Singapore’s next retail evolutionMay 16, 2014 / By
Singapore has established itself as a resilient retail market for both domestic and international retailers due to its strategic location, stable economy and strong employment base. According to JLL Research and Singstat data, the average island-wide occupancy rate for retail space is above 95%, and retail spending has been generally increasing since 2009. Leveraging the country’s strong retail scene and sophisticated consumer profile, the retail market in Singapore appears capable of thriving in both physical space and online.
However, so far online has not been particularly popular in Singapore. In 2013, e commerce sales in the most developed US and UK online markets made up 5.8% and 10.4%, respectively, of total retail volume, but some industry players estimate online retail in Singapore only makes up 1.5% of total sales. In US dollar terms, internet sales in Singapore amounted to estimated USD 35 million in 2013, compared to USD 263 billion in the US and USD 295 billion in China, which surpassed the US for the first time last year. While 75% of the Singapore population are internet users, according to the Boston Consulting Group, Singapore ranks 30th in the world for online retail spending. In a technologically advanced and geographically contained space like Singapore with robust online security, infrastructure and connectivity, what is holding it back? With more than 35.8 million sq ft of current retail supply, do most consumers simply prefer to walk down the street for a retail purchase?
According to a poll conducted by JLL Research in 2013, there are limits to how much Singapore consumers are willing to spend online – typically limited to items priced below SGD 100. Further, price, delivery performance and product quality were the main factors cited by reluctant consumers. Stringent return policy in Singapore is another factor.
This could be improved, and Singapore is catching on. In 1Q14, Sosoon, an online retailer, launched in Singapore, offering next day delivery, free returns, and attractive pricing. As online retailers can eliminate 20% of the cost of a physical store, they can offer a huge price discount on items. Moreover, second generation e-commerce in the US and the UK markets indicates that e-commerce is expected to complement physical shop spaces, rather than pose a threat. This has been evidenced in Singapore by the bidirectional flow of retailers setting up both physical and virtual shop spaces, as seen with popular online retailers MDS, TRACYEINNY and KissJane, which have set up physical shops in a bid to reach a larger audience as well as to showcase the quality of their products. If implemented successfully, e-commerce sales are expected to support stronger growth for the overall retail market in Singapore in the near future.
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