Retailers are still expected to continue developing their physical stores post-pandemic.
Consumer demand has shifted largely from offline to online during the circuit breaker measures, which then leaves retailers who started with an offline model to turn digital. However, retailers who started with an online model are doing the opposite as they are starting to build brick-and-mortar stores. According to a report from Euromonitor International, offline presence still allows e-commerce players to offer value-added services for their consumers and build stronger brand identities that was still not possible to do online.
This has particularly been the case for fashion e-commerce players, such as Love, Bonito and Pomelo, which opened their new flagship stores in shopping malls.
In addition, NTUC FairPrice, which has been offering an omnichannel experience, finds both advantages and disadvantages in using both platforms. Though the grocery retail industry is facing disruption from changing consumer behaviour and tighter competition from both traditional and e-commerce, there is still an appeal for brick-and-mortar stores, FairPrice Group CEO Seah Kian Peng told Singapore Business Review.
“Offline shopping also has a place as it appeals to those who prefer to step into a brick-and-mortar store to explore the aisles and products. Some customers also prefer to speak with store staff in person. Grocery shopping remains a social activity and for FairPrice, physical stores continue to provide a unique customer experience,” Seah said.
Although the circuit breaker has put a pause on physical stores, the offline space would still be highly relevant for retailers after the pandemic, said Euromonitor International’s analyst Clare Lee. “Retailers operating on omnichannel would have a competitive advantage over retailers that are solely online due to services such as click-and-collect and experiential retail that consumers value,” Lee commented.
Physical stores can work in synergy with their online platform to drive sales as they provide different sets of functionalities, Lee explained. Retailers are also expected to continue developing their physical stores post-pandemic.
IGD’s senior retail analyst Soo-Eng Tan noted that FairPrice and Dairy Farm have been rolling out initiatives over the last two years to enhance the shopping experience in their physical stores. He cited FairPrice Xtra in Vivocity and CS Fresh in Great World as prime examples of how large format stores can transform to drive new shoppers and meet new missions.
“Increased ready-to-eat options, dine-in areas, oyster bars, exciting counters and better fresh produce are some key highlights in these stores. We will likely see some of these great elements being rolled out to other stores,” Tan said.
Despite opportunities offline, sales for Singapore’s physical retailers might still struggle to pick up quickly due to travel restrictions that are in place, Lee said. This is especially the case for the luxury retailers, who rely heavily on tourist spending.
“As for locals, we do not expect consumers to bounce back quickly when spending returns to pre-COVID level once the circuit breaker measures are over. A gloomy outlook on the economy would encourage consumers to be more conservative in their spending post-COVID-19, as well as trends towards working from home would affect physical retailers,” Lee added.
Some e-commerce retailers still faced challenges from logistical problems and struggles to meet the huge demand, IGD noted. Seah told that since the DORSCON Orange alert, daily essentials saw demand surge by as much as five times compared to the week before, which resulted in a bottleneck of deliveries to the store and a temporary shortage of products. Demand has subsided since.
“To cater to the unprecedented demand, we increased the volume of daily essentials being sent to the stores by three times; delivery trips were also doubled,” he added.
Skincare brand The Soap Haven shared that they were unable to fulfil their online orders for a short period, as their physical retail locations in Singapore were all shut, and so were their Fulfilment warehouse and office by authorities for a while, co-founder Jason Tay shared in the inaugural Amazon Singapore Online Seller Summit.
Nail beauty brand Rui Smiths also faced issues in managing inventory. “So supply from China was halted earlier in the year but that has resumed thankfully, now international shipping takes longer, and it's more expensive,” founder Debbie Cai also said.
RedMart, operated by Lazada, also temporarily reduced the range of products available to cope with the high demand for essential goods. “With the influx of new staff, it is hard to ensure that the handling and delivery process is well executed, and there are no automation or tech solutions in this area,” Tan said.
Despite all these, retailers still thrive in e-commerce platforms, and many are turning to online platforms to get by. Amazon Singapore saw as much as an over 40% surge in local business registration ever since the pandemic emerged and the government introduced measures including the eCommerce Booster Package to encourage online selling, said Amazon.sg Seller Services country leader Bernard Tay.
“Amazon.sg has seen an increase in demand over the past few months and we expect the consumer behaviour to persist even as physical stores reopen in the new normal,” Tay said.
Amongst its merchants, The Soap Haven’s online sales nearly tripled from February to May, Jason Tay shared. “I have been very lucky as with most of us to still be able to run our business, my business on the laptop from home, thanks to Amazon,” Cai said.
In response to this surge in demand, all the major players have been ramping up their resources to expand capacity, Tan said. To deal with the high transaction volume, FairPrice hired over 4,000 workers and are in talks with other adversely affected employers, along with various agencies, to discuss viable options in providing employment to affected workers. They also further expanded their online capacity by converting a brick-and-mortar store into another fulfilment centre for online orders
This is also the case even for those outside essential retail. “Many non-essential retailers have taken this opportunity to build up their online presence as they are expecting a shift in consumer behaviour—to acquire new online shopping habits. Also, due to uncertainty of when the pandemic would end that could affect the opening of their offline stores,” Lee said.
For small and medium businesses (SMBs), Amazon’s Tay recommended the re-evaluation of their needs to grow the business sustainably, which could involve identifying focus areas and developing skills in those areas. “For example, if opening an e-store is new for SMBs, they may need to learn about new tools to effectively manage an online business. Business owners can encourage their employees to join online courses and participate in online events to upskill their e-Commerce knowledge,” Tay said.
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