THE DATA suggests that Singapore’s reputation as a shopping paradise is taking a beating.
Retail sales grew by a lacklustre 2.0% in January after an eminently forgettable 2016.
Last year, excluding motor vehicle sales, retail sales slumped by 2.6%, extending declines of 0.5% in 2014 and 1.2% in 2015.
Having said that, it should be noted that total retail sales value in January was estimated at S$4.1 billion, which is still pretty impressive. If retail sales can be maintained at this level each month this year, the full-year retail sales value will be around the S$50 billion mark. That would represent a sizeable chunk of Singapore’s gross domestic product.
However, with Singapore’s economy always geared for growth by its elected custodians, the absence of any sustainable expansion in retail sales will be a worry. Not least because, to date, there are more than 150 malls or shopping centres around the island, with more under construction. This works out to about one mall or shopping centre every 4.8sqkm.
If retail sales growth continues to be pressured, we could see closures of some malls or major stores within malls, just like what is happening in the US.
Faced with online competition, there are expectations that more malls will close in the US in 2017 and more chain stores will close underperforming locations.
According to reports out of the US, nearly every major department store in the country, including Macy’s, Walmart, and Sears have collectively closed hundreds of stores over the last couple of years. The departure of such big-name stores has sounded the death knell for malls around the country.
Obstacles To Retail
In Singapore, factors like high rents, and difficulties in finding workers, which are exacerbated by government quotas and levies on foreign workers, is making life tough for retailers. Meanwhile, online shopping has also been hurting malls in Singapore, and this is evident in the retail sales figures for last year.
Let’s look at some items that can be bought online or at a physical outlet.
According to data from the Department of Statistics, retail sales of wearing apparel and footwear contracted year on year in every month last year except January.
Sales of watches and jewellery contracted in 10 of the 12 months in 2016.
Sales of computers and telecom equipment contracted every month last year.
It is likely that a lot of sales were diverted online.
Read the report HERE.
Innovating Retail
The pressure felt by retailers in brick-and-mortar outlets has been huge, and is unlikely to let up. In fact, things could get even hotter as new technological developments pervade the retail space. Retailers will have to keep up if they are to survive. Two areas of change in the US centre on points-of-sale (POS) systems and the internet of things (IoT).
Fixed POS could soon be replaced by mobile POS that allows a store to take payments anywhere in the store. So, if you thought self-checkout counters in supermarkets were cool, they will be outdated soon.
Meanwhile, IoT will see innovations like smart price tags that can change prices of goods in real time, and packaging that monitors how old fresh goods are and alerts you when the used-by date is close. This is happening now and is only the cusp of what is to come.
We can’t say that such developments will take years to reach Singapore. If there is one thing we have learnt about technological innovation, it is that changes happen very quickly. Amid such developments, the question remains: how can Singapore’s retail sales show sustainable growth?
Know They Shopper!
At the retailers’ level, one of the key things for them is to know more about the shopper, her/his habits and the overall shopping experience. Technology is helping out with Big Data analytics being used to learn about customers’ buying habits and experiences. It is still in the relatively early stages in Singapore, but the use of Big Data will likely become as ubiquitous as smartphones.
On a different note, there are some structural issues that can be addressed to alleviate cost pressures faced by retailers.
High rents are the norm in Singapore but, as usual, it is a short-sighted view taken by landlords who are more focused on short-term profitability than long-term sustainability. Landlords and retailers at malls should work more closely together to grow the latters’ business because in the end everyone benefits if a retailer is successful — not only the retailers, but also the landlords and, more importantly, the consumers. This attitude of landlords that if a retailer can’t pay the rent, they can always find another tenant who will pay has reached it’s use-by date.
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Meanwhile, to help retail sales grow, why not put more money into the pockets of Singapore residents? Singapore’s high cost of living means that most people have to be extremely careful about spending their money because of potential, unexpected payments for hospital bills or other emergencies that may lie ahead.
Encourage Spending
The high cost of living means that many local residents are turning to the Internet for the best deals so that they can stretch their money further. This becomes a habit that is hard to break. Indeed, Singaporeans’ discretionary spending is not really discretionary anymore—it is underpinned by constantly seeking the cheapest bargains.
This mentality has pervaded Singapore society, so much so that it is all that Millennials know about spending.
If people don’t know how to enjoy spending after working hard for their money, then there is not point in working.
If people have more disposable income, they could be freer to spend in malls. This will in turn get the economy ticking over. So, the question is not how can Singapore’s retail sales show sustainable growth. It should instead be how can we put more money into the hands of Singapore residents.
Thus It Was Unboxed by One-Five-Four Analytics presents alternative angles to current events. Reach us at 154analytics@gmail.com
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