Amazon in Singapore: Is the tide changing for traditional retail?

Singapore’s e-commerce market has seen tremendous growth in recent years, largely due to higher broadband and smartphone penetration. According to PayPal, this lucrative market is set to grow to US$4.4 billion by 2015. And as a clear indication of the upside potential in store, the world’s largest e-commerce player, Amazon, has set its sights on local shores and is now offering free shipping for purchases of $125 and above.

Amazon’s offer of cheaper and hard-to-find items appeals to Singaporeans, although not all products in their range will be available to local shoppers, who are already plagued by issues pertaining to delayed shipments and occasional voltage incompatibility.

While there is still a gap in Amazon’s service, it won’t be long before distribution networks are improved and the company perfects its offer.

This is dangerous news for local retail outlets and small and medium-sized enterprises (SMEs). Now, more than ever, it will be essential to drive value to their brand in order to compete with Amazon's cheaper products and diverse portfolio.

Differentiation now needs to come beyond price competition. Local retailers will need to develop a unique position within the market that clearly defines them—whether through challenging category conventions, or refining their product or service.

Business costs have always been an issue. Current conditions have not changed this fact in any way. The challenging business environment has always spurred SMEs to seek flexible methods to ensure the right tools and processes are in place. What is valued more now is the idea of strong market differentiation and successful entry into new or niche markets. Agility is on their side, meaning flexible systems are possible to implement.

Local retail outlets need to focus on the one thing that stands them apart from any online offer—a tangible brand experience.

Providing a holistic customer experience heightens brand appeal, and with it, brand loyalty. This bond between customer and retailer is a hard-fought battle. Where online platforms battle with price and simplicity of customer service, retail outlets need to showcase the personality of their brand as well.

A store experience that surprises and delights shoppers creates a buzz and encourages repeat visits, is a difficult factor to replicate online. Allowing consumers to interact with the brand's personality and brick-and-mortar shopping will seem less mundane. Using sight, sound and scent to provide a unique store experience, brands can successfully come alive. American retail brand Abercrombie & Fitch has been a pioneer of executing a unique brand experience and uses it exclusively to ward off online competition.

However, time is of the essence. While brick-and-mortar shops grapple with defining their brand experience, online retailers are quick to identify their pain points and are now offering alternative ways to overcome the lack of personal interaction available via their offerings.

Zalora is one such online brand, offering a ‘tangible’ online shopping experience with its 24/7 live-chat help desks. Relatively new to the market, Zalora is fast grabbing a market share with its aggressive marketing techniques that force themselves into consumer’s top of mind and signal that they are here to stay.

Zalora’s compelling proposition goes beyond product range and service quality. With a solid distribution network in Malaysia and Singapore, the advantage of speed and price make their offer very competitive.

To compete, some smaller businesses are looking to take control further up the value chain, so that they own the product or service brand rather than staying at the distribution or manufacture end of the value chain. The size and flexibility of smaller businesses allow them to react quickly to changing market conditions and leverage lucrative opportunities, and this is a valuable point of difference.

With the advancing saturation of mobile technology to a wider audience, retail outlets face a prolonged battle against their online competitors. Reaffirming their market position and value in the minds of the consumer is only part of the solution. Staying relevant with a meaningful difference is the key to long-term success.

Simon Bell is executive director strategy, Southeast Asia & Pacific, with Landor Associates.