Will online shops threaten the existence of brick-and-mortar outlets in Singapore?

December 20, 2012 / By  

The internet has become a familiar and secure place to conduct transactions, such as e-banking, filing taxes and paying bills, and retail operations can now be conducted online as well. The abundance of online shops and their visual appeal, competitive prices and quality products have made internet shopping increasingly popular.

To put things into a quantifiable perspective, a study released by PayPal in 2011 indicated that Singapore’s online shopping market conducted SGD 1.1 billion in transactions in 2010 and forecast this figure to reach SGD 4.4 billion in 2015. This sum equals 3% of the total operating receipts generated by Singapore’s retail segment in 2010 and can only be expected to increase given the exponential rise in the usage of smart phones and other online devices since then. In May 2012, Blackbox’s research reported that Singapore’s rate of smartphone penetration stood at 88%, making the city-state one of the most mobile-savvy nations in Southeast Asia.

A recent survey conducted by our research team highlighted three key factors that made online shopping attractive to consumers in Singapore. Of all the respondents, 84% quoted the generally cheaper prices of online products that attracted them to internet shopping, while 73% quoted the wide variety of products that can be found online, and 55% quoted the prompt delivery service of most internet shops as an important factor. The survey also uncovered that consumers were generally willing to compromise having a physical contact when making their purchases (42%). This was particularly true for the purchases of small-ticket fashion apparel (77%) and electronics (62%).

It is unlikely that the traditional retail shops could be put out of business by these online shops, at least not in the foreseeable future. The online purchases reportedly were confined to small-ticket items priced below SGD 100 (73%), and the majority of the purchasers bought products online less than once a month (67%). In addition, 97% of the respondents still preferred to shop in traditional retail malls suggesting a strong appetite for physical interaction still exists among local consumers.

However, this definitely does not mean that owners of brick-and-mortar shops should rest on their laurels. A daunting 47% of the respondents have restricted their purchases of certain product types to only online outlets. As the experience and security of online shopping is further enhanced in the future, the types of products that consumers buy and their threshold price could easily expand. In addition, when asked if retail malls still attracted them, 47% of the respondents remained neutral. A product of prudent use of space to maximise returns, the cookie-cutter layout of local malls has perhaps caused consumers to become unexcited with these traditional outlets.

As a certain proportion of the consumers still prefer the tactile experience before purchasing, traditional retail malls will likely remain relevant in the coming years but the local retail scene could benefit from a major reinvention to enhance shopper sensory experience and retain these shoppers. Online outlets could then be used to complement these brick-and-mortar shops by helping retailers reach a larger market, free up space by selling small-ticket items through the internet and provide a truly holistic retail experience.

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