HOW THE RISING MIDDLE CLASS IS CHANGING
THE FACE OF THE ASIAN RETAIL MARKET
by Larry Sweeney, Senior Director, Honeywell Sensing and Productivity Solutions
The retail market in Asia is undergoing a period of rapid changes and faces operational challenges that could not have been imagined ten years ago. While the industry is adept at having to evolve to meet changing consumer purchasing behaviours, today, it is the collective growth in purchasing power of the middle class and its increased customer expectations that are shaping the industry.
The expanding middle class across Asia and the corresponding rise in consumer buying power are having a significant impact on the local and regional retail supply chain. While in the past purchasing power in Asia was smaller and led to lower sales of certain products, now with the growth of the middle class, regional consumers are getting a taste for a wider array of goods. Asian consumers are today filling their shopping carts with the basics as always, but because they have more disposable income, they are also starting to spend more by buying middle- to highend items they didn’t buy in the past – often making these purchases online.
You will find the middle class online
According to Forrester, e-commerce is set to grow at a rapid rate for the Asia Pacific region with online retail sales in Asia Pacific expected to reach $1.3tr by 2019 and growing at a compound annual growth rate (CAGR) of 18.5 per cent over the next five years. Interestingly there is also strong growth for online retail sales via mobile phones as well, which accounted for 27 per cent of total Asia Pacific online retail sales in 2014. The growing Asian middle class and their rising interest in shopping online is good news for Asian retailers, who are experiencing increased demand from local and regional buyers of goods. However this good news also comes with challenges.
Asian retailers, like their counterparts around the world, are facing pressures related to the e-commerce delivery process. The popularity of e-commerce is putting pressure on a retailers resources (which were not designed for the omnichannel) to meet consumer needs. As a result, distribution centres are struggling to ship single piece orders on time and transportation and distribution operators do not have the level of resources on the ground (trucks, vans and air freight) to deliver these orders in the time expected by consumers.
Why a retailer’s reputation extends to the delivery process today
A key challenge for Asian retailers is how best to manage a rising middle class’s expectations in an e-commerce world. The growth in the ‘get it now’ society we live in is now calling for immediate access to goods and services, which in turn is creating opportunities and operational challenges. A recent Honeywell Sensing and Productivity Solutions survey highlighted the very real pressures that delivery businesses are under these days. The survey found that in the United Kingdom, consumers expected a three-hour delivery window for goods purchased online.
It also found that: “The majority of customers (57 per cent) declared that current delivery options offered by retailers are not satisfactory, and more than half of respondents (51 per cent) say it is often the case that “the parcel delivery reaches their home address when they are not at home and/or misses the appointment time.”
Importantly, just as goods manufacturers face the possibility of negative online commentary about their products impacting on their brand reputation in the digital age, Asian retailers also need to take into consideration that the delivery process itself can reinforce both a positive and negative brand experience, and both can be amplified online.
Consumers want to be able to track their order and shipment every step of the way. Not long ago companies offered customers self-service shipment tracking as a differentiating feature. Now it is a requirement to meet most customer service expectations and if a company does not offer it or misses a delivery window with a consumer they open themselves to negative criticism online that can influence other potential customers in whether to buy through one retailer or another. To help address delivery issues in Asia, retailers should be looking to adopt technology such as shipping address validation and document imaging to ensure the right goods are delivered to the right destination at the right time.
The margin for error in traditional retail is shrinking
With the explosion of social media and mobile devices globally, there are new threats and opportunities for traditional bricks and mortar retailers. Research shows that Southeast Asian consumers are visiting online retailers 41 times for every single visit to a traditional platform. This poses a very real threat to the longterm viability of some traditional retailers across the region, and can mean that if a consumer in a retail outlet finds that the goods they are seeking aren’t in stock or are in a bad condition, they may be unlikely to return.
To ensure that goods are always on-shelf, traditional retailers in Asia need a strong inventory management system in place and the right picking technologies to ensure that each outlet gets delivered the goods they need to meet customer demands. In a voice-enabled picking environment, distribution workers wearing rugged headsets and mobile computers that can be used in a number of environments, including freezers, receive verbal direction on tasks to complete select workflows. Workers speak their responses back to the voice system — which is trained to each user’s individual voice – enabling the system to determine if they are completing the correct task. This results in increased productivity and accuracy.
Voice users report productivity improvements well above 20 per cent, depending on the type of system that voice technology replaces (paper/label systems or handheld scanning). Greater productivity means more products can pass through a facility and get onto a retailer’s shelves in a given amount of time. Additionally, the ability of voice systems to deliver picking accuracy in excess of 99.99 per cent means that retail outlets get the right goods to shelf, which results in a much higher level of customer satisfaction.
Invest for the future
The regional retail sector is being greatly impacted on by the rising middle class across Asia and the increasing popularity of e-commerce. Savvy businesses that invest in specialist technologies like voice for their supply chain will be better positioned to keep up with changing consumer demands, and be able to increase productivity and ensure their place in the regional retail market long into the future.
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