The future of retail space
By Dr Chua Yang Liang,
Sun Shuyu
/ JLL |
Affected by the waning global economic climate over the past one or two years, sales in the Singapore retail sector have been generally declining. The e-commerce segment, however, has bucked the downtrend.
This could only have been possible with The Fourth Industrial Revolution, more often referred to as Industrial 4.0 or the Internet of Things (IoT). Put simply, the concept of IoT is the fusion of technologies that blur the line that separates physical and digital spaces. It has brought about revolutionary changes in traditional work processes across almost every industry in every country.
A significant factor contributing to the success of many industry leaders today is the incorporation of technological advancement brought about by IoT into traditional business models. Some continue to depend heavily or solely on IoT for day-to-day operations. For instance, the largest accommodation provider, Airbnb, owns no real estate, but a customer-to-customer platform that connects the entire world. The same goes for the world’s largest taxi company, Uber, which owns no vehicles, and the most valuable retailer, Alibaba, which carries no inventory.
As for the Singapore retail sector, IoT has provided an effective platform that continues to promote the rapid growth of digital and more flexible retail space. Between 2009 and 2014, a handful of major online businesses, including C2C platform Carousell, multi-brand carriers Zalora and Reebonz, as well as business-to-customer platforms such as Qoo10, Rakuten and Lazada, have popped up in Singapore and gradually gained a foothold in the retail scene.
According to a recent paper released by the Competition Commission of Singapore, the size of the city state’s online retail market by end-2015 was expected to have quadrupled compared with that for 2010. Evidence suggests that e-commerce activity will continue to grow and account for a higher percentage share of total retail sales, considering the experience of other more mature e-commerce markets.
The next phase of IoT could see physical retailers providing real-time information on their stock and prices directly on a digital platform that is accessible to mall shoppers.
This may appear to be good news for consumers, who are likely to benefit from more varied choices, as well as certain retailers with limited start-up capital. For bricks-and-mortar retail stakeholders, however, the positive outlook for the online retail sector creates a more challenging business environment that may not necessarily work well with their strategy. Many even fear the plausible cannibalisation of online to offline sales. As a result, bricks-and-mortar retailers regard click-and-buy businesses as vicious competitors that pose a threat of complete takeover.
While digital retail space has been rapidly expanding in Singapore over the past few years, its integration with physical bricks-and-mortar retail is still quite remote. In the case of landlords, digital technology has been largely applied to providing retailers’ information via their website and digital screens placed in their malls to offer shoppers directions. Some have also taken the extra effort to feature various retailers’ promotional activities and mall events, in the hope of driving sales.
For retailers, the use of digital media to showcase products and store locations is the norm. Not many landlords and retailers, however, have expanded the level of online information to their physical store. For example, while it is common for consumers to browse an online retailer’s catalogue via its website, the same cannot be said about their experience in a physical retail store.
It does not take a lot for a bricks-and-mortar retailer to provide shoppers an online catalogue of its physical products when they enter their shop. Physical retailers could eventually provide shoppers with a comparable level of information, search ability and integrated delivery service as their online counterparts. The next phase of IoT could possibly see physical retailers providing real-time retail information on their stock and prices directly on a digital platform that is accessible and searchable by shoppers at the mall. In the foreseeable future, it should be possible to locate, using a mobile phone or other personal devices, a particular product within the mall without physically visiting each store to uncover its merchandise, as shoppers usually do now. Free home delivery could also be the norm, as each mall would be equipped with a centralised logistics service provider who could deliver every single purchase within the mall directly to the shopper’s home in one single trip.
Hence, the concern that online could replace physical retail space has been misplaced. On the contrary, physical retail space will still be relevant— as an important avenue to showcase products and for consumers to enjoy quality services. This is also a primary reason for successful e-tailers such as Zalora and Reebonz to venture into the offline retail scene, closing the trust gap between themselves and customers while trying to reach out to a wider audience.
Malls could also become increasingly important as a social gathering spot for providing shared experiences among friends and families. Online interest groups could meet up in these physical malls for special events and social interaction. Friends could spend more time in the mall attending enrichment social programmes, and not just visit for entertainment and food.
There is potential for malls in Singapore to thrive as lifestyle and entertainment centres offering highly convenient shopping amenities, a place for social activity and visual pleasures with the support of technology and digital retail space. A move in this direction will help the retail sector retain its competitiveness in the region.
Dr Chua Yang Liang is head of research, Southeast Asia, JLL and Sun Shuyu, its senior research analyst.
This article appeared in The Edge Property Pullout, Issue 720 (March 21, 2016) of The Edge Singapore.
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