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Where revenues went, profits followed. Those same 20 companies made a net profit of US$320.6 billion, an increase of US$50.7 billion on 2019. That’s an astonishing 19 per cent profit gain.
Top of the list of tech giants was Amazon, which had a net profit of US$21.3 billion on revenues of US$386.1 billion. Amazon’s revenues increased by 38 per cent over the year, a number upstaged only by the increase in wealth of its CEO, Jeff Bezos, whose net worth grew from US$113 billion to US$177 billion, or 57 per cent.
Second on the list of big tech companies was Apple, with revenues of US$274.5 billion (+6 per cent on 2019), while Alibaba was at number 8 with US$110.4 billion (+41 per cent).
What has this got to do with retail and retail property? Plenty.
Taking on Covid-19 restrictions
During the past two years, retailers and other property operators have desperately sought technological solutions to make up for the loss of footfall caused by fear, incessant government lockdowns, and social-distancing directives that were sometimes imposed by governments and sometimes self-imposed as retailers and shopping centres sought to reassure their customers that shopping was safe.
Political leaders and their health advisers portrayed Covid-19 directives as short-term at first. Lockdowns, movement restrictions, and other social-distancing initiatives were promoted as quick fixes, but dragged on. This created an unprecedented opening for technological workarounds that could bring products to customers without the latter having to venture out, or with minimal human contact if they did go out.
So in one way, government Covid regulations during 2020-21 can be thought of as an act of support for technology companies and a put-down for commercial property operators. The decline in political influence of retail property in 2020-21 was global, and similar to that of airlines, hotels, fossil fuels, and other industries that bore the brunt of government anti-Covid policies.
In some instances, the diminution in power led to attempts to pivot, for example by leveraging digital infrastructure to turn shopping centres into online marketplaces and food delivery services. Frasers Property’s e-store in Singapore was an early example. The mall operator provided a delivery service there for its tenants.
The peak industry body in the US even pivoted its branding. The International Council of Shopping Centers somewhat head-scratchingly relabeled itself as ICSC: Innovating Commerce Serving Communities.
Since short-term actions have little lasting impact on consumer behaviour, if health officials and governments had delivered on their promise of a quick fix then retail property would have got back to normal fairly quickly. However, the sheer duration of the policy actions dictated otherwise.
The results have been plain to see. Growth of online delivery services has exploded and what appears to be a permanent shift in consumer behaviour has occurred: consumers are using more digital services and using them more often.
Online delivery takes hold
Nowhere was the transformation more obvious than in Asia. Google, Temasek and Bain & Company compiled a study on Southeast Asia’s internet economy called the e-conomy SEA 2021 Report. It found that the overwhelming majority of new users of digital services in 2020 continued using them in 2021. This suggests that although there will inevitably be some erosion of usage as people return to physical stores, a significant amount of changed behaviour has already become part of daily life.
The largest surges in online delivery occurred in groceries and food; not surprisingly, a good chunk of merchants surveyed for the e-conomy study say they wouldn’t have survived without being able to resort to digital services.
Delivery platforms are thriving. Singapore-based Grab Holdings has been experiencing explosive growth in merchandise value moved via its ‘superapp’. By the third quarter of 2021, the company was delivering $2.3 billion worth of merchandise to consumers, an increase of 63 per cent on the same quarter a year ago. Among the retailers teaming up to supply merchandise through Grab was Lazada, a partnership now operating in Indonesia, Malaysia, and Singapore. Grab is now also onboarding the Big C hypermarket chain in Thailand, Lotus’s in Malaysia, S&R in the Philippines, and MM Mega Market in Vietnam.
There has also – anecdotally at least – been rapid growth in so-called informal e-commerce, which occurs through transactions conducted on messaging apps and social media rather than in online shops. This kind of e-commerce has become particularly common in Thailand and Vietnam but quantifying it is tough.
Along with online delivery, adoption of digital payment and financial services was also high.
Shopping centres must catch up
But while technology making online delivery quicker and slicker has advanced in leaps and bounds, technology to make shopping more user-friendly inside the shopping centre itself is still lagging. Wayfinding, for example, is still agonising, with Asian mall operators caught between two opposing objectives: wanting to make the customer experience more convenient, and trying to prolong the trip and expose shoppers to as many stores and as much merchandise as possible.
Marketing is also still problematic, particularly in the multilingual settings that exist across much of Asia. In fact, as I sit here writing this in Hua Hin, Thailand, I just received an email push promotion on my phone from Decathlon, the sporting goods giant that has stores all over Asia. I shop occasionally at Decathlon but the promotion is only in Thai language and I don’t have time to translate it. It’s consequently of no value other than annoyance. So much for targeting. I quickly delete the email and unsubscribe.
The last two years have brought a terrific acceleration in e-commerce and shopping centres are still huffing and puffing to catch up. They need to get back in stride, because there is no going back to the way things were.