Two in five SEA retailers eye going digital

Retailers were urged to consider driving an omnichannel strategy.

Almost three in five or 59% of retailers in Southeast Asia are looking to digitise their business over the next 12 months, according to a survey by EY.

“With physical store closures and online platforms being the key sales avenue for retailers during the COVID-19 pandemic, retailers are seeing digitalization as the way forward to achieve growth in a post-COVID-19 era,” EY said in a press release.

Meanwhile, 23% are looking to restructure their business, one in 10 (11%) are planning to exit non-performing businesses, and 3% are thinking of acquiring and merging with another retailer.

Currently, improving topline performance through online sales and market listings is the most immediate priority (57%), followed by promotions and markdowns (9%), updated product portfolio (7%), and partnerships and loyalty programmes (7%).

However, two in five expressed that they are facing resource constraints. To better manage their margins, retailers have been working to reduce overhead costs and back office costs (43%), implementing in-store cost reduction and store portfolio rationalisation (33%), as well as managing cost of goods sold (10%) and cost of supply chain and logistics (7%).

For short-term cash relief, retailers are turning to working capital optimization (61%), rental negotiations and profit-sharing readjustments (23%) and balance sheet restructuring (4%). Seven percent of respondents do not know where to focus on for their immediate cash needs.

EY urged retailers to consider accelerating efforts in five areas in order to emerge stronger after the COVID-19. This includes driving an omnichannel strategy, driving supply chain resilience by ensuring diversified and local sourcing, expanding offerings and adapting to changing consumer needs, engaging in timely M&A, and driving agility for fast and local decision-making.

“Whilst digitalisation is a very visible option in current times, an online strategy alone may be insufficient for retailers to stay profitable or successful in the long run,” EY ASEAN consumer products & retail sector leader (elect) Oliver Gergele said.