4th January 2021 Post by Picon-Deed
RETAIL AND E-COMMERCE IN MYANMAR AFTER POST-VACCINE
The retail revolution is only just beginning in Myanmar and has at least one generation to rapidly expand. Retailers should look at prospering in the medium- to long-term as well as toughing things during the pandemic.
As with all real estate sectors in Myanmar, the exciting emergence of a modern retail landscape ground to an abrupt halt with the onset of the COVID-19 pandemic after the first cases were reported in March 2020. The lockdowns / stay at home orders in Myanmar have continued and have remained more or less in place in the commercial capital of Yangon until the end of 2020.
The end of 2020 promised hope globally in the form of almost miraculous news regarding a number of highly successful vaccine trials. Already in Europe vaccines are starting to be administered with a significant ramp up expected over the course of 2021 likely leading to herd-immunity. However, for countries like Myanmar the wait for vaccines may be far longer and the achievement of gradual eradication of the virus through vaccination could be well after 2021.
Myanmar may be more reliant on Chinese and Russian vaccines that are showing some success but these are still not assured, and that is before the logistics of manufacture and distribution are considered. Whatever the outcomes it would appear tough choices will need to be made in the trade-off between health and the economy in Myanmar for 2021. This extends to how far the retail sector can open up this year.
Even before 2020 the western world was witnessing the trend of declining bricks and mortar retail in favour of online shopping but that move has been turbocharged by the onset of the pandemic. Closer to home, Bangkok has started to see an increase in retail vacancies with large scale department stores shutting down for good.
Also, smaller shops are closing in Thailand’s capital, which is likely to increase as leases expire. There is also a danger of a bubble bursting in domestic credit, potentially exacerbating the retail slump. However, it is unlikely that this spells long-term doom for the modern retail sector in Thailand because shopping patterns in Asia are fluid and there is often significant churn in retail over the middle- and long-term. Even before COVID-19 department stores were already seen as being in decline, with more hybrid versions taking root in many refurbished shopping malls. Expect that modern retail will continue to be a vibrant sector in Southeast Asia as it evolves to changing tastes and fashions, and maybe even more so in Myanmar.
Myanmar at base camp
The first modern shopping malls appeared in Southeast Asia in the early 1980’s but it took more than 10 years for the main commercial cities to reach a supply exceeding 1 million square metres of floor space, a point where it could be argued that retail becomes a major focus of how people shop and are entertained. Yangon’s overall supply has not even reached 500,000sqm and it is likely to be later in the decade before it reaches the one-million mark.
Figure: Year when mass retail Net Floor Area exceeded 1,000,000sqm
When cities reach a net floor area of about 1 million square metres of retail space there is a tendency for shopping areas to reach critical mass as shopping malls, F&B outlets, leisure providers and transport come together in a cluster and take on a life of their own. Here we can think of destinations such as Orchard Rd in Singapore or Rama I Rd in Bangkok. At present Yangon has no such clusters and is characterized by well-dispersed medium-sized shopping locations. However, there are sites where retail clusters might form: the downtown area on Bogyoke Aung San Road that is home to Junction City, Sule Square the Yoma Central development with the planned 64-acre Yangon Central Railway Station project potentially added in future. Clusters could potentially form in Yankin township around Myanmar Plaza or in Kamaryut township around Junction Square and Times City.
The COVID-19 pandemic has hit the retail sector hard in Myanmar and is likely to continue to do so in 2021. However, the modern retail sector is only in its infancy and has a long way to go before emulating its neighbours. Typically, retail growth surges when discretionary spending increases as people’s salaries begin to rise on the back of sustained economic growth. This is the future of Myanmar, with COVID-19 or other black swan events only interrupting the juggernaut. And while the overall picture for the retail sector is a rosy one, operators must be aware that the nature of retail is always changing with two key interrelating factors: the internet and new demographic trends occurring in the country.
Millennials and centennials to dominate the retail sector
Globally, generations are defined and marked with certain general characteristics shaped by the significant events and trends of their formative periods, such as traumatic wars, cultural or technological sea-changes. The Silent Generation, now in their eighties of older, lived through the Second World War and were instrumental in building the economic foundations of today from the ruins and ashes of a global war. The Baby Boomers were cultivated in the enormous cultural upheavals in the 1960s and 1970s, while the Millennials were the first generation brought up with the internet but fully aware of the fragilities of society by being aware of the 9/11 attacks.
Figure: Population of various generation cohorts in 20-69 age group in Myanmar
In Myanmar the relatively young population means that Baby Boomers are a quickly declining force in retail, while Millennials will be joined by Generation Z (Centennials) as the key generational markets for the next 20 years. This is the timeframe that retailers should be looking at for the development of new retail malls and refurbishments of existing ones.
Globally, Millennials obviously are more in touch with new technologies but also value experiences rather than the mere acquisition of material goods. Entertainment and dining represent important considerations for their retail experience and neither can be experienced online. Compared to previous generational cohorts Millennials tend to focus more on communities, so future retail should embrace more elements of a mixed-use development such as temporary working and living spaces for Millennial visitors and travelers.
Recent trends in the United States show that Centennials are rather less independent than previous generations, likely because high rents and house prices have encouraged younger people to stay longer with their parents. The economic shock of COVID-19 will only add to this trend. In Myanmar the opposite is likely to happen as the country grows economically, while a developing mortgage market – and hopefully improved condominium regulations – will lead more people to have the means and opportunity to move away from the extended family and be more independent. Centennials are likely to be the first generation in Myanmar where a significant proportion of young people will have significant disposable income and therefore be the key spending force for the next 30 years, which savvy retailers will need to be aware of in order to benefit.
The oldest Centennial has not reached 25 years of age, so the characteristics of this generation is still being formed with some uncertainty surrounding the impact of long-term social and economic effects from COVID-19. Attention spans compared to older generations are shorter, so social media has reflected this with the growing popularity and potential far shorter longevity of apps such as Tik-Tok and Instagram. This may sound like a weakness, but it also means Centennials are used to sensory overload in which a buzzing, fast and furious retail experience could be the ideal environment. The one thing that defines Centennials is that they are the first generation never to have known a world without internet and especially the pervasiveness of the mobile kind. It is also the internet that is seen globally as the threat to the bricks and mortar retailing so prevalent throughout most of the urban world. While in Europe and the United States retail has been struggling to cope and with more nails in the coffin being hammered in through the pandemic, the relationship between internet and retail is more symbiotic and even potentially beneficial to the further spread of modern retail in Myanmar.
Clicks and mortar, not bricks and mortar
The relationship between the physical and ephemeral retail experience in Southeast Asia is not a zero-sum game, especially with the ubiquity of smart phones; the two have blended and have been mutually reinforcing. Witness the iconic Apple Central World store that opened in Bangkok in April 2020 amid the pandemic. Shoppers in Bangkok, Jakarta and Kuala Lumpur have had access to the internet for more than 20 years and still the retail sector remains robust.
In Myanmar the growth in internet usage has been dramatic over the past five years albeit from such a very low base and has been further accelerated in this year of COVID. The digital payments sector in the country has grown by 7.1 percent this year, with numbers surging during the COVID-19 lockdowns, according to data from the Oxford Business Group. The business advisory group’s research is summarized in their COVID-19 Economic Impact Assessment Report, which shows that the number of new fintech users overall increased by 20pc during the pandemic.
Social media has presented a portal for retailers to promote their physical malls, especially the sights and experiences. Facebook has become ubiquitous in Myanmar and kickstarted the explosion of internet usage in the middle of the last decade. Retailers have been focusing on this and ‘likes’ of the most prominent malls in Yangon are on a par with a number of other Southeast Asian cities, although still far behind technophile Thailand.
Figure: Facebook ‘likes’ for key shopping centres up to November 2020
For Myanmar the physical retail experience has only just begun and there are many millions or even billions more selfies to be had before this wears off. The relationship between internet and retail will evolve over time with a combination of ‘webrooming’ (researching products offline before buying them in a physical shop) and ‘showrooming’ (the opposite of webrooming). But in any future scenario it is difficult to understate the growing importance for city dwellers in Myanmar of large, air-conditioned public spaces in how people eat, drink, entertain themselves and even live and work.
CONCLUSION Retail globally and in Myanmar will be in a state of flux over coming decades: that is good news
While in Europe the high street has been the main focus of the physical retail experience, the advent of air-conditioning has led to the shopping centre being the main shopping conduit in hot and steamy Southeast Asian cities. But malls mean far more than just a place to shop. In temperate Europe the average city dweller has a whole environment in which to relax as well as shop, be it a high street or park, so malls are less important in the whole retail infrastructure. In Myanmar, which deals with challenging weather for most of the year, the mall represents so much more. A mall essentially is a very large, weather-protected, open public space filled with activities and experiences for shopping, entertainment, sports, education or even government functions; potentially even other services that nobody has thought to include yet. Even if retail as we know it dies, something will take its place in the mall.
Globally, since the advent of shopping, retail has altered with changing times and technologies. Supermarkets only appeared on mass in Europe in the 1970s and the development of escalators led to fixed floor department stores making way for vibrant new open plan shopping malls. The increased usage of cars and public transport led to the development of larger out-of-town retail centres. But retail also has a way of confounding expectations and trends such as the appearance in many malls of cafes dedicated to traditional board games, while bookshops continue as key tenants.
Throughout the world the internet has helped save retail during the pandemic by allowing shoppers to buy online and also to keep a semblance of physical retail open during lockdown with the proliferation of click-and-collect services. Such trends have also allowed Myanmar to cope with the pandemic. In the end whether people are out and about or stuck at home, they need to consume and a service needs to provide this requirement. Also, as restrictions abate and assuming there is public confidence in the decline in the lethality and spread of Covid, then it is likely that an upsurge of retail activity in all its forms will eventuate as people make up for lost time with separated friends and relatives.
But in the longer-term retailers need to understand the trends and motivations of future generations of shoppers who might want to experience the latest virtual reality game or to play a game of Monopoly with friends right in the heart of a shopping mall.