This article first appeared in The Edge Malaysia Weekly on July 6, 2020 - July 12, 2020

THE Covid-19 pandemic has been crippling for many retail groups, but InNature Bhd — the holding company of The Body Shop — seems to have found a silver lining.

Sales through its e-commerce channel have taken off, helping cushion the blow of lower revenue from its 86 stores nationwide.

According to InNature managing director Datin Mina Cheah-Foong, the number of daily e-commerce transactions in Malaysia averaged “just under 600” during the Movement Control Order (MCO) ­period of March 18 to April 30, when its stores were closed.

This is a jump of about 12 times compared with just 50 daily in the period before the MCO, from Jan 1 to March 17.

InNature saw a similar increase in online sales value, she says, declining to provide exact figures as the Main Market-listed group has yet to release its second-quarter financial results.

In Malaysia, it began reopening stores in stages from May 4. All The Body Shop stores were open as at two weeks ago.

“I’m really happy to note that, even with restrictions lifted and most businesses allowed to open now, our e-commerce sales [have] stayed at a new high. In Malaysia,  sales value for May and June are now more than five times higher than that a year ago. The increase was exponential, rather than gradual, because of Covid-19,” Cheah-Foong tells The Edge.

She is quick to add, however, that the growth in e-commerce sales did not make up for the loss in business at the retail stores.

“Of course, online [sales] don’t make up for the loss from not opening all our stores, but they really helped to cushion it,” she says.

Like most retailers, InNature’s 2Q2020 revenue is likely to be lower than a year ago, she says. However, the group is expected to remain profitable, not just for the quarter but the full year.

In 1Q2020, the group reported a 72.2% year-on-year decline in net profit to RM2.75 million, even as revenue fell 21.5% to RM37.39 million.

“The MCO really drove a lot of people onto our e-commerce channel and that business immediately shot up. We were ready for [the online traffic] because we have always believed in an omnichannel approach for Malaysia, [that is], trying to get people to shop both online and offline,” Cheah-Foong says.

E-commerce sales had been slow in the past because Malaysians generally prefer to shop in malls, she adds.

“We have been trying for years to [push] omnichannel because we know that a customer who shops with us online and offline actually spends more. They shop more frequently, their total spend is more and their basket size is higher than someone who only shops [through] one channel. It was the MCO that really propelled people to go digital, more so than any of our own strategies.”

The number of new e-commerce customers grew by more than 1,600% during the MCO, according to Cheah-Foong.

Of the new customers, those aged 25 to 34 spent the most, followed by those aged 35 to 44.

However, the biggest growth in new customers came from those aged 55 and above, showing that even older customers turned to digital channels during the MCO.

InNature has 121 The Body Shop stores in total, including 34 in Vietnam and one in Cambodia.

Interestingly, The Body Shop was the first major cosmetics company to tap the e-commerce trend. It launched a dedicated website in Malaysia in 2012, and in Vietnam a year later.

In 2019, the websites contributed 1.7% of InNature’s total sales in Malaysia and 8.4% in Vietnam.

Pivot to new normal

Cheah-Foong says looking at the May and June numbers, it is unlikely that there will be a V-shaped recovery in consumer spending.

“It’s more likely going to be U-shaped, because we see less traffic in the malls, and hence, less traffic into our stores. For as long as people are staying at home and working from home, mall traffic will remain subdued. Therefore, traditional retail will also follow that subdued trend,” she says, adding that retailers will just have to pivot to the new normal.

“A vaccine [for Covid-19] is about a year off, at least. So, you cannot just hope for [things to go back to normal]; you’ve got to try new things. We have accelerated our investments in e-commerce. We were not going to launch e-commerce in Cambodia until much later but [once we saw the series of lockdowns in the region], we launched e-commerce there on April 17. There are not many transactions, maybe two or three a day but still, it is additional income.”

The group also launched an e-magazine so that customers are aware of new launches and products. Apart from that, it initiated a staff referral programme — basically, getting staff to promote products among friends and families. “During the MCO, about 15% of our e-commerce transactions were from staff referrals,” Cheah-Foong says.

Given that store traffic is down, InNature will not be launching any new The Body Shop stores in Malaysia this year. However, it will open four stores in Vietnam and one in Cambodia in the second half.

It closed three stores in Malaysia this year, two of which were in airports. Asked whether there will be more store closures at home, Cheah-Foong says it would depend on whether the current shopping pattern prevails.

“In the old days, the most crowded malls were the most popular, with the highest rent, of course. But now, because of social distancing, people tend to avoid the traditionally crowded malls. So, we need to see whether this actually becomes the trend. We don’t want to be hasty,” she says.

The group also needs to consider its store investments and staff when making such decisions, she says. “We’re being vigilant with our stores, to ensure that they all remain profitable. Any one that doesn’t remain profitable, as per [the usual], we will try and get it profitable, failing which we will consider closing it.”

Meanwhile, its fledgling direct selling business under Natura — a Brazilian brand for which it is the distributor — has also picked up.

“During the MCO, we recruited quite a lot of beauty consultants, and we expect to continue to do so. People are increasingly looking for alternative sources of income and we see social selling (via social networks over social media platforms) to be the thing,” Cheah-Foong says.

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