Brick and mortar stores stay strong in the face of digitalisation. More needs to be done to fully transform ASEAN consumers’ spending habits.
By Joelyn Chan
Commercialisation, marketing efforts and sales targets are part of Lunar New Year festivities. Consumers spend more despite price hikes. In 2018, the Lunar New Year holiday generated US$70.2 billion in revenue both within China and abroad. The figure is expected to rise further as economies develop and ASEAN’s middle classes expand.
The region will move from physical to digital red packets eventually
Tradition dictates married citizens give red packets to their parents, younger generations and at times, friends. Physical red packets fell out of favour when WeChat introduced the digital version in 2014. The novelty of digital red packets combined with WeChat’s position as the leading messaging application in China spurred adoption and soon after, its rival, Alipay, launched its own version of a digital red packet.
Outside of China, DBS Singapore followed suit and launched its eAng Baos service in 2015. However, it has yet to gain significant traction and its user acquisition remains stagnant.
Ride hailing and payment firm, Grab, is facing the same challenge. It reported more than 1.6 million red packets being sent in 2018. However, that figure looks trivial when we consider Singapore’s mobile penetration rate of 147%. As of 2018, there are 2.6 million people aged between 20 and 64 years old in the city. There is still plenty of room for expansion for Grab’s digital red packets.
Part of the issue is that the appeal of digital red packets in Singapore still falls short of the experiential aspect of gifting and blessing loved ones with a physical token. A handwritten note appears more personal and sincere than sending an e-card or text message, the same logic applies to red packets. People want to attach sentiment to their financial gift, a
Digital payment providers have to apply meaning, sentiment and tradition to technology. For example, leveraging the physical interaction required for QR code payments could bridge the gap between physical payments and e-payments by allowing room for tradition and sentiment in the interaction.
Brick and mortar stores are also still preferred in Singapore
Although Singapore has laid out plans for a fully-digital economy and enjoys a high rate of mobile penetration, its citizens still physically head down to stores for Lunar New Year shopping.
According to correspondences between Google and the Business Times, more than 90% of all retail sales in Singapore were carried out offline during the festive season in 2018. Limited delivery options and longer delivery times around the holiday season hinder the growth of online shopping during the New Year period.
Chinese tourists are driving greater mobile payment adoption
If ASEAN needs a push, Chinese tourist will gladly demonstrate the perks of mobile payment. Considering this Lunar New Year alone, there were around 7 million Chinese citizens travelling abroad. During last year’s festive season, they contributed US$9 billion to the economies of their chosen holiday destinations.
Singapore, Malaysia and Thailand were perfectly placed to capitalise on this influx of Chinese visitors. 75% of supermarkets and convenience stores in the three countries accept Chinese mobile payment. Following these nations’ lead, expect retailers across the region to adopt the e-payment technology and try to capitalise on the Chinese Lunar New Year footfall and spending.
With or without ASEAN, the digital race will continue
When WeChat and Alipay launched their digital red packet function, they enticed users to connect their bank accounts. From there, e-payments made inroads due to its increased convenience and faster payment options.
This Lunar New Year, many firms have failed to capitalise on the influx of Chinese visitors to boost receptiveness and increase e-payment adoption.
It seems like an excuse if firms cite traditions as a reason for low adoption rate. Traditions evolve with time. In the past, the Chinese would write the character “Fu”, which brings good fortune. This year, Alipay rewarded users with Lunar New Year cards when they scan “Fu”. Different “Fu” characters unlock different cards. Once users collect all of the lucky cards, they receive a cash reward. Schemes like this are bridging the gap between tradition and modernity. The more bridges that can be built, the smaller that gap will become.