Slipping for the 8th consecutive month in September 2019, retail sales recorded a drop of 2.2 per cent according to data released by the Singapore Department of Statistics (DOS). According to DOS, the estimated total retail sales value in September 2019 amounted to $3.5bn, of which an estimated 6.9 per cent made up the online retail sales. With the rising disruption posed by e-commerce, find out how stakeholders are embracing change and reinventing themselves in order to stay relevant.
By Alice Tan, Senior Director, Research and Consulting
In a rapidly evolving digital era and the burgeoning e-commerce market, consumers are increasingly connected in cyberspace for their retailing needs. To stay relevant and to engage consumers actively, shopping malls are rapidly going beyond the conventional bricks-and-mortar mode of retail to embrace online commerce as a strategic thrust in their asset enhancement initiatives.
At the same time, technology adoption and capturing consumer behavior and shopper patterns are essential for mall owners and retailers to cope with the labour crunch and to reach out to customers effectively. Coupled with increasing competition in the region with bigger and better malls and the quest amongst cities for the accolade as the ‘retail destination of choice’, the urgency for Singapore malls to refresh themselves becomes even more important so as to gain traction in the tourism industry.
Despite moderated retail sales performance, real estate asset owners recognise the continued importance and relevance of physical retail assets as platforms and showcases to attract shoppers from a wider base of locals and foreigners, and also as a means to enhance its overall revenue base and asset value. Integrating physical (i.e. offline) experience with online retailing will be an essential strategy for asset owners to expand their consumer outreach. As a case in point, we have witnessed trend reversal from established online retailers – such as Taobao and Love, Bonito – which have moved into physical retail space for an omnichannel approach.
Singapore’s retail landscape is well poised to grow its online retail market. In the latest report by United Nations Conference on Trade and Development (Unctad), Singapore came in third out of 152 economies in a United Nations business-to-consumer (B2C) e-commerce index that measures an economy’s readiness for online shopping. It remains with Australia (10th) the only two non-European economies in the top 10 rankings of the 2019 index constructed by Unctad.
Singapore’s high quality in technology and logistics infrastructure offers strong foundations for an active online shopping landscape, and physical retailers seeking to enter this area will benefit from a mature ecosystem that is already thriving with ample demand.
The growing e-buying trend
With the proliferation of e-commerce and elevated rentals, retail sales have been adversely affected, especially with the recent store closure of Metro at Centrepoint. After five years as the anchor tenant, department store Metro has recently closed down its flagship store at The Centrepoint in the face of rising competition with larger and newer malls in the Somerset precinct.
On the other hand, despite the tough retail scene, retailers such as Sephora have gone omni-channel, as they compete both online and offline to reach and retain customers. In the prevailing age of digital commerce, retail experience, brand identity, and a wide variety of exciting products are key factors to retain existing customers on top of brick and mortar retail.
While shoppers are demanding greater value, variety and convenience, online retailers have been able to fulfill these needs efficiently. The onslaught of major online retailers, with its extensive ecosystem, logistical support and proactive customer service, has captured a growing market share of shoppers from department stores and shopping malls.
Department store owners and retailers would need to devise creative strategies to capture shoppers in the online retail space and integrate its online platform with strategic locations offline to enable an effective and seamless outreach to target customers.
A differentiated strategy
Many mall owners, together with their business partners, have been proactively reaching out to various retailers and searching for new retail concepts. The key considerations of cost, labour and estimated target market size weigh on the minds of retailers who are new to the Singapore market. Providing existing and new retailers with on-the-ground retail market knowledge and consumer insights would better enhance the awareness of Singapore’s market fundamentals and potential.
Such market intelligence could be realised through partnerships with consultants and players in and beyond the real estate arena. Additionally, the strong support from mall owners to enable a collaborative and sustainable landlord-tenant engagement would help to retain and attract more retailers to Singapore.
A notable example would be CapitaLand, which has been proactive to understand and engage customers in their continuous curation of retail concepts. Their consumer-centric approach in the design of Funan Mall, through a progressive consulting effort to gather consumer insights and new ideas, has identified the ingredients of what delights the customer. A social retail space for discovery, learning and shopping is envisioned. Now, a technologically-integrated lifestyle mall, online-and-offline omni-channelling, click-and-collect and technology-enabled systems are introduced, with new tech systems to be rolled out in subsequent stages.
Their differentiated ways of designing the mall and attracting new-concept retailers and brand names have created an interesting real estate space that promotes vibrancy, community engagement and visual impact.
The increasing blurring of lines between different use types within a development could actually create more refreshing and engaging spaces for users. Moving forward, we might see more asset owners adjusting their business strategies, such as introducing more mixed uses in their assets where possible, to attract customers from a wider market base such as residents, visitors and the workforce.
|Download insight paper|