Cross-border e-commerce key in retail sector recovery

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The trend has surged due to international travel restrictions brought by the COVID-19 pandemic.

Singapore’s retail industry is still miles away from recovery, despite several measures and initiatives to improve market conditions.

According to data from OCBC, retail sales for the entire 2020 dropped 15.3% YOY. This was after the Department of Statistics reported a 3.6% YOY decline in retail sales for December 2020, bringing the slump to its 23rd straight month.

OCBC economist Howie Lee observed that despite the contraction in overall retail sales, sales of computers and telecommunication equipment rose by 24.8% YOY in December 2020.

“This reflects the broader trend of increased consumer demand for electronics goods, as structural changes in the way people interact and work have encouraged many to continuously upgrade their technological infrastructure,” Lee said.

Whilst gradual economic recovery is underway due to the rollout of COVID-19 vaccines, retailers will still have to rethink their business strategies and organisation moving forward to the post-pandemic retail market. Innovations in the retail sector have continued to provide hope for businesses amidst an uncertain future.

Leveraging on cross-border e-commerce
The COVID-19 pandemic and subsequent circuit breaker measure introduced by the Singapore government have put e-commerce on the map amidst the rapidly changing consumer trends and demands.

Minister for Trade and Industry Chan Chun Sing revealed in a speech that Enterprise Singapore is in active discussions with Amazon on introducing new programmes to help local small- and medium-sized enterprises (SMEs) sell overseas. The programmes include listing optimisation, customer service, and international demand generation.

“The borderless world of e-commerce presents fresh opportunities that are up for grabs by all who are willing to try. Technology is neutral. Businesses that can master it faster and better, win,” Chan said.

The minister added that the competition is already on a regional and global level, and Singapore firms must position themselves to make the most out of the phenomenon as it is unlikely to end.

Meanwhile, IGD head of APAC insight Nick Miles mentioned that cross-border sales have been a growth segment of e-commerce in recent years.

He added that whilst cross-border sales remain more focused on general merchandise products, food and consumer goods have a role to play with retailers and manufacturers using e-commerce platforms to tap into the demand for international products from Asia.

“These businesses provide a whole range of services from import assistance, marketing support, sophisticated and user-friendly platforms, excellent logistics capabilities and huge amounts of data to help brands target consumers,” Miles explained.

Such is the case for e-commerce platform Lazada and cross-border marketplace Tmall Global.

According to Lazada head of LazGlobal Qian Yi, the increasing popularity of e-commerce reinforces the brand’s belief in building a strong e-commerce infrastructure, which Lazada has been investing heavily since its establishment in 2012.

“More consumers have shifted online for their daily needs, and have been forming new online shopping habits, which propels businesses to digitalise their operations and start on their e-commerce journey,” Yi said.

Lazada upgraded its cross-border logistics capabilities in 2020, including the launch of its newest warehouse solution Fulfilled by Lazada (FBL), which helped enhance efficiency in cross-border shipping to allow sellers to upgrade their supply chain solutions.

The pandemic has also prompted Lazada to make greater efforts in tapping sellers and brands from Korean and Japanese markets to help them expand their businesses across Southeast Asia.

“With enhanced shipping efficiency and diversified product offerings, consumers are now able to shop the world from the comfort and safety of their homes. We see it as complementary to the local marketplace businesses, which brings vitality to the market, and is for the greater good for our consumers,” Yi said.

Meanwhile, Tmall Global has noted shifts in consumption patterns and attitudes toward online shopping.

“The pandemic has supercharged the adoption of and affinity for e-commerce worldwide. Consumer behaviors have changed dramatically, with a lot more people shopping online due to lockdowns and other social distancing measures,” Tmall Global senior director William Zhao said.

The brand has accelerated its merchant onboarding and incubation process to open wider doors for overseas brands, including those from Singapore, to sell to Chinese consumers.

“We’ve also shifted our platform from an invitation-based model to an open one, meaning merchants are now able to launch their own brands onto the platform, and with more flexible options to choose from that best suits their business model and location,” Zhao said.

Looking into e-commerce logistics
The rise of cross-border e-commerce has also posed opportunities for industries like logistics amidst challenges brought by international travel restrictions.

Singapore Post (SingPost) revenue for H1 2020 rose 9.6% to $707.8m, mainly due to growth in post and parcel and logistics segments, with strong e-commerce volume growth.

Domestic post and parcel saw significant e-commerce volume growth of 43% for the period ended September 2020. E-commerce revenue now stands at 32% of all domestic post and parcel revenues.

Meanwhile, the logistics segment revenue rose 20.3% for the period. SingPost’s courier subsidiaries CouriersPlease, Quantium Solutions, and SP eCommerce all experienced robust growth as a result of increased adoption of e-commerce in Asia Pacific.

“Both Quantium Solutions and SP eCommerce continue to benefit from the reengineering of processes to improve customer experience, efficiency, and scalability. This has resulted in more customers taking up their suite of e-commerce logistics solutions, which include warehousing, fulfilment, and front-end solutions,” SingPost said in its financial highlights.

Yi mentioned that logistics is fundamental in the cross-border e-commerce value chain, especially in Southeast Asia that has a unique diversity and vast geography.

Leveraging the synergy with Alibaba’s logistics arm Cainiao, Lazada’s integrated logistics and supply chain network for e-commerce has enabled it to provide cross-border sellers with advantages such as a competitive shipping rate card, diversified warehousing solutions, and pick-up and drop-off services.

Similarly, Tmall Global tapped into Cainiao to upgrade its cross-border solutions to facilitate seamless movement of goods, and innovate new ones to reduce costs and sales uncertainty for overseas merchants.

“Whilst we can easily facilitate the transaction of goods online, the physical movement of the actual goods from brands to shoppers across borders has been a significant challenge,” Zhao said.

Technology innovations for post-pandemic retail
Singapore's retail industry has maximised online technologies to drive up recovery amidst the impacts of the pandemic.

According to a report by financial services company PPRO, 43% of cross-border e-commerce in Singapore as of January 2020 was from China.

Moreover, the decrease in footfall of retail brands has led to the rise of immersive technologies such as virtual reality and augmented reality. A previous report by Euromonitor International mentioned that these immersive technologies have allowed consumers to form new shopping habits going into 2021.

Livestream shopping and online shopping festivals are some of the trends that rose in 2020 due to travel restrictions. Alibaba Group’s 11.11 Global Shopping Festival in November 2020 has ridden on these trends, with focus on helping more merchants tap the surge in Chinese consumers’ demand for cross-border online shopping.

According to Zhao, going online is not just a lifeline for many brick-and-mortar brands, but also allows easy access to a vast audience worldwide whilst consumers are drawn to e-commerce because of its convenience.

“In a period where the virtual space is now customers’ main source of online consumption, technology such as this has helped redefine cross-border trade by eliminating the need for physical boundaries and storefronts whilst increasing the variety of offerings online,” Zhao said.

For Lazada, technologies have allowed the company to monitor consumer behaviour. Having over 100 million annual active consumers across Southeast Asia, Lazada leverages big data to stay abreast of consumer trends in making informed and timely decisions as to adjust its business strategy.

“Such technology also empowers our sellers to help them understand consumer needs. For example, without geographic constraints, our cross-border sellers are able to access real-time updates of their stores’ performance, as well as broad-stroke consumer insights that are not readily available in the market,” Yi said.

What is ahead the retail industry
Now that Singapore is well on its way to recovery due to vaccination programmes and border reopening, the retail sector can also expect a better year ahead.

Miles noted that many businesses have been focusing their attention on ensuring supply of products in local markets to keep with demand.

“As a new normal emerges, cross border will remain a key new revenue stream, whilst restricted travel will also promote this trend further,” he said.

Lee forecasts that retail sales will bounce back by 12.5% YOY in 2021 largely due to low base from the pandemic. However, retail spending will not return to pre-pandemic level until herd immunity is achieved within the local population and until Singapore opens up its borders to international travellers.

Both Lazada Singapore and Tmall Global, as part of the wider Alibaba Group ecosystem, have found ways to allow cross-border e-commerce in providing better retail experience to brands and consumers.

“We will continue to look at how we can leverage our digital ecosystem to help merchants take advantage of interactive and unique digital commerce opportunities. As SMEs and businesses continue to face challenges from the pandemic, we hope to move beyond just providing a cross-border platform for merchants but to be a holistic partner from marketing, payments, logistics and more,” Zhao said.