The Covid-19 health crisis has seen retailers accelerate their digital transformation as they mine new technologies in response to novel consumption patterns. Nowhere is this shift more evident than in Asia-Pacific, which is at the forefront of retail’s digital transformation, says new research from Bain & Company.
Bain & Company highlights that many companies have invested earlier than planned in new capabilities, sought new partnerships and generally looked to “future-proof” their businesses, including reviewing the role of traditional stores and shifting operating models to become more data-driven.
“The current pandemic has sped up disruptions that have impacted the retail sector, but the industry as a whole had already begun its shift towards digital innovation and e-commerce,” points out Melanie Sanders, Bain & Company partner and co-author of the report, The Future of Retail in Asia-Pacific: How to Thrive at High Speed.
The study reveals a sharp rise in online sales growth and e-commerce in the region, which accounts for around three-quarters of the world’s retail growth. Retail sales’ compound annual growth rate (CAGR) in Asia-Pacific was more than four times that of the rest of the world between 2014 and 2019, according to the report, and online sales growth was almost double: online penetration in the region increased from 9% in 2014 to 19% in 2019, compared to a rise from 6% to 11% during the period elsewhere.
China retail innovation
Looking at China, where retail sales are rebounding following the health crisis, particularly for luxury and beauty, new online and offline consumption patterns are emerging. “We’ve seen a substantial amount of retail innovation about how offline retailers connected online to provide goods and services to consumers who were at home,” commented Daniel Zipser, McKinsey senior partner in China, in an AliCast (podcast) from Alibaba Group.
However, this is more about an acceleration of existing trends rather than completely new innovations, added Zipser, such as livestreaming. Indeed, livestreaming saw significant growth in 2020, and although social commerce and social engagement has largely been driven by the younger generation, digital acceleration has been seen across demographics, he said.
E-commerce on the up
June 2020 marked the start of China’s mid-year 618 Shopping Festival, with all major e-commerce platforms and retailers launching their own campaigns. The shopping event has seen unprecedented levels compared to previous years, noted the McKinsey partner.
The event provided a boost to the beauty category, with The NPD Group noting that China prestige beauty e-commerce sales grew by 87% to $1.3bn in June 2020 compared to the same period last year. Close to 100,000 brands selling more than 10 million discounted items participated in 618, more than double the number compared to 2019.
Skincare sales increased by 98% to $489m in June, makeup sales grew 58% to $102m and fragrance was up 61% to $21m. Sales of haircare, meanwhile, rose by 126% to $16m. There has been a shift in focus from lip to eye makeup given the continued use of masks—lip color saw 12% growth this June compared to the same period last year, while eye product sales saw a 159% spike.
“E-commerce is likely to keep the fast growth rate in the coming months for beauty,” said Stanley Kee, Managing Director, APAC, The NPD Group. “In fact, our recent consumer sentiment study in China showed that 26% of Chinese consumers claimed they only purchase beauty items online. With another online shopping festival, Double 11, scheduled for November, it is likely that sales from this event will help China experience record sales for the year.”