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COVID-19 coronavirus is changing traditional retail and eCommerce

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The COVID-19 (Coronavirus) outbreak has resulted in empty shopping malls across Asia, especially in countries like Singapore, South Korea, and China where the spread of the virus has been even more pronounced. Except for the initial weeks where consumers wiped out supermarkets of toilet paper, instant noodles and rice, most are avoiding crowded areas and delaying non-essential purchases and travel across Asia and now globally.


Besides a slow down in business travel, tourism has also been greatly impacted. According to the Singapore Tourism Board (STB) estimates, tourist arrivals are expected to drop by 25-30 percent this year due to the COVID-19 virus. This would indeed have a negative impact towards retail sales, especially for a country that is highly dependent on tourist dollars. Under pressure to reduce rent by retailers, shopping mall owners such as Capitaland will be offering rental relief of 20% to 30% at the end of March 2020 for affected tenants mainly in the downtown shopping belt.   


In Malaysia, retailers have encouraged shopping malls owners to give them rental rebates of between 30% to 50% after seeing a decline in sales of up to 50 percent. The Department of Tourism in the Philippines announced that the Nationwide Mall Sale will be postponed until further notice. This event was initially scheduled to start on Sunday, March 1, 2020. 


In contrast to the depressing situation which traditional retail is facing, eCommerce has benefited from this episode of the virus outbreak as people are now turning to online grocery platforms to purchase their daily necessities. In China, for example, Carrefour reported vegetable deliveries growing 600% year-over-year during the Lunar New Year period and JD.com saw an increase of 215% in online shopping grocery sales to 15,000 tons in just the first 10 days of February 2020.


This pattern of behaviour is similar to the impact that SARS (Severe Acute Respiratory Syndrome) had on purchasing behaviour almost 2 decades ago. SARS spurred the growth of eCommerce and likewise, with the outbreak of COVID-19, it will encourage the rapid movement from traditional store-based selling to digitalization and retail through omnichannel.


When the deadly SARS outbreak hit China then, it helped accelerate the development of the eCommerce industry in the country. SARS forced JD.com to start selling its products online in 2004 and now it is the largest online retailer in China. Alibaba also experienced a positive impact as a result of SARS by seizing the opportunity to go C2C with the creation of Taobao as a result of reduced foreign business travelers to the country.


Just like SARS, the presence of COVID-19 will result in consumers moving their purchases online, however, impact would be even more far-reaching as the COVID-19 spread is more global in nature. So what can retailers and shopping malls do to keep revenues up and remain relevant in these challenging times? 


Retailers Going Online


According to Esther Ho, Nanyang Polytechnic school of business management director, in a Singapore Straits Times article. "Physical store sales will be the most impacted in light of the COVID-19 situation. This may provide the impetus for retailers to seriously consider (going) online, especially if there are success stories to share".

 

Good examples of such success stories include Iuiga and Awfully Chocolate who have reported that their online sales have experienced a surge, even though they have been experiencing a drastic drop in sales at their offline stores in shopping malls due to COVID-19. Furniture retailer IKEA also saw its online shop sales increase from 10% to 14% as a result of the virus. 


Most notable retailers have begun their foray into eCommerce over the past decade as part of their overall channel strategy either as a branded online store or as part of an existing online marketplace like eBay, Amazon, Lazada or Q10. Many more can leverage this consumer behaviour change to drive their digital transformation, ensuring that they remain accessible to their customers even in these hard times. 


What can shopping malls do to remain relevant?


Shopping malls also come under tremendous pressure as a result of the COVID-19 virus. As landlords, making sure that their tenants stay afloat has a direct impact on the bottom line, lesser tenants means less rent revenue collected. This is especially true if a major component of rent is a percentage of sales generated by the tenant at their store in the mall. However, getting consumers through the door and maintaining the usual footfall traffic at the malls is difficult during this time. 


Retailers have shown the way to cushion the losses in their stores is to move their business online. Shopping Malls can do the same, allowing regular customers to continue shopping at their favourite stores in the malls but as a shopping mall online marketplace. Online Marketplaces are not new and they have seen tremendous growth globally. In fact, Euromonitor reports that 47% of all digital commerce sales in Asia are made through marketplaces in 2018. Shopping Malls are inherently physical marketplaces themselves, in reality, they are a collection of different vendors in a physical location. As such, to remain relevant in these hard times, Shopping Mall owners can create an online version of their shopping malls in the form of a mall branded online marketplace by adding a digital multi-vendor marketplace platform to their current business models. Pursuing an “offline to online” (O2O) dual strategy would not only add on a new channel of distribution for tenants of the mall but also help cushion sales losses at their physical stores. Consumers who are loyal and regular visitors to the shopping mall would now be able to avoid catching the virus from crowds and shop at their favourite retailers from the safety and comforts of their own homes. 


The Covid-19 virus spread is, unfortunately, gaining pace around the world with no end in sight. Its sustained impact will cause a fundamental change in consumer behaviour, fueling the growth of eCommerce and the slow demise of traditional retail. As the saying goes, “disrupt or be disrupted”, any retailer or shopping mall owners who do not start embracing online commerce as part of their business strategy may see themselves left behind and soon disappear as their businesses falter.   

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