r has now exceeded pre-Covid 19 levels, and Chan expects the overall increase in consumer traffic to be about 15 per cent above pre-pandemic levels by the end of 2022. Meanwhile, Malaysian Retailers Association (MRA) president Andrew Lim told Free Malaysia Today that the increase in sales can be attributed to the trend of ‘revenge shopping” and the feel-good factor surrounding the country’s recent general election, which has brought about more political stability. People are more confident about the country’s direction, he said. Chan noted that 2022 will be remembered as the year of recovery for the retail sector in Malaysia, with the main sales drivers being seasonal gifts such as beauty and skincare products, perfumes, confectionery and toys. Spotlight on Southeast Asia Within the next decade, ASEAN (Association of Southeast Asian Nations) is projected to become the fourth largest economy in the world, powered by an expected population growth of more than 700 million by 2030.  The World Economic Forum estimates that domestic consumption, which fuels roughly 60 per cent of ASEAN’s GDP today, will double to US$4 trillion by 2030.  In a recent report on the state of grocery retail in Southeast Asia in 2022, McKinsey & Company provided a deep dive into how the changing demographics and digital penetration in this marketplace are impacting retail.  One of the main takeaways from the report was that customers are becoming increasingly discerning about their purchases. They are tightening their belts, while working to improve their physical wellness. Coupled with a willingness to purchase food online, more sophisticated purchasing patterns are emerging. Changing consumer behaviour Traditional grocery stores in Southeast Asia are facing fierce competition from companies like Grab, which have their own ecosystems and value propositions that could erode the competitive advantage of physical retailers.  A great example of this is Grab’s acquisition of Jaya Grocer back in January of this year. Jaya Grocer is a leading mass-premium supermarket chain in Malaysia. The partnership is designed to accelerate the GrabMart component of the Grab superapp in Malaysia. But while many retailers are using dark stores to support the rise of quick commerce initiatives, it should be noted that almost two-thirds of grocery transactions are still made in traditional grocery stores.  Indeed, the rise of small-format stores has consistently fueled growth in local markets, such as Indonesia and Vietnam. For example, CJ Express in Thailand, 99 Speedmart in Malaysia and Bach Hoa Xanh in Vietnam are relative newcomers that have built significant momentum. Direct-to-consumer strategies, both online and offline, have also emerged as a clear trend. For example, TH Group and Vinamilk are experimenting with physical retail in Vietnam. Early signs of polarisation Citizens of tier-one cities in Southeast Asia are expected to account for the majority of grocery consumption, but there are early signs of polarisation in the market, and spending outside of major cities is expected to make up close to $1.7 trillion from 2020 to 2030.  For example, premium retailers such as Jaya Grocer and Village Grocer in Malaysia, Annam Group in Vietnam and Farmers Market and Ranch Market have enjoyed increased demand, while Lan Chi Mart and Bách Hóa Xanh in Vietnam have built their market share outside of main city centres and helped to redistribute the market’s revenue pool.  The digital revolution Several Southeast Asian markets are also witnessing the rise of digital B2B platforms, which are helping shore up the competitiveness of mom-and-pop stores, particularly in countries like Indonesia. Super apps, such as Gojek and Grab, e-commerce marketplaces, such as Shopee, Tokopedia’s Tokomart, and Blibli’s Bliblimart, and even food delivery apps like Foodpanda have waded into this segment with various offerings.  These services include pick and fulfil from stores, whether third-party locations or a retailer’s own stores, fulfil from the retailer’s warehouse, click and collect, and marketplace models.