Investment Highlights

• We attended the 18th Asia Pacific Retailers Convention and Exhibition 2017. It is the longest running biennial regional retail conference in Asia Pacific. Based on our anecdotal observation, there were well over 1,500 attendants. The core retail topics discussed were future retail customers, winning retail formats of the future, retail technologies and solutions and omni-channel retailing. Insights into these core topics were discussed by renowned retail practitioners and industry heavyweights. Among the companies and associations represented at the conference were JD.com, 11Street Malaysia, Isetan Mitsukoshi Japan, GS Retail (Korea), Seven-Eleven Japan and Ministry of Economy, Trade & Industry of Japan.

• It was interesting to observe the trends in countries with more developed and advanced retail concepts and services. Although the e-commerce theme wasn’t addressed explicitly, elements of it were the underlying resonating theme. It will present challenges to most existing retailers but there will be opportunities to thrive. Ultimately, retailers will need to strike a fine balance between brick-and-mortar presence and an online presence to varying degrees depending on its position in the retail industry value chain.

• We attempt to relate it to the Malaysian context (refer Figure 1). Among the beneficiaries of e-commerce are the convenience store operators. We think 7-Eleven and Bison’s extensive store network and increasingly established distribution chain will play well into the e-commerce theme as its stores become pickup and return hubs. It is an alternative to last-mile parcel delivery services. There are other benefits which include higher foot traffic and related spillover spending and commission fee from payments made through the convenience store. Aside from that, other technological best practices seen during the conference led us to believe that it could alleviate the convenience store operators’ dependence on labour.

• On the opposite end of the spectrum, we think the shopping mall and departmental store operators such as AEON and Parkson may face an existential crisis in the longer term. They face intense competition from both online and offline players. Online shopping provides consumers with the ultimate level of convenience, offering endless product selection and price comparisons. Meanwhile, we opine there are numerous competing shopping malls that offer value-added elements beyond the commoditized shopping experience commonly found with AEON malls.

Source: AmInvest Research - 15 Nov 2017