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Retailers increase the physical presence of stores

PETALING JAYA: More retail players with established online businesses are expected to increase their visibility in physical stores and integrate an omnichannel selling approach.

This multi-channel approach, according to Hong Leong Investment Bank (HLIB) Research, is rapidly gaining traction despite the pandemic spurring growth in demand for e-commerce.

The e-commerce industry grew from humble beginnings to a staple of global retailing, when most derailed and locked in their homes 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.

Nonetheless, the research house said the trend going forward for e-commerce players will be to incorporate an omnichannel strategy and increase their presence in physical businesses.

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

“By emulating the two e-commerce giants, we see that Malaysia’s e-commerce market is mature enough to move towards increasing visibility in the physical space.

“We are already seeing some of these examples unfold in terms of the physical presence of the Lazada pop-up store; the Taobao retail store in Malaysia; Grab’s interest in Jaya Grocer’s and Country Heights collaboration with, ”he said in a report yesterday.

Citing data from the National Property Information Center, HLIB Research said that shopping center occupancy rates in Malaysia fell for the fifth year in a row, from 79.2% in 2019 to 77.5% in 2020.

“With the overabundance of retail space in Malaysia, we believe the existing retail space is poised to benefit from the omnichannel business of brick and mortar e-commerce. “

In its report, HLIB Research cited nine players who could benefit from an omnichannel strategy.

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

Having a strong omnichannel presence will help these players gain a competitive advantage from a vendor’s perspective, HLIB Research said.

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

“The discounts will significantly reduce their costs, compared to the cost of single / small retailers.

“As a result, they could set lower selling prices than their smaller competitors, thereby increasing their market share.”

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

“This competitive advantage of having hundreds of physical locations in Malaysia can double as distribution centers for e-commerce pickups, as well as product delivery.

“This last mile delivery is a crucial aspect, considering that necessities such as fresh food and health care supplies would require urgent delivery.”

Additionally, HLIB Research said having an omnichannel presence means retailers can offer variation and better visibility of products.

“In addition to providing a closer delivery location, physical retailers can help e-commerce make their products more visible.

“In-store shoppers are more likely to make impulse purchases than online shoppers, which is a great reason for Amazon to continue to expand its physical presence. According to Bloomberg, a survey found that 69% of customers who walked into a store to pick up an item they ordered online also purchased additional products.

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