Asia-Pacific will remain the retail industry’s growth engine in the post-corona world, but retailers will need to make investment and changes in several areas to keep pace with changing consumer demands, according to a new Bain & Company report.

The region accounts for about three quarters of global retail growth, and about two-thirds of online growth. From 2014 to 2019, the compound annual growth rate for Asia-Pacific retail sales was more than quadruple that of the rest of the world. Online sales growth was nearly double the rest of the world’s, even though Asia-Pacific e-commerce was starting from a higher base (online penetration in the region grew from 9% to 19% between 2014 and 2019, while rising from 6% to 11% in the rest of the world.)

Riding that growth are three Chinese retailers – Alibaba, and Pinduoduo – which together with Japan’s Seven & I now rank among the top 10 retailers worldwide, according to Bain analysis. The firm noted that about a decade ago, only one or two Asia Pacific-based retailers made the top 10 list.

“What’s happening in China today is going to happen in other markets to a lesser or greater degree depending on the market,” Kanaiya Parekh, expert partner, Hong Kong, at Bain told CNBC. “People need to be looking at China, especially with regards to the future of retail.”

Reinventing the value proposition

Asia-Pacific consumers are still becoming more middle class, urban, and more digitally driven. “Except for China and India, dual-income households are on the rise as women continue to join the workforce. Yet the gap between richest and poorest has also widened in many parts of the region, and COVID-19 is ratcheting up pressure on the most deprived by increasing unemployment,” the report noted.

Retailers must ensure their value proposition meets the needs of this fast-evolving customer base. That might involve putting ultra-convenience at the heart of their offering in response to denser urbanization and the rise of time-poor dual-income households.

As more consumers struggle financially in COVID-19’s economically destructive wake, some retailers might benefit from pushing deeper into value/discount formats and offers. Others might tilt toward rising interest in health, wellness and sustainability – or use advanced analytics to meet swelling demand for personalisation.

Winning digital engagement

Asia-Pacific consumers already tend to do most of their online shopping through their phones, and this trend is set to deepen, with Forrester forecasting that 70% to 85% of e-commerce will be conducted by phone in 2023 in key regional markets (vs. a forecast of 43% in the US).

The path to purchase is still fragmenting, as people buy more through super-apps such as WeChat, Paytm, KakaoTalk and Grab. Consumers have also increasingly turned to social commerce like this during the pandemic. A survey by Bain of Chinese consumers found that they were now more likely to use livestreams and short-form videos as a research and purchasing tool than they had been before COVID-19.

The firm noted that improved digital engagement with shoppers, particularly through mobile phones, is likely to be vital regardless of a retailer’s evolving value proposition. Asia-Pacific retailers must follow the eyeballs of their customers and optimise their presence on super-apps and social commerce channels. In addition, brands must be constantly mindful of using the right content formats for current preferences: while short-form video may dominate today, this can change.

Bain analysts added that rapid adaptation will be key for retailers to gain a competitive edge, as effective responses to current challenges are going to look very different to the strategies that worked in the past.

Sourced from Bain & Company, CNBC