Local retailers still ill-equipped for e-commerce: Study

Shoppers walking along the shops at Orchard Road on March 10, 2014.
Shoppers walking along the shops at Orchard Road on March 10, 2014.PHOTO: ST FILE

SINGAPORE - The average Singaporean retail company still makes 88 per cent of their sales through brick and mortar store fronts, a local study has found.

Only 3 per cent of sales were generated from e-commerce and mobile commerce, and another 3 per cent from overseas sales, according to research by the Singapore Productivity Centre (SPC) and DP Information Group.

This reflects a general trend of retailers having underdeveloped online capabilities despite globalisation and changes in the way consumers use technology.

The research was based on 215 respondents from the retail sector in Singapore, with 94 per cent representing small and medium-sized enterprises.

"The importance of going online for sales acquisition has been well documented. E-commerce business generation will continue to grow, but it looks painfully low at this point in time, based on our survey," said Mr Lincoln Teo, Chief Operating Officer of DP Information Group.

"Because of our geographical closeness, it's easy for retailers to provide goods directly to clients. However, this focus on direct selling cripples our ability to understand the logistic strategy needed if we want to sell beyond the shores of Singapore."

Competition for market share is increasingly coming not only from other local retailers, but also from overseas brands as Internet shopping becomes increasingly convenient, said Mr Teo.

Sales volumes from e-commerce have remained relatively low for Singapore retailers, even though they are relying more on online advertising and social media platforms for marketing and branding. Online advertising grew from being the fifth most used method for raising brand awareness in 2014 to the second most used in 2015, with direct sales remaining the top method.

"It is important for retailers to reassess their existing concepts and ask themselves if they are still relevant," said Mr Bernard Ng, Senior Consultant at SPC. "Their product range needs to be sharpened, and calibrated to respond to the changing retail landscape."

Using examples from successful case studies and the best business practices of top firms in various retail sectors, SPC is organising a series of workshops with Boston Consulting Group to help local retailers improve their productivity and enable them to better address new challenges. These workshops will begin in mid-July.