Innovation & Disruption in Retail


Retail Malls are struggling. Not just in Kuala Lumpur which now has more mall space per capital than most, if not all cities in Asia. Developers looked to past success - the old world focused on the physical ignoring the digital. Recently they have scrambled to add more food, but food will not work for all malls. No one has found an entertainment offering other than cinemas that works. There are no easy answers. Today, let me sketch out 4 issues facing the retail industry.


No 1: Buyers have lots of alternative purchase options - Buyers today have alternative shopping options for the same product. Branded stores were built on the belief that even if a customer comes in to try something and does not buy it, they will return to complete the purchase. But what if they just come in to try it for size, or look and while they are in the changing room find it cheaper online. Some large online retailer might run a cash-back, or an alternative is on offer?


What then is the outlook for physical stores promoting a brand, but not making sales? Perhaps Brands will need to pay retailers a marketing fee? Else, why would entrepreneurs invest to set up shops when the brands sell online directly? On the other hand, why should brands support retail outlets when they can put their money behind Key Opinion Leaders, Influencers and Bloggers?


No 2: Local Products are gaining acceptance providing Value - This is most evident in food products. Walk down the aisle of your supermarket and you will see a proliferation of local brands with new products and flavors. I like looking at coffee. International brands are no longer the default choice or premium product. There are several local coffee players competing and winning in the local market, especially in the “2 in 1” and “3 in 1” sachet business. You also see this in fashion, with a huge number of hijab and batik brands, jewellery, ladies fashion accessories, shoes, etc. Going local can be a winning strategy, but growth opportunities are limited - local players are emerging across the region.


No 3: Traditional retailers are slow to adopt technologies - That can give them better insights. Compared to online retailers that are continually optimizing their websites – Alibaba are experts at this – with tracking, AI and automation, the traditional retailers have no clue what shoppers are doing in their stores or who the shoppers are. The online guys are getting smarter with every click online capturing a data point, plus the sharing of card purchase behavior allows them to track you both on and off-line.


No 4: Online retailers with buckets of money are getting into offline - With big funding, these retailers are running promotions and taking up physical spaces and products. Google a couple of weeks ago bought failing Fitbit. Amazon bought Whole Foods two years ago. Taobao has just set up a physical mall in KL. But this was done earlier at Glo-Damansara by Lazada. In this Lazada furniture store which I visited earlier this year, you can see, touch and try the products. If you want to make a purchase just zap the QR code on your Lazada app.


CONCLUSION: TWO FUNDAMENTAL TRUTHS . . . In this changing landscape of products, services and businesses, remember two fundamental truths.


The first is that all businesses are started by Entrepreneurs and businesses that survive have entrepreneurship embedded in them. You don’t need to start a business to be an entrepreneur. If you run your company like an Entrepreneur your company will survive any change. Talk to me about this.


The Second is that we are all wired to seek pleasure and avoid pain. The meta-programs cannot be changed. Simon Sinek reminded us of this in his Golden Circle. It is for this reason that the science of selling remains the same and needs to drive your choice of products and services.


The entire value-chain of the retail industry is stressed . . . Companies will fail, but the cycle of entrepreneurship will continue as new companies are born. I wish you every success.


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