Retailers must innovate amid downturn

KUALA LUMPUR--Faced with new challenges in an increasingly difficult economic climate, local retailers must become more innovative by leveraging technology to boost revenues and profits, urge ICT (infocomm technology) vendors.

Thomas Halliday, industry principal for retail and consumer products, SAP Asia-Pacific Japan, noted that during economic downturns, the retail sector must innovate to become leaner and more agile so it can respond to changing market forces accurately and quickly.

"The challenge for retailers is that they must meet many customers' needs, each with unique wants," Halliday told ZDNet Asia in an e-mail interview. "ICT gives retailers a better understanding of their customers and allows refinements to be made to customer segmentation.

With this information, Halliday said, retailers can market their products and services more effectively, accurately calculate their customers' price sensitivity, deliver personalized product up-selling and cross-selling, and provide multi-channel customer service.

Ash Khalek, group vice president of manufacturing retail distribution at Oracle Asia-Pacific, concurred, noting opportunities are available to retailers but the challenge is finding which segments are providing the opportunities.

"Retailers need to look at their respective segments from a different perspective," Khalek said in an interview. They must achieve, as closely as possible, to real-time response using ICT as a tool, so that they can profile and target product promotions accordingly.

Khalek noted that traditional retail segmentations are based on demographic factors such as age and income. Retailers, he added, now need to turn to lifestyle-based segmentation, targeting users by identifying changes in pace, budgets and buying patterns.

Lifestyle segmentation considers factors such as whether one is single, married or retired so that retailers can tailor-make promotions accordingly, he said. "With the current economic situation, there's going to be a shift in buying patterns and retailers that use ICT to understand the dynamics of these changes and identify the patterns in near real-time, will gain the most," Khalek said.

According to Halliday, customer loyalty is an important factor that will help retailers weather the slowdown. One way for retailers to identify and cultivate loyalty is to build refined loyalty programs for high-value customers, he said. "Using analytics, retailers can analyze customer behavior and allow them to deliver an improved shopping experience to their customers," he noted.

Slowdown effects felt
Meanwhile, two retailers told ZDNet Asia that retail businesses in Malaysia are already beginning to experience a lackluster response as a result of the global economic crisis. This slowdon is felt despite both companies' efforts in using online technologies to sell their products.

Chris Chan, an online certified seller with auction site eBay Malaysia, said the ripple effects of the global economic slowdown in the retail space was especially prevalent after the Christmas and Chinese New Year period. Chan sells various types of merchandize and 1980s memorabilia on eBay.

"From the people I've spoken to, retailers are beginning to feel the pinch," she told ZDNet Asia in an interview. "Personally, I do not receive as many enquires today. Last year, for example, I received an average of 100 enquires [about my products] per week but I only get half as many today."

But Chan added that her business has not been badly affected as her sales revenue has only seen marginal fluctuations. "Almost all my customers are from abroad and are still buying items on my site," she said. "A lot of the products I sell are quite niche, and I believe eBay still has the market presence to help my business survive."

Chan, however, acknowledged the recession has not seen its worst yet, noting that she had to make adjustments to her business model in order to stay competitive.

"The slowdown will force buyers to look for other online alternatives," she said. "As an online retailer, I have to work harder to strategically sell based on prevailing trends and offer more value-added services, such as throwing in freebies with my products to further attract customers."

Tom Law, a partner at Timezone Resources, said his business has experienced mixed fortunes, where his retail outlets at local malls are weathering the slowdown better than his online store on eBay that sells merchandize.

"In our retail store, we sell branded second-hand watches," Law said in a phone interview. "During slower times, more people actually want to sell watches in exchange for cash. This helps keep us going."

Compared to business at his company's physical stores, the demand for watches Law sells on eBay has shrunk as some 80 percent of his customers are from the United States, where the average disposable income has been badly affected.

While his retail business in Malaysia has not been as badly affected, Law said profit margins were thinner. "But, in times like these, what we want is to keep our business going and cash flowing," he said. "This is the only way small businesses like ours will survive."

Edwin Yapp is a freelance IT writer based in Malaysia.