The need to shift online, or to bolster a company’s online presence, is a long forgone conclusion for the retail conversation in Asia, with consumers and businesses alike in the region firmly embracing the digital life. This is clearly evidenced in the recent e-Conomy SEA 2019 Report by Google, Temasek, and Bain & Company, with Southeast Asia’s internet economy expected to hit USD $100 billion this year.
The rapid shift has created a widening rift between businesses that have embraced the need to continuously innovate to capture business opportunities, and those that are being left behind. ACI Worldwide recently launched the Culture of Innovation Index, together with analyst and consultancy firm Ovum, as well as whitepapers that explore the attitudes toward innovation among merchants across four key vertical sectors – retail, hospitality, digital goods and telecoms. Organizations, as defined by their approach to innovation and business transformation, fall into five categories: Laggards, Emerging, Tech-led, Advanced and Trailblazers.
Omni-channel remains a key concern for Asian merchants
Merchants globally are challenged by pressure from new market entrants, the breakdown of traditional industry boundaries, and growing customer preference for a digital-led or digital-influenced purchasing experience. eCommerce companies – often relative newcomers to the retail industry – have proven that they are able to cater quickly to changing consumers preferences.
There is an ever-increasing need across ASEAN to support a broad range of digital payment types to be able to access the rich cross-border retail opportunities in the region. This is noted in the e-Conomy SEA 2019 Report, which claims “the adoption of Digital Payments has finally reached the inflection point and is expected to cross $1 trillion by 2025, accounting for almost one in every two dollars spent in the region.”
At the same time, it is clear from our own research that APAC merchants believe there is still a great deal of business to be found in retail’s brick-and-mortar roots. When queried on investment priorities for new payment-related services in the coming year, more than half of APAC respondents indicated that supporting the convergence of in-store/in-person and digital commerce was a top priority (52%), compared to only 42 percent in Europe and 43 percent in the Americas.
How quickly are the region’s merchants changing?
The good news for Asia’s retail industry is that merchants are taking note of the need to innovate. According to ACI’s Culture of Innovation Index findings, 32 percent of Asian merchants fall into the Tech-led group, with 26 percent in the Advanced category; only 19 percent are classified as Laggards. In contrast, 35 percent of merchants in Europe are classified as Laggards, with the proportion in the US standing at 34 percent. But that’s not an invitation for Asian merchants to rest on their laurels – a significant 16 percent in the U.S. are considered Trailblazers, owing to the thriving digital-native businesses in that market.
How to innovate though? The term “digital transformation” is widely used to describe a range of large-scale projects with an array of objectives and outcomes. But in practice, these sit on a continuum between two extremes. Merchants need to differentiate between initiatives that are short-term responses to current challenges and those that are longer-term and designed to reshape how they do business.
Both approaches are informed by the need to differentiate and enhance customer experience, but the speed and agility required to address short-term priorities should not be at the expense of strategic initiatives leading to more fundamental digital transformation. Merchants need to take a realistic look at how they balance these demands to plan properly for success.
Investment in AI technologies is growing, and security remains a key issue
Our research also finds that investment in Artificial Intelligence (AI) technologies is growing, with the hospitality and telecoms sectors leading. Among hospitality businesses, 42 percent have clear plans around increased use of technologies such as machine learning and bots, while the figure is 39 percent for telecoms. In the case of hospitality, this reflects a growing emphasis on the use of data across operational areas such as supply chain, logistics and maintenance.
Security remains a key issue too, as new technologies emerge, and the need to provide a smooth customer experience while not compromising security remains a delicate balance. At a global level, 73 percent of merchants believe that the risk of a data breach is higher than a year ago, and 76 percent view security concerns as a brake on their ability to innovate. Interestingly, merchants in the Trailblazer category are less concerned about this point, perhaps reflecting their investments in fraud detection and prevention capabilities.
The key characteristics of trailblazing merchants
The report also outlines seven key characteristics of “trailblazing” merchants – the most innovative enterprises – that differentiates them from the rest of the market. Among those key features are: a strong central function tasked with driving innovation, an agile culture that is responsive to customer needs, taking advantage of emerging technologies, and focusing on customer experience by bringing innovative products and services quickly to market.
While there is no single recipe for success in today’s new retail environment, our research does provide a blueprint for what the most innovative and successful merchants are doing right. Catering to a growing customer preference for digital-led or digital-influenced purchasing is key. This includes providing new payment options; a focus on mobile (especially in-store) and a stronger, more seamless cross-channel payments experience.
