The Battle of E-commerce vs Retail Stores in Southeast Asia

Is online shopping killing offline businesses, as popular sentiments paint it? 
Monday 16 December 2019
What does the future hold for retail stores? Photo: Unsplash

E-commerce transactions in Southeast Asia have broken records – this statement itself is beginning to sound like a broken record. Every year, we get a variation of the same information from one of the region’s many online marketplaces or research firms.

But e-commerce is out of control in Southeast Asia. Just recently, the report e-Conomy SEA 2019 by Google, Temasek and Bain reveals that e-commerce in the region – projected to be the world’s fourth largest economic bloc by 2030 – has jumped seven times from US$5.5 billion in 2015 to over US$38 billion in 2019.

“The sector is on track to exceed US$150 billion by 2025 – US$50 billion more than predictions made over a year ago – on the back of stronger-than-anticipated growth,” states the report.

It adds that some 49 million people in Southeast Asia bought or sold items online in 2015. Today, that number has tripled to 150 million people. And they are not just fishing for deals on the latest smartphones. They are also buying milk and make-up – basically, groceries and beauty items that consumers once preferred to browse in-store.

Meanwhile, the brick-and-mortar landscape is being bulldozed with news of closures. In Malaysia, department store operator Parkson Corp Sdn Bhd closed its 20-year-old outlet in Suria KLCC earlier this year, and subsequently shut another store that has only operated for 18 months. Gap, Banana Republic and American Eagle outlets went belly up in Singapore last year. Meanwhile, Hero Supermarket announced in January that it has closed 26 stores in Indonesia.

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Can supermarkets survive the battle of e-commerce vs retail stores? Photo: Unsplash.

A convenient conclusion would be that consumers are ditching physical retail for e-commerce. Armchair shopping is convenient and round-the-clock, unaffected by parking conditions or Grab peak-hour surge rates. With less overhead costs and operational burden, online shops are often able to offer a cheaper price – an important advantage in price-sensitive Southeast Asia.

 E-commerce vs retail stores: Existing in harmony.

But retailers tell UNRESERVED this assumption risks oversimplifying the evolving shopper habits that are surfacing. They find that many consumers are not either-or creatures. Online and offline spending are not mutually exclusive. Customers cycle through several touchpoints – from the web to physical retail and back, over and over.

To understand the story of blurred lines and evolution, meet Stickerrific. Established in 2014, Stickerrific is both an online and offline business that sells speciality stationary, art tools and merchandise by local artists. But many see the shop as more than a retail space. “It’s the happiest place on the planet, writes Laila Zain, a customer who blogs on Ninjahousewife.com.

“Many of my customers have actually browsed extensively on our webstore, even made a list of possible purchases, but still make the trip to our shop to buy them in person even though they could have bought everything online. There are also customers who come to our store just to browse, then later buy the items online,” Stickerrific’s Szetoo Weiwen, who runs the shop in Petaling Jaya, Malaysia, points out.

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E-commerce giants like Amazon are opening brick-and-mortar stores like the Amazon City Store in New York City. Photo: AFP

The disruption on retail by e-commerce does not necessarily mean that physical shops are lagging behind. In fact, this simply drove many brick-and-mortar businesses to adopt an omni-channel approach and fast forward their adoption of technology, notes Christopher Daguimol, director of brand communications at Zalora, one of Southeast Asia’s top online fashion marketplace.

“Fashion e-tailers need to recognise that their competitors are not just each other but the offline players [as well],” says Daguimol.

This article is an excerpt from UNRESERVED’s December 2019 issue from the article THE ON-OFF SWITCH.

Related: Shopping Malls: Dying or Thriving?