The Singapore Perspective

Brick-and-mortar stores have tough challenges ahead

Shopping is a pastime for many people in Singapore, given the number of malls and shops that line the country's streets.

Besides the popular Orchard Road shopping belt, consumers can now also buy branded clothes, shoes, bags and accessories outside the city with the advent of heartland malls over the years.

Such shopping centres - which put stores much closer to people's homes - include Jem and Westgate in Jurong East, Nex in Serangoon and Waterway Point in Punggol.

Other than shopping on a regular basis, many Singaporeans also splurge during the Great Singapore Sale (GSS), typically held between May and July every year.

The eight-week sale was extended by two weeks this year to better cater to tourists from Asia-Pacific countries, including China, whose summer holidays fall in the June to August period, according to the Singapore Retailers Association (SRA). GSS ends on Aug 14.

Started in 1994 by the Singapore Tourism Board in alliance with SRA, GSS is seen as an indirect government stimulus programme to give the economy a boost by encouraging consumers to spend.

A study on GSS at the National University of Singapore found that, overall, Singaporeans spend 27 cents more on a daily basis during GSS. But while crowds still regularly throng malls, several of which are abuzz with activity regardless of whether it is a weekday or weekend, shoppers appear to have been buying less in recent months. Excluding motor vehicles, retail sales decreased 3 per cent in April this year compared with a year ago, according to the latest data released by the Singapore Department of Statistics.

Some brands like British fashion store New Look and French menswear chain Celio have exited Singapore amid a weaker retail scene.The slowdown in the retail scene can be attributed, in part, to an oversupply of retail space.

Islandwide, retail vacancy rates hit 7.3 per cent in the first three months of this year, up 0.1 percentage point from the previous quarter.

But a surge in retail supply is expected, which could aggravate matters. In a report from the third quarter of last year, property consultancy Knight Frank estimated an incoming supply of 4.2 million sq ft of net lettable retail space between 2015 and 2019.

The Orchard Road belt has also taken a hit. Urban Redevelopment Authority data shows that the vacancy rate for retail spaces in the Orchard Road area rose 1.2 percentage points to 8.8 per cent in the first quarter of the year, the highest in five years.

Tourist spending has also dropped. The number of visitors to Singapore was up by 0.9 per cent at 15.2 million last year, but their overall spending fell 6.8 per cent to $22 billion.

Another reason some physical stores are struggling is the proliferation of online shopping.

Singaporeans have been increasingly shopping on the go too. MasterCard's 2015 online shopping survey showed that 48.5 per cent of respondents in Singapore had made a purchase through their mobile phones, an increase from 36.7 per cent in 2014.

During last year's Singapore Retail Industry Conference, then Senior Minister of State for Trade and Industry Lee Yi Shyan, citing a study by research firm Euromonitor International, said that online spending in Singapore grew from $1.08 billion in 2014 to $1.22 billion in 2015.

Despite that, Mr Lee held hope that retail stores can hold their own. "Our brick-and-mortar stores will not vanish overnight. However, they will have to compete much harder for a shrinking pie by offering better and more immersive in-store experiences," he said.

Jalelah Abu Baker

A version of this article appeared in the print edition of The Straits Times on July 11, 2016, with the headline 'Brick-and-mortar stores have tough challenges ahead'. Print Edition | Subscribe