Consumer goods: shifting retail trends and micro-retailing An overarching demand for convenience is redefining Asia’s retail landscape, both in urban and rural locations.

The penchant for time-saving shopping across Asia is being driven by mass urbanization, rising discretionary spending, changes in lifestyle and work patterns and the growth of suburban living and commuting. Previously overlooked rural consumers, too, are being embraced into the route-to-market strategies of brands seeking greater penetration across Asian markets.

Retail format change is becoming entrenched – from the surging growth of online shopping, particularly in North East Asia, to the growth of third-party self-collection venues for receiving and returning products purchased online. Another discernible trend is the consolidation of convenience store outlets in city centers, suburban and, increasingly, rural areas.
 

Three key route-to-market challenges for consumer brands. There are three common challenges along the route to the consumer in Asia, although these vary by market in terms of their current and potential level of impact.

In 2016, global B2C e-commerce sales totalled USD 1 trillion, and it is estimated that around 40 percent of those sales took place in Asia Pacific. Calibrating offline and online channels is critical for a route-to-market strategy, especially in China, Hong Kong, Taiwan, Korea, and Japan where the speed of online purchasing growth is high. In China, e-commerce is predicted to account for 24 percent of all consumer transactions by 2020, according to The Boston Consulting Group.

Traditional trade stores are fragmenting in both format and location adding new layers of complexity to the route-to-market, especially in large geographical markets, such as China, Indonesia, Thailand, Vietnam and Indonesia. As retail landscapes diversify well beyond urban centers, real-time customer data is a critical enabler to prioritize sales resources and maximize sales force efficiency.

Modern retail chains benefit from scale and supply chain efficiencies, but direct competition for customers is intensifying. For example, Tesco and Big C go head-to-head in Thailand, PARKnSHOP and Wellcome in Hong Kong, Tesco and Aeon in Malaysia, and DFI and NTUC Fair Price in Singapore. The route-to-market must focus on joint value creation between supplier and customers in key areas, such as in-store execution, consumer marketing and supply chain operations. For modern chains, a nationwide route-to-market strategy enhances competitiveness in South East Asia, whereas a more regionalized focus is crucial in China and Japan.

Serving urban, suburban and rural markets

Urbanization across Asia is creating more middle class consumers whose needs are changing, with a shift towards convenient retail formats that enable fast decisions to be made in-store, or via online touch points. At the same time, rural populations are becoming more brand and product-aware due to the broadening of internet access.

Retail businesses in Asia should find cost-effective ways to serve the needs of urban, suburban and rural consumers by combining digitized and micro-retail channels.

Micro-retailers – often known as High Frequency Stores (HFS) – are notable for their convenient location for shoppers. This type of retail outlet is proving highly durable, because its product range is closely aligned with local community needs. Micro-retailers find it difficult to adjust to an omni-channel strategy, however, as their operating model is based on conventional offline sales. 

“Despite this challenge, brand owners need to win over micro-retailers by integrating them into brand executions and communication networks to strengthen brand perceptions,” says Tosapon Agadmeck, Assistant General Manager – Regional Traditional Trade Channel at DKSH Thailand. “Especially for new brands, micro-retailer networks in non-urban areas can be used as a ‘guerrilla marketing’ channel to test brand concepts and grow awareness before launching in competitive urban areas.”  

Across Asia, independent micro-retailers are being recognized for their untapped potential:

  • In Thailand, convenience chain 7-Eleven is working with local mom-and-pop stores to integrate them into its branded store network under franchise agreements
  • Brand owners are assisting independent drugstores in Hong Kong to offer the AliPay cashless payment system to shoppers. In addition to enhancing payment options, this enables invaluable purchasing data to be collected 
  • In Myanmar’s cash-only trading environment, an e-commerce network has been launched which allows Myanmar’s citizens to buy online and pay offline. Mom-and-pop stores across the country can join the network through a mobile app 
  • Tiny outlets like warungs in Indonesia, which are popular with less wealthy rural consumers, are coveted by leading convenience retail chains, such as Indomart and Alfamart, which are seeking to diversify their store networks. Some companies are working to equip warungs with the capability to sell their products online. This can be considered as a route-to-market refinement, as it can enhance information gathering and data analysis of consumer behaviors beyond the urban environment 
  • In the Philippines, banks are partnering with small sari-sari stores to offer services such as micro-financing that help them develop their business

The quest for agility

The key concept for micro-retailing growth is agility. To successfully implement an omni-channel strategy, micro retailers are seeking support from MES providers to expand their operational capabilities – because as Asian retail markets continue to fragment, micro-retailers must adapt to shifting consumer trends and the complexities of online and offline transactional channels.