- 70% of polled respondents are prioritizing online sales and marketplace listings to improve immediate topline
- In the next 12 months, digital strategies are being prioritized ahead of divesting non-core assets and M&As
- Disruption in the retail sector across Asean – shift in economics, emerging business models and new retail formats - resonates with the Malaysian market
Amidst the COVID-19 pandemic with the corresponding widespread health concerns, travel restrictions and movement control, Malaysian retailers are under increasing pressure to move away from their traditional ‘brick and mortar’ models in order to stay relevant and thrive.
In a recent EY live poll conducted during a webinar for the retail sector, 70% of the close to 100 respondents shared that they are prioritizing online sales and marketplace listings to improve their topline results in the immediate term. The survey respondents recognize that there is a need to reinvent themselves, with digital strategies (55%) and business restructuring (31%) identified as key strategic options in the next 12 months, ahead of alternatives such as divesting non-core assets and mergers and acquisitions (M&As).
Regional sector trends gaining headway locally
The accelerated disruption to the retail sector across ASEAN centers around three common trends. It is a matter of time before these trends are seen in Malaysia, with some already resonating locally.
- Accelerating shifts across retail formats and categories
Online retail and convenience formats will see a higher online penetration and retailers are expected to move away from large store formats. Over the next five years, ASEAN is expected to see a three to fourfold increase in online retail sales (with an estimated market size of USD 90b - 120b). Spending in the consumer health and homecare categories is expected to be positively impacted, driven by shifts in consumer hygiene and cleaning habits as a result of COVID-19.
- Emergence of new business models
New business models emerging from this crisis include dark kitchens, platform-based communities and subscription models, as social distancing becomes the new norm.
Online retailers and other platform related businesses are expected to start getting their fair share of the profit pool and ASEAN e-commerce players are likely to become profitable soon.
Social distancing, working from home and online shopping have emerged as trends that are influencing consumer habits. As consumer-facing organisations try to navigate their way through the COVID-19 pandemic, the global consumer is evolving at an even greater speed.
Preman Menon, Partner, Strategy and Transactions, Ernst & Young PLT said, “The rate of change in consumer behavior has been rapid and retailers are having to anticipate the kinds of consumers that are emerging from the crisis. Retailers have to remain agile and build capabilities to remain relevant in the current market. They have to relook their business models, understand the changes happening in their markets and adjust to the new normal.”
Five key drivers to help retailers accelerate growth
There are five key drivers that retailers should consider to accelerate their growth and emerge ahead of the competition.
- Win online – prepare for online accelerated growth, ensuring a clear omni-channel strategy
- Drive supply chain resilience – ensure diversified, local sourcing and strong demand scenario planning to prevent disruptions
- Expand offerings – adapt to changing consumer needs and behaviours
- Engage in timely M&As – take advantage of low valuation multiples to consider strategic acquisitions
- Drive agility – empower organisations for fast (local) decision-making within a volatile environment
Olivier Gergele, Partner, Strategy & Operations, Ernst & Young Solutions LLP said, “COVID-19 is accelerating the disruption of retail in ASEAN and players that are proactively rethinking their offering, online presence and back-end operations will come out of the crisis stronger.”
“Post COVID-19, the winners will be those who are able to quickly adapt. It will be more a case of survival of the quickest, and not so much of the fittest,” concludes Preman.
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About the live poll
EY hosted a retail sector webinar on 30 April 2020. Participants at the webinar were invited to participate in a live poll where they were asked a series of questions on their priorities to improve topline, focus areas for cost reduction initiatives to release cash and strategic options being considered over the next 12 months.