More stores being disrupted

THE terse statement from Kamdar Group (M) Bhd says it all - the retail industry is feeling the heat from online sales.

Kamdar in an announcement this week stated that it was relocating one of its stores in Johor Baru and merging another store in Kuching with an existing outlet.

In short, Kamdar is reducing its presence in Kuching – a move which does not come as a surprise because it is only following what the others in the industry are already doing. Major retail chains such as Parkson, Carrefour and Aeon Big are consolidating their positioning of the stores in the market due to competition.

The competition is not from the `mom and pop’ stores but online sites. Having a larger presence obviously does not seem to be the flavour now. The traditional retail stores have now embarked on two fronts to fight the battle against online sites.

The first strategy is to consolidate operations and focus on stores that generate the most sales. The second is to embark on an aggressive online sales campaign. The overall objective now is to increase sales and not stores.

This is exactly the strategy that overseas retail chains such as Hennes & Mauritz, or better known as H&M, have adopted. It has reduced the number of stores and instead is looking at increasing sales by 10%.

Stores such as H&M are sandwiched by low-cost retail chains such as Primark and online websites that sell higher-quality products at much lower prices. This has resulted in H&M experiencing lower visitors to its stores.

Like many other retail chains, the concern is that H&M would not be able to price its goods as cheap as the online sites or able to deliver as efficiently as the disrupters. But over the longer term, some traditional stores have fought back.

For instance, Wal-Mart is giving Amazon a run for its money. Also some retail chains that offer a range of high-end luxury goods such as Yves Saint Laurent are not seeing any disruption. The operator of luxury goods stores recorded its sixth consecutive growth in its topline.

So, the disrupters are not in all segments of the retail sector. There are some that have not been disrupted.