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IGD: Asia’s big box retailers continue to be relevant in ecommerce age

Large retailers in Asia such as Walmart, Aeon and Auchan are successfully fending off increasing competition from ecommerce and will continue to grow in...

Tom Wadlow
|Jul 26|magazine11 min read

Large retailers in Asia such as Walmart, Aeon and Auchan are successfully fending off increasing competition from ecommerce and will continue to grow in value, a new report shows.

Asia’s leading big box grocery retailers are forecast to grow on average 3.5% a year between 2016 and 2021, according to new figures released today by IGD.

Although growth in large grocery formats varies significantly across the region and, as in other markets around the world, they are coming under pressures due to growth of other retailer channels and changing shopper behaviour, these numbers show that large formats still have a key role to play in shaping the future of modern trade in Asia over the next five years.

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Some 30 years after the first modern trade retailer entered Asia, Nick Miles, Head of Asia-Pacific at IGD, has analysed 10 of the leading large format grocery retailers in the region, identifying a number of challenges and opportunities for this channel to consider over the next few years.

Miles said: “When the first modern trade retailer broke into the Asian market in the early 1990s with hypermarket and supermarket formats, we expected traditional trade, largely made up of family-owned grocery chains and small independent stores, to be gradually eliminated. However, 30 years on, traditional trade is still going strong in most of the region and the shape of retail is changing once again. Online grocery shopping is starting to gain a foothold across all markets and convenience stores are seeing a surge in growth too – often at the expense of big box formats.

“However, despite these challenges big box stores still have a critical role to play. In markets where modern retail is starting to take off, large formats are still often the go-to option for retailers to enter the market and create excitement amongst shoppers; whereas in markets where modern trade is already well established, retailers are on the front foot by repurposing these stores so that they are fit for future requirements.

“As in other parts of the world, one of the key challenges facing large format grocery retailers is rising property prices and increasing levels of competition. Retailers in markets like Thailand and China have been quick to respond to this test, slowing down new space growth to focus more investment on existing stores, downsizing their stores, plus converting space into malls, with complimentary retail and foodservice offers that are targeted at families. These tenants bring in both extra rental income and create a stronger retail destination, helping drive higher footfall to the stores.”

With plenty of scope for modern trade growth there remain great opportunities for Asia’s big box retailers – and their suppliers – who can engage cleverly and in a meaningful way with their shoppers.

Aeon, Walmart and Auchan are the top three hypermarket and supermarket retailers in the region, driven by strong store networks in Japan and China. However, domestic players are also developing a strong presence, with home-grown retailers like Yonghui and SM Retail growing quickly in China and the Philippines, respectively.

Miles added: “Big box retailers could consider a number of different tactics to encourage greater engagement with their shoppers. One way would be to create a real sense of excitement about grocery shopping, which can be very hard to replicate online. Running chef demos or competitions in-store can boost brand appeal, as well as celebrating unique dates or anniversaries, which can in turn be used as an opportunity to trial new products. Social media is another great way to engage with shoppers – new launches, in-store events and food fairs could grab lots of attention through digital media sites, if done properly.

“Suppliers to large format retailers also need to consider how much standards are being raised on freshness, and ensure that they are innovating in this area with strong communication of their fresh credentials. And what about private label? These products are no longer considered a cheap alternative, so if you’re a private label supplier, remember that they can also be part of a high-quality range and should be marketed as such. Bigger retailers can have a key role to play here.”