With the expansion of digital payments in Asia Pacific, the retail industry is becoming a battleground between digital and traditional sales and distribution channels. Michael McCool, Managing Director at AlixPartners, takes a look at the situation in China and how industry players there and in the rest of Asia Pacific can rethink operational structures and strategies in a fast-changing market.
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Consumer Goods and Retail INDUSTRY INSIGHTS: RESTRUCTURING RETAIL
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Consumer demands in Asia Pacific are changing so quickly that consumer goods companies need to not only be thinking about the future, they need to actively have one foot in that future. What are consumers going to want, and how will they want to buy it? You almost have to be able to predict what these trends will be – that is, give the consumer what they want before they know they want it. For retailers, they need to understand customer buying patterns and how these wants vary with demographics and country. In the luxury segment, for example, luxury fashion houses are loathe to go into e-commerce as their consumers demand exclusivity and an on-site experience. However, the fastmoving consumer goods segment lends itself to the convenience and ease of online marketplaces.
LEADERS WILL BE ABLE TO PREDICT CHANGING CONSUMER TASTES BEFORE THEY START TRENDING
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In China, retailers traditionally go through distributers and franchisers to sell in physical storefronts. With e-retail rising, marketplaces like China-based Tmall, the largest business-to-consumer retail platform in Asia, allow brand-owners and manufacturers to sell directly to consumers. This has resulted in a conflict in sales channels as brick-and-mortar distributers fear losing customers to the brand-owners’ direct sales online. At the same time, distributers are also allowed to sell through Tmall, further increasing the competition between brand-owners and distributors. To unravel the complexities of channel conflict, brand-owners and manufacturers need to look into how they can tweak their marketing strategies and supply chains so they can price, promote, sell and deliver directly to individual consumers, where they only have a history of selling to distributers and depending on them to take care of the rest.
UNTANGLING CHANNEL CONFLICT WILL BECOME INCREASINGLY IMPORTANT
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Asia Pacific’s consumer market is saddled with excess capacity, and M&A can facilitate consolidations among local companies. Asian brands that previously anticipated large-scale rapid expansion can look to acquisitions by foreign multinationals as a way out of physical retail sites and to transfer assets so they can operate more efficiently. As Asian consumer brands start to amass brand value, we expect foreign multi-brand retailers to become increasingly interested in acquiring local brands, as a more assured way of getting access to products which have proven their appeal to local tastes.
INDUSTRY CONSOLIDATION WILL CREATE A CHANNEL FOR GROWTH AMONG ASIA’S CONSUMER GOODS AND RETAIL COMPANIES
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