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Taking Stock: Is e-commerce replacing or complementing physical stores?

When was the last time you bought goods in a real store and took the product home with you? For most consumers in Asia, this is not the only shopping option available. You can buy stuff from a store and have it delivered to your home. You can also buy something online and pick it up in a store later. Purely online transactions and mobile shopping are gaining ground as well.

Arnaud Frade, Managing Partner, HALL & PARTNERS, said at the recent Retail Innovation & Management Forum in Singapore that for consumers, the e-commerce versus the physical store debate is non-existent. The current retail play is all about choice.

“It (the debate) is very much a question from a business perspective, not from a consumer perspective. For the consumer, it is a portfolio of retail options,” he said.

Should retailers go into e-commerce? The members of the panel that explored the e-commerce topic, are one in saying that the online business is definitely a revenue driver, but whether one should go exclusively online or explore a mix of options depend on the strategy.

“There are a lot of retailers scared of e-commerce. I don’t think you need to be scared. See it as something complementary to your business…See your retail presence also as a value driver and see it as a tool to drive online sales,” Marcelo Wesseler, Senior Vice President of e-commerce, Singapore Post.

The 150-year-old SingPost has itself transformed its business model and now works with over 200 brands and retailers across Southeast Asia. Wesseler has a lot to share about the e-commerce space.

“From a category perspective, there isn’t really a huge limitation (in going online). On the high-end fashion, you really have to fit it. There are some things though that are easier to sell online like groceries, electronics, downloadable books, or even cars. Who would have thought of buy cars online?” he said.

However, Marc Ardisson, Group Digital Director, Bluebell, a distributor of luxury brands in Asia, said that on the luxury category a pure-play online retail may not work for all brands.

“At one point, you need to work on your brand, you need to work with your product and make sure that the brand and the product are well-known by the consumers before going online…In some very specific segments like accessories, shoes, bags, and small goods it makes sense, but for ready-to-wear high luxury items, it is very difficult. Maybe 10 years from today (it may work), but for now, we need to have a mix of online and retail to make it happen,” he said.

In other categories such as grocery shopping, Singapore’s purely online grocer RedMart have showed that it can work.

“In this market, not many people have cars so they don’t want to carry their groceries home from the stores. There’s a lot of advantages in being online only. The inventory management, for example, is another factor to consider, we don’t have to stock stores, we can service the entire island from one warehouse,” he shared.

From a business perspective, he said there are a lot of advantages in being online only, one of which is that real estate cost in Singapore is very high. The online grocer was launched in October 2011 and two years into the business, the start-up has been growing steadily and Egan is very bullish about its future.

“We view our category as a modern trade for groceries. It is a $68-billion market in Southeast Asia. It’s $5.9 billion in Singapore. People say that it is a small market. It’s not that small for groceries,” he said.

Wesseler affirmed that Singapore is the most sophisticated market in Southeast Asia. “You can start with a local distribution center here and localized sites across Southeast Asia. You can start with one warehouse here, fulfill across the region and once you know what works then you can set up local warehouses,” he said.

Egan admits that there have been talks about expanding in other countries, but the company wants to get its operations and business model right on home turf before it expands in other locations.

The panel concedes that e-commerce is still commerce and its success depends a lot on customer service. “You want to have your internal operations running smoothly, your systems in place, your economics solved before looking at other cities or markets,” Egan advised.

Wesseler shared that localization is key in entering new markets. SingPost has localized customer service. In India, for example, he said the website is in English but the customer service is available in nine different dialects – Tamil, Hindu and others.

Ardisson affirmed that Asia is a different market and each country is different. “There are two strategies: You decide that you are a global brand and in whatever market people will buy from you because you are the big brand. So you don’t really need to localize. Or you go the other way around, you go for localization, which means you need to adapt your back-end system, your team and your organization. So you have to think that way to make it happen,” he said.

He also believes that e-commerce is actually much more difficult than retail. The challenges he sees for online retail include logistics, fraud, and unhappy customers. “You also have to adopt a mindset that the truth of today may be over in three months. You have to constantly rethink your business model and seek new opportunities. The consumer is smarter than you and not all organizations can face that challenge,” he said.

Taking Stock is Retail in Asia’s fortnightly column dedicated to showcasing opinions from experts in the retail industry.

Bluebell is the owner of retailinAsia

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