Retail Asia (November 2022)

Issue No. 02

Fragrances now wear the ‘lipstick effect’ Retail ‘war’ starts before shoppers enter the store Tailor-fitting retail stores play catch-up on digitisation Figaro Coffee Group finds niche in pizza delivery From farm to cart: This e-grocer delivers fresh goods Display to November 30, 2022 | retailasia.com

RETAIL ASIA

MEET THE WINNERS OF THE FMCG ASIA AWARDS 2021 Justin Liu, Chairman, FCG p. 24

Wee Lee Loh CEO, Lazada Singapore

FROM THE EDITOR

I

n this issue, we take a close look at the latest trends in the Asia Pacific retail industry as it continues to adopt digitalisation strategies to evolve its marketplaces.

About Us

Retail Asia is the industry magazine serving Asia’s dynamic retail landscape. Each issue carries a balanced mix of articles that appeal to the C-level executives of large retail companies in Asia. Now a part of the award-winning Charlton Media Group, the brand attracts a combined print and online of audience of more than 88,000.

Do reach out to us if you would like us to tell your story to our readers via print and online advertising or events.

PUBLISHER & EDITOR-IN-CHIEF Tim Charlton PRINT PRODUCTION EDITOR COMMERCIAL EDITOR COPY EDITOR PRODUCTION TEAM

Jeline Acabo Janine Ballesteros Tessa Distor Vann Villegas Charmaine A. Tadalan Aulia Putri Pandamsari

GRAPHIC ARTIST Mark Simon Engracial ADVERTISING CONTACT Aileen Cruz aileen@charltonmediamail.com Karisse Coderes karisse@charltonmediamail.com Reiniela Hernandez reiniela@charltonmediamail.com ADMINISTRATION ACCOUNTS DEPARTMENT accounts@charltonmediamail.com

Indonesian convenience store chain Alfamart invests in a CRM platform to build knowledge and understanding of consumer shopping behaviour.

E-commerce giant Zalora sees an increase in skincare and beauty products catering to men over the past two years. Retailers would need over 200 hours to digitise their inventories manually, but tech startup Fairmart claims this could be trimmed down to zero.

We sat down with Lazada Singapore CEO Wee Lee Loh to discuss the company's journey over the last decade, as well as how consumer behaviour has changed over time. Read the full interview on page 22. We also chatted with Figaro Coffee Group Chairman Justin Liu on how its pizza expansion Angel's Pizza propelled the food conglomerate’s growth in the Philippines. See the full story on page 24. In another exclusive interview, HappyFresh CEO Guillian Segarra shares how the e-grocer manages to keep its goods fresh and the delivery free of charge. Read the full story on page 32.

Read on and enjoy!

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Tim Charlton

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CONTENTS

INTERVIEW

BUILDS AN E-COMMERCE GIANT 22 LAZADA FROM A ‘BLANK SLATE’

FIRST 06 Jakarta retail space supply to increase within the next 3 years

08 Demographic shifts boost APAC’s DIY retail

09 Sustainability for success? 3 in 5 SMEs agree

10 Here’s what you should expect from the APAC retail property market in 2022

12 Hong Kong set for rebound in retail activity

CONCEPT WATCH 14 Comfortable office furniture must not cost ‘silly money’: ErgoTune and EverDesk+

STORE WATCH 16 Carzuno is the Netflix for cars – here’s why this platform works

INTERVIEW 24 Figaro Coffee Group finds niche in pizza delivery

20

RETAIL INSIGHTS FRAGRANCES NOW WEAR THE ‘LIPSTICK EFFECT’

28

MARKETING BRIEFING 5 ADVANCED PAYMENT METHODS TO ADOPT IN 2022

RETAIL WATCH 18 Retail ‘war’ starts even before shoppers enter the store: Alfamart

RETAIL INSIGHT 26 Tailor-fitting retail stores to catch up on the digitisation race

EVENT 34 Retail Asia commends leading companies in the region at the FMCG Asia Awards

30 Daraz juggles assortment and delivery speed

32 From farm to cart: E-grocer delivers fresh produce

Published Biannually by HK: Charlton Media Group Room 1006, 10th Floor SG: 299 QRC, 287-299 Queen's 101 Cecil St. #17-09 Tong Eng Building Road Central, Sheung Wan, 2 SINGAPORE RETAIL ASIABUSINESS REVIEW | MARCH 2018 Singapore 069533 Hong Kong +852 3972 7166

For the latest business news from Singapore visit the website

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News from retailasia.com Daily news from Asia MOST READ

E-COMMERCE

STORES

Top 5 things to do for APAC retailers to be 'shopper-first' in 2022

APAC’s foodservice sector rapidly adopts robots

Anxious consumers to hold back APAC retail spending

Digital business transformation company Publicis Sapient released its inaugural 2022 Retail Guide to Next report. The report highlights the top five things retail companies in APAC must do in the year ahead to transform their businesses into shopper-first organisations.

Asia-Pacific has seen a fast-tracking of robotics and automation technologies’ implementation in the foodservice sector, as consumers in the region are more inclined to seek out digitally advanced and smart products and services, according to a recent report from GlobalData.

Despite growing adoption of e-commerce by customers, retail spending in Asia Pacific is still expected to be held back by lingering concerns on the pandemic, as 83% of consumers in the region are still worried about its impacts, according to a report from GlobalData.

STORES

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STORES

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Tensions escalate between India’s restaurants and food aggregators

Only 1 in 4 Singapore boomers make purchases through social media

'Procrasti-shoppers': 16% of Singaporean adults shop on Black

Tensions are escalating between Indian food service operators and food aggregators—who have been at loggerheads for years over the latter’s commissions, lack of data sharing and policy changes—much to the loss of consumers, according to a recent report from GlobalData.

A report from WorldPay revealed that about one-fourth of boomers in Singapore have made purchases directly on social media.

22% of boomers, meanwhile, have not purchased anything through this platform, but are open to doing so.

Comparison platform, Finder.com, released the Black Friday Statistics report, which surveyed 1,003 Singaporeans. The report revealed 37%, or an estimated 1.9 million people, will shop the Black Friday sales. Pure boredom was the most popular reason given at 16%.

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FIRST average occupancy rate was registered at 70.9% in 2021, a drop of about 5% compared to 2020, or almost 9% compared to before the pandemic. In the Greater Jakarta area, the average occupancy rate was relatively stable for the last three months at 70%, lower by about 5% compared to 2020.

The relatively low number of stores opening at newly operating malls, again due to the impact of the pandemic, has also lowered the average occupancy rate, both in Jakarta and the Greater Jakarta area. However, store expansions and openings are expected to go ahead as retailers re-adapt to the new retail environment post pandemic. Committed tenants are also expected to improve the average occupancy rate.

However, challenges within the retail sector remain; closures and consolidations of underperforming stores are still set to be a key theme.

In the Greater Jakarta area, more mall projects are currently underway

Jakarta retail space supply to increase within the next 3 years

J

akarta’s cumulative supply of retail space has reached 4.9 million sqm with two new malls completed in South Jakarta.

According to Colliers, Pondok Indah Mall began operating in the first half of 2021, and Aeon Mall Tanjung Barat is the newest mall, starting operations at the end of the same year. Two malls are currently under construction, namely Lippo Mall East Side (within Holland Village) and Shopping Mall at Menara Jakarta (within Menara Jakarta).

Consecutive completion of these malls is expected in 2022 to 2023.

In the Greater Jakarta area, more mall projects are currently under construction.

However, the pandemic has slowed construction and completions have been delayed. As a result, Colliers recorded the extension of Margo City as an addition to cumulative supply, which stands at 2.87 million sq m.

The development of shopping malls in the Greater Jakarta area is expected to be more vibrant than in Jakarta. The cumulative supply will increase by around 350,000 sq m up to

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2025. Four of the future mall projects will be completed in 2022, increasing cumulative supply by 3.3% YOY. Occupancy According to the Indonesian Shopping Centers Management Association (APPBI), visitor traffic at re-opening malls is expected to continue to increase, particularly at the year-end holiday. Based on store destination, APPBI added, leasing demand will continue to be driven by F&B and essential sectors such as supermarkets, beauty, wellness and household appliances. In addition, entertainment retailers have also become a destination for people visiting malls.

Nevertheless, due to the impacts of the relatively prolonged pandemic, the increase in visitor numbers has not yet resulted in an improved average occupancy rate. The

2022 projection In Colliers' 2022 projection, limited supply will see the average occupancy rate improve in Jakarta, despite modest growth. Conversely, some completed projects will likely continue to put pressure on the Greater Jakarta area, and the average occupancy rate may continue on a downward trend in 2022.

Retailers are getting more confident and are looking to expand again to reap the benefits of the soft market. However, retailers continue to be very selective in terms of location. Strong foreign retail brands are also expected to enter the Indonesian market in different retail segments. They are looking for both standalone and mall spaces where they are likely to quickly implement omnichannel strategies to serve consumers both on- and offline.

With landlords forced to adopt a flexible stance towards rents and terms, tenants may be in a stronger bargaining position. Rather than focusing purely on rents, landlords and tenants should establish better synergies with respect to flexibility in lease negotiations and terms.

Landlords currently are still looking for replacement tenants in a soft market where retailers know they can get more favourable rental terms. To secure tenants, landlords tend to be a bit more flexible by adopting strategies such as lower percentage down payments, flexible exit clauses and negotiated rental caps.

Retailers are getting more confident and are looking to expand again to reap the benefits of the soft market

FIRST

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FIRST pandemic wreaked havoc across several industries and businesses, but the region’s home improvement retailing market nonetheless witnessed a significant growth rate, with many retailers adopting advanced technologies like the Internet of Things (IoT) and augmented reality (AR) to enhance user experience.

“In addition, acquisitions by some major market players like that of Scapic by Flipkart to boost online shopping rate amongst customers during the pandemic by utilising modern technologies also accelerated the market growth during the deadly coronavirus pandemic,” the report further explained.

BANGKOK’S RETAIL GROWTH TO DEPEND ON GOV'T HELP THAILAND

T

he improvement in Bangkok’s retail market in coming months will mainly depend on how much the Thai government will provide support, especially in facilitating consumer spending in Thailand’s capital city in 2022, according to a report from CBRE. Thailand’s retail industry started to be active again in Q4 2021 due to the country’s improved sentiment from relaxed COVID measures both domestically and for international tourist arrivals, the report stated.

However, concerns of new COVID variants, such as the surge caused by the Omicron variant early this year, meant that optimism was cautious in Thailand and Bangkok and the expectation was that 2022 will begin without any clear picture of recovery.

As of Q4 2021, 600,000 square metres of net leasable retail area was under construction in Bangkok.

The large new retail developments expected to be completed between 2022 and 2023 are such as Terminal 21 Harbour, The EmSphere, and Central Village (Phase 2).

Evolving retail Retail landlords must need to keep focusing on adjusting rental structures and lease clauses relating to flexibility to tackle the uncertainties in the market, the report stated.

“Both landlords and retailers will have to continue evolving together.

Landlords will need to collaborate more with tenants to differentiate their experience and bring back traffic to their physical stores,” CBRE said.

The total retail supply in Bangkok climbed 1.3% YoY to 7.9 million square meters in the last quarter of 2021, according to the report. At the same time, overall occupancy rate dropped 0.9 ppt when compared with the same period last year.

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The market’s revenue is projected to grow to $87.1b in to 2028

Demographic shifts boost APAC’s DIY retail ASIA PACIFIC

T

he rise in population and demographic shifts in Asia Pacific has boosted the region’s do-it-yourself (DIY) home improvement retailing market, which is expected to see steady growth in the coming years, according to a report from Research Dive.

The market’s revenue is projected to grow at a 3.9% compound annual growth rate (CAGR) to $87.1b by 2028, driven by the the dominance of populated countries like India, China, and Pakistan in the retail sector, immense urban increments, and prominence of megacities.

On the other hand, the lack of skilled professionals in the DIY home improvement sector is the major factor expected to hinder market growth, the report stated.

Nonetheless, growing emphasis on environment-friendly projects and initiatives like DIY combo kits, reusable snack bags, and DIY un-paper towels could potentially offer abundant growth opportunities for the market in the coming years, Research Drive said.

The onset of the COVID-19

The lack of skilled professionals in the DIY home improvement sector hinders market growth

Better growth opportunities The rest of the Asia Pacific region is especially expected to witness better growth opportunities, with revenue projected to hit $26m by 2028 due to the rising number of South-East Asian customers.

“In addition, technological advancements, ultra-modern DIY product enhancements by market players, their powerful acquisitions, and heavy investments in the R&D activities are some factors estimated to propel the market development in the rest of the Asia Pacific region,” the report added.

The DIY market’s painting subsegment is also expected to see a lucrative growth rate over the same period due to the availability of several DIY paint products, as well as the implementation of DIY product enhancements by major market players due to rising customer demand.

The offline sub-segment is also projected to maintain a dominating market share, as offline distribution channels effectively helped in enlarging the customer base of the local market, the report stated.

The DIY market's painting subsegment is expected to see a lucrative growth rate

FIRST Having sustainability as a core could help improve the reputation of SMEs

SMEs plan to implement clear ESG practices, operational policies and processes

Sustainability for success? 3 in 5 SMEs agree SINGAPORE

T

hree in five small- and medium-sized enterprises (SMEs) believe that incorporating sustainability practices in their business will help them grow and improve, the UOB SME Outlook Study 2022 showed.

SMEs said having sustainability as a core could help improve their reputation (54%), make working with multinational corporations concerned with sustainability goals easier (45%), and enable them to help build an environmentally- and sociallyresponsible Singapore (44%).

Amongst environmental, social, and governance (ESG) practices

SMEs plan to implement are clear operational policies and processes such as risk management and financial control (45%), more efficient use of resources to minimise waste (43%), and use of energy-efficient equipment and technologies (35%).

Apart from ESG practices, SMEs, particularly those in whole trade (98%), said they are also aligning their initiatives to the Singapore Green Plan 2030 by stepping up recycling efforts (60%), training employees in climate risk or environmental protection (60%) and switching to energyefficient sources to reduce carbon footprint (56%).

The road to sustainability Meanwhile, companies in construction and infrastructure (98%) are increasing their recycling efforts (41%) and applying for green certification schemes (39%). Real estate and hospitality companies, on the other hand, are looking mainly to reduce packaging waste (42%) such as single-use plastic.

The road to sustainability, however, isn’t an easy one, especially for SMEs who said they either have insufficient knowledge to identify and to execute relevant initiatives for their organisation (40%) or inadequate nonfinancial support such as sustainability training (33%).

In particular, small businesses are also concerned about the potential increase in cost for their end customers (31%) and inadequate financial support from the government and banks for such initiatives (31%).

Meanwhile, medium-sized businesses said inadequate non-financial support (47%), insufficient knowledge (46%) and the possible impact on short-term revenue (44%) are their key barriers to adopting sustainable practices.

To help address these concerns and deepen their capability, 43% of SMEs said they are looking for collaboration opportunities with industry bodies, government-linked companies or large businesses, whilst 39% are seeking connections to industry peers and ecosystem partners, and 38% plan to tap training or solutions providers.

UNA BRANDS, KLICKBRANDS COMMIT US$100M TO SOUTH KOREA’S E-COMMERCE MARKET

U

na Brands and KlickBrands have formed an alliance to commit up to US$100m worth of investment in South Korea’s e-commerce market.

The investment could benefit at least 25 profitable e-commerce brands with revenues of up to US$50m in categories such as health, K-beauty, baby, pets, and home and living brands.

“Of all the local ecommerce aggregators, we chose KlickBrands as our strategic partner because of our shared vision, mission, and values,” Kiren Tanna, Co-founder & CEO of Una Brands, said.

“This will make KlickBrands an instrumental partner in strengthening Una Brands’ presence in, and understanding of, the South Korean

ecommerce landscape.”

South Korea is amongst the key markets of Una Brands, considering it has the fifth-largest e-commerce market across the globe.

The market is projected to see an annual growth rate of around 14% with an expected market value of US$250 billion by 2025.

“Our partnership with Una Brands bears testament to the growing possibilities for ecommerce brands in South Korea,” KlickBrands Co-founder & CEO Brian Hyun said.

“We bring to the partnership local ecommerce expertise, as well as the understanding and empathy of local brand owners’ mindsets.”

South Korea is amongst the key markets of Una Brands, with the 5th largest e-commerce market globally

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FIRST globe, and consumers and businesses have increasingly learned to use the internet to conduct online transactions. This trend piles pressure on physical retail shops, landlords, and their retailers to reinvent themselves by incorporating more experiential elements into the retail experience to maintain footfall.

Retailers will seek to adapt by pivoting to experiential retail both in-store and online, moving beyond omnichannel into an omniexperiential strategy. Those who successfully leverage technology to integrate the offline and online worlds into a seamless retail experience will stand out.

Mall owners are likely to continue adjusting their tenant mix to include more experiencebased tenants, such as food & beverage and entertainment operators.

Deep-pocketed retail operators are likely to launch new expansion plans

Here’s what you should expect from the APAC retail property market in 2022

R

etail markets across Asia Pacific are expected to recover at varying speeds as the pandemic continues to evolve.

As international visitors return, JLL expects consumer spending to slowly recover, and retail sales growth is expected to outpace the long-term average across many countries in the Asia Pacific region.

Here’s more from JLL: Although sentiment is expected to improve, retailers will maintain a focus on operational resilience given the potential for further headwinds related to COVID-19 and, more recently, supply chain disruptions and inflation. Flexibility and agility will still be needed to navigate the evolving retail landscape in Asia Pacific with strengthening existing store performance and enhancing online capabilities remaining integral parts of retailer strategies.

Nonetheless, various retailers, often wellcapitalised operators, are likely to shift their attention further ahead and commit to new expansion plans.

Rents set for a recovery Easing restrictions should help shore up consumer confidence and support the

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recovery in footfall at physical stores. Whilst loosening border restrictions could also provide additional impetus as international business and leisure travel gradually resumes.

Improving retailer sentiment in tandem with a stabilising vacancy environment is expected to set the stage for a recovery in rents in 2022, albeit at an uneven pace across markets and asset types.

The pivot towards prime shopping destinations and quality space in local neighbourhoods from retailers, coupled with an increasing importance for active management of assets, is likely to see welllocated, high-quality assets operated by experienced landlords outperform.

There is no “one size fits all” strategy for reinventing or repurposing retail properties, and intensified competitive pressures have made it paramount for landlords to be proactive with their strategies to keep their properties relevant.

Further acceleration in demand for retail experience Due to the need for social distancing, COVID-19 has accelerated the growth of e-commerce across the region and

Investors to remain mindful and selective over retail assets A less uncertain operating environment and improving rental outlook should help gradually restore investors’ confidence.

Retail yields have softened in several markets and the relative level, compared to other core commercial sectors amid stiff competition for these assets, may entice more investors to explore retail opportunities. The defensive characteristics of neighbourhood centres may attract income-driven investors whilst opportunistic investors look for value-add or repurposing potential.

That said, the scarcity of opportunities to acquire high-quality assets in urban centres across many Asia Pacific property markets would likely attract healthy interest if a chance becomes available.

Investors will nonetheless be mindful of the ever changing retail environment when assessing potential opportunities.

Retailers will seek to adapt by pivoting to experiential retail both in-store and online

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FIRST ‘BARGAIN HUNTING’ DRIVES CONSUMERS’ ONLINE PURCHASE SOUTHEAST ASIA

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aving money is amongst the crucial factors that drive the online shopping behaviours of Southeast Asian consumers, according to a report.

Under the E-commerce Southeast Asia (SEA) Barometer Report Uncovering SEA online shoppers and delivery preferences report conducted

by Ninja Van Group and DPDgroup, 72% of the consumers in the region think online shopping saves money.

Around four in 10 or 38% of consumers rated free delivery as a key driver for buying online.

“Bargain hunting behaviour is a key driving factor for online shopping, and free delivery is one of the tactics to encourage online purchases,” the report read.

Reviews drive purchase The report also found that e-shoppers are “heavily reliant” on online reviews to assist in purchase decision making, with 81% choosing websites based on social media influencers, and 94% saying they have shared or published feedback after purchasing.

“In a hyper social environment, feedback is a form of currency that cannot be underestimated as more than half of the e-shoppers are likely to discuss their purchase via websites or apps,” the report said.

A total of 57% said they have published comments and rated a product on the website or the application itself, whilst 36% make recommendations to friends and family. Around three in 10 or 29% have published comments and rated the product on social networks, 25% published posts and pictures of their purchases on social networks, whilst 6% said they had never done so.

Over 9,000 participants in Indonesia, Malaysia, Singapore, the Philippines, Thailand, and Vietnam were surveyed in July 2021 for the study.

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Tourist demand is expected to remain muted in the coming months

Hong Kong set for rebound in retail activity HONG KONG

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ong Kong’s retail sector is expected to see a rebound in footfall and dine-in activity following the return to office by employees in late April, but a full market recovery remains uncertain in the next few months, according to the latest report from CBRE. The latest COVID-19 wave is expected to be contained by the end of Q2, which would help bring footfall and dine-in activity back to growth.

Restrictions on various retail segments are likely to stay for most of the quarter, but most operations could likely resume with vaccine passes by the end of May, the report stated. The rising vaccination rate is also expected to help retail activity in the city regain market momentum.

Meanwhile, the COVID-19 pandemic has been growing on the mainland, whilst most other economies have adopted “living with the new normal” policies, which could discourage Hong Kong from relaxing its travelling restrictions.

This means domestic demand will therefore continue to drive the retail

Full retail market recovery will have to rely on inbound tourism growth

market for the foreseeable future, the report stated.

The government has introduced a rental enforcement moratorium that allows tenants in specific sectors to delay rental payments for up to three months. The distribution of consumption vouchers is also expected to support the sector in the coming months.

However, the challenging business environment means many groups will still be unable to pay rents, and some tenants in these sectors are likely to go out of business as dining-in and entertainment venues are likely to remain somehow restricted in Q2 2022, CBRE said.

“Full retail market recovery will have to rely on inbound tourism growth, which is not expected to return in the next few months.

Uncertainties in global investment market outlook and higher interest rates will also translate into weaker wealth effect and dampen demand for discretionary consumption goods,” CBRE further said.

Fifth wave dampens activity Hong Kong's fifth and strongest ever wave of COVID-19 infections dampened leasing sentiment and activity in Q1 2022, with the total number of leasing deals falling by 30% QoQ as business activity was disrupted by the pandemic, the report stated.

Leasing activity slowed across all sectors including food and beverage (F&B) and apparel, which were the main demand drivers in 2021.

Only a few local F&B and fast-food restaurant chains committed to new leases over the quarter.

Weaker leasing activity also pushed up vacancy by 0.8 ppt to 152% this quarter, the report added. Vacancy in Tsim Sha Tsui rose by 4.3 ppt to 20.3%, the highest amongst core submarkets.

Causeway Bay saw vacancy climb by 2.6 ppt to 15.8% as backfill space given up by a luxury brand and a bakery store failed to attract new tenants.

Meanwhile, Mong Kok vacancy edged down by 0.6 ppt although the proportion of short leases increased.

Central remained the most resilient submarket, with vacancy falling by -1.3-ppt thanks to the area's diverse trade mix.

CONCEPT WATCH

Comfortable office furniture must not cost ‘silly money’: ErgoTune and EverDesk+

The Singapore brands brought ergonomic chairs and desks to overseas markets with prices starting at $399 and $599, respectively – with the help of e-commerce aggregator Una Brands.

into international markets. Our entry into Australia is just the beginning.

We are also exploring Western markets, like the US or European markets where we see opportunities for growth,” he said.

In terms of product expansion, Una Brands is lending expertise and resources that will allow ErgoTune and EverDesk+ to engage in more and deeper research and development to further innovate an exciting new line of products.

Creating a brand around affordable, high-quality furniture seemed like the perfect market gap to tackle (Photo: ErgoTune and EverDesk+ founders)

F

resh out of university in 2018, Damon Lye, along with his friends, Joshua Chan and Tan Jun Kiat, explored various business ideas. But the three friends only ventured into business together when they identified the need for a standing desk, and could not get one that was easily accessible and affordable.

Lye recalled the frustration they felt back in the days when they were trying to acquire a standing desk.

They had to send an email to get a quotation and waited for two or three days to receive a response, only to find out the products ranged from $2,000 to $3,000—a silly amount of money to pay for such a necessity, the group of friends thought. Creating a brand around affordable, high-quality furniture seemed like the perfect market gap to tackle; hence the birth of ErgoTune and EverDesk+.

“And that's kind of the genesis of how we got started in this whole business,” he said. “We thought that we could create a better experience, a better product, and at a better price point for ergonomic furniture.”

Fast forward to last year, the two brands posted record sales after they grew 150%, tripling the business’ revenue to more than S$13m.

Moreover, its flagship product, the

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ErgoTune Supreme Chair, alone sold nearly 20,000 units during the year.

Kushal Patel

We create better experience, a better product, at a better price point for ergonomic furniture

Expansion plans With the companies continuing to ride on this growth and plans to expand outside of Singapore, ErgoTune and EverDesk+ entered into an eight-figure acquisition deal with Una Brands, an e-commerce aggregator, which acquires brands and helps grow them into global household names.

“We've taken the brands quite far.

From something that we started at home around three or four years ago, it has gone much further than we thought possible,” Lye said.

“But we realised a lot of challenges were not getting easier and that's when we thought we needed the backing of a company with the proven experience and track record to help us grow the brands and achieve our ambitious targets.”

By working with Una Brands, ErgoTune and EverDesk+ have launched into Australia, contributing to more than 15% of the business’ overall revenue in the fourth quarter of 2021.

“With Una Brands’ help, we now have the financial resourcing and capabilities to fast-track our expansion

Where Una Brands comes in Kushal Patel, co-founder of Una Brands and VP of Investments, said Una Brands is looking to build on the strong growth momentum ErgoTune and EverDesk+ have seen over the last few years, with the intention to “turbocharge” their growth further and enable the brands to become “best-selling” global ergonomic chairs and desks.

Patel shared that in making acquisitions, Una Brands factors in several considerations, such as whether the brands carry category-leading products with low cyclicality and have strong financial fundamentals. Examples of such financial fundamentals include large annual revenue, sustained yearon-year growth and healthy profit margins of the brands.

“We look for brands with strong long-term growth prospects driven by favourable underlying trends,” he said.

Since acquisition, Una Brands has greatly reduced the exposure of the brands’ fulfillment process to operational risks by fully automating their order management system (OMS). This has resulted in a 57% decrease in waiting time required for a delivery and was achieved within six months of acquisition.

Furthermore, this has significantly reduced the amount of time that the brands’ operational team spends on resolving issues and errors.

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STORE WATCH

Carzuno is the Netflix for cars – here’s why this platform works

The first subscription-based car rental in Singapore seeks to provide an alternative to car ownership.

W

hen subscription-based models are brought up, the majority point to Netflix or HBO Max for video consumption and Spotify or Apple iTunes for music.

For a low price, multiple options are presented for customers to choose from at the touch of a button or tap on a screen. Two former Grab executives thought of a different use for the subscription model.

Andrew Chan and Amrt Sagar developed Singapore’s first subscription-based car rental platform called Carzuno.

“With the whole world changing and moving digital, car leasing has not changed much. And that's where I see me and my co-founder realise that actually there is a space for car subscriptions,” explained Chan in an exclusive interview with Retail Asia.

Traditionally, consumers either purchase or lease vehicles. Buying a car meant dealing with the minimum payment of at least $10,000 for the certificate of entitlement (COE) alone.

Adding on to that would be expenses like taxes and the depreciation of their personal vehicle. On the other hand, renting a car meant paying a daily rental rate that could add up over the long term.

Chan saw all of these inconveniences as something that could be avoided through Carzuno, an alternative option that could make it easier and more accessible for Singaporeans to eventually own a car for the long term.

What’s in a name The founders, both veterans in the industry, coined the name Carzuno by combining the two words ‘car’ and the Spanish word for one, ‘uno’. It was fitting, then, that the start-up is Singapore’s first subscription-based car rental service.

A customer’s review summarised how Carzuno worked: “I always thought it was very complicated to get a car in Singapore. Then I

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Carzuno makes it easier and more accessible for Singaporeans to own a car for the long term (Photo: Amrt Sagar and Andrew Chan)

We are the only platform with no brand preference.

We are here to consolidate everybody

saw Carzuno’s ad online, found an excellent car at a great price, picked how many months I wanted to subscribe, paid online and uploaded my and my partner’s driver’s licences.

Great customer service throughout the whole process.”

One thing that sets Carzuno’s pricing apart from other car rental businesses employing a daily rate, is that it includes the vehicle's insurance in the customer’s monthly bill, as well as a 24/7 roadside assistance program and taxes.

The use of a digital platform also addressed one of Chan’s initial comments on the rental process. If one were to go through the traditional route, multiple trips to the showroom would be needed, with negotiations with dealers often taking longer than usual. With Carzuno, consumers can sign up, choose a car, and pay within a matter of minutes. One-, six-, 12-, and 24-month subscription plans are available. The car is then delivered to the consumer within one to two days from the transaction.

“We are the only platform that's neutral, meaning there is no brand preference. We are here to consolidate everybody, and that allows us to have a range of stocks as well as pricing,” explained Chan.

In other words, over 60 models can

be found in Carzuno’s catalogue, from Japanese hatchbacks to Germanmanufactured vans. Meanwhile, other rentals primarily partner up with other car manufacturers, resulting in a car roster primarily populated by that certain brand.

To further grow the current subscriber base, its talent roster, and the product itself, the startup entered into pre-seed funding round and received $674,655 (US $500,000).

Lead investors for the start-up’s funding round include Net Ventures and Hustle Fund, as well as private investors in the automotive and ride-hailing sectors. According to Chan, the startup even proved popular enough that they were over-subscribed.

Going forward, Chan looks toward expanding into Southeast Asia over the next five years. As early as now, he is gearing up for a different set of challenges beyond Singapore’s unique automobile market.

For instance, with Thailand and Indonesia, a larger delivery area is required. On the other hand, the same countries present a less volatile market and have the opportunity to provide more transparent pricing due to a wider range of aging cars.

But for Chan and Carzuno? It’s the next mile in a long drive.

RETAIL ASIA

17

RETAIL WATCH

Retail ‘war’ starts even before shoppers enter the store: Alfamart

At the front line is Alfamart's CRM platform that analyses consumer shopping behaviour.

because the promos given were targeted to members,” Ryan said.

Based on Alfamart’s financial reports as of 30 September 2021, the company posted a 12.10% increase in net revenue to IDR63.18t (US$4.4b) from IDR56.36t (US$3.9b) in the same period in 2020.

Alfamart invested to build knowledge and understanding of consumer shopping behaviour with its CRM platform (Photo: Ryan Alfons Kaloh)

I

n marketing jargon, the moment of truth or MOT is considered the time when the shopper finally gives an impression after interacting with a brand, product, or service.

This theory, however, is considered less relevant in the midst of rapid digital developments, claimed Ryan Alfons Kaloh, marketing director of PT Sumber Alfaria Trijaya Tbk, the operator of Alfamart Group convenience store. He argued that the 'battle' starts before the shopper even goes to the store.

This is why Alfamart invested in building knowledge and understanding of consumer shopping behaviour with its Customer Relationship Management (CRM) platform. Through big data analysis, CRM provides relevant promotions offered through various online platforms based on the shopper shopping patterns gathered from the physical outlets. From the data 18

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It’s like shoppers have been escorted before going to the store to make transactions

obtained, Alfamart is able to know the business prospects of each of its 16,500 outlets across Indonesia.

“It’s like shoppers have been escorted before going to the store to make transactions. In the midst of digital development, business owners need data so that they can process it into knowledge and be able to promote their business digitally, such as through mobile phones or Whatsapp,” Ryan said in an exclusive interview with Retail Asia.

Alfamart started to build the CRM platform in 2016 and has since seen positive results, Ryan disclosed.

From 2019 to 2021, Alfamart has been seeing strong double-digit growth in sales. In 2021, sales from membership grow more than 30% and members contributed more than 35% of total Alfamart sales.

“Amidst the pandemic and challenging situation, we were saved by knowledge from our CRM,

Launch of Alfagift The data gathered and analysed through the CRM platform were used by Alfamart to build and launch Alfagift in 2016. It is a loyalty program application that gives updates on promos and vouchers to Alfamart's members.

In 2019, Alfamart relaunched Alfagift with added features that support Alfamart’s goal to achieve an ideal Online to Offline (O2O) model. In the same year, it acquired PT Global Loyalty Indonesia (GLI) which developed a member point program for Alfamart.

“Since 2019, Alfagift is fully managed by GLI. [But in terms of management,] they are completely independent. It’s not just a sideline for one department. That makes Alfagift a digital membership platform that enables CRM activation, as well as transactional capabilities,” said Ryan, who also serves as the CEO of GLI. This partnership launched a new version of Alfagift, an integration of both offline and online shopper knowledge capabilities into the transactional applications. Various features were also developed based on big data analysis on shopping behaviour, such as personal offers and personalised shopping lists with products offered based on both online and offline historical transactions, as well as cross-selling promotion supported by shopping affinity algorithm. It was also able to offer various payment options to COD options and free shipping.

Alfamart aimed to synergise between shopping at Alfamart’s physical outlets and online at Alfagift.

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RETAIL INSIGHT: COSMETICS

Shoppers switched to spritzing fragrances as quick luxury fixes to feel happier during downturns

Fragrances now wear the ‘lipstick effect’ Replacing lip products, scents topped ZALORA’s beauty category both in 2020 and 2021.

F

rom long-lasting lipsticks, celebrity beauty brands, such as Rihanna’s Fenty Beauty, have pierced through the perfume industry. As it seems, this came about when shoppers switched to spritzing fragrances as quick luxury fixes to feel happier during downturns, which was once fulfilled by painting the lips.

ZALORA Corporate Communications Director Christopher Daguimol told Retail Asia that the better-than-expected sales can be attributed to fragrances, comparable to aromatherapy, are experiencing the “lipstick effect.”

“Fragrances could have also been a way for consumers to feel more ‘dressed up’ and presentable on Zoom calls,” Daguimol said.

In both 2020 and 2021, fragrances emerged as the top beauty product purchased by consumers in Southeast Asia, respectively accounting for 19.82% and 22.58% of its sales in the beauty category, based on its Southeast Asia 20

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TRENDER Report 2021.

Fragrances also grew by 455.66% year-on-year (YoY) in 2020 and by 77.54% YoY in 2021. It also stood second in terms of the top luxury products consumers buy with an 8.03% share, closely following wallets and purses with 8.79%.

This trend is not exclusive to women as fragrances also topped the men’s beauty category. Data from TRENDER showed that fragrances made up 42.9% of the sales in the beauty category.

It overtook face serums and treatments (16.28%) and bath and body (10.12%).

It is expected that the increased investment in self-care, growth of the male beauty market, as well as the confidence to purchase luxury goods will likely continue and further contribute to the demand for fragrances.

Beauty category runners-up After fragrances, face serums and treatments, which accounted for

Fragrances could have been a way for consumers to feel more ‘dressed up’ and presentable on Zoom calls

20.88% of the beauty category sales in 2021, followed. This improved from 15.21% in the previous year.

Placing third amongst the top beauty products is bath and body with 9.79% in 2021, surpassing makeup products.

Daguimol linked this to health measures, such as mask-wearing, that rendered it less important for consumers to wear make-up.

The prolonged stay at home with lockdowns, forcing offices and schools to operate under a hybrid setup also led to an “opportunity” for consumers to start and stick to skincare regimens.

“Having stayed home for long periods of time, consumers have become more adjusted indoors, resulting in a shift towards embracing natural beauty,” Daguimol said.

“These newfound pandemic habits would now be a crucial part of routines that consumers would not want to break.”

ZALORA also expects demand

RETAIL INSIGHT: COSMETICS

Christopher Daguimol

ZALORA noted that demand is also driven by the younger demographics in Southeast Asia

for men’s beauty products to sustain its rise as the industry is projected to grow by an average of 8.4% annually between 2020 and 2026 in Southeast Asia. Demand for beauty products amongst male consumers soared 247% in 2020 from the previous year; and continued to grow in 2021 when it jumped 45%.

Daguimol noted this comes as men are also seen to be increasingly invested in self-care and skincare with face serum and treatments, and bath and body products, which likewise, followed fragrances.

“This rise can be attributed to the increasing awareness of the benefits that skincare entails, along with the convenience of purchasing beauty products online,” he said.

In addition ZALORA noted this demand is also driven by the younger demographics in Southeast Asia, which make up the majority of ZALORA’s consumers as the use of beauty and skincare products amongst men is normalised.

‘Revenge Dressing’ ahead Outside the beauty category, casualwear, particularly sports apparel, filled the carts of online shoppers in Southeast Asia as lockdown periods were prolonged, driving consumers to prioritise their health more.

This trend even spilled over footwear as ZALORA found a demand uptick in sneakers and running shoes, outweighing heels.

Citing TRENDER data, Daguimol said that in shoes, casual footwear made up 95.89% of demand, whilst

formal footwear only made up 4.11% in 2021.

This demand for casualwear is expected to continue this year with consumers preferring a work-from-home setup, or hybrid working arrangement; but whilst that is the case, ZALORA noted that occasionwear will likely make a comeback in 2022.

“Our TRENDER insights find that forgotten categories are seeing a rebound and consumers – particularly females – have been looking to purchase new pieces to wear out as restrictions ease.”

Daguimol shared this trend was first seen in winter wear, when search terms for “winter wear” have increased by 275% on ZALORA after Singapore announced its pilot Vaccinated Travel Lane with Germany in October.

The year ahead In the year ahead, ZALORA still sees comfort and sustainability will remain as a major factor for purchasing decisions. This comes as shoppers continue to cling longer to more comfortable options.

Its TRENDER report found that consumers will likely look for healthier options that are backed by science and research as digital acceleration led to social activism amongst beauty and fashion consumers. This arose from interactions in online communities that paved the way for exchanges in values regarding sustainability and ethical moral codes.

“Thus we may be seeing more

The increased investment in self-care and growth of the male beauty market will further contribute to the demand for fragrances

consumers getting involved and considering factors, such as ingredient or material sourcing, and eco-friendly packaging before making a purchase decision,” he said, noting that behavioural shifts have already been seen in the resale industry, where consumers increasingly lean towards thrifted and upcycled materials.

More consumers also got into the secondhand clothing market as shoppers want to buy pieces that have quality at a more affordable prices, instead of buying cheap yet disposable attires.

Apart from a projected comeback of dressier pieces and sustained demand for casual wear and personal care products, ZALORA also sees demand for children’s wear to surge as children quickly outgrow their clothes.

Daguimol said that demand will likely be sustained as consumers begin to return to normalcy and as cross-border travel resumes with more countries easing restrictions. He noted, however, that this demand could be tempered particularly in Singapore amidst a new tax policy hike, coupled with the continued financial impact of the crisis and the rising inflation rate in the region.

Fragrances also topped the men’s beauty category

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21

INTERVIEW

Lazada builds an e-commerce giant from a ‘blank slate’ Switching from buy-and-sell to marketplace, now to the right mix in e-commerce model.

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nline shopping has easily become a top-of-mind option amongst consumers, but this did not just happen overnight. Lazada Singapore, now in its 10th year, said the company had to build trust from scratch amongst buyers who would have been skeptical of the online shopping experience.

“We started with a blank slate and what we learned helped us innovate and constantly rebuild new capabilities to fit into this Southeast Asian market,” Lazada Singapore CEO Wee Lee Loh told Retail Asia.

In this exclusive interview, Loh shared the company’s journey over the last decade as well as how consumer behaviour has changed over time as revealed by their recent Regional E-commerce Consumer Study.

You celebrated your 10th year anniversary in March of this year, could you share with us how the journey had been and what were the key lessons for Lazada?

When we started a decade ago, e-commerce was very nascent in Southeast Asia. Back in that time, one of the key challenges we faced was trust.

People didn't trust the shopping experience, so we had to do some credentialisation. In the early beginnings, e-commerce was creating threads to list products on more familiar local platforms at the time, such as the HardwareZone and Locanto. The buyer and seller would arrange to meet in person to make the transaction.

E-commerce as we know today has changed all that, providing a 24/7 platform for sellers to list their products and bridging payments via a variety of payment options from credit cards to e-wallet, whilst retaining cash on delivery (for all markets except Singapore). This is also one of the distinctive capabilities Lazada has built, together with our logistics. Over time, this trust has been fostered by having reliable logistics, having a good range of assortment, and also partnering with leading brands and SMEs. I think all that helped us to accelerate the progress of e-commerce in Southeast Asia.

Ultimately, for Lazada, the goal is not just to be a platform to buy, but also to have an ecosystem so that we can help to grow the local businesses and consumers alike. We have also put in place very strong analytics for merchants and for users.

On the merchant side, it is how we use technology to allow them to accelerate and choose and recommend to them what items they should list. On the consumer aside, our search engine will then provide suggestions on perhaps interesting assortment that the consumer should view. I think all that is helping to change the face of e-commerce.

What mistakes, did you commit when you started your operations and what would you have done differently?

We started with a retail model where Lazada would buy the

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Wee Lee Loh, CEO, Lazada Singapore

When we started a decade ago, e-commerce was nascent in Southeast Asia. Back then, one of the key challenges we faced was trust

stock, and then sell it to consumers on our platform. But this had some challenges in terms of providing the range of assortment that suited customers' appetites. This was very much similar to the Amazon retail model.

We then later shifted our strategy from this retail model to a marketplace-based model. And today, what we are more established in doing is the e-commerce retail market.

For example, last year in 2021, we partnered with the Great Singapore Sale, a major shopping festival. For the offline merchants along the Orchard Road, the famous shopping belt, we partnered with them to accelerate the growth of both online-offline sales together. And then for the 11.11, and 12.12 festivals, we gave out very interesting prizes, like the million-dollar condominium. These help create a lot more excitement and interest in driving these shopping events.

Third, we continue to build upon the needs of the brands to accelerate their online presence. We have launched the LazMall, as well as the LazMall Prestige, where we are not just able to provide a solution for brands, but even luxury brands with the likes of the Mont Blanc and the Ferragamo. Some of these luxury brands are then able to find a way to engage with users and also to continue their journey online. This is what we continuously innovate.

How has digital commerce changed the shopping behaviour of consumers in the last 10 years?

INTERVIEW We started with the mobile-first, where we engage users through the mobile app. This helped accelerate digital commerce. Digital commerce today is an ingrained habit of Southeast Asia consumers with seven in 10, considering online shopping to be part of their everyday life; and eight in 10, indicating the ability to purchase items online.

Almost half of the shoppers indicate that they do make online purchases at least once a week or more, whereas close to six in 10 indicate that they only made shopping a part of their lives in the past one to two years. This shift was also accelerated by the pandemic and digital adoption in the Southeast Asian region.

We also realised that mega campaigns play a role in the behaviour of shoppers as seven in 10 looks to purchase something during such mega-events. It has evolved to become a place where consumers are adopting window shopping with close to three in 10, exploring websites and applications to window shop. Lastly, we also note the brands continue to adopt live streaming and shopper attainment to further help boost sales. In the study, we saw that six in 10 of the shoppers indicate that the Lazada helped make shopping more entertaining.

How do you see online shopping evolving in the next year as economies continue to reopen?

Our understanding is that even as the countries reopen their economies, we will expect that digital commerce remains a relevant and big part of shoppers' purchase journey.

Fundamentally, we see the e-commerce penetration to be a lot more significant and higher, even in the other markets around the world, which illustrates the continued growth of that e-commerce penetration amongst users. We also found people shoppers prefer online shopping because prices are lower. It's convenient as the items are delivered straight to them, and they can browse online reviews.

Your report also found that consumers are actively choosing to purchase items through digital channels. What will this mean for brick-and-mortar retailers?

Offline and online commerce work hand-in-hand to complete the modern-day retail experience. In that sense, we continue to see the online shopping journey as part of the total buying experience. This continues to be relevant for the brands, as well. The brand says sellers find that e-commerce platforms are a convenient and easy way to onboard and instead of just their own “.com” shop, many brands from international to local ones have their online stores in Lazada as a means to quickly and easily have a nationwide reach without the need to invest in some of these online shop infrastructure and logistics. This has also been a key reason retailers flocked to Lazada and have increasingly become part of their overall business strategy.

We are keeping our offline retailers to have a digital presence with several of our recent initiatives, such as the partnership with one of the constituencies in Singapore, Randin Mas. Lazada also looks to educate sellers on the variety of tools available for their online business, such as live streaming functions, data analytics for business, and so forth.

How about in terms of trends, what are the current ones that have emerged in digital commerce?

For the Singapore side, we mentioned that about half said online shopping has become important to them in the last

Digital commerce today is an ingrained habit of Southeast Asia consumers

two years and 85% said they are now spending more online than in stores. This is a very significant number, which means that of the total 10-dollar basket spent, more than $5 is spent online. Shoppers continue to look for a marketplace guided by trust, experience, and products that provide a convenient and worry-free transaction.

This is shown by their preference for reviews about 60% of them; authentic products, 54%, and secure payment options, which is 53%. Singapore shoppers also increasingly value peer ratings and reviews (61%) along with secure payment options when it comes to platform features. This suggests that trust remains one of the most important considerations when choosing a platform to complete a purchase.

Regionally, consumers value wide product availability, and focus on authentic product reviews has also been a very important aspect of online shopping. One in two shoppers said reviews make the shopping experience positive and holistic. And 50% of them also say they actually contribute to the reviews on the products that they post online.

What challenges will likely emerge and how should brands prepare for these?

One is the competition in digital commerce. With a range of products readily available, brands need to work on differentiating themselves through avenues that consumers recognise and regard highly. To stay relevant, brands can continue to look out for innovative ways to further enhance their engagement with the consumers, such as live streaming or gamification. Another challenge that the studies show is that for certain categories of products, consumers prefer to purchase them offline. These include grocery and pets, 55%, and health and beauty, 35%. For brands, this would mean that they will need to find a way to marry offline with online to bridge the shopping experience for consumers.

What more can we expect from Lazada?

In Singapore, we continue to want to have a localised strategy to build stickiness and also the top of mind share from our local consumers. That fundamentally shifts our strategy to have a very user-centric targeted offering, not just in terms of the marketing, but also in terms of the go-to-market assortment available for them.

As we become an increasingly localised e-commerce player, we will continue to serve our communities living in Singapore, the top three largest local communities, the Chinese, the Malays, and the Indians. And, the top 10 largest international communities living in Singapore all constitute the local users that we want to serve.

Offline and online commerce work hand-in-hand to complete the modern-day retail experience

RETAIL ASIA

23

INTERVIEW

Figaro Coffee Group finds niche in pizza delivery

Angel’s Pizza propelled the food conglomerate’s growth in the Philippines.

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ver the span of nearly three decades, the Figaro Coffee Group (FCG) has grown its business from serving a cup of joe to Filipinos with Figaro Coffee to bringing Taiwan’s food scene to the Philippines with Tien Ma’s restaurant. But what FCG did not see coming is that its expansion into the pizza delivery business, through Angel’s Pizza, would propel its growth and encourage the company into going public today.

“We decided to go public because we saw that our small food company could actually be something bigger,” FCG Chairman Justin Liu told Retail Asia.

“We never envisioned to be a huge player in the market; but because of the success of Angel's [Pizza] and the loyal customer following of Figaro, we were very encouraged.”

At present, the group has more than 100 branches nationwide across all its retail restaurants and the company eyes adding 29 more Angel’s Pizza outlets, six The Figaro Group Express multi-brand outlets, five Figaro Coffee shops, and one Tien Ma’s Taiwanese cuisine restaurant after generating P767m (US$14.68m) in its initial public offering.

In an interview with Retail Asia, Liu shared how the company thrived over the years since 1993 and how its pizza delivery business led FCG’s expansion.

FCG's expansion into the pizza delivery business, through Angel’s Pizza, encouraged it into going public today (Photo: Justin Liu, Chairman, FCG)

You recently launched your IPO. What drove you into going public this year?

We decided to go public early this year [2022], and we have been planning this since last year to be able to secure growth capital. It's quite challenging right now. Because of the pandemic, many businesses and banks have tightened their lending practices. Therefore, going public ensures long-term business continuity for our business. Also, because of the positive feedback we've had in the past years, we see that our company can become one of the strong food conglomerates in the Philippines, and perhaps expand abroad in the future.

We are a very small and still rapidly growing company. We also discounted the IPO price. Therefore, we believe there's a lot of upside for public shareholders and we are very happy to share our business growth with everyone.

Could you share with us how you plan on using your proceeds, any plans of expansion here and abroad, and new products?

We had a successful IPO and we were able to raise P767m.

The IPO market early this year was a bit challenging, but we were still able to pull it off successfully with very strong demand. At the moment, our shares are actually trading at a healthy premium from the IPO price.

For the proceeds, so with the money that we raised, we're looking to basically spend about 50% of it for our production 24

RETAIL ASIA

We saw that our small food company could actually be something bigger

and commissary development. We are also looking to expand our stores nationwide. So we will be spending about 39% of the proceeds on store openings. The expenses, the capex used for commissary, and store openings will go hand in hand because we have to expand all over Luzon, Visayas, and Mindanao where we will have to put commissaries there, as well. And 10% of the proceeds will be used for debt repayment, whilst the last 1% will be used to improve our IT infrastructure and digitalisation.

We introduced a lot of new products for Angel’s Pizza.

Everyone is familiar with our best selling product, which is the creamy spinach that actually contributed to our growth and it went viral during the pandemic. It's encouraging because a lot of other pizza players now are getting into the spinach pizza craze, which we also encourage, to push innovation and new pizza variants. In addition to this, we also launched our Hallelujah Mozzarella Pizza, which has more than double the portion of pure Mozzarella Cheese. It has been a hit, especially with the kids because everyone really loves mozzarella. We also introduced two new pizzas recently, which is our big Kahuna Hawaiian with huge, whole slices of pineapple, instead of just tidbits. We didn't stop there, we produced our Triple Threat. The Triple Threat is basically a pizza, which combines three flavours in one bite—All Meat, Pepperoni, and Hawaiian and the pizza is square cut, so people can really

INTERVIEW share more with family and friends and be able to taste three flavours in one pizza.

In Angel’s Pizza we want to always strive to break the mould when it comes to pizza and Italian fast food. So, we introduced our latest pasta called the Tomato, Cream, and Shrimp Penne. This is a very delicious blend of tomato cream, shrimp basil, and high-end pasta at a very affordable price. At Figaro, we were very proud to launch some of our new keto and sugar-free sweets. One of the solid trends now and something that many people have learned during the pandemic is health is wealth, to really watch what we eat.

Figaro ventured into creating keto brownies, and our keto tiramisu cake, which has actually been quite successful in our stores, and we're looking to develop healthier alternatives.

What are the challenges that the business operation faced and how did you cope with it?

In 2020 to 2021, our revenues grew by over 150%. And although the overall F&B industry was very challenging, and many players encountered a lot of setbacks due to lockdowns and restrictions, we were very fortunate because our Angel's Pizza brand really drove the sales and growth because of take outs and delivery orders, and our focus on product quality and affordability.

In 2021, we opened 18 stores and we were one of the very few brands that really grew.

The major challenges we, and I believe many companies, not only in the F&B industry, faced were how to take care of our employees, especially those who got COVID and how to protect them and their families. What we did was we put up a small housing in our office, and those employees who wish to stay and be able to prevent infecting their family, or if they wish to isolate themselves, could stay in our facility. We also provided regular testing which the company paid for, and we make sure that we always provide sanitary products that they need, such as masks and alcohol and medicine, especially vitamins. We're happy because even up to now, our company is able to provide our people with vitamins to strengthen their immune system.

What changes have been implemented to keep the business up and running?

We did not really change much of our business model. Ever since, our company has been very diversified in business

FCG is developing a new Angel's Pizza app to launch this year

In Angel’s Pizza we want to always strive to break the mold when it comes to pizza and Italian fast food

concepts, meaning we have dine-in concepts at Figaro, and Tien Ma's, these are more of a cafe, dine-in restaurants. But we also have delivery-focused concepts, like Angel's Pizza.

This has actually helped us weather the challenge in the past couple of years.

In terms of delivery, we have also expanded our inhouse delivery to our other concepts. One of the major fruitful partnerships that we developed and are continually growing is our partnership with Grab. We're proud that we are one of the top merchant partners of Grab in the Philippines. Grab recently went public on NASDAQ and they featured Angel’s Pizza. We continue to communicate and cooperate very well with Grab to create enticing attractive promotions for our loyal customers.

Can we expect more e-commerce initiatives from your brands in the next year?

Yes, last year, we actually improved our Angel’s Pizza website. We beautified it and improved the user experience.

This year, we are focused on integrating our website to our point-of-sale systems in the stores and to our back-end warehouse logistics and commissary systems in the office.

We are also developing a new Angel's Pizza app, which will have a lot of exciting features for our customers. So we're looking to launch all of that this year.

For Figaro Coffee and Tien Ma’s, as well as the Figaro Group Express, we are actually going very strong with our partnership with Grab. We are looking to create more promotions with Grab and also expand our store network in these branches. At the moment, our e-commerce initiatives are mostly focused on Angel’s Pizza.

Any current trends that you've observed in the industry and are there new ones that you expect to emerge this year?

Yes, some of the important trends that I've seen in the past few years and up to now are really the focus of customers on quality and authenticity. Because of the pandemic, we've seen customers be more selective on how they spend their money. Price is no longer the main driver for people's choice in the food and the products that they buy. In addition to that, we are seeing that people also take into account whether the products they buy are healthy or not. So, with this in mind, in the past two years, we also developed a very successful vegetable pizza in Angel’s called the Garden of Eden, which has very unique toppings such as eggplant, zucchini, mushroom, and peppers. This is also a hit and we continue to see that people are choosing to be healthier. We think that we believe that this trend will continue.

What other plans does the group have in the pipeline?

Our plan really is to continue to focus on delivering value for money products to our customers, improve our customer user experience, customer satisfaction, and grow our store outlets in a prudent manner which is focused on profitability and quality of the business. In line with that, we will continue to innovate our products, innovate how we reach our customers, and how we communicate with them. Most importantly, we will always improve on how we take care of our employees because food business is really labour driven.

The growth is attributed to our excellent employees.

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RETAIL INSIGHT: DIGITAL RETAIL

Tailor-fitting retail stores to catch up on the digitisation race Retailers would need over 200 hours to manually digitise their inventories, but tech startup Fairmart claims this could be trimmed down to zero.

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etail stores in Southeast Asia could have earned $4.5b more in sales if only consumers could find their products online. Now, these stores, whose operations are mainly physical, are at risk of losing another $4.5b, should they fail to digitise their inventory, tech startup Fairmart said.

As an example Fairmart CEO and Co-founder Jan Gasparic shared that he would often search online for new pet food or toy for his dog. But whilst there are three pet stores within the two-kilometre radius from his home, his online searches lead him to marketplaces elsewhere, sometimes even those from overseas.

“I would look through the results and I'd see a lot of online listings.

Then I would go into the map

section and try to find which one of my local stores actually carries this product. But because the stores don't digitise their inventory, they essentially just do not come up in the search results at all. Now, then I'll keep on scrolling,” he said.

“The reason this problem exists is [that] current solutions are essentially made for e-commerce, and they’re a poor fit for the way physical retailers work,” the Fairmart CEO said.

He shared that physical retailers have a high number of stockkeeping units with some stores storing more than 2,000 items, making it difficult for retailers to manually digitise their products.

Putting local stores on the map This is where the tech startup comes in as Fairmart enables

Current solutions are essentially made for e-commerce, and they’re a poor fit for the way physical retailers work

small businesses to increase foot traffic to retailers by installing an IoT device that allows businesses to digitise products available in their stores. Retail stores then get a real-time feed of the barcodes that are being scanned and, with Fairmart’s software, the stores can automatically generate a list of its products online.

“In order for them to manually digitise all their products, they would need over 200 hours of manual data entry each month and we bring that number essentially down to zero,” he said.

Gasparic raised that whilst shoppers have gone “irreversibly digital,” it is important that retailers digitise operations as 95% of transactions are expected to happen offline.

He also said that consumers

Whilst shoppers have gone “irreversibly digital,” retailers must digitise operations as 95% of transactions are expected to happen offline

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RETAIL INSIGHT: DIGITAL RETAIL Our role as a company is to help physical retailers unlock the potential of capturing local searches and drive people to their store

Fairmart has uplifted performance of local stores that have now digitised their inventories

are now inclined to do “near me” searches, wherein they look at buying the products at physical stores even as their purchasing process started online.

“Essentially, that's equivalent to what window shopping is in the physical world. It's just the start stage. Now our role as a company is to help physical retailers to unlock the potential of capturing these local searches and drive people to their store,” he said.

Making sense of the data Fairmart’s digitisation strategy benefits retailers in two ways, that is through automation and data, Gasparic said. For instance, he shared that one of their merchant partners had believed that the customers that visit their store are after the frozen food products they sell. It was not until a month after using Fairmart’s software that the merchant found that most of their customers, particularly new ones, frequent their store for the specific product offered only at their store – sambal sauce.

“All these kinds of things that typically you would need right before your meal if you're cooking for the night and you don't know where to buy. But with this kind of data, we're able to empower the retailer to make better decisions in terms of the kinds of products that we're actually getting people into their store,” he said.

Gasparic said Fairmart has seen

its software uplift the performance of local stores that have now digitised their inventories. And, generally, retailers have reported between an 8% to 10% increase in organic leads in their store, largely because customers now find specific products they carry in online searches. He added this essentially allows merchants to capture new customers in an organic way as it is based on specific and unique products offered by the store.

Singapore and beyond Just recently, Fairmart raised $1.5m worth of funds in an oversubscribed seed round, co-led by Quest Ventures and Entrepreneur First. The funding has been earmarked for the

expansion of the Fairmart team, as well as the startup's infrastructure, amongst others.

Fairmart has a presence in New Zealand and Hong Kong, but since relocating in 2020, it has focused largely on Singapore and it plans to keep its eye on the market in the next year.

Whilst that is the case, the startup is looking at expanding outside of Singapore, particularly in Thailand and the Philippines.

He explained in particular that an “enormous” opportunity lies in the Philippine market as retailers have larger distances to cover which makes it harder to straddle through retail logistics.

“The local search problem where people want to understand does this mall have this product or does this store have this product? You want to know what's available in [the Philippine] communities and that information needs to be surfaced,” he said.

Beyond expanding into new markets, Fairmart will also zero in on developing the data they have to enable local retailers to better understand their customers.

“On the data side, we see that our customers really just lack good data to make business decisions off of and that's going to be a key vector for us to be able to productise the data that we have and make it accessible and understandable in a way that allows our customers to make business decisions,” he said.

Fairmart enables small businesses to increase foot traffic to retailers and allows them to digitise products available in their stores

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MARKETING BRIEFING (80%) about biometric payments is the risk of infection when paying in-store or touching POS machines.

Singapore consumers envision the new era of e-commerce of no passwords or pin authorisation

5 advanced payment methods to adopt in 2022

Consumers increasingly want to do away with the cards and passwords and just pay with a wave of a hand, study shows.

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magine paying for fuel, meals, and other necessities by simply showing a hand and not having to remember passwords and pins to authorise online payments. This is how Singapore consumers envision the new era of e-commerce—and they might not need to wait for long for this future to arrive given that 94% of businesses are planning to adopt a new payment method in 2022, according to a report by Visa.

But with several payment methods available in the ecosystem, which exactly should businesses adopt?

Based on the FIS Generation Pay 2021, there are five methods of paying which are gaining ground amongst Singaporean consumers: biometric authentication (71%), smart commands (47%), in-car integration (52%), cryptocurrencies (37%), and a hand-implanted microchip (25%).

Amongst these options, Kelvin Lam, regional general manager of a fintech firm, YouTrip, said the best payment method to adopt in terms of cost, convenience, and safety would be biometric authentication. “[It is a] tried-and-tested payment method that promises both

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Kelvin Lam

Claus Hansen

Gen Z and Millennials are particularly fond of mobile payments and digital credit schemes like BNPL

convenience and security,” Lam told Retail Asia, adding that biometric authentication through fingerprint or facial verification is “inherently more secure than passwords and [two-factor authentication] methods.”

This was echoed by fintech company Zwipe’s VP for Sales and Business Development, Claus Hansen, saying that the use of biometrics in the payment authentication process has the highest form of security available today.

“Unlike a PIN code, a fingerprint securely stored in the EMV chip as a template cannot be stolen,” Hansen told Retail Asia.

“Matching the fingerprint with the image already stored on the card, keeps the privacy of the cardholder intact and the safety and health of the consumer addressed whilst maintaining the convenience of contactless payment,” Hansen added.

It’s not only experts who are backing the safety of biometric authentication, even consumers are saying so with nine in 10 already wanting their payment cards to be biometric in 2022, Zwipe’s study revealed.

The only concern of consumers

Crypto for cross-border commerce For businesses that serve not only the local market but across borders, as well, cryptocurrency would be a good option to consider, especially by small and medium enterprises.

Lam told Retail Asia that cryptocurrencies are “set to bring about faster and cheaper” crossborder transactions which he said are “expected to go up as companies increasingly operate in a distributed and borderless manner.”

“Just like B2C payments, companies will also expect to pay in the fastest and cheapest manner. Advancements in payment technologies such as blockchain is a step towards helping businesses save time and cost on crossborder payments,” Lam added.

In 2022, professional services company EY Global said it expects global cross-border payment flows to reach US$156t or $209.75t (1 SGD = 0.74 USD); of which $201.66t or US$150t will be from B2B payment transactions.

Whilst crypto will hugely benefit B2B transactions, Lam cautioned that this type of payment is still “a volatile space that requires a more sustainable framework and more consumer protections before it can be rolled out to the masses.”

Things to consider When selecting which to adopt amongst the rising payment methods, Nagesh Devata, Regional SVP, GTM APAC at commerce technology company Payoneer, said businesses should take into consideration not only their global appeal but the preferences of the local markets they operate in.

“For example, Gen Z and Millennials are the digital generations and are particularly fond of mobile payments, and digital credit schemes, such as Buy-Now-Pay-Later." With consumers paying more attention to convenience, the Payoneer expert said it is important to consider the complexity, cost, user experience, speed, and market reach of these innovative payments.

MARKETING BRIEFING retailers can tap a number of Store Value Facilities (SVF) service providers in Hong Kong which offer low-cost cashless payment services.

Businesses could invest in point of sale systems, either through a POS device or a POS terminal to receive payment

Go cashless or pay the price 1 in 3 consumers will abandon a purchase if they cannot pay for it digitally.

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ith more consumers planning to drop cash and go fully digital with their payments in 2022 and in years to come, and with one in three abandoning a purchase when not given a digital payment option, small businesses really have no other way to go than shift to cashless.

Fortunately, a majority (95%) of small and medium enterprises (SMEs) are planning to accept contactless payment or some form of digital payment option in 2022, according to a report by Visa.

For the remaining 5%, they might have no choice but to hop on to the cashless movement. “It is a matter of time for the cashless transaction to further penetrate into SMEs and independent retailers,” Herbert Yum, research manager at Euromonitor International, told Retail Asia.

According to Yum, SMEs can “either develop their platforms for their product and services to list out for consumers to choose and proceed to checkout or simply list their product and services on other e-commerce platforms,” depending on the missing pieces of the SMEs' online capabilities.

“The former choice would require SMEs to invest in payment solutions or use third-party payment services, where the latter would reduce SMEs initial investment on such solution and result in higher cost of sales,” Euromonitor's Yum added.

Amongst the digital platforms, mobile apps are the most commonly used by Hong Kong shoppers (50%), followed by a web browser on a computer (23%), and a web browser on mobile (16%), according to Visa.

As for businesses that focus on offline channels, Yum said they could invest in point of sale (POS) systems, either through a POS device or using a mobile device as a POS terminal to receive payment.

Yum cited HSBC’s mobile payment service, PayMe, as an example of a POS system.

“Either way, the POS terminal for them to receive digital payment would be a must for them to adapt to the ongoing shift towards a cashless society. Followed by product and services listing platforms, as well as logistic capabilities for them to deliver their goods to customers,” Yum added.

PwC Risk Assurance Partner, Gary Ng, for his part, said small

Herbert Yum

Gary Ng

It is a matter of time for the cashless transaction to further penetrate into SMEs and independent retailers

Will cash bid adieu?

With the growing demand for new modes of payment, will Hong Kong finally bid adieu to cash? Ng said it depends on what is being looked at.

In terms of infrastructure and customer demand, Ng said Hong Kong is ready to shift to a fully cashless society.

However, that is not the case on the merchant side because, according to Ng, cash will still be used in several transactions in Hong Kong, particularly amongst smaller merchants. This is backed by Visa’s Back to Business Study, which found that 16% of small businesses said they will never make the shift to digital payments only.

One of the reasons why smaller merchants are not inclined towards shifting to cashless transactions is probably because of the fees that come along with implementing electronic payments, Ng said.

“They need to pay some fees 1-5% depending on the type of payment vehicles that they're using,” he said.

Ng said financial services could play a part in easing the burden of merchants by offering cheaper payment acquiring services, which in turn, would benefit them since they will be able to acquire a larger pool of customers.

Checklist for going cashless For those planning to change to cashless, Euromonitor International’s Yum left a checklist of what businesses should consider before adopting new payment methods.

According to Yum, businesses should first have a good understanding of consumers’ preferences; their distribution model; and the additional solutions that accompany the payment solutions they will adopt.

As for consumer preference, Yum said buy now pay later (BNPL) is the latest type of cashless payment to gain ground in Hong Kong, as well as QR code payments, e-wallets, and faster payment systems (FPS).

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INTERVIEW

Daraz juggles assortment and delivery speed

It won’t dive into quick commerce at the expense of its merchandise mix.

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uick commerce, or item delivery as fast as 10 minutes, is on the rise but one e-commerce platform is taking a different approach to the trend. Daraz Group Founder and CEO Bjarke Mikkelsen vowed that Daraz will not sacrifice having a wide assortment of products, which is a crucial factor for online shoppers. It will, instead, strike a balance between assortment and delivery speed–even if not as fast as within an hour but still within the day.

In an exclusive interview with Retail Asia, he discussed what is in store for the e-commerce platform in 2022, a year focused on integrating business models and features that will address the customers’ needs.

How has Daraz performed in 2021? What were the factors that contributed to these results?

2021 was a very good year for us. We saw tremendous growth in our user numbers. We now have about 40 million active users across our platforms and the internet population in our four markets is about 100 million. Almost 40% of the internet population in our markets is now using Daraz on a monthly basis. The key driver of this is COVID which has accelerated the shift toward digital services.

Do you expect the same performance this year, and what do you think will be the drivers for this?

We're very optimistic. First of all, e-commerce is still a very small proportion of the retail market in our countries.

Regardless of COVID, we still have a lot of growth opportunities. We will ensure that e-commerce becomes much more integrated, and we start building frequency and high engagement with all of these users. As I mentioned, in 2021, we reached 40 million users across our platforms whilst growing orders by 100% year-on-year. In 2022, we expect a reduced pace of growth as we focus on strengthening customer experience.

Amongst your foreign markets, which country is the biggest market and which countries in Southeast Asia do you see an increase in consumers or penetration?

We operate in four markets primarily. Pakistan and Bangladesh are the two biggest markets from a population and from an economic perspective. These two markets are almost the same in terms of business size. We also have Sri Lanka and Nepal, and both are performing really well. They're also significant in terms of population, particularly Sri Lanka which has a higher gross domestic product per capita. It's a country where we see a tremendous opportunity.

In all of our countries, we see the potential for growth over the next five to 10 years as a fantastic opportunity. Particularly now, in many countries that we're heading into, there is a 30

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Daraz will not sacrifice having a wide assortment of products, which is a crucial factor for online shoppers (Photo: Bjarke Mikkelsen, CEO, Daraz)

tough macro situation where inflation is rising, and we'll probably see some currency depreciation, which we expect in some of our markets, this is an opportunity for Daraz also to help the countries navigate through this macro uncertainty because e-commerce can make sure that there's an equal service for everyone in the country and that everyone has access to products at the best possible prices.

In many countries that we're heading into, there is a tough macro situation where inflation is rising

What consumer trends have you observed last year and what are the emerging trends amongst shoppers this year?

First and foremost, live streaming is something that we're seeing taking off in our countries and where we are investing a lot of our time and also tech resources in terms of developing digital content. For example, we started Streaming Cricket, which has had tremendous success and adoption in our countries through our platform. It is also the way that sellers can interact with consumers because, in our countries, the biggest factor for growth is building trust with the consumers.

Most of the time, if the consumer can actually see the product in the live environment with the seller actually displaying it in his store, this is something that can help build trust. It is definitely one trend that I think will only accelerate, and we'll see a lot of that in 2022.

The second that I would pick that was big in the last year is quick commerce. A lot of companies started doing these

INTERVIEW needs at the best possible price. This theme of creating a universe where people can come, explore, discover, and be inspired is something that we will be building on with the new brand and that's what makes Daraz unique.

Daraz's new look is "something that lives up to our brand and our architecture and starts a new chapter"

very fast, like 30 to 40 minutes, or even 10 minute grocery deliveries, which is a big trend that we're seeing taking off in our countries. What we're seeing now from our customers is that it's about finding the right balance between assortment and speed. Rather than having a very small assortment of products that you can get delivered in 30 minutes, a lot of people are asking for a bigger range of assortment, but maybe same-day or four-hour delivery. That's where we're going to focus on because we have about 10 warehouses across the region, and we have 50,000 products that we can deliver relatively quickly. The balance between assortment and speed is going to be a big thing.

Early this year, Daraz unveiled its new look for 2022. Can you share with us the reason behind this move?

The last time we did anything that touched the brand was in 2018, which was before we were acquired by Alibaba.

Everything has evolved since this time. We now have built a complete ecosystem. We've built a nationwide logistics infrastructure operating across the region. We’ve developed the payment infrastructure of our marketplaces. We built our buy now, pay later solution to offer credit services to our customers. We’ve also built a lot of channel experiences to segment the user experience on the app.

If I think back, it's a completely different company.

Everything has changed including the technology and the whole platform. So we thought it was time to refresh our brand and make sure that it lives up to this ecosystem that we've built, but also with an architecture that ties all of these different aspects of our ecosystem together in a more coherent way. I wouldn't call it a departure from who we are. We're still called Daraz and we still have the same business model. But it's something that lives up to our brand and our architecture and starts a new chapter for us.

What are the new things that come along with this move?

The main thing that we want to drive is discovery, exploration, and engagement for our consumers. Daraz shouldn't only be about going and buying something that you need right now.

It should be the place where you can find anything that you're looking for and we always have the product that the customer

Customer experience is the sum of everything we do. It's something that we always obsess about

How important is customer experience to the company and how do you plan to improve this?

Customer experience is really the sum of everything we do.

It's something that we always obsess about. It's also not easy when you have an ecosystem of hundreds of thousands of active sellers and millions of customers and products, and to always control the customer experience. But it's our job and our responsibility to make sure that even in this ecosystem, the customer, as well as the seller, always feels protected and has the best possible experience.

Over the last couple of years, we’ve spent a ton of time building the framework, which starts with seller education, making sure that our sellers on the platform are educated and that we have the right regulation around the marketplace, we have the right enforcement of our marketplace rules, and we build good services to support it.

But what we want to do now is take it to another level where people also feel that it's a personal experience, it shouldn't just be about a framework that works in the background. A great example of this is through our algorithms and machine learning technology where we can deliver a unique navigation experience on the Daraz app, allowing us to match deals and promotions to a customer’s interests and preferences. It should be about every single customer or seller. If they need to reach out to us and speak to us for whatever reason, they should feel the passion that we have for this customer experience and make sure that they understand that we take it personally.

How do you encourage business sellers or small businesses to join Daraz?

It always starts with the onboarding journey. I think we've come a long way here but we're still trying to make it easier and more integrated because it's important for us to know who our sellers are so that we can verify to the customers that we know who's selling the product and that we can take action if anything doesn't happen according to the marketplace regulation.

We also need to make sure that we do our “Know Your Client” checks properly. Investing in having this integrated with all of the different databases of bank account verification is something we spend a lot of time on.

The second thing is to make sure that the sellers have the tools and the knowledge that they need to have to start growing and selling their products. What we're also investing in is more technology, more features for the sellers to have more insights on what exactly it is that they need to do in order to grow your business Daraz such as the product type, prices, assortment type, and content they need to produce.

To make it more personal, we've spent a lot of time making our app personalised for customers so everyone will see their product experience and based on algorithms that display things that are relevant to them personally. Now, we want to do the same for our sellers, so that everybody should have an experience that matches the business that they want to build.

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INTERVIEW

From farm to cart: E-grocer delivers fresh produce

HappyFresh relies on its customer behaviour database in determining product offerings.

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resh and never out-of-stock—this has been the cornerstone of HappyFresh’s strategy. And how does this e-grocery keep its massive 15,000 stock units of products fresh? HappyFresh CEO Guillian Segarra said that it is through sourcing directly from the farmers.

Through its digital store, HappyFresh Supermarket, the e-grocer not only offers fresh products but also free delivery. This enables the company to cope with the trends in consumer behaviours toward a healthy lifestyle.

Segarra spoke with Retail Asia and discussed what more can be expected from the e-grocer.

How has HappyFresh performed in 2021 and what are the factors that drove these results?

Both 2020 and 2021 have been our best years, so far, both in terms of overall newly-acquired customers and monthly active users. Also, in 2021 we delivered millions of orders.

Compared to 2018, we were in the hundred-thousands range.

We grew three or four times year on year.

The external factor for this is that the Southeast Asian region, especially Indonesia, was already going through a massive digital transformation. A Temasek article said that throughout 2020, over 50% to 60% of people actually tried groceries online for the first time.

There are internal factors, as well. We were probably the service in the groceries that benefited the most because we've been in the region for five to six years. We already had a recognised brand, a household brand. We had solid operations. More importantly, we already had the leadership position. When people think about groceries for the first time, HappyFresh is probably the household name that first comes to mind, and that's why we had a lot of new customers coming in then.

The second internal aspect is that we always focus on quality, customer experience, and delivering superior value propositions. A lot of the customers who tried for the first time continue using our services even after the lockdown.

Now we have a large number of new users, and especially an even larger number of repeat users, which has driven growth throughout 2021 and the beginning of 2022.

Do you expect the same performance in 2022? Do you expect any challenges down the line?

We saw a shift in purchasing behaviour throughout 2020 and 2021 and it’s not going back. People are already used to shopping for groceries online. After you've done it more than once and you've gotten good service, good value for money, we just don't go back. For 2022, what we see is that all these new customers that came in the last two years will be staying with us and that's driving the growth.

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When people think about groceries, HappyFresh is the household name that comes to mind (Photo: Guillian Segarra, CEO, HappyFresh)

This year, we are also aggressively expanding our newest service, HappyFresh Supermarket. As we have better control over things like branding, pricing, packaging, last-mile delivery, or opening hours, we can cater for more and more users. That's driving significant growth for us this year. At the beginning of this year, we’ve already seen it and we expect this to continue throughout 2022. If anything, we expect 2022 to be our best year thus far. I think it would be a combination of the HappyFresh Supermarket addressing a larger pool of customers or a larger addressable market, overall customer shifts, and the penetration of groceries that continue on increasing exponentially.

People are already used to shopping for groceries online. After you've gotten good service, good value for money, we just don't go back

Can you tell us more about the HappyFresh Supermarket and how will this help the company's goals?

When you go into the HappyFresh app, you would see all our supermarket partners that we historically have and we are still going to work with them. They are a key part of our ecosystem. But you will also see a digital store called HappyFresh Supermarket. Within that store, you will be able to find anything around 15,000 products curated by using the five to six years of customer behaviour data, and understanding what products are made for your daily and weekly shopping. Those products will be offered to you at a very competitive pricing, high-quality source and with free

INTERVIEW delivery. We believe that by doing that, we are tackling a part of the market that is not addressed yet or is not served. These markets are where all people are looking for quality, especially for fresh products, but yet they also are very conscious about price. The fresh produce price is probably even below the wet market because we sourced directly from some of our partners that work with farmers.

When we look at the service level, you can get your order delivered within 30 minutes up to one hour, and we offer it for free. How do we manage to do that? That's the secret sauce of it. We build a network of fulfilment centres across the city that allows us to bring all these products. We work with some of our retailer partners' distributors and because we build this within the cities, we are very close to the customer, allowing us to deliver to you in 30 minutes. This also allowed us to have really strong quality control over the products, for example, having policies around plastic and packaging, which some of our retailer partners still don't have.

In the end, by doing that, we have full control from the brand, to the pricing, to the range, assortment, to the products, all the way to the service, quality packaging, and the customer experience. This for us is a really important initiative. As our volumes grow, we also need to start thinking about what would be next right. At the volumes that we're currently moving, we need to start to take our steps toward infrastructure sourcing and the supply chain makes a lot of sense in terms of that.

HappyFresh is also pushing for grocery shopping that's done sustainably. What are your initiatives on this?

We believe that as you grow bigger as a company, your social responsibility should grow accordingly, as well. Because of this evolution of the business model, we start to have our infrastructure where we start working directly with suppliers, and farmers' supply chain, and here is where we can make a big difference. We have initiatives like plastic-free policies within our warehouses. We also have the GoGreen option at checkout, where we encourage customers to get eco-bags or carbon boxes, or nothing plastic-related.

We also work with different NGOs in Indonesia and Malaysia to work on food wastage. If we have any excess food

HappyFresh has anything around 15,000 products curated by using six years of customer behaviour data

We believe that as you grow bigger as a company, your social responsibility should grow accordingly

that is close to expiration, we anticipate that and we donate this so the food doesn't go to waste. This is just the very first step that we started around six to 12 months ago and it now becomes even more important because we're working with supply chain, food, and transportation.

In terms of the grocery industry, what are the emerging trends you have observed amongst consumers and how does the company plan on catering to this?

There are a couple of trends that are emerging quite strongly in Southeast Asia. First, we care much more about what we eat. We are much more conscious about health and what we put in our bodies. That's translating into shopping habits shifting junk food to healthier products ranging from supplements to vegetables.

Number two, people in consumers care much more about where these products are sourced, and how these products have been produced. Have they been produced sustainably and have they been produced respecting animals and labourers? There is this growing consciousness around food quality and healthiness, and whether they were produced respecting the ecosystem, regulations, and if they are locally sourced or not.

We start to look at if we can source more locally produced products, and work closely with farmers. We also start to work with organically grown products. This is still at a very early stage. But being able to understand and ultimately offer products that have been fairly sourced and healthy, and you don't need to pay much more to get that kind of quality would be key for groceries, online or offline, to drive and thrive within these trends.

What other new services will you be introducing this year?

Customers first wanted convenience and reliable service that can offer quality and fresh produce. That's what we focussed on in the beginning and we built that brand and that reputation. Second, customers wanted additional value for money without having to compromise on the quality of fresh produce. The answer to that is HappyFresh Supermarket.

I think customers also want to make sure that they are spoiled. We're working on things like our loyalty programmes, reward programmes, and a few other programmes around customers that usually and recurrently shop with us in order for them to get the best value for money moving forward.

What are the company's goals this year? Any expansion plans outside of Malaysia, Indonesia and Thailand?

We wanted to solidify and further increase our market leadership position in the markets where we operate. We believe that this year and next year will be incredibly critical for e-groceries and I think the players that would dominate the market would emerge within these couple of years.

Hence, that would be our goal and how do we even further increase our market share.

In terms of expansion, we as a company decide expansion around the focus on quality-over-quantity. We might spend a lot of our time in our core markets. We are potentially going to other cities within those markets.

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EVENT: FMCG ASIA AWARDS

Retail Asia commends leading companies in the region at the FMCG Asia Awards

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nline shopping is here to stay, and as more businesses move online to increase their reach, the competition is now tougher than ever. Companies that were able to improve their branding and showed their unique selling points to consumers amidst the cutthroat competition were able to provide their consumers with exemplary products and a solid customer experience.

To recognise these companies that have risen amidst the challenging landscape, FMCG Asia Awards, presented by Retail Asia, was launched in 2021 and lauded over 20 companies. The prestigious

event celebrates the most outstanding companies in Asia Pacific's FMCG industry that have shown exemplary performance with their innovative products and initiatives.

The awards were handled via digital presentations during the first and second week of December. Winning companies were also interviewed virtually to share their thoughts on winning in the inaugural programme.

FMCG ASIA AWARDS

PT. Langgeng Kreasi Jayaprima (Diageo Indonesia) Product Packaging of the Year - Indonesia

Bairaha Farms ESG Initiative of the Year - Sri Lanka

PT. Nutricia Indonesia Sejahtera Campaign of the Year - Indonesia

Beam Suntory Asia Customer Experience Initiative of the Year - Singapore

Reckitt Benckiser Hong Kong Limited Health & Wellness Initiative of the Year - Hong Kong

Blackmores Digital Marketing Strategy of the Year - China

Tyson International APAC Limited Product Launch of the Year - Thailand

Danone Indonesia COVID Management Initiative of the Year - Indonesia

Unilever Product Launch of the Year - Indonesia

Danone-AQUA (PT. Tirta Investama) ESG Initiative of the Year - Indonesia

Yves Rocher Thailand Customer Experience Initiative of the Year - Thailand

Congratulations to all the winners of the FMCG Asia Awards 2021!

Danone-AQUA (PT. Tirta Investama) Consumer Good of the Year (Bottled Water) - Indonesia DFI Retail Group Home Brand of the Year - Hong Kong Diageo Health & Wellness Initiative of the Year - Singapore DKSH Malaysia Sdn Bhd Customer Experience Initiative of the Year - Malaysia Everbest Soya Bean Products Sdn Bhd Consumer Good of the Year (Ready-to-Eat Meals) - Malaysia H&H Group Digital Marketing Strategy of the Year - Singapore NTUC FairPrice Home Brand of the Year - Singapore Campaign of the Year - Singapore Product Packaging of the Year - Singapore Opal Cosmetics (Hong Kong) Limited Consumer Good of the Year (Body Wash) - Hong Kong P&G Australia Campaign of the Year - Australia Product Launch of the Year - Australia P&G Vietnam Digital Marketing Strategy of the Year - Vietnam PT Upfield Indonesia Consumer Good of the Year (Spread) - Indonesia 34

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Beam Suntory Asia

Bairaha Farms

Danone Indonesia

DFI Retail Group

Blackmores

Danone-AQUA (PT. Tirta Investama)

Diageo RETAIL ASIA

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EVENT: FMCG ASIA AWARDS

Everbest Soya Bean Products Sdn Bhd

NTUC FairPrice

P&G Australia 36

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H&H Group

PT. Nutricia Indonesia Sejahtera

P&G Vietnam

PT Upfield Indonesia

Reckitt Benckiser Hong Kong Limited

Tyson International APAC Limited

Yves Rocher Thailand RETAIL ASIA

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ROKU GIN SPRING EXPERIENCE 2021 Drink Responsibly

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DIGITAL MARKETING STRATEGY OF THE YEAR - CHINA

Blackmores receives Digital Marketing Strategy of the Year – China for successful Tiktok campaign The campaign promoted living healthily amongst office workers.

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iving healthy nowadays may actually be possible. With many alternate food options and activities that occupy and interest consumers, a health option is not always the go-to choice —but China-based Blackmores suggest otherwise.

Blackmores launched a campaign to answer this rising problem. In April 2021, the company founded the campaign focused on the tagline “The busier you are, the more you need to start exercising.” Its campaign was launched on Tiktok, with links that redirect users to its Taobao store. Since then, Blackmores has been having significant results.

The main target of the company was to inspire the modern office worker to start taking action for their own well-being and to exercise despite having a busy schedule.

The Blackmores’ brand purpose aims to empower the best of health in everyone,

naturally. But with the rise of COVID-19 and the prevalent work lifestyle culture, created an imbalanced work-life for many.

The company observed that there has been an increase in the rate of modern office workers becoming more stressed, tired, and unhealthy than ever before.

Blackmores identified that it has an important role to play. It asked the questions “How do we improve everyone’s overall wellbeing?” and “How do we support the modern office workers to start paying attention to wellbeing, start exercising, and live healthily—naturally?”

For this initiative, Blackmores was awarded the Digital Marketing Strategy of the Year – China award in the recently concluded FMCG Asia Awards hosted by Retail Asia. The judging panel considered three major achievements of Blackmores in this award.

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Supported

First is that it was able to reach more than 360 million unique views and exposure.

Through this number, the company received more than 91,000 unique video submissions through its campaign. The second highlight is that since the campaign launch, its MOVE supplements “Joint Formula Advanced” saw a significant 222% growth vs LY. The company noted that one of the MOVE supplements that performed exceptionally well was the Joint Formula Advanced.

The third and final achievement is the aim of Blackmores to further reach its goal of connecting one billion consumers by 2024.

Its main goal is to invite consumers to live healthier with the power of nature.

2.000.000

92 vaccination center in 27 major cities in Indonesia than 4000 hydration support locations

and more

Beneficiaries include the elderly, health workers and public servants, people with disability, public and vulnerable communities

1,322,592

AQUA

140,712

924

Two Ten

s

140,712

Product Donation Healthy Hydration Donation s

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ONE PLANET ONE HEALTH We Believe that the health of people and planet are interconnected. in implementing that vision, we focus on 3 main sustainability pillars:

1. PROTECTING OUR WATER CYCLE

We commit to preserve water resource and maintain it’s quality and quantity to bring positive impacts through healthy hydration to Indonesia

2. ADVANCING THE CIRCULAR ECONOMY OF PACKAGING #Bijakberplastik movement

ACHIEVEMENT Planted 2.4 Million trees Created 1.9 thousand infiltration wells Created 6.8 thousand Trenches Develop 19 biodiversity parks

3. COMBATING CLIMATE CHANGE

VISION

Created 80 thousand Biophore holes Created 31 waterponds

Be a carbon neutral company throughout the supply chain (2050)

Created 52 rainwater collection installations

Using 100% renewable electricity (2030)

COLLECTION Collect more plastic waste than AQUA uses by 2025

EDUCATION

INNOVATION

Expand education programs in schools to reach 5 million children and education campaigns for 100 million consumers by 2025

Ensure the use of 100% recyclable, reusable or compostable packaging and increase the proportion of recycled content in our bottles to 50% by 2025

DANONE COMMITMENT REDUCE CO2 Reducing Energy Consumption

Alternative Energy Development

Savings in electricity consumption per 100 liters of product

Use of geothermal, refined used cooking oil, biogas, and solar panel

ACHIEVEMENTS Collect more than 13,000 tons of plastic annually through 6 Recycling Business Units across Indonesia, city-level waste banks, and integrated waste management sites (TPST).

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Reduce Energy Consumption

Developing “My Waste, My Responsibility” Education module as part of consumers and school-age children waste management educations.

innovation & producing more environmentally friendly product packaging options.

1gigajoule .234,5 > 1rumah 5.000 in Indonesia

P0163487_DRE Retail Asia Ad_200x130mm_V1_OL.pdf

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EVENT: ZENDESK

The impact of customer experience maturity in today’s agile retail landscape

Zendesk’s Director of CX Practice laid out 7 best practices that firms should adopt to elevate their CX game. sales and bring in new customers.

Playasia now enjoys “excellent” ratings from its customers on different platforms and virtual spaces.

C

ustomer expectations have skyrocketed over the last couple of years, thereby requiring companies to integrate customer support technologies and processes into their business models. A recent CX research conducted by ESG demonstrated that companies with higher customer experience maturity led to increased retention, more new customers, and overall higher revenues. Given these outcomes, it’s no surprise that customer experience is now what businesses consider as a top priority moving forward.

Retail Asia, in partnership with Zendesk, hosted a webinar titled: The CX Era: Creating end-to-end digital experiences for retail customers.

During the event, senior operations and customer practice professionals discussed the value of messaging for the retail industry and adopting good messaging practices.

Customers as a community Playasia, a cross border e-commerce website specialising in video games and related merchandise, leverages video streaming technology to create a strong sense of community within its niche customer base. According to 42

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Companies must constantly practice agility to become better at adapting to changes, and not just under the threat of crises or pandemics

Playasia’s COO, Igor Narozniak, the company’s main promise is to supply its customers with specific, hard-tofind products that revolve around all things Japanese pop culture and anime (animation).

Igor says that because Playasia caters to a niche market, its goal is to create a space for its customers to express their affinity for the products and cultivate their passion for collecting merchandise with other like-minded people. In doing so, Playasia utilises virtual spaces like YouTube and Discord to not only just promote their products but also interact with their customers. Using virtual YouTubers and Discord, Playasia connects with their customers in ways they’re already familiar with. Not only are these discussion boards used for promotion purposes, but it also serves as a free entertainment channel to keep customers engaged, especially for a market that doesn’t necessarily make high-volume purchases.

Playasia has seen an increase in customer engagement, retention and satisfaction thanks to its virtual communities. With these tactics, customers tend to repeat purchases, often coming back for higher value items, and inadvertently drive more

Using customer insights to develop an agile mindset Malcolm Koh, Director for CX Practice at Zendesk, emphasises the changing expectations of customers brought about by our current realities. Companies are accelerating their adoption of digitalisation and automation, a necessity to support and respond to customer demands.

Traditional customer support meant contacting companies and waiting in the queue to be attended to.

In that sense, customers are passed on from agents to departments but this process is ineffective, costly and timeconsuming. Malcolm highlighted the importance of proactively working on customer service by taking the data and insights to deliver faster responses.

However, this cannot be done without integrating the back-end processes across different departments whose collaboration is vital to fulfill the customer service support.

With the global trend on business digitalisation, Malcolm reiterates the value of endorsing an agile mindset in the organisation to create valueadded services with the customer in mind. He compared agility to a muscle - companies must constantly practice this muscle to become better at adapting to changes, and not just under the threat of crises or pandemics. The ESG research also points that champions of CX are 2x more likely to be accelerating major CX initiatives. These champions enjoy better business outcomes through investing in three key areas: customer experience, agent experience and business operations.

With agility in mind, businesses should constantly assess where they are at on the CX maturity scale, and prioritise the areas to improve to help be a CX differentiator.

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EVENT: BOARD ASIA PACIFIC

Answering consumer needs amidst the push for digital transformation The push to become more customer-centric makes digitalisation inevitable.

T

he challenges in operations to meet the ever changing needs of consumers have been made easier because of the rise of digitalisation. However, this is a double-edged sword as the digital era has also forced companies to adapt to new methods of monitoring and controlling the supply chain.

In the recently concluded joint webinar by Retail Asia and Board Asia Pacific, How Digital Transformation Is Shaping the Retail Supply Chain, top executives discussed the effect of digitalisation in Asia and how businesses and retailers can create opportunities in the age of the digital era.

State of the supply chain Opening the discussion, Head of Supply Chain Marketing of Board International David Food gave a quick overview of the state of the supply chain.

Food mentions that before the pandemic, retailers who get products offshore mainly try to get from the cheapest source.

Then, as the world stabilised, a lot of manufacturers and retailers have tried nearshoring to find more suppliers with more lead times and less risks of delay through shipment.

“And now as people are getting a balance, they're now trying to move to a mixed view, right-shoring where they're looking offshore for the cheapest source, but they're looking nearshore for flexibility and capability,” Food said.

That sourcing not only includes the original source, but also includes how it gets from the factory to the store.

Customer-centric Many companies have talked about putting the customer experience in the centre whenever they talked about the omnichannel concept.

However, Food believes the reality is that these are siloed experiences.

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In supply chains there is a need for information and acceleration.

That basically requires digital transformation

As an example, Food discussed a research he had done with Warwick University where they identified that letting customers buy a product online and give them the option to go to the retail store to try to return them was not possible.

“Physically, of course it was but from a siloed logical reward and measure point of view, this was limited and constrained,” Food explained.

This just means that having customer experience at the centre of the omnichannel concept is not enough. Food said you have to have planning at the centre to enable alternatives to be looked at by their customers.

“And those things require the right measures within the business to reward the store for delivering and to reward the customer for enjoying the experience and taking the products,” Food added.

To remain customer-centric, digital transformation is inevitable.

Digital transformation not only ensures that departments are connected and projects clear visibility but it ensures that there are measures that guarantee that the customer experience is truly customer-centric.

“And that requires increased flexibility and that increased flexibility really requires a greater

digitisation of the journey from the supplier and and through to the consumer,” Food explained.

Digital transformation During the panel discussion, the Merchandising Director of Slowear Luca Berga agreed that digital transformation is not an option even if you are a small business.

“Generally speaking, in supply chains there is a need for information and acceleration. That basically requires digital transformation. When you start facing a demand which is multichannel, this forces you to adopt a system and digital tools,” Berga said.

Meanwhile, Food added that a digital connection between operations and sales are vital for retailers to maintain.

Food explained that what companies don't want to be doing is promoting products that they have in short supply, or have large amounts of supply that they're not promoting through the business. This then gives the connection of price elasticity and the ability to flex pricing in particular the online categories, giving that trade off between sales and operations.

Lastly, Food said that retailers should make use of their data to make their business more differential thus making themselves more competitive.

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OPINION

ANDREW SIM

Holistic changes needed for the logistics industry to thrive

O

ver the past few years, e-commerce’s popularity has soared tremendously, as restrictions on mobility drove more and more people to shop online. In fact, e-commerce values in Singapore alone skyrocketed by 87% in 2020 compared to the year before, according to a recent report by Google, Temasek, and Bain Southeast Asia.

Driven by the e-commerce boom, the logistics industry has started to feel the impact of digitally discerning consumers, as the average consumer becomes more digitally savvy because of the pandemic.

Consumers now demand an online shopping experience that is efficient, accurate, and responsive to their needs and more are expecting multiple delivery options and the ability to track and trace their parcels.

As more businesses scale up and expand their presence online, there is also an increase in demand for fulfillment and warehousing services by businesses of all sizes. With more consumers now shopping globally online, there is also an increasing demand for cross-border shipping in the post-pandemic world.

As a result of changing consumer and business demands, it is no longer enough for logistics companies to focus their business on a sole aspect of the supply chain, but also demonstrate the necessary resources, expertise, and know-how across every aspect of the logistical process.

With that, what lies in the horizon for the industry is that it will be imperative as we enter into 2022 and beyond for logistics companies to consider big changes, and this includes delivering a holistic suite of services across the supply chain in order to adequately meet the evolving needs of consumers and businesses.

Building bigger, better, and stronger In order for the industry to move towards a more holistic business model, the first order of business for any logistics firm is to diversify one’s offerings. The ability to provide one-stop e-commerce solutions – from the set-up of an online store, order and inventory management, to logistics operations – is no longer just about achieving a competitive edge over other players. It will simply become the norm in the next few years.

Beyond expanding the breadth and depth of one’s core offerings, the need for more comprehensive, reliable supply chain networks has never been more apparent in the new normal. The supply chain disruptions experienced during the height of the pandemic – of which is still felt in some parts of the world – have brought to light some of the unseen vulnerabilities and demonstrated that enterprises need to make their supply chains more resilient, collaborative, and networked.

As countries move towards recovery, we are seeing demand for crossborder shipping picking up pace again, with more consumers shopping globally online to enjoy greater options, and businesses looking to expand beyond Singapore to other markets. This in turn led to the need for networks to be extensive.

The future is digital and autonomous The pandemic has undeniably accelerated digital transformation for every industry, and the supply chain is no exception. Technology such as automation, big data, and the Internet of Things (IoT) will continue

46

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ANDREW SIM CEO, J&T Express Singapore Pte Ltd.

to play a huge role in meeting changing consumer and business demands. According to management consulting firm Mckinsey, automation will be amongst the top agenda for the logistics industry due to the increasing demand from online retailers, a growing shortage of labour, and technological advances. Hence, it will be crucial to continuously invest in technology and automation to deliver more efficient and quality services.

Currently, in the industry, innovations such as automated parcel sorting systems can provide valuable efficiencies and insight. Not only can it help to sort incoming parcels automatically, it also allows for additional data to be captured such as their weight and dimensions to help cut down on human error, increase the team’s efficiency, and allow manpower to be shifted to more skilled areas where needed.

Digitalisation also needs to exist beyond the warehouse floor. At its most cutting-edge, logistics companies will also need to look at enabling application programming interfaces (API) integration to provide their e-commerce sellers with a seamless process from the capturing of orders and fulfillment to last-mile delivery by allowing integration with major e-commerce marketplaces and platforms like Shopify, WooCommerce, and more. APIs have positively impacted a number of industries as they connect traditionally siloed sources of data, opening a door to improved processes, better communication, and more efficiencies.

Big Data will also continue to play a big role in helping logistics companies reduce inefficiencies and make better-informed decisions, whether it is optimising delivery routes for greater efficiency and maximise profits, or even forecasting demand with greater accuracy for the deployment of resources and manpower. On the other hand, IoT will be able to help logistics companies increase operational efficiency, increase security, and enable real-time tracking of the parcel to ensure peace of mind for both sellers and consumers.

Green logistics taking root in the industry The final piece to the puzzle of achieving a holistic approach in the industry is embracing sustainability. All the strategic advancements and innovations discussed above will only sustain success for the short term if we do not strive to protect the environment and ensure a future for all. Our present choices and actions have huge long-term impacts on future generations, and both businesses and consumers are recognising this in where they put their dollar towards.

In fact, logistics companies have already started to adopt environmentally friendly practices to cut carbon emissions and contribute to sustainability. Small steps such as recycling the used warehouse resources and materials, and leveraging innovative software to calculate and reduce their carbon footprint can make a significant difference in the long run.

Since the COP26 in Glasgow, ​the drive to create a more sustainable logistics industry has gained more traction than ever before. Moving forward, for green logistics to truly take root and grow, greater collaboration and joint efforts across the industry will be required to truly achieve the sustainability goals.

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47

OPINION

TIM FU

SMBs can ramp up business by harnessing the power of innovation

T

he fifth COVID wave in Hong Kong has brought unprecedented challenges to small-and-medium-sized businesses (SMBs) but signs of recovery are already starting to emerge. A recent survey conducted by CPA Australia found that 57% of SMB respondents expect their revenue to stay at a normal level or even grow in the next three months. Whilst the relaxing of social-distancing restrictions has undoubtedly eased some of the burdens SMBs are facing, there is another factor contributing to the optimistic outlook – investment in innovation. According to the aforementioned survey, the pandemic has pushed local SMBs to become more creative in their business models. Over half of the surveyed businesses said that they generated more than 10% of revenue through e-commerce in 2021 - the highest figure since 2017.

In other words, transforming the need to stay afloat during the pandemic into drivers of innovation can help SMBs not just survive but also thrive.

Embracing innovation in times of crisis Innovation has become synonymous with the tech industry in recent years but its central ideas are more relevant to SMBs than ever. At its core, the concept of innovation simply means using creativity to improve in three areas: products and services, business model and customer experience.

The effects of the pandemic will be felt for years to come.

Nonetheless, there is no better time to innovate than in periods of crisis. According to a report by McKinsey, companies that prioritise innovation in times of crisis outperform their competitors by 30% during the recovery.

Whilst radical shifts in consumer behaviours and market needs are pushing SMBs to the brink, these factors are also key dynamics that allow disruptive products, business models and customer experiences to emerge. For instance, the e-commerce boom spurred by the pandemic has offered an excellent gateway for SMBs to reach new markets and a wider consumer base by adopting digital technologies.

It has also challenged businesses to create new customer experiences as they now need to cater to more diverse needs and preferences from all around the world.

Here are three tips for SMB owners who are looking to transform survival into innovation: 1. Listen to your customers Starting the process of innovation can seem daunting, especially for SMB owners who are already strapped for time and resources. But it’s important to remember that investing huge sums into R&D is not the only way to kickstart the innovation journey.

Not all businesses need to come up with ground-breaking products and services to succeed. To ensure new offerings bring extra value to consumers, SMBs can turn to one resource they all have free access to – customer feedback. According to a survey, 90% of the consumers 48

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TIM FU Market Leader, Hong Kong, Korea & Taiwan, PayPal

surveyed said that “listening to customers” is the best way for companies to drive innovation. In addition, paying closer attention to peers and joining trade networks can help business owners find new sources of inspiration to improve their products and services.

2. Build a digital-first business model Establishing an innovative business model does not require rebuilding your business from scratch. For traditionally brick-andmortar stores, simply expanding sales channel into the digital world can create new revenue streams.

Setting up a social media account and building an online presence is a fast and low-cost way for SMBs to generate sales through e-commerce. In PayPal’s SMB survey, 41% of local SMB respondents said social media was their most important channel for stimulating growth during the pandemic.

Not only can e-commerce generate growth in the domestic market, but it can also help SMBs access overseas markets through cross-border trade. A recent survey in the U.S. found that 39% of SMBs with digital sales channels are confident that their exports will grow in 2022 compared to just 13% of those who only use offline channels. Going global is no longer an option but a driver of growth and a key priority for SMBs. 3. Create customer-centric experiences Building trust with customers is the cornerstone of success for every SMB. When it comes to e-commerce, providing a seamless user experience can go a long way in enhancing brand loyalty and increase bottom line results. For example: two-thirds of consumers are found to be willing to pay more for a great user experience when shopping online.

Optimising the payment process is one of the best ways to enhance the user experience. Innovation in this area means making the process more intuitive by reducing the number of steps involved, offering payment options consumers prefer and simply reducing load time. Research found that close to one in five consumers abandoned their shopping cart during checkout because the process was too complicated or taking too long. The good news is that even incremental improvements can lead to significant reduction in cart abandonment and increase conversion. For instance, speed improvement of as little as 0.1 seconds can increase conversion rates by an average of 8% and the order value by an average of 9%.

The past few months have been tough for SMBs in Hong Kong but there is no reason to lose hope. The pandemic provides fertile ground for breakthroughs in the market. Therefore, it’s critical that business owners use this time to explore new ideas and prepare for the future. By paying closer attention to consumers, investing in e-commerce channels and minimising friction in the user experience, SMBs can go beyond short-term survival and start building a solid foundation for long-term growth and success.

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