Events such as this Iconic Multimedia Water Features by Iconsiam late in 2018 give people reasons to get dressed and shop at brick-and-mortar malls. (Bangkok Post file photo)

The retail industry is undergoing one of the most profound periods of technological transformation in history and operators must adapt themselves to remain relevant.

The evolving retail landscape and consumers' changing behaviour have led to the emergence of new retail formats and adoption of new technologies. Traditional retailers are continuously being forced to evolve and invest in digital transformation.

The growing future supply in Bangkok will put more pressure on older centres to renovate and upgrade in order to remain competitive. As of the first quarter of 2019, the total retail supply in Bangkok was almost 7.8 million sq m according to CBRE Thailand, increasing by 3.70% year-on-year.

The total new retail supply all of 2019 will be one third higher than total new supply last year. And by the end of 2021, the total retail supply will likely exceed 8 million sq m, with the majority of the increase in large mixed-use developments downtown.

To survive, big retail players are venturing into new retail formats such as mixed-use development and outlet malls to diversify their portfolio. However, smaller players who are unable to reinvent themselves have been struggling.

E-commerce is having a significant influence on consumers' behaviour. The impact is increasing as it provides the consumer with choices and convenience which malls cannot fulfil.

According to the Electronic Transactions Development Agency (ETDA), the value of Thai e-commerce grew by 14% in 2018 to about 3.2 trillion baht and the growth is expected to reach 20% this year. Meanwhhile, the retail sales only grew by 3-4% year-on-year.

According to the Digital Economy and Society Ministry, Thailand's digital economy will play a critical role in every industry and is expected to reach 25% of gross domestic product by 2027. The country's four largest banks have all dropped digital transaction fees since April last year to retain retail customers.

Customers are more demanding than ever, forcing retailers to invest heavily in digital transformation. According to Gartner, global retail technology spending will increase by 3.65%, to $203.6 billion this year. Leading Thai retail players are shifting investments towards data analytics, omnichannel, artificial intelligence, digitalised in-store experience and personalisation/customisation.

Thai retail giant like the Central Group are focusing on building cloud-based consumer data, personalised loyalty platforms and omnichannel experiences. 7-Eleven, whose network exceeds 11,000 stores, has been expanding into banking and embracing artificial intelligence to gain customer insights and create personalised in-store experiences.

Globally, China's largest technology giants Alibaba and Tencent have been spending billions of dollars on an omnichannel ecosystem to create a seamless customer journey across online and offline channels.

Despite the surge in e-commerce and other technology, a majority of consumers still value the personal experience in a physical store.

A study conducted by IBM and the National Retail Federation validates that 98% of Gen-Z shoppers still prefer to make their purchases in brick-and-mortar stores.

Another recent retail customer research by Accenture also found that by 2020, the Gen-Z population will grow to 2.56 billion and 98% will own a smartphone.

This means retailers need to constantly adopt new technologies and innovative strategies for both online and offline channels to remain relevant to ever-changing consumer demand.

The retail industry is signalling a tipping point where retailers must reinvent themselves to survive. And the winners are the ones ready to move away from the traditional retail models and rethink their strategies in alignment with customer expectations.

Pichamon Chomanan is an analyst at Research and Consulting, CBRE Thailand. She can be reached at bangkok@cbre.co.th Facebook: CBREThailand LinkedIn: CBRE Thailand Line@: CBRE Thailand Twitter: @CBREThailand and website: www.cbre.co.th