The change in consumers’ behavior and the application of new technologies during the pandemic have led to a restructuring of the business models for products and services in different industries. Retailers on the frontline are also at the cusp of the transformation. Traditional offline shops have suffered an unprecedented impact, but e-commerce operators are also seeing a slowdown in traffic growth due to an increasing number of competitors.
The pandemic has accelerated the transformation of retailers towards smart retailing in the new economy. This does not only entail the application of digital technology, but also the development of new technologies and business models to address new requirements. Centered on the spending experience with a human touch, this model aims to perfectly combine technology via data application, domain reshaping, integrated marketing, industry cooperation and supply chain integration, so that online and offline channels can be completely covered. Smart new retail strives to enhance consumers’ experience based on a better understanding of their preferences and intrinsic needs. Digitalization of supply chains puts consumption end-to-end. Prices and promotions are no longer the only tools to encourage willingness to spend and purchase decisions.
In 2018, Malaysia released its National Digital Strategy to promote a digital transformation in the economy via the promotion of e-payment and to move towards a cashless society. As a result, there has been a mushrooming of mobile wallet products and a growing user base of mobile payments. Many foreign e-commerce companies have been drawn to Malaysia to expand their global footprint and seek to benefit from the demographic dividend of the emerging markets. According to e-Conomy SEA 2019, an annual authoritative report on the development of digital economies in Southeast Asia, the e-commerce market in Malaysia in 2019 reached US$3 billion and is expected to total US$11 billion by 2025. According to the rankings of e-payments in 73 countries by the Economist, Malaysia ranked 19th, the highest among Southeast Asian countries.
Meanwhile, Kearney's 2019 Global Retail Development Index (GRDI) ranked Malaysia third, behind China and India, in terms of investment potential in the retail market. It has become the primary battlefield for retailers and investors. With its environmental niches, Malaysia has seen the rapid rise of e-commerce and the going remains strong. However, it is necessary to understand the local consumers’ behavior and the local culture in order to make inroads into the Malaysian retail market. This will help to overcome the challenges of business development in a new country.
Smart retail is centered on the needs of local consumers. The reshaping of the relationship between shops and local consumers is the starting point of cross-border smart retail. The population of Malaysia consists of Malays, Chinese and Indians, accounting for 69.1%, 23.0%, and 6.9% of the total 32.38 million people. These ethnic groups have their own consumption patterns and festival behaviors.
For instance, most locals enjoy a LOHAS, slow-paced life. They like to share activities on social media during holidays, enjoy discounts and buying novel and personalized things. The offering of appropriate merchandise for different occasions and celebrations via word of mouth and copywriting marketing on social media will enhance trust and the recognition of products.
Meanwhile, the development of cross-border retail in Malaysia may necessitate reconsidering the essence of smart retail. This encompasses the reshaping of the relationship between consumers, merchandise and the domain, so as to enhance operating efficiency and boost profitability. It is essential to appeal to consumers as end users based on insights gained from data, by showcasing the core values of the business. The clear profiling of target customers will confirm what to produce and where to sell it.
The idea that the offering of merchandise is an extension of the user’s mind entails the consideration of manufacturing, management and transportation. The process of order prediction, procurement, production and delivery can be optimized by the digitalization of the supply chain to enhance product value and meet customers’ needs. The focus on the domain refers to the pursuit of online development, but not at the expense of offline presence. The abundant traffic flows online should be supported through the geographic advantage of an offline premises in order to create a value-added experience. In this way, the online-offline combination can generate greater commercial value.
As online traffic growth tapers off, commercial innovation will move from the online to the offline experience. However, not every bricks-and-mortar retailer will be able to effectively utilize their offline resources in order to provide the same level of service to consumers both online and offline. The Matthew effect has resulted in the polarization of two opposites in many industries. In the retail market where the competition is increasingly fierce, small and medium-sized enterprises (SMEs) are faced with many challenges in the transformation to smart retail. In addition to the need for more capital and better technology, the business philosophy also needs a complete makeover.
Martin Christopher, a supply chain management expert in the UK, indicated that competition in the 21st century will not be between companies, but between supply chains. When pursuing overseas development, SMEs in Taiwan may explore ways to leverage their strengths, develop niche domains through the use of smart retailing. This will allow them to better approach consumers and businesses with better services based on data analytics and decision-making, precise marketing and local supply chain optimization. Such a strategy will help Taiwan’s businesses to reap the rewards of overseas markets and acquire the knowledge and skills to allow them to survive and thrive.