Will Amazon kill the retail stars?

Omnichannelisation is the name of the game for traditional retailers in Singapore.

When Amazon officially launched its Prime Now service in Singapore, one of the biggest talking points is whether it will snap most of the market share out of incumbent e-commerce players and e-tailers like Lazada and online clothes store Zalora whilst cannibalising traditional brick and mortar stores like Tesco in Singapore.

For a start, Shirley Zhu, Programme Director at IGD Singapore, shared that the entrance of new e-commerce players, especially big names like Amazon, will help drive the development of e-commerce as in industry and attract more people to shop online. Whilst Singapore has a high internet and smartphone penetration, she reckoned that only a small percentage of retail sales happen online.

To some experts, Amazon Prime Now’s entry may not exactly be a bad thing for e-commerce and brick and mortar incumbents. Local e-tailer Pelando.sg’s co-founder Mehul Jobanputra believes that the talk of competition is too premature for now.

“Lazada has been around since 2011 and it has expanded to neighbouring Southeast Asian countries gradually,” he said, adding that Lazada’s online marketplace is too well-positioned to be affected by the arrival of Amazon in Singapore since they are currently the “master of the region with local expertise and Alibaba backing.”

Elvin Too, General Manager, FairPrice Online, NTUC FairPrice, also expressed that the arrival of Amazon, the advent of e-commerce and the rising popularity of online retail has impacted positively while presenting challenges and opportunities for retailers like his company.

Despite the positives that Amazon’s entry to Singapore (and eventually in Southeast Asia) entail, other industry experts are also not turning a blind eye to the possible negative effects.

Adrian Lee, Research Director at Gartner, shared that the entry of Amazon into Singapore reaffirms the importance of the Southeast Asian region for digital commerce — a unique market hotly contested between regional and local e-commerce providers. “The incumbents should worry as the focus shifts to differentiation of customer experience and ability to fulfil a growing and more discerning consumer base,” he said.

Demolition of bricks and mortar?

Jobanputra shared that damage to Singapore’s offline retail and commercial real estate sectors is growing every passing year due to online players like Amazon and Zalora. Rental rates, for instance, dropped by 1.5% in the third quarter of 2016.

This trend could mean the end of bricks and mortar stores as we know it — but only in a traditional sense. Bricks and mortar stores, including pop-up ones, should evolve with the existence of technology and how consumer behaviour changes, and this means embracing the very same thing making them scarce.

Foodpanda managing director Luc Andreani said that the whole cannibalisation of the market and its players really depends on what kind of operational and growth model is being compared. For example, marketplace models, like food delivery service foodpanda, may not necessarily mean cannibalising bricks and mortar because there is still a value chain connection there with these physical stores providing the goods and the online service acting as the platform for consumption or delivery.

IGD Singapore’s Zhu emphasised the importance of the human experience in food shopping. “Shoppers will always want to touch and experience a product in the flesh, especially fresh food, so we believe there will always be a place for brick and mortar stores.”

Zalora, for instance, needed to adopt and launch mobile pop-up stores in certain cities in Southeast Asia tagged as growth areas, allowing people to physically see and experience their products as a guide before purchasing online.

“No matter what channel, understanding shoppers and their needs is the key to success,” Zhu reckoned.

This is echoed by Jobanputra, saying that more retailers are evolving the store-based retailing strategies in order to keep up with the consumer demand, depending on the nature of the specific retailer. “Physical retail stores are set to remain relevant, although increased flexibility is likely to come to the fore,” he reckoned.

Omnichannelisation: the Amazon response

Omnichannelisation, oddly described by some experts as the “Amazon response” where retailers let their customers discover, purchase, and their products anywhere the customers desire, and turning their physical stores into interactive fun zones, all while gathering consumer data from it, seems to be currently the name of the game — especially for e-commerce players and e-tailers in Singapore.

Lee shared that the greatest impact will be felt by marketers as they grapple with delivering the same customer experience across various channels. “They need to possess a growing comfort with the new immersive technologies and the ability to harness them for measurable returns on investment,” he added.

Some of these emerging immersive technologies include Augmented Reality where people can use their phones to project prospective purchases (like furniture) to their homes or office spaces to see how it will look like in real life. Another is Conversational Artificial Intelligence, given that this can impact consumer behaviour, particularly in the latter end of the consumer cycle in terms of product inquiry or after-sales support.

For Jobanputra, adapting to the concept of omnipresence for retailers and online market platforms is a matter of becoming the “master of this era” as consumers are expecting speedier delivery services and after-sales support. Examples of Zalora and Uniqlo adopting a physical store or having a digital showroom while traditional retailers embracing online optimization will lead to a new face of omnichannel digital-first retail, bringing the best of the experience for consumers.

Andreani agrees, saying that omnichannelisation isn’t just an option for companies anymore, but a must-have, as customers expect a seamless customer experience, across every touchpoint, at every stage in their journey. “Companies can, and will, no longer be able to work by ‘team channels’, given that they need to be much smarter and far more integrated with how they are structure,” he concluded.

In terms of future trends, Zhu has similar sentiments, sharing that we can expect to see the online and offline worlds coming together with online players setting up a physical presence and bricks and mortar stores merging the physical and digital worlds.

“The store of the future will create a much more absorbing experience featuring fresh food, new products, unique events, and more ways to taste, learn, and discover,” she reckoned.