Tag: Sustainability

6 Disruptive Forces that are Creating New Challenges and Opportunities for Retailers (Part 2)

Posted on by Omprasad Devadiga

Welcome back to Part 2 of “6 Disruptive Forces that are Creating New Challenges and Opportunities for Retailers.” In Part 1, we explored the 3 disruptives and how they are shaping the future of retail. Now, let’s delve into the remaining three.

4. Escalating Prioritization of Sustainability

Sustainability has become a top priority for consumers, businesses, and policymakers. Retailers are facing increasing pressure to adopt sustainable practices and demonstrate their commitment to environmental and social responsibility. Key trends include:

  • Supply chain transparency: Consumers demand transparency into the supply chains of the products they purchase, ensuring ethical and sustainable sourcing.
  • Decarbonization: Retailers are under pressure to reduce their carbon footprint and transition to renewable energy sources.
  • Human rights & DEI: Ensuring human rights and promoting diversity, equity, and inclusion (DEI) are becoming essential for retailers.
  • Plastic packaging: Reducing plastic waste and promoting sustainable packaging solutions is a growing concern.
  • Circularity: Retailers are exploring circular economy models to minimize waste and extend product lifecycles.
  • Food waste: Reducing food waste throughout the supply chain is a key sustainability challenge.
  • Consumer health: Consumers are increasingly concerned about the health and safety of products, leading to stricter regulations and labeling requirements.
  • Biodiversity: Protecting biodiversity and minimizing the environmental impact of retail operations is essential.
  • Resource intensity: Retailers are under pressure to reduce their consumption of natural resources.

70% of consumers feel companies should drive positive ESG outcomes

Imperatives for Retailers

To address these sustainability challenges, retailers must:

  • Build end-to-end supply chain transparency to ensure ethical and sustainable sourcing.
  • Develop circular processes to minimize waste and extend product lifecycles.
  • Create alliances with peers to share best practices and collaborate on sustainability initiatives.
  • Prioritize material issues, such as plastic reduction and sustainable packaging.
  • Measure and report their environmental and social impact to demonstrate accountability.
  • Educate consumers on how to use and dispose of products sustainably.
  • Optimize stakeholder communications to build trust and transparency.
  • Operationalize their ESG strategy to integrate sustainability into all aspects of their business.
  • Explore alternative suppliers that prioritize sustainability and ethical practices.

5. Rising Political & Economic Uncertainty

The global political and economic landscape is increasingly volatile, creating uncertainty for retailers. Key trends include:

  • Geopolitical conflict: Geopolitical tensions and conflicts can disrupt supply chains and increase costs.
  • Rising trade tensions: Trade wars and tariffs can impact the cost of goods and create uncertainty for businesses.
  • Uneven vaccinations: The global distribution of vaccines and the emergence of new variants can impact economic recovery and consumer confidence.
  • Inflation and energy costs: Rising inflation and energy costs can increase operating costs for retailers.
  • Debt and interest rates: High debt levels and rising interest rates can create financial challenges for businesses.
  • Supply chain disruption: Disruptions in supply chains due to geopolitical events, natural disasters, or other factors can impact product availability and costs.
  • Unemployment: Rising unemployment can reduce consumer spending and create economic uncertainty.
  • Cybersecurity breaches: The risk of cybersecurity breaches is increasing, posing a threat to businesses and consumers.
  • Political polarization: Political polarization can create a challenging environment for businesses and make it difficult to navigate regulatory changes.

60% of consumers are worried that war will spread globally

Imperatives for Retailers

To mitigate these risks, retailers must:

  • Build local supplier networks to reduce reliance on global supply chains and mitigate the impact of geopolitical events.
  • Hedge for cost spikes by implementing strategies to manage price fluctuations and protect profit margins.
  • Diversify global logistics to reduce the risk of disruptions and ensure a reliable supply of products.
  • Assess geopolitical scenarios to anticipate potential risks and develop contingency plans.
  • Impose price guarantees to maintain customer loyalty and mitigate the impact of rising costs.
  • Simplify in-store assortments to focus on essential products and reduce inventory costs.
  • Reduce fossil energy reliance to mitigate the impact of rising energy costs and support sustainability goals.
  • Tighten data encryption to protect sensitive customer data and mitigate the risk of cybersecurity breaches.
  • Restructure debt burden to improve financial stability and reduce the impact of rising interest rates.

6. Blurring Lines Between Sectors and Channels

The boundaries between sectors and channels are blurring, creating new opportunities for retailers to expand their offerings and reach new customers. Key trends include:

  • Consumers as products: Retailers are increasingly leveraging customer data to provide personalized experiences and sell targeted products and services.
  • From product to service: Retailers are transitioning from selling products to providing services, such as subscription models and personalized recommendations.
  • Retailtainment: Retailers are combining retail with entertainment to create immersive and engaging experiences.
  • Immersive experiences: Retailers are leveraging technologies like augmented reality (AR) and virtual reality (VR) to create immersive shopping experiences.
  • End-to-end engagement: Retailers are striving to provide a seamless customer experience across all channels, from online to in-store.
  • Bundled solutions: Retailers are offering bundled solutions that combine products and services to meet the needs of customers.
  • Self-healthcare: Retailers are expanding into self-healthcare products and services, such as wellness products and virtual consultations.
  • Gamification: Retailers are incorporating gamification elements into their shopping experiences to engage customers and drive sales.
  • Selling data: Retailers are exploring new opportunities to monetize customer data, such as targeted advertising and market research.

44% of consumers intend to spend more on experiences

Imperatives for Retailers

To capitalize on these trends, retailers must:

  • Expand the scope of their ecosystem to include a wider range of products and services.
  • Increase the range of services they offer to meet the evolving needs of customers.
  • Group products with services to create bundled solutions and increase customer value.
  • Explore sector adjacencies to identify new growth opportunities.
  • Leverage alternative models such as subscription services and rental options.
  • Identify B2B value pools to expand their customer base and revenue streams.
  • Build a retail media presence to reach new customers and monetize their audience.
  • Develop digital-first offerings to meet the needs of digital-savvy consumers.
  • Create in-store experiences that are engaging and memorable.

The retail industry is facing a complex and challenging landscape, shaped by evolving consumer behaviors, rapidly changing technologies, increasing tax & regulatory complexity, escalating sustainability priorities, rising political & economic uncertainty, and blurring lines between sectors and channels. Retailers that can successfully navigate these disruptive forces will be well-positioned for long-term success. By understanding these trends and implementing appropriate strategies, retailers can adapt to the changing landscape and thrive in the future.

Six Emerging Trends Shaping Modern Grocery Retailing in Southeast Asia

Posted on by Omprasad Devadiga

Introduction

In the dynamic landscape of Southeast Asian grocery retailing, several emerging trends are shaping the industry and influencing the way consumers shop for their daily needs. These trends reflect changing consumer priorities, the evolving competitive environment, and the industry’s collective push for profitability, sustainability, and enhanced customer experiences. Here, we delve into these six critical trends that are redefining modern grocery retailing in Southeast Asia:

The ASEAN region offers substantial growth prospects for contemporary grocery retailers. With a population exceeding 600 million, yearly grocery expenditures reach $200 billion. Traditional trade still dominates, accounting for roughly two-thirds of these expenses, signifying untapped potential for the modern grocery sector to gain a larger market share. Anticipated overall consumer spending across ASEAN is projected to increase by approximately 5% in the coming year, contingent on global economic influences. Urban consumers, in particular, demonstrate a growing demand, transitioning their spending habits from fragmented to modern shopping channels. This shift is propelling significant growth in modern retail, with our analysis forecasting annual expansion rates of 6 to 7% until 2025. As a result, ASEAN stands out as one of the world’s swiftest-growing and most promising regions for contemporary grocers. (see image below)

The penetration of modern retail tends to follow growth in GDP per capita, with wide variations across Southeast Asia.

1 Retail sales value, including sales tax.

2 The Log10 (or common logarithm) is used to simplify the scale for countries with large differences in GDP per capita. For example, log10 of 3 is 1,000; log10 of 4 is 10,000; and log10 of 5 is 10,000.

Source: Euromonitor

1. Priorities Influencing Consumer Purchasing Decisions

In the fast-paced world of grocery retailing, consumers are influenced by several key priorities. These include:

  • Consumers are becoming more value-conscious. They seek quality products at reasonable prices. Grocery retailers that offer competitive pricing, promotions, and loyalty programs are gaining a competitive edge.
  • Healthy Nutrition: There’s a growing awareness of the importance of healthy eating. Consumers are looking for fresh, organic, and locally-sourced products. Retailers are responding by expanding their offerings of fresh and nutritious products.
  • Willingness to Purchase Food Online: The convenience of online grocery shopping has gained popularity. Retailers are investing in robust e-commerce platforms, ensuring a seamless online shopping experience.

2. Fierce Competition from Ecosystem Players

The grocery retail sector in Southeast Asia faces fierce competition from ecosystem players, including digital giants and online marketplaces. These competitors have an advantage in terms of data on consumer behaviour and can attract and retain consumers by creating exceptional shopping experiences. The pressure on traditional fresh food offerings is particularly palpable as digital players expand their influence. Grocery retailers are responding by leveraging data-driven insights and investing in technologies that enhance the consumer experience. Solutions like ETP V5 are pivotal in staying competitive and relevant in this ecosystem.

Table 1: Advantages of Ecosystem Players in Grocery Retail

AdvantagesImpact on Grocery Retailers
Data on Consumer BehaviourInformed decision-making for targeted offerings
Creating Exceptional Customer ExperiencesEnhanced customer loyalty and satisfaction
Pressuring Fresh OfferingsTraditional grocery retailers innovate and compete more effectively

3. A Shift from Growth to Profitability

While grocery retailers have made impressive progress towards growth, breaking even and achieving profitability still remains a challenge. Grocery retailers are re-evaluating their strategies to find new sources of profitability. By embracing technology solutions like ETP V5, retailers can streamline operations, improve inventory management, and optimize the supply chain, leading to reduced costs and improved profitability. The shift from growth-focused expansion to a profit-centric approach is becoming imperative for long-term sustainability.

4. Reframe Your Playing Field to Embrace Consumer Tech

To stay relevant, grocery retailers are adopting a consumer tech mindset. This approach involves converging into a “consumer tech” ecosystem and thinking like disruptors. It empowers them to focus on providing the best consumer experiences, from seamless online shopping to in-store innovation. By embracing technology, grocery retailers can enhance customer interactions, boost loyalty, and reimagine their roles in the lives of consumers.

5. Competing Demands on Omni-channel

Omni-channel retailing is no longer a novelty but a necessity in the grocery sector. The surge in e-commerce penetration has increased the gross merchandise value and amplified user acquisition and retention. Retailers are navigating the competing demands of this complex ecosystem by optimizing their online and offline channels, offering a convenient and consistent shopping experience to consumers regardless of their preferred platform.

Table 2: The Impact of E-commerce on Grocery Retail

E-commerce ImpactResponse from Grocery Retailers
Increased Gross Merchandise Value (GMV)Expanding online product offerings
Growing User Acquisition and RetentionEnhancing customer loyalty programs

6. A Growing Emphasis on Sustainability

Sustainability is a significant theme in the grocery retailing landscape of Southeast Asia. Retailers are not only focusing on profit but also on pursuing profitable, sustainable, and inclusive growth. This includes initiatives to reduce food waste, source products responsibly, and decrease the environmental footprint of operations. Consumers are increasingly considering the social and environmental responsibility of retailers when making purchasing decisions, and businesses that align with these values are poised for success.

Wrapping up, the grocery retail landscape in Southeast Asia is rapidly evolving, driven by consumer preferences and technological advancements. Grocery retail is adapting to meet the changing consumer landscape and leveraging technology to enhance its operations, all while placing an increasing emphasis on sustainability and the consumer experience. By embracing these trends, grocery retailers can stay competitive, achieve profitability, and provide an innovative and sustainable shopping experience for their customers. With the right strategies and retail technology solutions like ETP V5, they can successfully secure their position in the modern grocery retailing landscape of Southeast Asia.

To know more about the business benefits that ETP V5 omni-channel retail software offers the grocery retail segment, visit https://www.etpgroup.com/industries/grocery/ or write to contactus@etpgroup.com