical revenue during the circuit breaker, even if the physical store is closed. Consumers can then use their eCards once the outlet opens and enjoy savings.

Apart from its initiatives and campaigns, Fave has reduced and waived some of its fees for merchants to help them with their cash flow. Fave has also upgraded its app interface to highlight merchants who were able to continue businesses throughout the circuit breaker, and revised its listings every time the government closed or opened specific sectors, in most cases within 24 hours of the announcements.

Once these businesses have set up an online platform where consumers can purchase their products, there is a need for customer support and engagement. And with manpower cost and safe distancing measures being issues, what better way to reach out to consumers than via the internet? This may very well shape the future of marketing and customer support.

Wendy Johnstone, Asia Pacific COO of Zendesk, says customer request volume overall steadily increased in Singapore since late February before subsiding in June. “The largest spike was a 38% y-o-y increase between April and mid-May following a surge in local outbreaks, indicating that there’s a strong link between the spread of Covid-19 and fluctuations in customer requests among companies of all sizes in every industry.”

She adds: “The pandemic has also resulted in a shift toward immediate, real-time customer support across APAC, as the adoption of WhatsApp (+39%), Facebook/Twitter direct messaging (+19%) and online chat platforms (+11%) has increased over the same period.”

To help retail businesses better prepare for a “new normal”, Zendesk will help equip these businesses with the necessary tools to scale their self-service operations and take the pressure off remote support teams. This includes engaging the use of AI-powered chatbots to address simple inquiries or utilising messaging apps and social media platforms for real-time engagement, and safeguarding the health and well-being of both customers and support agents by minimising the need for face-to-face interactions.

E-commerce boom

Shopping has gotten a whole lot easier. Within a single app, one can purchase almost anything from food, groceries and electronics to clothes. Consumers can even secure a booking slot with certain car brands. E-commerce platforms are growing at a fast rate and the Covid-19 pandemic has spurred this growth. With the capacity to host a multitude of sellers, an e-commerce platform can be likened to a whole mall.

Research done by Google, Temasek and Bain & Company showed that Southeast Asia’s e-commerce industry was valued at about US$38 billion ($53 billion) in 2019. This number is expected to more than double to US$150 billion by 2025.

During the circuit breaker, consumers could not go out to shop. During Phase Two, although retail stores can be reopened, strict safe distancing measures are still in place. Shoppers have to check in and out of every mall and store they enter, and often have to wait in line to do so. Given this inconvenience, consumers may prefer to shop in the comfort of their own homes.

One of the largest e-commerce platforms in the region is Lazada, the Southeast Asian unit of Chinese e-commerce giant Alibaba Group Holding. James Chang, CEO of Lazada Singapore, told The Edge Singapore that in the past few months, particularly during the circuit breaker period, Lazada made significant adjustments to cater to the needs of both its consumers and retailers. For the sellers on the Lazada platform, Chang notes that those from the retail sector were badly affected by the circuit breaker period.

“We wanted to help SMEs in particular as they form the lifeblood of the economy,” says Chang, who adds that Lazada has a few tricks up its sleeve to help the sellers.

First, for businesses to stay afloat when they have to keep their physical stores closed, they would have to go digital. Lazada has partnered with Enterprise Singapore to provide up to $9,000 in subsidies for retailers that are selling on Lazada for the first time.

Lazada has also launched its Mid-Year Festival. Typically held in July, the sale event was brought forward to give retailers, especially the tech retailers that were impacted by the cancellation of the quarterly IT Show, a platform to showcase their sale items.

Apart from the IT Show, another one of Singapore’s biggest sale events has also been cancelled. For the first time in its 26-year history, the Great Singapore Sale (GSS), which is usually held from June to August nationwide, will not be taking place.

As the mid-year period typically signals “the time to shop” for most Singaporeans, it is no surprise that they have turned to e-commerce and online shopping sites to snag deals.

“Millions of dollars were transacted within the first hour of the [Mid-Year Festival] campaign, indicating the pent-up demand for online shopping,” says Chang, who also noted that Lazada had hit a record high in sales revenue, new customer sign-ups and new retailer sign-ups during the circuit breaker period. This even surpassed November last year, a month when Lazada typically reaches its record high due to the 11-11 sales.

RedMart had difficulty keeping up with the surge in demand

Also found on Lazada’s platform is its online grocery store RedMart, which saw a large surge in demand since the Singapore government declared DORSCON Orange. In fact, RedMart had difficulty keeping up with the purchases as panic buying spread across the nation. One especially memorable order came up to 800kg worth of goods — equivalent to the weight of a giraffe, says Chang.

To keep up with the surge in demand, Lazada hired 500 more full- and part-time staff. It has also changed delivery options from a time-based one to an area-based one. “As the majority of consumers remained indoors, this change allowed us to serve more deliveries within an area. We also imposed order limits and focused on a smaller, core group of product offerings that were in demand. These changes allowed us to serve 50% more consumers as a result,” explains Chang.

Meanwhile, with e-commerce platforms easily accessible by overseas consumers, this was also a good chance for some brands to scale and build their overseas presence.

Alibaba’s cross-border e-commerce platform, Tmall Global, has leveraged the recent 618 Mid-Year Shopping Festival to create more accessibility to the China market for overseas brands and merchants, bringing together more than 25,000 overseas brands including Eu Yan Sang, Hi-Beau and Irvins to take part in the sale, launching a total of more than 400,000 new products.

Snack maker Irvins, famous for its salt-egg-flavoured snacks, saw strong demand from the China market, where it sold more than 1,000 packets of the snack on the first day of listing on Tmall. Since then, Irvins has generated sales that were 800% more than their usual volume, thanks to TMall.

“For brands without a physical presence in China, we have been working with them to set up a flagship store on Tmall Global, or leverage the Tmall Overseas Fulfilment programme (TOF) model which provides overseas brands and merchants the opportunity to test the Chinese market at a lower cost and risk,” says Chris Wang, Tmall Global’s head of business development for Southeast Asia.

Local online market Ezbuy, which is owned by Beijing-based, Nasdaq-listed Lightinthebox, also saw a similar surge in both new users and merchants on its platform, especially after it launched its Million-Dollar Markdown initiative, a promotion where a $1 million budget was set to provide consumers with markdowns of 20%–70% for various products.

Wendy Liu, CEO of Ezbuy Singapore, says: “As most people were confined to their homes during the circuit breaker, we definitely saw a surge in online purchasing as many turned to digital platforms and delivery services to purchase their goods. Categories such as home appliances, groceries and sleepwear and sportswear were the more popular product categories during the period.”

During the circuit breaker, Ezbuy realised a 15% increase in average basket size and 50% increase in the number of transactions. And from April to May this year, the platform saw a 50% spike in traffic, especially after the Million-Dollar Markdown campaign launch. What is more interesting is that Ezbuy saw a tripling of senior shoppers (aged between 55 and 64) in April and May.

If this demographic group, in no way akin to the “digital natives”, are taking to buying online as well, the trend is clear — e-commerce is here to stay.

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