IGD identified the top five trends set to shape the Asia grocery retail market over the next 12 months. Nick Miles, its head of Asia-Pacific, outlines the trends and reveals what they mean for suppliers.
The top trends:
- Asian retailers leading expansion
- Smaller, more enhanced stores
- Format innovation that differentiates
- Online to offline collaboration
- Technology driving in-store efficiencies
“The grocery landscape in Asia continued to move at a fast pace in 2017. We saw retailer market entries and exits, the repurposing of store networks, the growing emergence of online and rapid experimentation with technology.
“Although consumer habits and landscape evolution vary across the region, there are common trends and opportunities. In 2018, we expect Asian-based retailers to expand their store networks, to see a further focus on format differentiation and smaller format stores. We anticipate greater fluidity and collaboration online, plus a shift to technologies that will help businesses be more efficient,” said Miles.
Five years ago, retailers headquartered outside Asia were the ones driving international expansion. However, today it is Asian retailers who are predominantly establishing new and more extensive store networks beyond their existing operations.
“Suppliers should look to strengthen their relationships with Asian retailers who are driving expansion. Being the first to make a move will remain a key priority for long-term growth,” said Miles.
Although hypermarkets still have an important role to play in Asia, across almost all countries retailers are also focusing more on developing formats with smaller average sales areas. The trend is being driven by changing shopper preferences towards the online and convenience channels.
“We are seeing an emphasis on developing smaller hypermarkets and supermarkets and formats nearer to home. This is in addition to the ongoing explosive growth of convenience formats in many markets. As store footprints shrink, suppliers will have to make sure that their brands remain relevant by tailoring their approach by channel,” said Miles.
Throughout 2017, we saw an increasing focus on shopper-focused format innovation, with new and improved retail concepts being tested, rolled out and enhanced through the growing use of customer data and analysis. Retailers are looking to deliver better in-store environments that differentiate their stores from competitors and target specific demographics, as well as find new locations for expansion.
“Retailers across Asia are grappling with how to better use data and insights to ensure they are tailoring stores to shopper demand, so suppliers should ensure that they are supporting them on this journey,” said Miles.
The online environment in Asia is becoming increasingly fluid. Online retailers are partnering with physical retailers and physical retailers are experimenting with new solutions. As e-commerce companies grow, we expect collaboration with bricks and mortar retailers to also happen more across borders.
“Asia’s online grocery landscape is far more fluid compared to other regions, so suppliers should focus on forming relationships with the big players and ensure their brands can be traded across borders,” said Miles.
Asia continues to be a hotspot for digital and technology adoption, with retailers increasingly experimenting with new solutions. This will continue into 2018, however, retailers are progressively using this technology to their advantage to deliver better solutions for shoppers.
This trend will predominantly be focused in markets where modern trade is more developed, although will not be limited to these geographies. In less developed grocery markets, retailers will look to use technology to develop more rapidly.
“Test and play with new innovations will remain important, but to get buy-in from retailers, digital solutions will need to improve the shopping experience or drive profitability,” said Miles.