by Marcus Turner-Jones
Singapore’s retail industry is suffering something of a tough time now, along with the country’s property market. Compared to the country’s booming financial and technology industries, retail is suffering from many of the same factors affecting high streets across the world; mainly the rise of ecommerce and online shopping.
There has been some positive news for the sector in recent months, with total retail sales rising by 0.4% in December 2016 compared to a year earlier. Yet on a month-by-month and seasonally adjusted basis total retail sales fell 1.9%. Problems for the property market and low rental rates could provide a boost to the industry though.
The Singapore property sector has also been experiencing problems recently, as house prices fell by 3% in 2016 and for a 13th straight quarter. It’s not just residential property that has been slipping for so long either, commercial property prices have fallen along with rental rates dropping by 1.5%. This is not to mention the potential inflation poised for a comeback indicated by the rising price of gold.
In theory, this should be presenting many opportunities for retail companies to cut their costs and turn a profit. However, the opposite appears to be happening with vacancies in malls in Singapore at an all-time high since 2006. This seems to suggest that retail problems are worse than expected, and that lower rental rates are so far not boosting the sector.
Singapore’s government recently unveiled an expansionary budget for the coming year, with a focus on offshore and construction industries. The Singapore $75.07 billion budget addressed many areas but failed to include any measures for helping the retail and property sectors.
Finance Minister Heng Swee Keat said in Parliament: “Given the uneven performance across different sectors, we need to go beyond general stimulus, and target the specific issues faced by different sectors.” He also noted that industries such as electronics, infocomm and health and social services had performed relatively well while others struggled.
This lack of new policies to assist the dwindling retail industry and property sector is unlikely to boost either of them in the short term. Unless some new measures are introduced in the future to assist Singapore retail then it is likely to continue struggling.
If reduced rental rates can’t save Singapore’s retail sector, then businesses will have to look for new and innovate ways to profit. The ongoing challenges for retail businesses around the world, not just in Singapore, could lead to fresh innovation to overcome them.
Retailers will be forced to offer customers unique and interesting shopping experiences, introduce new concepts and more to fight off the threat of online sales. Using technology, especially smartphone apps, could be a great way to reach out to consumers.
The Move Online
It is the growth of online sales and ecommerce that has really hit Singapore’s retail sector hard. Its market value is predicted to triple by 2020 and take a higher cut of the Singaporean grocery market. This will provide a good boost for the Singapore dollar and the country’s GDP, we have seen a greater interest in the currency due to such predicted growth.
As shopper habits continue to change, it looks like innovation and retail businesses changing their processes could provide a boost to the sector, rather than the low rental rates the property sector is providing.