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High-end retailers face tough battle for shoppers

With tourist spending falling and more shoppers buying luxury goods overseas, high-end retailers are turning to value-added services to retain customers

They walk into gleaming designer boutiques, browse the racks and pick out items they have their eye on. They try on the clothes, the leather bags and the shoes, taking note of their sizes or the styles they like. And then they leave without buying anything.

But these customers get exactly what they are shopping for: the information needed to purchase that coveted designer item overseas or online at a cheaper price.

"My sister is going to Hong Kong so she can get a Givenchy bag for me," says secretary Shelin Tan, 40, who spent half an hour at the Givenchy store in Paragon shopping mall one Saturday in October last year looking at different bags.

"I dropped by the store to check out which designs I liked and to note the prices."

Food, travel and experiences are high on the priorities of many Singaporeans. They are investing in experiences that last and brands which are consistent and timeless.

MR STEVEN LAM, 40, managing director of Hugo Boss South East Asia

Tourist spending is down. Domestic spending has also dropped. Overall rental and general costs have also increased and it is also not easy to find staff.

MR DOUGLAS BENJAMIN, 51, chief operations officer at FJ Benjamin

There is at least one salesperson in these stores who knows me and my style well and will keep in touch with me when new collections are released. They send me pictures via WhatsApp of clothes they think will suit me.

MS OLGA ISERLIS, 52, who is a VIP client of brands such as Louis Vuitton, Chanel, On Pedder and Prada, on the high level of service offered by these stores

Consultant Jonathan Tieh, 28, visited the flagship Gucci store at Paragon around the same time last year with a similar purpose.

He says: "I went to check the price and my size for a jacket because my parents are going to France and it is cheaper to get the item there."

Likewise, Ms Andrea Phua, 20, pops by luxury brand stores at The Shoppes at Marina Bay Sands to "find out how much a particular item costs just to get a gauge of the price range", before asking her aunt, who travels for business every month, to buy it for her overseas.

The marketing executive at a public relations and communications agency has at least five bags from high-end brands such as Chanel, Gucci and Balenciaga, all of which were bought overseas at about 20 per cent less than what she would have paid here.

Such are the customers who are making tough times tougher for luxury retailers here.

Adding to the retailers' woes: the strong Singapore dollar and a drop in tourist spending.

Mr Desmond Sim, head of CBRE Research, Singapore and South East Asia, says: "The strength of the Singapore dollar over the past year has driven shoppers to purchase online or to go physically to the source of the products.

"Chinese tourists, for example, are travelling to Milan and Paris to purchase luxury products, bypassing Singapore. "

According to statistics on international visitor arrivals from the Singapore Tourism Board, 13.8 million visitors arrived in Singapore from January to November last year. That compares with 15.1 million visitors in the whole of 2014, which was a 3 per cent drop from 2013.

According to tourism board data interpreted by property adviser CBRE, the average amount of money each tourist spent on shopping dropped from $341 in 2010 to $273 in 2014. Figures for last year have not been released.

 

Mr Sim says: "The profile of tourists has changed. Most of those who travel to Singapore come here for business and defer spending. Tourists who come for leisure are spending less, possibly in favour of sightseeing over shopping."

 

Based on data from the Department of Statistics, CBRE has also calculated that growth in total retail sales (excluding those of motor vehicles) has diminished in the last few years. Growth in retail sales fell from 7 per cent in 2010 to 1 per cent in 2013 and went into negative territory in 2014, declining by 1 per cent.

BRANDS STILL EXPANDING

Yet, more luxury brands are entering the Singapore market and existing ones are expanding.

New entrants last year include French-Italian apparel brand Moncler, which opened its first standalone boutique in South-east Asia at Ion Orchard in November; and Belgian handbag brand Delvaux, which set up shop at Scotts Square in September.

Ion Orchard also saw a slew of existing tenants, such as Saint Laurent, Dior and Dolce & Gabbana, expand their shop spaces. New tenant, jeweller Tiffany & Co, moved into a 5,000 sq ft duplex store.

At Paragon, Givenchy expanded from a 1,600 sq ft boutique into a 3,100 sq ft flagship store. Spanish fashion label Loewe opened a 3,000 sq ft shop there as well.

Takashimaya saw the introduction of new high-end brands such as contemporary womens label Red Valentino and luxury ready-to- wear brand Kiton.

At Scotts Square, luxury multilabel footwear and accessories retailer Pedder Group opened a 20,000 sq ft concept store, Pedder On Scotts, at Scotts Square in October, making it the group's largest free-standing outlet in Asia.

This year, Como Lifestyle, a subsidiary of Singapore fashion doyenne Christina Ong's Club 21, will open high-end multi-label concept store Dover Street Market in the Dempsey cluster of Tanglin Village.

According to a study published in May last year by CBRE, Singapore was second only to Tokyo in new retailer expansion, having attracted 58 new retail brands in 2014, just shy of Tokyo's 63.

Mr Sim, in a press statement for the study, says: "Despite the high level of new entrants, the retail market continues to be challenging. Retailers big and small are using Singapore as a test bed for the South-east Asia market, given the Republic's cosmopolitan consumer market."

POOR SALES ALL ROUND

However, positive physical growth does not necessarily reflect positive sales growth. For example, fashion and lifestyle group FJ Benjamin reported a first-quarter loss of $5.5 million in November last year.

According to a report in The Straits Times, it was the third consecutive quarter of red ink for the group, which distributes luxury brands such as French label Givenchy, American designer Tom Ford, Italian luxury leather goods brand Valextra and French trunk and leather goods maker Goyard.

On why the retail industry has been so badly affected, Mr Douglas Benjamin, 51, chief operations officer of FJ Benjamin, tells The Straits Times: "Tourism is down and tourist spending is down. Domestic spending has also dropped. Overall rental and general costs have increased and it is also not easy to find staff.

"A lot of people are going online where offerings are cheaper and they can find better deals."

Mr Steven Lam, 40, managing director of Hugo Boss South East Asia, says that almost everyone in retail has been "affected by the downturn in spending".

"In June, Hugo Boss Singapore's retail sales were down almost 20 per cent as compared with that in 2014. But we recovered in December and brought the sales decline to a low single digit that is close to 2014 figures.

"Right now, we are up from last year, trending at about 15 per cent higher than in 2015. But that is off very weak 2015 numbers. I think we are confident that we can maintain last year's numbers."

He also says that consumers have changed their spending habits.

"Food, travel and experiences are high on the priorities of many Singaporeans. They are investing in experiences that last and brands which are consistent and timeless."

BEYOND JUST DISCOUNTS

With things looking so bleak, what are retailers doing to combat the situation?

Stores such as multi-brand luxury retailer Club 21 have taken to adjusting their prices to draw customers. Club 21 last year reduced the prices of merchandise of several brands such as Comme des Garcons Play, Marni and DKNY by 15 to 25 per cent.

French fashion house Chanel also revised its prices in April. The Chanel 2.55 medium handbag now costs $7,090 instead of $7,550, which is almost 6 per cent cheaper than before.

Mr Lam feels retailers have to do more than offer discounts to lure customers; they have to "go above and beyond the products and services they currently offer".

As such, Hugo Boss at Ngee Ann City will be launching its Made To Measure Service in the second quarter "to offer a personalised product for discerning customers".

Prices for such suits are unavailable. Those who buy these suits will enjoy a free first-time dry-cleaning service for each suit and they will be invited for a re-fit after three months.

Mr Lam says: "It is important for customers to know that buying the suit is only the beginning of their relationship with us. This relationship is important. Customers are looking for a different level of engagement beyond the monetary."

Regular customers say that luxury brands are being proactive in alerting them to new arrivals or by inviting them to by-invite-only events such as in-store appearances by designers or trunk show previews where they get first dibs of yet-to-be-launched collections.

Ms Olga Iserlis, 52, director of luxury events company Twise and a VIP client of brands such as Louis Vuitton, Chanel, On Pedder and Prada, says she often gets invited to such events, which can be attended by 10 to 40 VIP customers.

She says: "There is at least one salesperson in these stores who knows me and my style well and will keep in touch with me when new collections are released. They send me pictures via WhatsApp of clothes they think will suit me."

Ms Paige Parker, 47, a gemologist and writer, says luxury brands such as Dior, Tiffany & Co and Chanel, have always done a "terrific job" of taking care of repeat customers.

"Many of the brands send birthday presents, flowers and holiday gifts. At the end of the day, I think we are all interested in value for money, so price matters; yet, the personal relationships and exceptional service do make it easier to become a repeat customer," she says.

At least one luxury retailer has set its sights on a different market. Luxury watch retailer The Hour Glass opened its first outlet at Parkway Parade last month - the first suburban store to carry Rolex watches.

In November, the company bought over multi-label watch retailer Watches Of Switzerland, which has outlets in VivoCity and suburban mall Tampines Mall.

Ms Wong Mei Ling, 43, managing director of The Hour Glass (Singapore), says these moves have allowed it to extend its reach.

"We are not just in Orchard Road. We are bringing ourselves closer to our customers.

"A timepiece is not just something you buy, you also have to manage its upkeep. So we want to be closer to our customers and make it convenient for them."

The Hour Glass has also started flexible payment programmes for clients to combat the downturn, says Ms Wong. Its interest-free payment plan allows customers to buy a watch and spread the payment over up to 40 months.

She adds that the plan has so far been popular with clients.

Retailers are also stepping up on in-store service by rewarding staff.

Mr Benjamin says: "We're more focused on making sure the staff are well trained and looking closer at how each store is doing."

Besides regular training, he says some monetary incentives are given to boost productivity.

"For example, cash for every item sold, on top of the commission, and extra money for higher average transaction values." He declined to give dollar amounts as they differ from store to store.

These steps are essential in preparing for an upturn when it eventually happens.

Mr Benjamin says: "Yes, retail is weak now, but it always recovers and when it does, it is always stronger than in the last round.

"Retailers need to get themselves into a good position so that when it happens, they are in a position to take full advantage of it."

A version of this article appeared in the print edition of The Straits Times on January 21, 2016, with the headline 'Tough battle for shoppers'. Print Edition | Subscribe