The Great Singapore Sale is on but shop owners here are unlikely to be in a festive mood.
Squeezed by high costs, more competitors and shrinking sales, retailers have been asking for more help to survive amid challenging market conditions.
In an industry where rents can make up nearly a third of business costs, many of the complaints centre on real estate investment trusts (Reits).
These publicly listed vehicles own a fifth of the retail space here, according to property consultants' estimates.
Retailers say Reits have been jacking up rents to pay out ever-higher dividends to their unitholders, sending rental costs soaring.
But hopes of aid on that front faded when a government study last month suggested Reit ownership was not to blame for high shop rents.
The Ministry of Trade and Industry said malls owned by Reits could be charging higher rents and raising rents faster simply because they are better located and more well-maintained than other shopping centres.
Only a small number of retailers islandwide see huge rental spikes, the ministry added. It also said that up to a quarter of retailers every year would see either no rent increase or lower rents when they renewed their leases.
An easy target?
STILL, retail businesses and some private-sector analysts remain unconvinced. They argue that Reits play a significant role in influencing prices in the Republic's relatively small retail scene.
CapitaMall Trust, which owns about half of all Reit-owned mall space islandwide, raised rents by 6.3 per cent on average last year upon lease renewals, according to its financial statements. Other major retail Reits posted similar or higher average rental increases over their past financial year.
Minister of State for Trade and Industry Teo Ser Luck acknowledged in Parliament last week that rent hikes by one landlord can affect the rest of the market, though he did not single out Reits.
Some also say Reits make use of their dominance in the industry to negotiate lease contracts that indirectly raise costs for tenants.
For instance, tenants may be required to renovate their units every time they renew their leases, which is typically once every three years, said Mr Victor Tay, chief operating officer of the Singapore Business Federation.
The landlord may also take a portion of the tenant's sales on top of the base rent even when sales are poor, or may prevent the tenant from opening another outlet at a competing mall nearby, he added.
But Reit managers have also spoken up to say that it is not all just a numbers game for them.
YTL Starhill Global Reit chief Ho Sing told The Straits Times that he has received flak from stock analysts for not always picking the highest-paying tenant.
For instance, he chose to rent space in Wisma Atria to new-to-market South Korean cafe Paris Baguette to create a better and more sustainable tenant mix for shoppers, even though other retailers offered a higher price for the unit.
Property experts say Reits can end up as an easy target for retailers' frustrations because they regularly publish data on rent increases, while other non-listed mall owners may stay under the radar.
After all, Reit owners are subject to market forces as well, they add. If they set their rents too high, they may not get a tenant.
Still, because most popular malls in Singapore are controlled by a few heavyweight landlords, serious retailers may not be able to avoid stumping up high rents to get the shop space they need.
"Retailers and operators are regularly committing to rents asked by the existing landlords in a bid to stay in business," said Colliers International research director Chia Siew Chuin.
While stocks last
BUT the problems in Singapore's retail industry run deeper than retailers' gripes with Reits.
Shops here are dealing with intense competition, both from brick-and-mortar stores as well as online sellers.
International brands with deep pockets are setting up shop in the Republic, driving up rents across malls regardless of ownership, retail experts say.
"As the wealth quantum of Singapore has leaped, so have retail leasing rates associated with brands that serve the wealthy," said Mr Jonathan Galaviz, a partner at Global Market Advisors.
The shine of local shops may also be dulled by the strength of the Singapore dollar.
This dampens shopping demand in two ways: It makes online shopping at foreign retailers cheaper for Singaporeans, and makes shopping here more expensive for tourists.
A government price survey in April found that some consumer products from global brands such as Apple, Ikea and Zara can be pricier in Singapore than abroad.
OCBC economist Selena Ling noted that the retail sector's contribution to the country's economic output has shrunk over time. Retail sales made up about 10 per cent of Singapore's economy in December last year, down from 13.6 per cent in December 2008.
"This could possibly be explained by the increasing competition from other tourist destinations in the region," she said.
DBS economist Irvin Seah added: "With budget airlines, many Singaporeans will do their shopping in regional countries which are much cheaper."
The way forward
THE good news is that some cost respite may lie ahead for retailers. Rents in Orchard Road malls could ease soon because demand for space there may falter, said Mr Alan Cheong, research head at property firm Savills.
Businesses may be less keen on opening a shop there than before due to a labour crunch and fewer tourists visiting the prime shopping area, he said.
Retailers also hope a government plan to release more data on retail rents before the end of this year would provide more cost transparency and thus bring soaring rents back down to earth.
"We have a fair idea of what everyone pays, but more information on effective rents could help in general," Mr Angelo Augustus, managing director of electronics retailer Harvey Norman, said.
How to draw more shoppers is a harder problem, and one in which landlords can be a key part of the solution. Singapore's retail scene needs major changes to become more attractive, said tourism and retail experts.
"Singapore continues to lag (behind) places like Hong Kong and Shanghai in terms of shopping diversity," said Mr Galaviz.
At malls like Lucky Plaza, where Mr Muhammad Waseem Ahmed runs a perfume shop, more shops have been closing in recent years partly because they all fight for a slice of the same pie. "There are many repeating shops here - electronics, perfume, money changers," he said.
Mall landlords must also adapt to changing consumer trends, incorporating entertainment elements such as cinemas to attract shoppers, experts added.
"Singapore needs to create lifestyle retail entertainment, not just offer products in nice-looking stores," said Mr Galaviz.
Dr Michael Chiam, a senior lecturer in tourism at Ngee Ann Polytechnic, said retail stores must "offer things that the Internet cannot offer, or have to be situated at a place of utmost convenience".
"For instance, while going to a hospital you may browse stores as a time-filling activity. Retail stores in malls that have a cinema also tend to do better," he said.
Consumers also prefer different types of stores now, such as smaller boutique shops over large-format general stores. Retailers will need to adjust accordingly, Dr Chiam said.
They can also look at new ways of doing business, such as combining online and offline shopping, he added.
In London, some online shops rent a mall unit to display their wares for two to three months at a time and then take orders via their website.
Dr Chiam noted, however, that this business model may work only if landlords are willing to accept such short leases rather than the typical three-year lease terms.
As Mr Galaviz put it: "The marketing strategies of Singapore's mall owners must evolve."
Retailers have, so far, played by landlords' rules, but this need not be a zero-sum game. For both sides to thrive in the long run, landlords may ultimately have to reinvent themselves as well.