Malaysia: Retailers seen to increase physical store presence

PETALING JAYA: More retail players with established online businesses are expected to increase their visibility into physical stores and incorporate an omnichannel sales approach.

This multichannel approach, according to Hong Leong Investment Bank (HLIB) Research, is quickly gaining traction in spite of the fact that the pandemic has spurred growth in demand for e-commerce.

The e-commerce industry has blossomed from modest beginnings into an essential part of worldwide retail, when most were derailed and cooped up at home during the pandemic.

HLIB Research noted that Malaysia’s e-commerce segment contributed 7% and 9% of total retail sales in 2020 and 2021, respectively.

Nevertheless, the research house said the trend moving forward for e-commerce players will be to incorporate an omnichannel strategy and increase their presence in brick-and-mortar businesses.

Citing global giants Amazon and Alibaba Group as examples, which have been expanding their presence into physical stores, HLIB Research said a similar trend can be expected in Malaysia.

“Emulating the two e-commerce giants, we gather that Malaysia’s e-commerce market is matured enough to progress into increasing visibility in the brick-and-mortar space.

“We already see some of this example panning out in terms of physical presence by Lazada’s pop up store; Taobao’s retail store in Malaysia; Grab’s interest in Jaya Grocer and Country Heights’ collaboration with,” it said in a report yesterday.

Citing data by the National Property Information Centre, HLIB Research said occupancy rates at Malaysia’s shopping malls dropped for a fifth consecutive year, declining from 79.2% in 2019 to 77.5% in 2020.

“Following the glut of retail space in Malaysia, we view that the existing retail space is poised to benefit from the omnichannel venture from e-commerce to brick-and-mortar.”

In its report, HLIB Research cited nine players that have the potential to benefit from having an omnichannel strategy.

These players are Aeon, MR DIY, MyNews, Parkson, QL Resources, 7-Eleven, Jaya Grocer, Guardian and Watsons.

Having a solid omnichannel presence will help these players to have a competitive advantage from a supplier’s standpoint, said HLIB Research.

“We believe that retail chains will be able to buy a wide variety of merchandise in large quantities with discounts from suppliers.

“The discounts will substantially lower their costs, as compared to the cost of single/ small retailers.

“As a result, they could set selling prices that are cheaper than those of their small competitors, thereby increasing their market share.”

HLIB Research also said the more established retailers will also be able to attract more customers due to their convenient locations.

“This competitive advantage of having hundreds of physical locations around Malaysia can double as distribution hubs for e-commerce pickups, as well as delivery of products.

“This last mile delivery is a crucial aspect, taking into consideration that necessities such as fresh food items and healthcare supply would require urgent delivery.”

Additionally, HLIB Research said having an omnichannel presence meant retailers could provide variation and better visibility of products.

“Beyond providing a nearer delivery location, physical retailers can help e-commerce make more of its products visible.

“In-store shoppers are more inclined to make impulse purchases than online shoppers, a lofty reason for Amazon to keep expanding its brick-and-mortar presence. According to Bloomberg, a survey found that 69% of customers who entered a store to pick up an item they ordered online also bought additional products.”