Asia Pacific retailers are navigating two horizons: a difficult near term, marked by slowing growth and weaker demand, and a longer-term opportunity shaped by digital and AI. Both require investment. The challenge is clear: funding the business that creates value now while investing in the model that can create value tomorrow. BCG’s findings draw on an in-depth survey of 50 senior retail leaders across Asia Pacific, alongside broader perspectives gathered through more than 100 in-person conversations with retail executives across the region. Together, they offer a firsthand view of what matters now – and what comes next.
Against that backdrop, one message that comes through strongly: the pull of the core. Two in three respondents point to like-for-like store performance as a key source of growth over the next 12 months. That is also where much of the focus and funding are aimed. The logic makes sense: boosting the performance of existing stores and spend among existing customers can strengthen profitability.
But growth from the core has its limits, with the same stores and customers only able to take the business so far. Leaders see a different model for seizing tomorrow’s opportunities, with AI looming large. More than two in three retail leaders expect AI to improve EBITDA or view it as a strategic imperative over the next three years. Stronger core economics can help fund that future model. Yet almost nine in ten retailers currently invest less than 1% of revenue in AI – or don’t track their spending. Ambition, in other words, is running ahead of investment.
And investment is only part of the challenge. Realizing these ambitions will require retailers to change how they work and, crucially, how quickly they can act. The survey suggests that the barriers are more organizational than technological. When asked what would most accelerate execution, leaders put faster decision-making and stronger cross-functional collaboration ahead of better technology platforms.
The task now is to strengthen the business of today without short-changing the model of tomorrow – and to build the capabilities and flexibility to adapt and deliver.
A Tougher Environment Is Pushing Retailers Back to the Core
Asia Pacific retailers are contending with a tougher growth environment. Slowing growth and weak consumer demand is by far the most widely cited external pressure, selected by 76% of respondents. Yet even in this environment, leaders still see pockets of growth closer to the core. (See Exhibit 1.)
Like-for-like store growth is the leading source of near-term growth, cited by two in three retailers. Deeper spending from customers comes next, with just over half of respondents putting it among their top five sources of growth over the next 12 months. Newer growth engines, including M&A and social commerce, rank further down the list.
The core, however, needs to do more than grow: it also needs to be more profitable. More than half of leaders rank cost optimization and operational efficiency among their top three strategic priorities for the next 12 months, pointing to a broader push to strengthen the economics of the existing business and create more capacity to fund what comes next.
