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'Tis the season of good cheer...

The Edge Singapore
The Edge Singapore12/25/2018 10:29 PM GMT+08  • 5 min read
'Tis the season of good cheer...
SINGAPORE (Dec 24): The holidays are upon us and, traditionally, the season would be one of good cheer for retailers as people load up on festive food and gifts. These days, however, shoppers’ dollars and goodwill have spread to scores of online stores.
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SINGAPORE (Dec 24): The holidays are upon us and, traditionally, the season would be one of good cheer for retailers as people load up on festive food and gifts. These days, however, shoppers’ dollars and goodwill have spread to scores of online stores. These stores are ready to express ship just about anything and everything — from groceries and furniture to electronics, clothes and luxury handbags — at a moment’s notice.

According to a report by Google and Temasek Holdings, e-commerce transactions in Southeast Asia amounted to US$23 billion ($31.5 billion) this year, double that of the year before. There were 120 million shoppers, 2½ times more than just three years ago. The value of transactions is expected to quadruple, to hit US$102 billion in 2025.

The report also noted that some US$30 billion was spent on booking holidays online, while another US$8 billion was spent on transport and food delivery. Taken as a whole, the internet economy in Southeast Asia was worth some US$72 billion, and will surge threefold to US$240 billion in 2025.

The growth of e-commerce has led many to predict the end of the brick-and-mortar retail concept. In the US, the rise of Amazon.com has been blamed for the demise of Borders bookstore, and a host of other retailers that have gone bust. Suffering alongside the empty stores are the shopping malls that house them. In 2016, malls in Singapore hit their lowest occupancy rates in a decade as supply of retail space increased.

Are the traditional stores really at a disadvantage? Some have argued that e-commerce actually offers retailers, especially the small independent ones, the global marketplace access that would otherwise have been out of reach. As we report on Pages 12 and 13, nearly 80% of small and medium-sized enterprises in Singapore used e-commerce to export their products.

Yet, very often the small retailers would end up selling their wares via major e-commerce platforms, or marketplaces, such as Taobao, Lazada and Amazon. This gives them instant market reach, but also subjects them to the requirements and restrictions of those platforms, which may cost them. And, that also means giving those platforms even more dominance over the marketplace.

As the Google-Temasek report also noted, the top three e-commerce businesses were Lazada Group and Shopee — both started in Singapore, and Indonesia’s Tokopedia. They are local, home-grown players, but also marketplaces, consolidating the wares of a multitude of individual retailers. What’s more, they each have received substantial financial backing from even bigger internet players. Shopee is backed by Sea; Alibaba Group Holding owns Lazada and has funded Tokopedia.

Indeed, much of the e-commerce space globally is dominated by a handful of giants, most notably Amazon and Alibaba. In an indication of their influence, the sales tactic they have employed — picking a date and making it a shopping event, such as Black Friday and 11/11 — have translated offline as well. Are the retailers with physical stores being forced to match the deals available online, or are they simply capitalising on the retail event of the year?

One commentator believes such sales tactics are only increasing competitive pressure, and likely to have a diminishing effect. Thibault Ricbourg, director at consulting firm Simon-Kucher & Partners, sees retailers beginning to offer deep discounts even before the main shopping event starts. “Retailers need to reconsider if price slashing is the best way forward and avoid making price the only differentiating factor for shoppers. Promotions lose their effect if used too often, and additional discounts don’t always lead to more revenue,” he says.

Nevertheless, what is clear is that online shopping sites are also able to collect — quite easily — useful information on shopper profiles and habits. That is going to help them be more competitive, and even more so in the case of the major platforms, which have millions of users a day. One commentator is calling it “techno-colonialism”, pointing out that the platforms essentially own the data on most consumers in any given market. Another has suggested that regulation might be in order as the industry grows and evolves, given how the concentration of market power within a few players is anti-competitive, to say the least.

Meanwhile, as our reporter also explains, some retailers who had started out solely as internet-based businesses have seen fit to set up physical stores. The benefit in this, according to the retailers who have done so, is a better connection with customers. A physical store allows customers to experience the products — that means a store needs to be “differentiated, delightful and considerate”, says fashion store Love, Bonito’s chief commercial officer Dione Song.

With both online and offline retailers fighting for the attention and wallets of consumers, it should then be the shoppers who are filled with good cheer.

This story appears in The Edge Singapore (Issue 862, week of Dec 24) which is on sale now. Subscribe here

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