SINGAPORE (June 16): Following nationwide lockdowns which has led to physical store closures, retailers have had to rely more heavily on online platforms.
As such, retailers are now seeing digitalisation as “the way forward” to achieve growth in a post-Covid-19 era, according to a survey conducted by EY.
The survey was conducted among 263 retail business leaders across Southeast Asian countries – Indonesia, Malaysia, the Philippines, and Singapore – in May.
According to the survey, 59% of retailers polled, place digitalising their business as a top priority over the next 12 months. This is followed by restructuring the business, exiting non-performing businesses, and acquiring and merging with another retailer.
Immediate priorities among retailers include driving revenue through online sales and online market listings, which include creating seller accounts on e-commerce platforms at 57%. This was followed by promotions and markdowns at 9%.
At the same time, some 43% of the retailers surveyed are working to reduce overhead and back office costs, while 33% are looking to implement in-store cost reduction and store portfolio rationalisation.
For short-term cash relief, 61% of retailers are turning to working capital optimization (61%). About 23% of retailers are turning to rental negotiations and profit-sharing readjustments (23%) and balance sheet restructuring (4%).
In contrast, 7% of respondents do not know where to focus on for their immediate cash needs.
Following the results, EY recommends retailers focus on five areas to emerge stronger after the crisis. These include driving an omnichannel strategy, boosting supply chain resilience, expand offerings to adapt to changing consumer needs and behaviours, make strategic acquisitions, and driving agility for fast and local decision-making processes.
“This crisis is fast-evolving consumer’s preferences, behaviours and values. Online retail penetration is expected to grow at an accelerating pace, and the industry’s economics will shift with e-commerce gaining a fair share of the profit pool,” says Olivier Gergele, EY Asean consumer products and retail sector leader (elect) and partner of strategy and operations at Ernst & Young Solutions LLP.
“While digitalization is a very visible option in current times, an online strategy alone may be insufficient for retailers to stay profitable or successful in the long run. We are seeing a fundamental shift in the retail industry that demands a rethinking of business and operating models,” he adds.
“From what we have seen in previous crises, retailers that embrace change are more likely to emerge as leading businesses while those who persist in conducting business-as-usual may fall behind. Yet, unlike previous crises, the unprecedented disruption from the COVID-19 pandemic may require retailers to undertake a whole-of-business transformation that goes beyond simply implementing digital initiatives in silos,” Gergele notes.
