“Already a region of early social media adopters, the availability of faster mobile Internet in Asia has facilitated a rapid spread of information, influencing preference, and in many cases, driving greater demand.”
A growing critical mass
Home to approximately half the world’s population and witnessing rapid urbanization and income-growth, the Asia-Pacific region is an appetizing retail market for domestic and international players alike. This growing critical mass of consumers is certainly enticing, with China set to overtake the U.S. as the world’s biggest retail market by 2016.
However, as our analysis highlights, there are few truly regional brands to emerge despite the APAC region’s incredible potential—not surprising, perhaps, given the challenges of adapting to diverse cultural preferences and languages as well as navigating a variety of regulatory hurdles.
A fragmented landscape
Asia’s consumer markets remain highly fragmented, both as a whole and within individual markets. Genuine liberalization is patchy at best, with traditional and local retailing dominating in many markets. At one extreme, there are highly concentrated markets such as Singapore, where FairPrice commands over 50 percent market share in the grocery category; at the other, markets such as India, where modern retail brands remain dwarfed by traditional local retailers.
Winners expanding
Despite the challenges, and against this fragmented backdrop, some of this year’s most valuable Asian retail brands are those that actively expanded beyond their home base, either regionally or internationally. Leading Japanese retail brands such as Uniqlo and FamilyMart are looking beyond their domestic customer base to younger, dynamic markets in China and Southeast Asia to fuel future growth. Meanwhile, brands such as Chinese jeweler Chow Tai Fook are finding that expansion into third- and fourth-tier domestic cities offers new sources of revenue. SM, the leading retail brand in the Philippines, also sees enormous potential for expanding its footprint.
Digital driving expansion
The rise of smartphone penetration continues to revolutionize the retail sector. Already a region of early social media adopters, the availability of faster mobile broadband in Asia has facilitated a rapid spread of information, influencing preference, and in many cases, driving greater demand.
What’s more, by lowering barriers to entry and removing the need for a physical presence in remote or underdeveloped areas, online retailing is giving traditional retailers the opportunity to expand more rapidly. This, of course, also increases the competitive threat from more agile online retailers. Although there are no pure-play Asia-Pacific online retailers on Best Retail Brands (yet!), it is striking that many of the region’s leading e-commerce players such as Japan’s Rakuten, India’s Flipkart, and China’s Taobao, Tmall or JD.com are web-only.
Across the region, multichannel retailing is finally starting to take hold, as traditional players realize that their online and offline offerings need to work in harmony. In Japan, Rakuten and Amazon are forcing the traditional stores to do more and in the concentrated and relatively protected market of Australia, department stores David Jones and Myers are only now beginning to build-out omnichannel strategies due to competitive threats. Indeed, the major supermarkets such as Coles and Woolworths may find themselves being forced to innovate, or suffer a potential decline to their dominant positions as competition broadens.
China’s Suning, the nation’s largest home appliance retailer, is transforming itself into an e-tailer so that it doesn’t suffer the same decline as some of the brick-and-mortar stores in the U.S. and Europe. China has the world’s largest online population and Asia’s most vibrant e-commerce sector, where virtually anything can be bought and sold online. With 70 percent of e-tailing in China being peer to peer and a consumer class with money to spend, e-tailing is leaping ahead of brick-and-mortar stores in many parts of the country.
Rapid digital adoption also means that market maturity is no longer a prerequisite for sophisticated engagement. For example, Bangkok saw the launch of a (literally mobile) virtual store—the first in Asia—when a BTS SkyTrain was converted into a Big C store, where consumers could shop by snapping QR codes placed inside the train.
While some Asia-Pacific traditional retailers are gamely joining this brave new world, others appear to be trying to turn back the clock. 2013 saw one of Japan’s leading online fashion commerce sites launch WEAR, a “showrooming” mobile app allowing shoppers to scan barcodes in-store and purchase online, with the offline retailer receiving a commission. The response to this innovative solution was mixed: some Japanese retailers attempted to ban in-store mobile use, while established department stores such as Parco actively participated.
Targeting matters
The real story here is not the eye-catching execution—rather, it is back-end data capabilities. This is where true competitive advantage will accrue. The less-hyped aspect of the WEAR app is its potential as a massive database of personalized clothing preferences and its ability to suggest coordinated apparel based on what the shopper likes and may own, not just to sell a single item of clothing. From Lawson’s 57 million-strong loyalty card database to the local corner shop, at least one rule of successful retailing remains unchanged—know your customer.
By Stuart Green, CEO, Interbrand Asia-Pacific
