Retailers adapt to survive Covid-19

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/ EdgeProp Singapore
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March 19, 2020 3:12 PM SGT
Shoppers purchasing necessities in Seletar Mall on Feb 9 (Credit: Albert Chua/ The Edge Singapore)
SINGAPORE (EDGEPROP) - As the Malaysian government announced its countrywide lockdown on March 16, snaking queues quickly formed in Singapore’s grocery stores as shoppers snapped up goods for fear that the flow of goods between the two countries would be disrupted.
The latest wave of panic buying was the second to occur recently. The first happened right after Singapore first raised its Dorscon level in response to the Covid-19 virus outbreak. Both episodes offer a glimpse that not all is gloom for retail.
Source: CBRE Research

One bright spot

Across Asia, many consumers are now leaning to online shopping for essentials, with omnichannel grocery retailers reporting a surge in sales.
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Singapore-based online supermarket Redmart announced a 300% hike in average weekly orders for the month of February. Over the same period in Hong Kong, HKTVmall observed a 165% y-o-y jump in average daily orders on their digital platform.
Over the Lunar New Year period, which started on Jan 25, Chinese giant e-commerce firm JD.com, or Jingdong, registered a 400–500% increase in fresh food sales. Food delivery platforms such as Singapore-based Deliveroo recorded a 20% jump in orders from Jan 27 to Feb 16, while South Korea’s Yojiyo saw an 11% rise in deliveries from Feb 1 to Feb 16, as compared to Jan 6 to Jan 21.
In a recent report on the retail market, CBRE observed that the number of enquiries from restaurant operators seeking information about delivery has increased steadily in recent weeks. To that end, it believes that many F&B groups are considering to boost sales through deliveries.
Source: CBRE Research

Adapting in crisis

The pandemic has also forced some retailers and F&B platforms in Asia to innovate and adapt, a trend CBRE foresees could have “long-term consequences” for the retail industry.
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First, retailers have strengthened their omni-channel presence. Live-streaming — where retailers combine entertainment and e-commerce — has been popular.
Forest Cabin, a Chinese skincare brand, used live-streaming to grow sales by more than 45% y-o-y in just 15 days. Where online sales used to account for only about 25% of the firm’s sales, it now takes a share of 90%, the company revealed. If it had failed to adapt, the company said it would have faced possible bankruptcy in under two months.
To reach a younger audience, many global luxury brands have also held fashion shows and new product launches behind closed doors, or live-streamed them on their official websites or social media platform.
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Intime Department Store in China partnered with hundreds of brand influencers to host live-streaming sales events while several fitness centres in the country have live-streamed classes through social media to continue providing services to customers.
In March, luxury brand Hermès introduced its official online platform in Hong Kong, allowing customers to purchase products online round-the-clock.
Second, retailers providing delivery services have switched to contactless methods — delivery orders are left at dedicated locations to minimise human-to-human contact. Between Jan 26 and Feb 8, Chinese food delivery firm Meituan reported that over 80% of orders in the country requested the use of such a method.
Third, some retail players have introduced care measures for their loyal customers. In Guangzhou, mall operator K11 collaborated with a medical group to offer free online medical consultations for regular customers. In Hong Kong, Chinese Estates Holdings have been distributing face masks to its loyalty programme members.
Source: CBRE Research

Hardest hit

With weaker consumption, a regional tourism slowdown, closed store networks and shortened operating periods, brick-and-mortar stores have bore the brunt of the viral outbreak. Rents have also come under strong downward pressure, prompting landlords to offer rental relief.
In Singapore, Mapletree Commercial Trust has offered rental rebates for selected tenants at VivoCity mall, while Jewel Changi Airport has provided rental rebates to its F&B tenants.
Retail landlords in China and Hong Kong such as Wanda, China Resources, Seazen, Swire Properties and SHKP have also announced temporary rental cuts to alleviate pressure on tenants.
Elsewhere in Seoul, 300 landlords have offered rental assistance to tenants as at the end of February.

Looking ahead

CBRE expects the real estate market to likely recover in 2H2020, based on the extrapolation of data from the SARS outbreak in 2003. It therefore advises retailers to look ahead and prepare for business operations to run normally in 2H.
“Many retailers are likely to hold large-scale outlet and flash sales in the second half of the year to offload excess and out-of-season stock they were unable to sell due to store closures in Q12020,” says CBRE.
French luxury group Kering recently announced plans to increase marketing expenditure in China in 2H2020, anticipating a sharp rebound in consumer spending post-outbreak.
Over the long term, one of the lasting impacts of Covid-19 on the retail sector could be the introduction of new mall designs. This could see a shift from the standard enclosed big-boxed layout towards the inclusion of more green and outdoor areas that provide better ventilation, says CBRE.
Higher public awareness of wellness could also provide opportunities for retailers — especially F&B players — to introduce new and healthy product lines.
The implementation of hygiene measures could also be permanent. This may include providing hand sanitisers at mall entrances and the regular cleaning and disinfecting of goods or surfaces frequently touched by shoppers, including elevator buttons, shopping baskets and carts.
For F&B companies, CBRE suggests that dining and fast food joints could establish “ghost kitchens” or dedicated facilities to prepare food specifically for online orders. This would allow restaurants to focus on its dine-in orders, which would not impact service quality during peak hours.
Overall, “the jump in e-commerce sales since the outbreak will add momentum to the long-term fundamental shift to an online economy,” remarks CBRE. More so than ever, this is an opportunity for brick-and-mortar brands to diversify its offerings to stay in the game.
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