The strategic integration of technology into in-store operations is rapidly reshaping the shopping landscape across Southeast Asia. The COVID-19 pandemic was a significant catalyst for adopting retail tech in the region. With lockdowns and social distancing measures becoming the norm, consumers shifted towards online shopping channels. This increase in eCommerce activity exposed the limitations of traditional models and fueled the demand for innovative solutions for retail startups. 

According to a report by Google, Temasek, and Bain and Company, the eCommerce sector is on track to reach a value of USD 172 billion by 2025.

Emerging trends in the commerce industry

Over the past number of years, the commercial sector has witnessed notable advancements, embracing automated inventory management, precise pricing optimisation, and tailored customer experiences. Food delivery platforms like GrabFood and Food Panda experienced a surge in demand, with contactless delivery becoming the norm. 

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The introduction of contactless payment solutions like eWallets (GrabPay, Dana) and QR code payments has streamlined the checkout process and prioritised consumer and delivery personnel safety without the need to bring a physical wallet.

Another prominent trend is the emergence of omnichannel businesses. This approach integrates online and offline channels, allowing customers to browse products online, reserve them in-store, and potentially even enjoy contactless checkout options. The move towards online shopping is becoming increasingly apparent. Major retailers like Central Retail in Thailand are experiencing a substantial boost from online platforms, contributing 18% to their overall sales. Similarly, CP ALL in Thailand has observed that online channels make up 10% of its total in-store sales. Indonesia’s Mitra Adiperkasa has reported a 9.5% contribution from online sales.

The rise of eCommerce solutions post-pandemic

The pandemic’s upheaval at the end of 2019 inevitably disrupted the retail industry overnight and accelerated the adoption of eCommerce, with more than half of the global consumer base shifting towards digital platforms since October 2020. Amidst these changes, one notable innovation—the Buy Now, Pay Later (BNPL) payment scheme—has gained considerable momentum, particularly in Singapore. 

Partly propelled by the increase in pandemic-induced online transactions, BNPL offers consumers the convenience of making purchases and deferring payments without incurring interest within a specified period, all without needing a credit card. According to a survey by Finder, 38% of Singaporeans had used a BNPL service.

TikTok’s live shopping feature has revolutionised the world of eCommerce, providing brands with a unique platform to exhibit their products in real-time through live streaming events. By actively engaging in these events, TikTok users can seamlessly make purchases without exiting the app, fostering direct interaction between brands and customers while simplifying the buying process. 

Between March 2020 and July 2021, global live transactions increased by 76%, indicating the enduring growth of the live commerce industry. Notably, TikTok users are nearly twice as likely to make purchases based on products showcased on the app. 

Challenges and future outlook for the retail industry

Adopting retail technology in Southeast Asia is challenging, with countries like Laos and Cambodia showing lower adoption rates due to infrastructural limitations. Every country in the region grapples with a significant urban-rural digital divide, as over 40% of their populations reside in rural areas, according to estimates. For example, even with Indonesia’s consistent annual growth in internet penetration, it continues to struggle with this gap. 

The rapid advancement of digital technology exacerbates the risk of marginalising rural communities, underscoring the urgent need for concerted efforts to bridge this divide. While some significant cities boast sophisticated logistics networks, delivering to remote areas remains challenging. Last-mile delivery costs can be high, especially for hyperlocal startups focusing on quick deliveries within a small geographic area. Optimising delivery routes and exploring alternative solutions like drone deliveries are ways startups can address this hurdle.

Despite these challenges, the future of the retail technology sector presents potential areas for growth. At the forefront of these advancements is Generative AI (Gen AI), which can generate simulations of clothing items tailored to individual body measurements, fostering increased customer engagement and conversion rates. This technology can further reduce return rates and expedite the product development process by generating a vast array of fashion design concepts informed by current trends and customer insights.

A promising future

Investments in technology and analytics, particularly AI, have proven to yield substantial returns for digital pioneers. Those allocating an additional 15% in operational spending towards these technologies are witnessing total shareholder returns of 1.5 to 2.5 times higher.

Retail tech is undeniably transforming the commerce landscape in Southeast Asia. By embracing these advancements, retail startups can disrupt the traditional shopping experience and create a more personalised, convenient, and sustainable ecosystem for the region’s ever-evolving consumer base. 

The future of the commerce sector is brimming with possibilities, and its success will hinge on the ingenuity and adaptability of the region’s vibrant startup ecosystem.