Department stores fight back

How department stores can survive the retail crunch

Industry experts say food stops, a wider variety of products and finding a niche are some ways department stores here can stay relevant

The secret to a successful department store is through the stomachs of shoppers.

Retail experts think that food is the key to survival for department stores in Singapore. But they say that these one-stop-shops must also find a niche and stay nimble enough to evolve with ever-changing shopper preferences.

The advice comes a little too late for John Little, Singapore's oldest department store, which will shut its last outlet here by the end of the year after 174 years in operation.

The brand, which is managed by Robinsons Group, decided to shut "after evaluating the relevancy and sustainability of the John Little brick-and-mortar business", it said in a press statement last week.

In its heyday in the early 2000s, John Little had seven branches, including its flagship store at Specialists' Shopping Centre, which closed in 2007, after more than 20 years.

The department store's exit is symptomatic of the wider malaise affecting the department store brands here and retail in general.


Department store OG

Retail segments mostly experienced drops in the last year. Estimated retail sales in August, excluding cars, fell 6.5 per cent compared with the same period last year. Sales for department stores dropped 3.9 per cent.

According to market research company Euromonitor, there are about 10 department store brands in Singapore, with a concentration of outlets along Orchard Road and a peppering of stores across the heartland.

Each of them is grappling with wider issues such as falling tourism spending, a manpower shortage, a slowing economy, the rise of e- commerce as well as high operational costs.

However, experts say that department stores are likely harder hit for two reasons: flagship fast-fashion stores offering more variety and the spread of malls into the suburbs which has chipped away at department stores anchoring the city malls.

Figures show as much.

Metro Holdings' profits fell 12.6 per cent to $16.2 million in the second quarter this year. It closed two outlets - one at Sengkang and the other at City Square - last year and has only three remaining.

At its peak, Metro had five stores along Orchard Road in malls such as Far East Plaza and Lucky Plaza.

At Isetan, revenue slid 4 per cent to $68.61 million in the second quarter ending June 30 from the same period the previous year.

A spokesman admits that challenges faced here by the Japanese department store include a slowing economy and high rent, as well as shoppers who are "generally more price-conscious nowadays".

It is a similar situation elsewhere. In the United States and United Kingdom, big names such as Macy's, Neiman Marcus, Selfridges and Debenhams are also experiencing a crunch.

In June, The Wall Street Journal reported that luxury store operator Neiman Marcus Group recorded a profit of US$3.8 million (S$5.4 million), much less than the US$19.8 million a year before.

Its chief executive officer, Mrs Karen Katz, was reported saying that the strong US dollar had "chased away foreign tourists".

UK department store Debenhams, according to the Financial Times, reported a 10 per cent fall in annual pre-tax profit last month as shoppers spent less on clothes. The store will shift its focus to beauty, gift and casual dining in an effort to boost sales.

Upmarket UK store Selfridges, which also saw profits drop this year, has pledged to invest £300 million (S$531 million) over five years from 2014 to revamp its online store and give its flagship London store a facelift that will include an expanded accessories department and a new entrance.

The good news is that experts here say that there is still a place for department stores in Singapore.

The bad news? They must evolve to survive.

Mr Steven Goh, executive director of the Orchard Road Business Association, says that the retail landscape is changing very rapidly and that department stores here are unable to catch up.

What makes the situation tougher is the rise of mono-brand, big format fast-fashion stores such as Uniqlo and H&M, or "category killers" as Mr Goh calls them, because of their ability to offer a much wider merchandise range within the same category.

He adds that it is important for department stores to find their niche as they run the risk of being "too predictable".

All of them have a beauty hall on the first floor, for instance, he says.

"It's quite predictable, unlike Nordstrom," says Mr Goh, referring to his favourite US retailer.

"Because it started out selling shoes, the first thing you see when you walk into its store is a huge shoe department. That is its differentiation - it gives you a different experience."

According to The New York Times, Nordstrom sales rose 8.9 per cent in the third quarter to US$3 billion, while profit rose to US$142 million from US$137 million for the same period last year.

Mr Goh also suggests incorporating lifestyle elements, such as offering yoga classes, to connect with millennials.

Mr Desmond Sim, head of research at property consultancy CBRE, warns that with the retail trade under pressure, Singapore could be facing a saturation of department stores. "Generally, I think department stores in Singapore are on the brink of saturation. We are a small country, but we have almost 10 department stores," he says.

As for food, Singapore polytechnic senior retail lecturer Sarah Lim says: "This always attracts customers."

The Straits Times takes stock of how the seven department stores are doing here and how they can improve.


Tangs at Tang Plaza

The home-grown chain was started by the late Tang Choon Keng in River Valley Road in 1932. It moved to its current premises in Orchard Road in 1958 and opened its second branch, a smaller one, at VivoCity in 2006.

The retailer has tried to stay relevant in recent years. It underwent a $45-million revamp in 2012, which included adding more dining options and curating a mix of international and local brands. It is now known for its wide range of Singapore labels such as Beyond The Vines, In Good Company and Aijek.

Last year, it relaunched its website, www.tangs.com, to entice online shoppers with a more comprehensive e-commerce section.

The store's fourth floor is also now a dedicated experimental space used for events and pop-ups, such as the Mancave-themed fair in June, where it sold gadgets, wine, art and furniture targeted at men.

Although official revenue figures are not available, Mr Tang's youngest son Wee Kit, 61, one of the directors of Tang Holdings, was reported by Forbes' to be the 18th richest man in Singapore this year with a net worth of US$1.4 billion (S$2 billion).

When asked how it had been affected by the subdued retail climate and what it was doing to combat this, Tangs declined comment.

What works: The department store's focus on Singaporean brands and local heritage. Mr Steven Goh, executive director of the Orchard Road Business Association, says: "Tangs makes a lot of effort to promote local designers, which is its strong point. Most shoppers who go overseas want to buy brands they can't find at home. Similarly, tourists here look for local designer brands.

"Previously, it wasn't strong in its food and beverage elements, but you can see the increase in its offerings - it now has variety and it is quite carefully curated," he adds.

Almost every floor at the store has a dining option, including popular cafes such as The Providore and Tiong Bahru Bakery.

Mr Samuel Tan, course manager in retail management at Temasek Polytechnic, agrees. "The local flavour is much talked-about by Singaporeans and tourists here."

The fact that the retailer is a local name seems to resonate with some shoppers. A married civil servant, who wants to be known only as Mr Lim, likes the "homely" feel of the store, thanks to the warm lighting and the chain's late founder.

The 33-year-old says: "I heard that the founder is very nice. I don't know him, but I've read stories about him that he was very nice to his staff. That gives me a positive perception of Tangs."

What can be improved: Mr Tan says Tangs should consistently replace its older labels with newer ones. "For example, Korean fashion brand Headline Seoul has been revamped and reintroduced in South Korea and Thailand. Introducing more new and trendy Korean brands here could be more appealing to shoppers."

Mr Goh says that while Tangs offers a "very strong" range of electronics and household items, such products can be bought online easily. It should consider having a specially curated children and family department.

"Few department stores here champion the children and family department, such as maternity and children wear. It would be good if it can bring them together in one space."


Metro

Metro Holdings had a drop of 12.6 per cent in profits to $16.2 million in the second quarter this year. It shut its Sengkang store in August and its City Square one in December, both last year.

In a recent Straits Times report, Metro said its retail division will continue to face challenges such as the competitive trading environment, a slower domestic economy and higher operating costs.

Founded in 1953 by the late Ong Tjoe Kim, Metro Holdings now has three department stores at Paragon, The Centrepoint and Causeway Point.

While Metro did not elaborate on its challenges when contacted, it says it had evolved over the years.

Its Paragon outlet, for instance, unveiled a newly renovated Beauty Gallery earlier this year with an expanded offering of cosmetics and fragrances including brands such as YSL Beaute and and Guerlain.

What works: Profits may have fallen, but experts say Metro is still a brand that has a loyal following.

Shoppers give the thumbs up to the attractive benefits of its members programme that include a 10 per cent discount all year round and members-only invitations to private sales.

Housewife Genny Phua, 55, who shops at Metro a few times a month, says her Metro Elite Card allows her to get free parking at Metro Paragon and Metro Centrepoint with any purchase.

Administration clerk Belinda Wang, 40, a Metro Card member, says that in-store promotions such as discounts on special items when shoppers spend a certain amount, are also a plus.

For example, she spent more than $80 and got to buy a vacuum flask, originally priced at $85, for $29.

Its location in landmark malls, such as Paragon, are also a positive point. Mr Desmond Sim, head of research at real-estate company CBRE, says: "Metro's strength is that it is located at very good malls. So the footfall these places attract means it gets more shoppers as well."

What can be improved: Though it has secured locations in iconic shopping complexes, Dr Lynda Wee, an adjunct associate professor at Nanyang Business School, says Metro needs to do more.

It should, she says, tweak the offerings at each outlet to match each mall's customer profile.

"Metro Paragon sits with many luxury brands such as Gucci, so the mall crowd may not shop at a local department store with the usual run-of-the-mill brands."

She says the outlet could be turned into a Metro Grand, a luxury concept the department store used to have at its Lucky Plaza location in the 1980s.

That concept saw the introduction of designer brands such as Lanvin, Cartier, Charles Jourdan and Givenchy.

"Metro Grand would match the well-heeled crowd at Paragon."


OG

Department store OG is known for targeting the trendy auntie demographic, a focus that seems to have worked. Founded by China-born Tay Tee Peng, it opened its first big department store here in People's Park in the 1970s. It now has two other stores - at Albert Complex and Orchard Point.

No official revenue figures are available, but the Tay family, who still owns the chain, joined Singapore's shortlist of billionaires in 2014.

Retail experts warn that in OG's case, what was a boon could become a bane. As with many retailers targeting a mature market, they say, OG will soon face a dwindling base of loyal customers. And if it fails to secure new shoppers, it will struggle to survive, especially in the face of the rising popularity of online shopping.

What works: OG keeps its clothing prices relatively low, which appeals to its core crowd of customers of mainly housewives aged 35 and above.

It manages to keep prices low partly because it also makes its own clothes. About a third of its womenswear house brands are produced in its 70,000 sq ft factory in Jalan Bukit Merah. This helps to cut out the middle-man and lets the store control prices better.

Mr Desmond Sim, head of research at property consultancy CBRE, says that another plus is the chain's ability to adapt.

The store's Albert Complex outlet, for example, gets many Malaysian shoppers as tour buses drop them off at the places of worship in the nearby Waterloo Street.

"OG capitalises on this by providing lifestyle products such as kitchenware and bedlinen that are possibly more affordable here compared with Johor," he says, adding that the outlet has an entire floor dedicated to kitchen products.

What can be improved: Dr Seshan Ramaswami, associate professor of marketing education at Singapore Management University, says OG should evaluate its relevance to its future target clientele - current younger shoppers.

"The one-stop-shop format of department stores is not very relevant in the Internet age."

The convenience of online shopping, he says, means that benefits of one-stop-shopping and a central location for stores are less attractive.

But appealing to both ends of the age spectrum will not be easy.

He suggests having a family loyalty card that can be used even by children who move out of the home after marriage. This would mean that the card continues to accumulate points from the entire family's purchases. "This could be a way of cultivating loyalty in the next generation."


BHG

BHG began as Seiyu Wing On Department Store at Bugis Junction, established here in 1995 as a joint venture between Japanese company Seiyu and Hong Kong company Wing On.

In 1998, both companies ended the tie-up and Seiyu took over all the then three stores.

In 2005, Chinese retail giant Beijing Hualian Group bought over all Seiyu's stores for $4 million and renamed them BHG. At the time, the company had three department stores in Singapore in Junction 8, Lot 1 and Bugis Junction.

BHG now has six outlets across the island. It could not be reached for comment for this story.

What works: One of the strong points of BHG is its family-friendly environment, with its numerous offerings for young children and show screenings to keep them entertained.

When The Straits Times visited BHG Bugis earlier this week, young children were seen running around the spacious toy section while their parents shopped for clothes.

Speaking to The Straits Times from BHG's Bugis outlet, administration clerk Anna Tang, 41, says an advantage of shopping at a department store is that she can take her children along. "They are looking at toys now while I'm choosing clothes for them," she says of her three children aged under 10.

It is also easier for her to shop for her children at department stores compared with single-brand shops. "There's more variety here. My kids like different characters - one likes Captain America while another prefers the DC heroes. So it's not easy to find clothes for all of them at single-brand stores."

Housewife Amirah Syafiqah, 36, also shops at BHG because the children's clothes are affordable. Children's T-shirts can cost less than $10 when they are on sale. "There is also a BHG near my house in Chua Chu Kang. So it is easy to go there."

What can be improved: Singapore Retailers Association (SRA) president R. Dhinakaran says stores such as BHG need to integrate its brick- and-mortar presence with an online one "to survive and stay relevant".

BHG has no online store.

He says stores should let shoppers who buy online exchange items if the colours or sizes do not fit expectations. "Usually in Singapore, stores don't allow an exchange once an item is bought. But buying online means shoppers cannot touch the products. Having a flexible exchange policy for items such as clothes generates goodwill and is more likely to get shoppers to return and buy again."

Associate Professor Prem Shamdasani, from the National University of Singapore Business School's marketing department, agrees that stores need to go online.

"Otherwise, department stores will just end up being showrooms for brands while most of the transactions happen online due to better value and convenience."


Robinsons

The 158-year-old brand under the Dubai-based Al-Futtaim Group entered the market here in 1858 with a store at Raffles Place.

In November 2013, its flagship at The Heeren opened. It now also has two other stores at Jem in Jurong and Raffles City in the Central Business District.

When contacted, Mr Christophe Cann, the Al-Futtaim Group's group chief executive officer for Asia, admitted that the group faces challenges such as high rental and the ever-growing cost of operations. The group recently announced plans to close some Marks & Spencer outlets as well as several of its Royal Sporting House outlets.

"With ever-growing competition locally and in the region, consumers' shopping preferences have shifted as they have more choices with developments in heartland malls offering similar merchandising mix as town stores," he says, adding that Robinsons has evolved with shopper preferences to stay afloat.

For instance, feedback found that shoppers wanted to shop in a space with brands they recognised. The store then started a "shop-in-shop" concept, he says, where brands such as Ted Baker and John Lewis design their allotted floor space according to each brand's image.

The retailer is also trying to reel shoppers in through events such as its Lunch Time Frenzy promotion. Introduced this year, it had in-store deals during the lunch hour to attract the working crowd to shop during their lunch break.

It also has its finger on the pulse. The store held an exclusive exhibition to showcase the costumes from Netflix series, The Crown - on display until Sunday - after its popularity soared here.

"This form of 'retail entertainment' is something we continue to strive to attain for our customers," says Mr Cann, adding that it will launch a new three-in-one dining concept - L'Entrecote The Steak & Fries Bistro, Sabio Tapas Bar and &Made Burger Bistro - at its flagship at The Heeren next March.

What works: Interactive designer Cheryl Lee, 26, likes shopping at Robinsons for the store's ambience. "A lot of the windows allow natural light to come through, which makes it pleasant to shop there. It's also spacious, so it makes browsing less stressful."

Indonesian tourist Bobby Hartoyo, 25, who works in the wood industry and visits Singapore twice a year, likes that the department store always has new brands every time he visits. However, he feels that the store should consider widening the price range of its offerings as he finds its price "quite high".

What can be improved: Every floor needs a cafe, says Mr Steven Goh, executive director of the Orchard Road Business Association.

"Robinsons' weakness is that it does not have enough food offerings," he says, adding that this fails to keep shoppers in the mall. "Every floor needs a cafe to capture people there (so that they will) stay longer."

He points out that malls here typically allot about 40 per cent of their space to food and beverage tenants.

Department stores, he says, should rethink how they use their space and do something similar.

Polytechnic student Elly Wong, 20, agrees that having more food outlets will entice shoppers her age to visit the department store as "people like to Instagram food photos".

She also suggests organising activities such as make-up workshops.

Meanwhile, Singapore Polytechnic senior retail lecturer Sarah Lim thinks that Robinsons should be careful not to clutter its store floor with too much stock and to work on the merchandise display with its vendors.

The shoe section at the Raffles City branch, for instance, was previously too cluttered, she points out, with "all the shoes in one corner in an open display concept with no clear demarcation of brands". This was before it was recently revamped.

Ms Lim adds: "Department stores must help individual vendors with their display as this helps to create the overall feel and ambience of the space."


Isetan

The slowing economy and high retail rents have hit the 130-year- old department store.

It was reported in The Business Times in August this year that for the three months that ended on June 30, revenue for Isetan Singapore fell by 4 per cent to $68.61 million compared with the previous year.

To survive in the soft retail market, an Isetan Singapore spokesman says it is tweaking its business model to make operations more cost-efficient.

It has, for instance, installed energy-saving LED lights in its Isetan outlets and offices here.

The chain has also cut its operating hours at its Scotts Road and Jurong East stores since April last year.

In a bid to draw shoppers back, it has been organising fairs at its supermarket such as the Hokkaido and Kyushu fairs, which feature products from all over Japan.

Such fairs change every two weeks or so.

It also started holding workshops for shoppers for a fee. These include its upcoming Personalise Your Bauble Workshop on Nov 26, where participants can create their own Christmas baubles.

What works: Singapore Polytechnic senior retail lecturer Sarah Lim says "for Isetan - its supermarket is its strength", adding that it has helped the department store hone a positive brand image.

"People know it is from Japan, they associate the supermarket with value-for-money quality products and love the tasting counters which always have new food items for shoppers to try," she says.

"And at Isetan at Shaw, it brings in womenswear brands that are not commonly found at other department stores."

What can be improved: Ms Julie Lim, 53, a supply chain manager in the oil and gas industry, finds that Isetan "is a bit slow" in introducing new brands.

Although she declined to pinpoint specific brands, she said that its handbag department has been selling the same brands for years.

To attract more shoppers, special needs educator Vanessa Yeo, 26, suggests having more sales.

Bringing in more fashionable and trendy labels such as Australian womenswear brand Forever New would also cater to the millennials, she says.

She adds: "I think a lot of the designs sold at department stores are more suitable for people older than me, so that's why I think a lot of young people don't shop at department stores."

Mr Steven Goh, executive director of the Orchard Road Business Association, notes that it is time for Isetan to refresh its layout.

Referring to the Shaw outlet, he says: "From levels one to four, the layout has not changed for many years. If it always looks the same, it will not wow the customer."

He also suggests using its promotion gallery and event hall, on levels three and four respectively, for pop-up installations instead of always offering discounted items.


Takashimaya

A study by the Singapore Management University's Institute of Service Excellence, released in July this year, found that it was among the top three department stores in terms of customer satisfaction in Singapore, in categories such as the availability of products and service levels.

Takashimaya Singapore, when asked to elaborate on the challenges it faces, was unable to respond by press time.

What works: Takashimaya seems to be popular for its food hall, well-organised store layout and wide variety of product offerings.

Mr Samuel Tan, course manager in retail management at Temasek Polytechnic, puts this down to the Japanese products offered. "These items allow shoppers to have a slice of life from Japan without travelling and the store's wide selection of products appeals to everybody, from mass to luxury shoppers."

Housewife Helen Choong, who is in her late 50s, says: "I like that there are many brands under one roof, so I can compare products and prices across the brands.

"And I like the food hall because you can walk through it and not smell like food. The food selection is wide - there are a lot of Japanese chocolates, cookies, cakes and buns," she says, adding that she visits the store once a month. "I also like that there is a Cold Storage there so I can do my grocery shopping too."

Bank manager Ronald Low, 43, likes that the store's shopping vouchers have no expiry date and can be used on sale items. The married father of two says: "I like the flexibility on the store's part, although it would be good if the store can give shoppers complimentary carpark coupons - it is expensive here."

Parking at the mall's carpark on Saturday evening, from 5.01pm, costs $3.64 for the first hour and $2.14 for every subsequent half hour. From 7.01pm, it has a per entry charge of $4.28.

What can be improved: More can be done to promote Takashimaya as a destination in Orchard Road by playing up its Japanese heritage, says Mr Tan. It could introduce Japanese culture and products by featuring Japanese artists doing demonstrations or dedicating an area for seasonal food products from different provinces in Japan.

The store's layout can be enhanced by dedicating a space for all things Japan. Mr Tan says: "It would be a space customers can come back to to learn something different each time, such as kimono-wearing."

He also suggests that a sense of adventure be built into the shopping experience. "Videos of shrines and festive processions can be featured in the store - the visuals will help shoppers to know Japan better," he says. "These are experiences that only a brick-and-mortar retailer can create, as it has the capabilities and venue to host them."

A version of this article appeared in the print edition of The Straits Times on November 17, 2016, with the headline 'Staying alive'. Print Edition | Subscribe