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Can't be 'business as usual', say retail industry stakeholders

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The local retail industry needs to up the ante to get customers to bite in an increasingly challenging environment where it cannot be business as usual, say industry stakeholders.

Singapore

THE local retail industry needs to up the ante to get customers to bite in an increasingly challenging environment where it cannot be business as usual, say industry stakeholders.

The industry is under siege on a number of fronts as it grapples with issues such as slower economic growth, softening tourism spending, competition from overseas markets, a manpower crunch, high operational costs as well as the popularity of e-commerce.

Recently released data showed that retail sales (excluding motor vehicles) tumbled 9.6 per cent year on year in February despite Chinese New Year, after increasing just 1.4 per cent in January.

And while the number of foreign visitors have been on the rise this year - up some 12 per cent in January and February - it remains to be seen if spending is picking up in tandem: last year, overall tourism spending declined 6.8 per cent to S$22 billion.

"In this climate, retailers should take the opportunity to improve service standards, enhance their product mix and improve the shopping experience for customers," suggested Wendy Low, executive director and head of retail at Knight Frank Singapore. "Of late, many online stores have embarked on establishing a physical presence by setting up pop up stores in the malls, breaking from the conventional operating model of a typical online store."

In the face of rising e-commerce and e-shopping, several brick-and-mortar retailers are developing their own online presence. Robinsons, for instance, is planning an e-site with a collection of its best-selling items, while Uniqlo has some products that are exclusively available on its online store to differentiate the two offerings.

"It complements our physical store and provides value-add services by offering customers greater convenience with the option to shop from home as well as on-the-go," said a spokesman for Uniqlo. "Our customers will be able to shop beyond our opening hours."

The Singapore Retailers Association (SRA) is also trying to get all its members to go online, highlighting that retailers can use their online presence to drive customers to their physical stores. To help retailers tackle industry headwinds, it will be holding an e-commerce forum with the Singapore infocomm Technology Federation on April 28 and has also recently launched the multi-channel mystery shopping audit ACE programme, which can be partially subsidised through Spring Singapore.

"Customer service is now more important than ever in the digital age for large players, and SMEs alike," said SRA's executive director Anthony Gan, commenting on ACE. "We have received an overwhelming response from the industry to participate, and we are attempting to offer the programme to even more retailers."

But the rising popularity of e-commerce doesn't eradicate the need for brick-and-mortar stores either. A recent survey by iModerate Research Technologies of some 800 consumers revealed that 82 per cent of those aged 21 to 33 still think a physical store is important. Those polled cited factors such as product variety, customer service, ease of return and ambience.

"Retailers will have to engage consumers on a higher level by immersing them in a fun and memorable experience," said Christine Li, director of research at Cushman & Wakefield. "One way to attract consumers is to introduce a virtual reality shopping experience. In some (virtual reality) instances, shoppers can experience shopping at Champs-Élysées in Paris or 5th Avenue in New York."

To keep customers coming back, Robinsons has been bringing in new brands such as Windsor Smith, Jigsaw and John Lewis, exclusively available at its flagship Heeren store. Robinsons is also tying up with host Angela May and F&B group DHM to launch the Angela May Food Chapters restaurant next month, in addition to rolling out marketing campaigns and retail promotions like Lunch Time Frenzy.

Group CEO (Asia) for the Al-Futtaim Group, Christophe Cann, said the group is also making an effort to constantly re-innovate and connect with customers through digital and social media platforms. Al-Futtaim's portfolio in Singapore includes Robinsons, John Little and Zara.

Landlords too have an important part to play in revolutionising the retail space, said industry players.

OUE's senior vice-president (retail, marketing & leasing) Patrina Tan said: "Landlords can take the lead to understand what the trends are moving forward, what consumers want, and with that insight, share with business partners so they have a clearer direction on how they can evolve their businesses. Of course this ... will take time to come to fruition but it is a necessary evil for sustainability in the new era of retail."

OUE recently commissioned US-based consultancy Faith Popcorn's Brain Reserve to identify future retail trends, some of which it plans to introduce in its upcoming Downtown Gallery mall at Shenton Way come Q1 2017. It will also focus more on new digital capabilities, social networks and content creation instead of its usual advertising and promotion model.

Over at Mandarin Gallery, OUE has been introducing complimentary events such as silent yoga and SURFSET exercise sessions to boost footfall and raise awareness of the mall, especially among new visitors. Aside from keeping traffic figures up amid the softer environment, it also allows the developer to collaborate with new retailers, such as through door-gifts for participants. In addition, this enables it to test new retail concepts and change the tenant mix. Online fashion label Beyond the Vines, for instance, now has a pop-up store in Mandarin Gallery.

"Malls and retailers have to repurpose themselves," Ms Tan added, noting that these events have met with positive reception. "The mall is no longer a place for transactions. It is a place to meet the (lifestyle needs) of consumers." For instance, Downtown Gallery mall, which is focusing on themes such as health and wellness, will feature a farmers' market and cooking school.

Meanwhile, although tough operating conditions are causing some brands to head for the door, new ones are still expected to come in since Singapore is seen as a test-bed for South-east Asia. Franchised brands New Look and Celio are exiting the market, while other retailers such as the Al-Futtaim group are shuttering loss-making stores this year. But some other existing brands are also keen to expand their footprint.

"Even though there are retailers exiting the market, others are still trying to enter the market, especially when quality prime space comes up along the Orchard Road stretch," pointed out Ms Li.

Uniqlo will open a new outlet in Tiong Bahru Plaza come July and a 2,700 sq m global flagship store at Orchard Central in Q3 this year. Other brands opening or re-launching stores this year include Victoria's Secret, Michael Kors and Hermés.

Desmond Sim, CBRE's head of research (Singapore), expects new brands to keep coming in as big developers with a regional presence can leverage their network to bring in fresh faces. When it comes to securing brands they want, landlords may choose to be more flexible in terms of lease terms, he suggested. However, brands may also be more cautious given the current climate and adopt less aggressive expansion plans, Mr Sim added.

Because of labour constraints, some existing retail groups have been consolidating stores and are strategically maintaining outlets in key areas - a trend which could continue. Other retailers may choose to turn their attention to expanding overseas.

Prices of retail space in Singapore fell 1.9 per cent in Q1 this year, while the vacancy rate of retail space crept up to 7.3 per cent, from 7.2 per cent in 4Q15.

Coupled with more retail space coming onstream from developments such as Guoco Tower, Singapore Post Centre and Hillion mall, this will likely put downward pressure on rents. Knight Frank estimates incoming supply at 4.2 million sq ft of gross retail space for 2016 and 2017.

Unsurprisingly, some retailers are clamouring for more affordable rentals. "Landlords need to help their tenants much more and recognise once and for all that rental expectations need to be revised, rental concessions given until the market becomes more favourable to retailers and consumers again," said Mr Gan, adding that landlords should adopt the Fair Tenancy Framework.

"Landlords can look into offering more flexible tenancy periods and rental structures to encourage profit and risk sharing between landlords and tenants," suggested Ms Low. "Landlords can also consider enhancing the tenant mix within the mall and its positioning, as well as organise joint advertising and promotional activities with tenants."