Rising income levels in some of Asia’s fastest growing economies are set to drive solid growth in food retailing according to a report by logistics company DHL.
While retail sales in many categories in Hong Kong, China, Macau and other parts of Asia are suffering from decline, or at best static growth, food retailers are set for a boom according to independent research commissioned by DHL Hong Kong.
Some 300 industry decision makers were surveyed in India, Indonesia, Thailand and Vietnam for the report, titled Hungry for Growth: Logistics Trends in Asia’s High-Growth Food Retail Markets.
It found that one in four of the companies polled expected to grow sales by 10 per cent or more this year – and six in 10 predicted growth of at least six per cent.
However, the report also found that up to 38 per cent of those surveyed were unaware of their total logistics costs, while 37 per cent lacked any KPIs or formal measurements for their supply chain performance, potentially impacting their ability to keep shelves stocked and orders filled as demand and competitive factors grow increasingly complex.
“Rapid increases in purchasing power, coupled with surges in demand driven by population growth, will yield obvious expansionary benefits to food retailers,” said Dean Eichorn, VP retail for DHL Supply Chain Asia Pacific.
“However, any food retailer’s success is ultimately dependent on the agility of their supply chains when faced with demand volatility, seasonal fluctuations, and other complex market factors. Asia’s food retail industry looks set to undergo significant growth in the next year, and only with greater understanding and control of their logistics operations will companies be able to take advantage of new opportunities.”
The research found that food retailers are increasingly at risk from unpredictability on both demand and supply sides of their operations. In the four countries surveyed, late supplier deliveries were most commonly cited as food retailers’ top concern, while 36 per cent admitted that demand volatility had a major impact on their businesses.
Issues around supply chain performance and costs varied around the region: fuel, labor, and imbalances between supply and demand ranked amongst retailers’ top cost issues.
“Many of these concerns are amplified because a large number of food retailers don’t have visibility of their logistics operations, let alone the resources or subject expertise to improve and optimise them,” said Eichorn.
“Food retailers need reliable, agile supply lines if they’re to focus on their core competencies and compete. This agility only comes from being able to manage the supply chain as an end-to-end process across transport, warehousing, and value-added services in a way that’s rapidly scalable without creating extra complexity.”
The research also found that more than 60 per cent of food retailers have not outsourced any aspects of their supply chains, suggesting that retailers who actively adopt third-party logistics solutions stand to gain significant first-mover advantages over their competition. Of those surveyed, 44 per cent believe inventory optimisation technologies would be beneficial to their overall performance, while 38 per cent see advanced transport management services, like track and trace, as helping them improve reliability in meeting demand.
“Asia’s food retailers recognise the need to innovate and change, but the technologies and process transformations required to do so aren’t their domain of expertise, and nor should they be,” said Eichorn.
“The key to growth and expansion in Asia’s food retail industry, and those of other developing regions where we’re seeing similar trends, will be how effectively operators can take advantage of third-party expertise and managed solutions in everything from technology to end-to-end supply chain management.”
The DHL report said food retailers in Asia’s emerging markets are headed for a period of significant disruption, driven largely by rapidly growing competition and consolidation both within and between national markets.
“For the vast majority of those retailers, the strength and agility of their supply chains will make or break how they align customer service to the rising expectations of increasing middle-class consumers, respond to demand and cost fluctuations, and develop new ways to differentiate themselves against increasingly hungry competition,” the report concluded.
