Drivers shaping the retail industry in 2020 & beyond

THIS is a good time for owners and retailers in the mall and retail industry to explore what the drivers are that will shape 2020 as the sector seeks to recover from a sad state of affairs in the sector. 

In 2018, sales turnover in the sector was reported to be about RM104.2 bil, with all sub-sectors suffering a decline in sales in the third quarter with the exception of pharmacy and personal care which reported growth.

With e-commerce continuing to eat into traditional retail and what seems like the end of the road coming up fast for malls and brick-and-mortar retailers, we now see a totally different scenario. This has driven us to develop a list of retail drivers that will shape the industry in 2020 and beyond. 

We believe these drivers represent growth opportunities for retail industry players to take note of and act to make changes to the way retail has traditionally conducted its business.

Driver 1: Air travel 

Malaysians love to travel. According to Mastercard, about 11.9 million outbound travel trips from Malaysia were recorded in 2016 and the number is forecast to grow by an average of 3.5% annually to 14.2 million trips by 2021. Air Asia, for instance, saw 18% growth in passenger load between January and March 2019 over the same quarter in 2018, a good indication that Malaysians enjoy going on holidays. In 2020, Malaysians will have 12 long weekends. So how does this affect the malls & retail businesses? 

Obviously, there will be less traffic to the malls and this will also affect retailers’ bottom line. 

To top it, the number of tourist arrivals to Malaysia dropped by 930,000 visitors from 2016 to 2018 – from 26.76 million tourists to 25.83 million in 2018. 

These two trends lead to the conclusion that the retail sector will be adversely affected. We feel that as Malaysia moves towards developed nation status, this trend of travelling overseas will likely continue to grow. 

So how can mall owners and retailers respond? For one, greater efforts could be made to tap into the market comprising those who do not travel for whatever reason, as they would be looking for places within the country to be during the long holiday stretches. 

So ideas such as weekend promotions for those not travelling or travel promotions designed to tap into the buying mindset of shoppers before they leave for their getaways will help cushion the potential fall in the number of shoppers to malls and stores. 

Driver 2: Retail as an experience

With the current trend of consumers preferring to buy online rather than visit brick-and-mortar stores, it is important for mall owners and retailers to understand that retail today should be less concerned about the physical attributes of the store and more focused on the experience of being in the store. To drive the point home, is the mall just an amalgamation of shops selling products or is there something more wholesome behind each mall visit?  

A great example of this is Ikea, a brand with incredible reach and having a brand presence among shoppers. A visit to any home will come up with a product from Ikea. The reason is simple: When you visit an Ikea store, they do not sell you furniture but rather the idea of what your future home/bedroom/office could look like. 

Their stores take customers on a journey, starting from the living room all the way through different sections of your home (bedroom, kitchen, etc). Compare this to a visit to an average furniture store and you can see what makes the Ikea brand so successful. In 2019, Ikea’s revenue from Malaysia, Singapore and Thailand was RM3.7 bil (up 20% from 2018). 

Hence, mall owners and retailers need to question what a brand like Ikea is doing right which resonates so well with their customers. In short, it is this very experience which shoppers enjoy when visiting the brand’s stores. 

The role of mall owners and retailers is to duplicate that experience for their customers.

Driver 3: Digital everything

Whether a mall or store primarily benefits from having an online presence or just a physical presence is now moot – 2020 will see mall owners and retailers having to equally focus on a combination of these two as part of their overall retail strategy. 

It is important to point out that online represents both mobile and desktop. The Malaysian Communications and Multimedia Commission (MCMC) reports that smartphone penetration in Malaysia is at 70% of the population while broadband penetration is at 84.5%. 

As such, mall owners and retailers cannot afford to risk not having a strong online presence coupled with a great physical presence. 

Some local malls, such as Sunway Pyramid and 1 Utama Shopping Centre, have started to look into their online presence with malls such as 1 Utama promoting heavily its “OneShop concept.” It is amazing to see a local mall seriously looking into its online presence in such a focused way.

In the US, Amazon, is using its Amazon 4 Star concept store to draw customers who do not shop online, providing a curated experience of what its online store has to offer. 

In fact, every item sold there must be rated 4-star and above before it is featured. This represents a great way for online retail to have a physical equivalent. 

In fact, Malaysia is set to welcome such an online store concept with the first Taobao store which has opened in MyTOWN Shopping Centre. 

Plan of action

This list is in no way exhaustive as we are sure there more drivers out there which mall owners and retailers will need to keep on their radar. What is outlined here is what we believe are the very basis for growth of a mall or retail brand in 2020 and beyond. 

As always, knowing these trends alone is not enough. The key to success is not just to take a serious look at these retail trends but also to develop a plan of action and successfully execute such a plan. – Jan 5, 2020

Pamy Wong and Timothy Liew are from Visata Creative Sdn Bhd, a member of Persatuan Pengurusan Kompleks Malaysia (PPK)

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