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From clicks to bricks: Online stores setting up shop in malls

Online stores setting up shop in malls as retail slump makes rent more affordable

Online retailers have found a silver lining amid the current retail slump.

Falling rental rates have given these retailers a chance to venture offline and into shopping malls.

Last month, for example, online furniture retailer HipVan opened its permanent 11,000 sq ft flagship store at The Cathay in Dhoby Ghaut.

Lifestyle retailer Naiise similarly opened its 8,500 sq ft flagship store in that mall last June.

Other online retailers, such as Reebonz, Love Bonito and Ohvola, have opened short-term stores in Suntec City and Orchard Gateway, to catch shoppers who want to see, touch or try on a product before buying.

The islandwide vacancy rate for retail space was 7.5 per cent at the end of last year, up from 4.5 per cent at the end of 2013, Urban Redevelopment Authority (URA) data showed.

  • 7.5% Islandwide vacancy rate for retail space at the end of last year, up from 4.5 per cent at the end of 2013, URA data showed.

    $9.82 Median rental rate per sq ft per month for the Orchard Road area, the first time it fell below $10. The median rental rate for retail space in the third quarter of last year was the lowest on record.

Last year, home-furnishing store iwannagohome, British fashion store New Look and French menswear chain Celio exited the market.

The climbing vacancy rate has, in turn, reduced rental rates.

The median rental rate for retail space in the third quarter of last year was the lowest on record, falling to $9.82 per sq ft per month for the Orchard Road area - the first time it fell below $10, according to URA data.

A spokesman for Naiise, which first experimented with pop-up stores, or short-term rentals, in 2014, said: "The current retail climate has provided more opportunities to expand into bricks-and-mortar stores, with landlords more willing to liaise with small businesses and provide more affordable rentals."

Given the availability of retail space, landlords also tend to look out for new, unique retail concepts - and not chain stores - that will draw return customers, she added.

Naiise has five other stores in malls such as Westgate and 112 Katong, which offer self-collection services for online orders.

Its online plus offline strategy has paid off, with its six retail stores combined now generating more revenue than its online store.

HipVan co-founder Danny Tan, 33, said the retail slump has benefited his business, which now occupies the space formerly rented by sportswear brand Adidas.

"In a boom market, there's no way we can compete with Adidas for a retail space that's in such a central location and 11,000sq ft," he said but declined to reveal his monthly rent.

The store is seven times larger than HipVan's previous pop-up space in Millenia Walk and Suntec City. It features more than 1,000 of HipVan's bestsellers, including beds, dining tables and rugs.

Mr Tan said it was the right time for his 31/2-year-old shop to set up a physical store, now that it has a "ready captive audience" online.

Its website attracts 200,000 to 300,000 views a month, while revenue has been growing by 12 per cent on average every month.

Meanwhile, high-end fashion retailer Reebonz, whose lease for its pop-up boutique in Suntec ends next year, is moving into its own eight-storey building in Tampines this month. The building will house a permanent showroom.

"Physical stores were a natural extension of our omni-channel strategy, especially for higher-value items where the purchase decision may require a longer time," said its spokesman.

Dr Jimmy Wong, a senior marketing lecturer at SIM University's School of Business, said renting a retail space when the retail scene is weak may not necessarily be bad for online stores, as a physical presence can enhance their branding and build trust with customers.

"As long as the rent is justified and the product category fits, it should be a good investment."

A version of this article appeared in the print edition of The Straits Times on February 15, 2017, with the headline 'From clicks to bricks'. Print Edition | Subscribe