Viewpoint

Strategic impact of retail 4.0 on retailers’

performance in Malaysia
Poorni Sakrabani, Ai Ping Teoh and Azlan Amran

Introduction Poorni Sakrabani,

Ai Ping Teoh and
Globalization and technological advances are driving disruptions in the retail industry. Azlan Amran are all based
Nowadays, retailers are required to understand the needs of their customers and respond at Graduate School of
in real time. Failure in responding to customers’ needs will not only result in losing the Business, Universiti Sains
customer and business, but might also result in the retailer getting negative publicity. Malaysia, Minden,
Malaysia.
Today’s customers are looking for an exciting shopping experience. As such, retailers need
to use a combination of Industry 4.0 technologies, namely robotics, data analytics, mobile,
cloud and augmented reality to fulfill customers’ needs. This has led to the modernization of
the retail industry and the emergence of Retail 4.0.

Retail 4.0
Retail 4.0 is defined as omnichannel retailing whereby, customers are not restricted to ‘in
store’ or ‘online shopping’ but are also able to shop via a combination of both channels. In
webrooming, the customer looks for the merchandise online and then does the purchasing
‘in store’ whereas showrooming involves looking at the merchandise ‘in store’ and then
purchasing it online. Retail 4.0 utilizes multiple technologies from Industry 4.0 to provide
customers with the best shopping experience, service and products.

The Malaysian Retail Industry’s Performance

According to the Malaysian Department of Statistics, the retail industry was the largest contributor,
that is 44.8 per cent, toward Malaysia’s Gross Domestic Product (GDP) FY2017. However, the
Malaysia Retail Industry Report for the 4th quarter of 2018 shows that the retail industry is on a
downward trend. The Departmental Store Sub-sector achieved a near-zero growth rate, that is 0.5
per cent, FY2018, whereas the performance of the Supermarket and Hypermarket subsectors
was worse as the sales dropped by 5.0 per cent when compared with the previous year.
Since the Retail Industry’s contribution to the Malaysian economy is so important, measures
need to be taken to boost the sluggish Malaysian Retail Industry. Factors which contribute
to the poor performance of the retail industry are boring retail outlets/malls, Out-Of-Stock
(OOS) issues, Price Discrepancy (PD) problems and Long Queues (LQ) at the checkout.
These factors lead to customer dissatisfaction and consequently, have a negative impact
on the retail industry’s performance.

Moving forward
Since customer satisfaction is vital for the revival of the Malaysian retail industry, measures
need to be tailored to suit the expectations of Malaysian customers.

DOI 10.1108/SD-05-2019-0099 VOL. 35 NO. 11 2019, pp. 1-3, © Emerald Publishing Limited, ISSN 0258-0543 j STRATEGIC DIRECTION j PAGE 1
 Malaysia has 15.3 million online shoppers (50 per cent of the population). Out of this, 60 per
cent use their mobile devices for online shopping. Twenty- two million Malaysians use their
mobile devices to access social media (Export.Gov, 2018). Social media and constant
connectivity are a must for Gen Y and Gen Z (the younger generation) who make up 67 per
cent of Malaysia’s 32 million population (Population.pyramid.net, 2019).
The younger generation expects product availability and an exciting shopping experience
at all times. Retail 4.0, with its omni shopping channels and sophisticated technologies, is
the ideal tool which retailers should use to entice of this young group.
Incorporation of Retail 4.0 technologies can impact the retail industry in the following ways:

Strategic impact 1: enhancing customers’ shopping experience leads to an

improvement in retailers’ performance.
During the bricks-and-mortar era, customers would walk into the retail store and purchase
whatever was available ‘in store’. In the Retail 4.0 era, it is possible for customers to try on
items which they plan to purchase without even leaving their homes. Participants of a study
conducted in Germany, were able to try on spectacles via the web using augmented reality
technology. Such technologies can help retailers to increase sales even if the customers do
not physically visit the retail outlet.
Sales at ‘brick and mortar’ stores, too, can be improved if retailers adopt novel technology.
For example, there are apparel shops in Italy where customers are served by robotic
shopping assistants. These robots are able to advise customers on suitable apparel and
styles. Further, in Germany, Adidas stores are able to create customized sweaters for
customers by using 3D printing which is an example of additive manufacturing technology.
The promise of an exciting shopping experience will draw customers toward the retailer and
this will help to improve the retailer’s sales.

Strategic impact 2: internal operational efficiency

Factors which annoy ‘in store’ customers are Out-Of-Stock (OOS), price discrepancy, and
long queues at the checkout counters. However, implementation of Retail 4.0 technologies
can help to overcome these hurdles.
The amount of sales lost globally every year due to OOS is almost USD 1 trillion (Howland,
2018). Smart shelves can help to overcome both the OOS and price discrepancy
problems. RFID sensors, which are attached to the shelves, are able to detect low stock
levels on shelves. The sensors send messages to employees’ smartphones, informing
them to top up merchandise on specific shelves. This prevents loss of sales due to non-
replenishment.
Similarly, electronic labels on the smart shelves can help to overcome the price discrepancy
problem. Changes in merchandise pricing can be detected immediately on the electrical
labels. As such, retailers do not have to go through the hassle of printing and changing
paper labels. American supermarket chain, Kroger, uses a cloud-based electrical signage
for their smart shelves.
Finally, self-checkout counters can be used to reduce the waiting time for customers to
make payment. Thus operational efficiency can be improved by using Retail 4.0
technologies.

Strategic impact 3: efficient inventory management and cost control

RFID tagging enables retailers to keep track of merchandise once the supplier has sent out
the merchandise. Furthermore, the tagging system can also be used to locate misplaced

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merchandise. Efficient inventory tracking results in accurate stock ordering. Therefore, less
cash is tied up in slow moving inventory. So, less interest needs to be paid to the bank. As
such, Retail 4.0 technologies can help to keep costs down through efficient inventory
management.

Strategic impact 4: sustainable competitive edge for retailers

Data is collected at every step of the Retail Supply chain. Big Data Analytic tools enable
huge amounts of data to be sorted in an extremely short period. The analyzed data gives
the retailers valuable insights regarding the needs of their customers. Products and
services which have a high demand in the market can be easily identified. As a result,
retailers are able to make more informed decisions regarding promotions, pricing and
merchandise ordering. Retailers are able to order additional stock for fast moving
merchandise and reduce the order quantity for slow-moving stock. The ability to react in
real time will give retailers an edge over their competitors who have not adopted Retail 4.0
technologies.

Conclusion
Retail 4.0 is still in its infancy stage in Malaysia. This is mainly due to the slow incorporation
of Industry 4.0 technologies in the country. However, with the launching of the National
Policy on Industry 4.0 by the Malaysian Prime Minister in October 2018, there seems to be a
promise of great progress in the near future. Since several technologies are utilized in Retail
4.0, retailers must hire professionals with the required skills to implement these technologies
Keywords:
in their firms. Besides, existing systems need to be updated to be compatible with new Firm performance,
technologies. Finally, employees must be educated on the types of technology which will be Retail Industry,
used and also the impact of these technologies on firm performance. The modernization of Omnichannel retailing,
the retail industry due to adoption of Retail 4.0 technologies will, hopefully, receive support Industry 4.0
from the young generation. This will help to restore the retail industry’s former glory and technologies,
result in the improvement of the Malaysian economy. Retail 4.0

References
Export.gov (2018), available at: www.export.gov/apex/article2?id=Malaysia-E-Commerce

Howland, D. (2018), Out of Stocks Could be Causing Retailers $1T, available at: www.retaildive.com/
news/out-of-stocks-could-be-costing-retailers-1t/526327/

Population.pyramid.net (2019), “PopulationPyramid”, available at: www.populationpyramid.net/malaysia/

2019

Further reading
Malaysia Retail Industry (2018), “Malaysia Retail Industry Report”, Fourth Quarter.

Corresponding author
Poorni Sakrabani can be contacted at: psbani2804@gmail.com

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