PM Lee: "Retail stores will not disappear."

The topic of "Smart Nation" has been all the buzz lately, with the formation of the Smart Nation and Digital Government Group and GovTech, as well as initiatives such as Wireless@SG and plans for a fully cashless transport system by 2020. But what exactly is a "Smart Nation"?

Most recently in his National Day Rally speech, Prime Minister Lee Hsien Loong defined the term as Singapore taking full advantage of IT, and using it to "comprehensively" create new jobs and business opportunities. This is in a bid to make Singapore's economy more productive and citizens' lives more convenient.

He cited being a Smart Nation as one of the long term objectives that is crucial to the success and well-being of Singapore. While Singaporeans have a natural advantage of being highly connected and digitally literate, Prime Minister Lee highlighted the importance of simplifying and integrating the electronic payments systems in Singapore, which is one area that the country is still lagging behind compared to China.

(Read also: Why Singapore is deemed as the “failure” market for Decathlon)

China has surpassed most countries in Asia Pacific with the implementation of frictionless payments through WeChat Pay and AliPay. According to brand consultancy Prophet's first China Brand Relevance Index, AliPay and WeChat are the top two most relevant brands in the Chinese market, with the former owning 70% of China's mobile payment market in 2015.

To offer a better purchasing experience, AliPay is expanding into other markets such as Malaysia. Public Bank, for example, recently partnered with Alibaba Group's affiliate company Ant Financial Services Group to offer Alipay mobile wallet services in Malaysia. Genting also collaborated with CIMB Bank to introduce Alipay at Resorts World Genting, targeting primarily at Chinese visitors.

Meanwhile, WeChat, which has 700 million monthly active users, also became an integral part of consumers' lives by addressing a variety of daily needs such as digital payments, e-commerce and B2C customer service.

And while e-payments are not rare in Singapore, there is no one single consolidated payment system yet. As a result, six in 10 transactions locally are cash and cheques, said Prime Minister Lee. To solve this problem, the Monetary Authority of Singapore worked with banks to launch a new service known as PayNow, which allows consumers to pay and receive money using their mobile banking app, regardless of which banks they use.

Impact on retail as we know it

Being a Smart Nation not only benefits the consumers but also retailers. According to Prime Minister Lee, "traditional retail is being transformed by technology". He cited marketplaces such as Redmart, Honest Bee and Amazon Prime gaining popularity among consumers, as well as online retailers setting up brick-and-mortar stores.

Prime Minister Lee said:

This means retail stores will not disappear. But traditional stores and businesses must adapt and reinvent themselves.

He added there is a need to use technology to offer consumers more efficient and convenient services. Supermarkets now have self-service counters, and the unmanned, cashless Cheers store at Nanyang Polytechnic enables customers to do self-checkouts while a back-end system tracks the inventory and automatically restocks. The implementation of this new technology allows Cheers to save on manpower and costs, while offering convenience to customers.

However, as the Singapore government continues to push the country towards becoming a Smart Nation, retailers in Singapore might still be a little behind in adopting new technology.

During a recent retail conference hosted by Marketing, Lucy McCabe, president, OgilvyRED Asia Pacific, said that while Singapore is one of the most technologically-enabled societies and its government supports innovation, Singapore is missing an opportunity to create memorable customer experiences by not integrating technology into stores, even as the retail capital of the world.

"There are lots of simple ways that we could be making the most of technology for in-store experiences," McCabe said.

Michael Tan, CEO at Singapore Productivity Centre, stated return on investment and the "daunting" process of transforming a brick-and-mortar business to be the main reasons that are holding retailers back from investing in new technology. Companies with many brick-and-mortar stores might not know how to go about creating an omni-channel experience, he said.

"The assumption companies have at the moment is that when they have an e-commerce store, they expect sales to come in but that rarely happens even though companies have spent a lot of money on building their online store," Tan added.

However, he believes that technology provides retailers with a level playing field because a blog shop can emerge as a key player and a brick-and-mortar store can provide an omni-channel experience. "Technology is the enabler," he said.