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How are small brick-and-mortar retailers in Malaysia coping with the e-commerce revolution

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Coined in the 2010s, in response to a surge in high-profile closures of brick-and-mortar retail stores in the US, the term “retail apocalypse” supposedly heralded the end of physical retail.

While the situation in Malaysia is not yet as dire, the retail landscape has changed, and the outlook for traditional retail in Malaysia is gloomy.

Just last year, Parkson Corp Sdn Bhd shuttered its department store outlet in Suria KLCC, where it had been since 1998; and, as footfall into shopping malls continues to dwindle, more closures could be on the horizon. 

However, it may not be the end of days for physical retail. In China, malls and traditional retailers are seeing a resurgence as they adopt technologies that give them a better understanding of their customers, enabling them to deliver a better experience and value.

Furthermore, they have also invested in converging the online and offline experience for their shoppers, giving them seamless experiences between their online and offline stores. 

It is unlikely that physical retail will completely die out; if anything, the movement of e-commerce retailers into the brick-and-mortar landscapes shows that consumers still have some preference for sampling products in real life before purchasing them.

Also Read: Morning News Roundup: Vietnam’s e-commerce startup Leflair accused of owing US$2M to suppliers

However, in order to stay abreast of the changing retail landscape, brick-and-mortar retailers must adapt to customers’ changing expectations. This includes adopting the latest trends and technologies such as experiential retail, mobile payments, and big data. 

Bringing small retailers up to speed

What are the challenges they face?

That said, this solution may come easier to some businesses than others. Big data, analytics, market research, and even large-scale experiential retail employed by brands like Sephora, have traditionally been seen as capital- and labour-intensive solutions available only to big players; for SMEs with limited funding and technological know-how, these solutions seem out of reach. 

According to a study, 69 per cent of SMEs have incorporated Industry 4.0 technologies into their operations, which is certainly a figure to be optimistic about. However, obstacles remain in the adoption of the latest technologies, in the form of insufficient finances, knowledge, or workforce talent. 

This is something we at Innergia Labs have realised first-hand while communicating with retailers: Some retailers lack awareness of the benefits of data, and how understanding customers through data can drive revenue; some retailers hesitate to adopt new systems out of a fear that they lack the manpower and expertise to use the tools effectively; others believe that adopting new technology is an expensive affair with an unclear return on their investment. 

The troubles facing small retailers only deepens when online retailers are included in the equation. In contrast to the struggling physical retail sector, ecommerce seems to be on the up-and-up, with online retail in Southeast Asia predicted to grow from $19 billion in 2018, to $53 billion in 2023.

Increasingly, consumers are turning to large online marketplace platforms, like Lazada and Shoppee, who are able to provide products at competitive prices and deliver them at convenience. Already, 80 per cent of Malaysian internet users are shopping online

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In order to remain competitive, retailers — big or small — must adapt. However, there is a significant gap in the adoption of beneficial technologies between big businesses and SMEs. When considering that 98.5 per cent of Malaysia’s business establishments are SMEs, this is something that requires immediate attention. 

How can these issues be addressed?

As the saying goes, “if you can’t beat them, join them.” For small retailers to thrive, they must get on board with the sort of technologies that their competitors are using. 

When devising solutions for small retailers, the constraints that SMEs face must be taken into consideration. To address the lack of capital that most SMEs have, the solutions offered must be priced fairly.

To address the manpower and knowledge shortage SMEs deal with, these tools must be easily implemented: the amount of resources required to start utilising them must be kept to a minimum — they should require as little extra hands, and extra knowledge as possible.

Of course, education is also paramount. More efforts must be made in reaching out to small retailers: They need to know that there are tangible benefits to adopting these tools, and that solutions they can afford exist in the market. 

An example of this is retail business analytics. With retail business intelligence software, data is no longer solely the domain of ecommerce and big businesses.

It is now possible for small retailers to gather data, to personalise their customers’ shopping experiences, craft sales strategies, and address the pain points of physical retail. 

Also Read: E-commerce trends: What to expect in 2020

Data collection addresses some of the unique pain points and challenges that small physical retailers face. These are the time and costs of manually collecting and managing sales data — which can take up to three days, or even more, when done traditionally — and shrinkage and pilferage by staff.

These problems are further exacerbated when expanding into multiple outlets as resources are spread thinner, resulting in a drain on revenue. With point-of-sale data analytics, managers can cut down on time spent rifling through and organizing sales data, and can quickly catch anomalies in sales records to nip pilferage at the bud. 

Furthermore, collecting data enables these small businesses to remain competitive by employing tailored sales strategies e-commerce-style. Just as most e-commerce websites gather data on consumers to personalise their shopping experience and thus drive sales, with the proper use of retail analytics, small businesses can identify sales patterns in the data they have retrieved and visualised, in order to craft sales strategies.

In the case of an F&B outlet, this could mean using retail analytics software to collect data on what their best-selling products are, what other products are bought alongside them, and what the average expenditure of each customer is. With this knowledge in hand, they can design a set meal that fits not just their customers’ tastes, but also their wallet size. 

In conclusion

Reports of physical retail’s death may have been greatly exaggerated, but it remains true that physical retailers must continually adapt in order to stay ahead of the game in the rapidly-changing retail landscape.

As SMEs form the backbone of Malaysia’s business establishments, it is imperative that they are not left behind. Now, there are more solutions available on the market that physical retailers — even those with limited capital — can utilise to give themselves that much-needed edge on the rocky road ahead.

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