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TECHNOLOGY | editor, Singapore

Ernst & Young retail sector leader on the exciting future of retail

Olivier Gergele is one of the speakers in the Retail Asia Virtual Conference 2020.

Olivier Gergele is EY Asean Consumer Products & Retail Leader based in Singapore, with vast operational and consulting experience in the consumer products and retail sector globally and across Southeast Asia.

His experience covers projects on growth strategies, innovation, value creation, go-to-market, sales and marketing effectiveness, profitability improvement, cost and complexity reduction, change management and large-scale transformation.

Olivier assists clients in engagements such as strategy development, operating model and organization review, go-to-market definition, value creation, and large-scale commercial and cost transformation programs.

As one of the speakers in the Retail Asia Virtual Conference 2020, Retail Asia sat down with Olivier as he shared strategies adopted by retailers, as well as the exciting future of retail.

EY Future Consumer Index shows a pivot away from brands to private label products. What does this entail to retailers?

During economic recessions, consumers tend to trade down, leading to a shift in demand from branded to private label products. Private label products are the retailers’ own brand of products.

The EY Future Consumer Index, which tracks emerging consumer behaviors and sentiment around the world since April 2020, clearly reveals consumers’ preferences for private labels. According to the Index, 60% of consumers say they will be more focused on value for money, with 32% saying they plan to buy more private label staples.

Private labels present some key benefits for retailers, which should incentivize retailers to help drive this shift. Private labels tend to have better margins for retailers due to overall lower cost including cheaper local procurement, lower trade barriers and ability to focus on those products in store. As a result, many retailers are doubling down on producing and promoting private labels across the region.

However, retailers will need to carefully manage any substandard and potential quality risk issues that may arise from private labels. Having a good mix of brands and private labels (depending on category e.g., grocery, apparel etc.) is a strategy many retailers are adopting.

What are the other trends and shifts in Asia-Pacific’s retail sector in recent months? What has changed since the pandemic?

The COVID-19 pandemic has disrupted the way we live and has a major impact on the ASEAN retail sector. This has created uncertainties in demand in the short and longer term, accelerated online retail penetration, and led to the continued emergence and expansion of new business models (e.g., dark kitchens, platform-based communities). In response to the current retail landscape, we observed that retailers have adopted the following strategies that could become long-term trends:

1) Created a roadmap for safe reopening – As each country has been opening up at different times, retailers had to quickly respond to demand surges and supply chain fluctuations. They had to ensure minimal disruption to businesses while managing working capital requirements. This required retailers to proactively plan how they would reopen safely and successfully.

2) Created a sense of trust and a safe experience for consumers – A greater focus on safety by retailers in Asia has led to the introduction of new practices, such as temperature controls at the entrance of stores; the provision of hydroalcoholic gel in retail outlets; the generalized use of contactless methods for both payment and delivery; the development of remote assistance or maintenance services; the extension of “click–collect” approaches; and adoption of drive-through facilities outside retail outlets. These practices are still evolving.

3) Rebalanced their product portfolio, beyond a greater focus on private labels – Retailers are placing a higher emphasis on value-based products in the medium term as all consumers, even the high-income segment, are seeking value-for-money products

4) Optimized supply chain – After experiencing supply chain disruptions, retailers across Asia are looking to have a diverse mix of local and international suppliers, optimize their real-time inventory management systems to cope with demand as well as mitigate uncertainty for the future. The most resilient companies of the future will be those that use a “control tower,” or a decision-making platform that governs a real-time, integrated and omniscient supply chain through end-to-end visibility and analytics.

5) Shift towards online – Many retailers would have used this opportunity to move and strengthen their online offerings. Even as customers re-enter physical stores, online retail will continue to remain a channel that will see exponential growth. To leverage this growth, retailers are providing discount cards and promo offers to in-store customers to incentivize them to move online.

Can you give us a summary of your presentation for the Retail Asia Virtual Conference 2020?

The presentation focused on the exciting future of retail globally and in the region. The retail industry has been undergoing disruption over the last 10 years, with megatrends shaping and further accelerating the pace of change. Specifically, an emerging new generation of digital consumers will demand innovative products and services. In that context, we will discuss four key themes that are defining the future retail experience.

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