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|By Le Khanh Lam - Partner, RSM Vietnam|
In accordance with an in-depth report on the impact of the pandemic on Vietnamese retailers, approximately 73 per cent of retailers have had their stores closed permanently and the closing rate reached 18.2 per cent along with directly affecting the demand, supply, and operations of the retail sector.
On the other hand, property owners from commercial real estate have been trying to strengthen their cash positions amongst the pandemic.
With many tenants refusing to pay rent while their stores were shuttered, landlords have been negotiating workarounds. Retailers, simultaneously, were struggling with systemic changes even before the onset of the pandemic, as bankruptcies and store closures were exacerbated by the change of consumer behaviors such as the online purchasing preferences.
Restricting consumption in the pandemic period has caused the retail industry to quickly fall into turmoil. Consequently, after the social distancing orders, the total number of wholesale and retail enterprises that temporarily shut down went up about 21 per cent in comparison with last year.
The remarkable point is that these dying corporates are mostly traditional passive retailers that do not have a flexible online business strategy to cope with the hardship.
Despite the inevitable losses of the direct retail segment, the retail industry has also shown its capability to adapt quickly to the market when instantly shifting to online sales to salvage the sales revenue during the difficult time.
This rapid shift to digital platform usage instead of selling directly also helps traditional retailers to stabilise their growth during the pandemic and continue to ensure the purchasing power after the second pandemic.
In spite of possessing impressive growth in online sales which is higher than that of the traditional retail industry and having considerable changes during the pandemic, in fact, online retail sales revenue still made up for only 4 per cent of the industry’s total
Indeed, businesses need to accelerate online sales even faster, not only to survive in case the pandemic storm returns, but also to be ready for immediate opportunities when the online trend is substantial enough.
The digital revolution is far from a new concept in the consumer ecosystem, yet retailers in small- and medium-sized businesses had been under pressure prior to the pandemic, struggling to manage digital platforms due to the limited knowledge and skills on digital appliance, and reluctance to get used to new technologies, as well as the lack of commitment to efficiency when applying online tools along with confronting lower margins amongst a variety of competitors.
They have become a huge barrier that the plethora of enterprises hesitate to switch to online business despite the urgent requirements of the market.
Regardless of facing challenges, more and more companies are searching and building efficient communication channels, dealing with their customers in a more effective way through digital approach.
Technology solutions are continually evolving to make the transition process faster and smarter. This change has been inadvertently driving a transformation in the way retail businesses operate that they have not paid attention to the preparation and adaptation before.
No matter how large or small a business they have, if a firm refuses to follow this flow it is understandable they will be out of the game and, as a result, a number of enterprises cannot catch up with the market and are forced to shut down.
To date, digital transformation remains a conundrum reaching every corner of the business that requires the management team to step out of their safety zone to make bold decisions for a breakthrough.
In particular, with the retail distribution sector, the most important issue in digital transformation is changing the mindset, approach, and application, thus the benefits of digital transformation can be fully utilised in order not to be excluded from the flow of the modern technology economy; it is also the time for ultimately accelerating the ongoing shift from brick-and-mortar to online retail.
For retailers, knowledge about customers’ evolving expectations has become much more important, especially in terms of consolidating digital technology. Retailers should have strategies that can cope with adjustment when and as needed.
Although the overall economic situation has been losing its shine this year, it offers retailers opportunities to ride out the market downturn.
In the longer term, a sharpened digital strategy should be developed and expanded to help retailers thrive when the fallout from the pandemic passes.