Home sweet home-based businesses

Spurred by the pandemic, Singapore micro-entrepreneurs find a place in the digital economy

THEY'RE small and informal, and - given that rules do not require registration with the authorities - no one knows for sure how many are around.

But home-based businesses (HBBs) were thrust into the spotlight earlier this year, when micro-entrepreneurs selling goods from their own kitchens faced curbs from April 22 to May 12. Amid circuit-breaker restrictions on operations, 1,400 dismayed HBBs registered with the Singapore Malay Chamber of Commerce & Industry for assistance, Berita Harian reported in May. More than three-quarters of these were in the food and beverage industry.

In this plague year, HBBs have thrown a lifeline to residents in need of extra income - even as Internet technology continues to revolutionise the ease of setting up shop.

Yet, despite industry and other efforts to promote professionalisation, it looks like this slice of the economy will still stay largely informal.

"They have not been burdened by the kinds of fixed costs that retail establishments face in rentals and overheads, which has made it very difficult for many in the retail sector," says Walter Theseira, associate professor of economics at the Singapore University of Social Sciences, of HBBs.

"But, at the same time, HBBs generally have not been eligible for any type of government support."

Going viral

While the number of HBBs is not on the books, Singapore had 207,200 registered micro-businesses in 2018, up from 199,300, according to the latest Department of Statistics data. Such firms each make under S$1 million a year.

That's of course even as Ng Weiyi, assistant professor of strategy and policy at NUS Business School, notes that HBBs may not even incorporate as a legal entity - and "we don't know how many tried and failed" either.

Mervyn Koh, country head of business banking at UOB, calls it "relatively easy to set up an HBB", with flexible working hours and lower set-up costs among the benefits, and baking, hairdressing, beauty, sewing and tuition are some popular lines of work.

"For most young startups tapping the online platforms, handmade products, home-cooked food or baked products and consumer services benefiting domestic needs are common," says Samuel Tan, course chair in retail management at Temasek Polytechnic. "It could be low-cost and have less barrier (to) entry."

With the Covid-19 outbreak, observers now expect the number of HBBs here to keep growing.

Zhou Junjie, chief commercial officer of Sea-owned e-commerce platform Shopee, adds without giving numbers that "we've observed robust volumes of transactions and traffic".

He attributes the trend to growing online shopping demand during the pandemic, as well as retailers' response to safe-distancing restrictions in the brick-and-mortar world.

But UOB's Mr Koh also cites a third factor: "The pandemic has seen losses of jobs and lower incomes. As such, some of these affected individuals are turning to setting up their own HBBs as a means to generate income."

One such business is curry bun retailer Eatmycb, so named as it opened in April during the circuit breaker.

Freelancer Lester Lee set up shop with his wife, siblings and parents after the couple's video and design business took a spill from Covid-19.

Despite listening to podcasts to learn about marketing and taking basic hygiene courses through SkillsFuture, Mr Lee says the family is earning enough to survive - but not thriving.

All the same, he adds that "can't imagine doing this without the Internet", which lets him connect with other HBBs. For instance, banking apps are a "pretty convenient" way to be paid, while a quick-reply function is among the "very cool business features" on Instagram, he tells BT.

Similarly, Augustine Soong, who also works in media, opened home bakery House of Soong in March, as "my income was totally wiped out for a few months" by the pandemic.

He and his wife began with cookies and branched out to sell tiramisu, sourdough and other breads - mostly to young adults over Instagram. "With the interface, it's easier to respond to messages, it's easier to post stuff, it's easier to engage," he says.

"The majority of home-based business owners tend to be sole proprietors and like most small businesses, operate on tight financial resources. As such, it is natural for them to rely heavily on digital platforms such as Facebook and Instagram to promote their products without incurring high costs," says UOB's Mr Koh.

"With the availability of cashless payment options such as PayNow, it is also easier for HBBs to collect payment from their buyers electronically."

Platform deals

Lee Gek Keow, senior lecturer in business management at Nanyang Polytechnic, thinks "the rise of online micro-entrepreneurs in recent times seem to mirror historical trends of blogshops in the early 2000s".

To be sure, Mr Tan notes that many early blogshops - "mom-and-pop operators and young startups" - may have fizzled out on the lack of technical know-how, consumer buy-in and government support then. But the ease of setting up shop online should have improved by leaps and bounds since its salad days.

Ms Lee, who teaches e-commerce and retail management, notes that early social network LiveJournal, once popular with blogshops, was replaced by "social media support groups" where business owners can trade tips with one another.

"Social commerce" - through platforms such as Facebook, Instagram and Carousell - is driven by media content and recommendations from friends and influencers, or "key opinion leaders", says Adriana Chia, consumer insights leader for Singapore at consumer research firm Nielsen .

In fact, social media firms have cottoned on to the business opportunity of micro-enterprises.

Facebook names e-commerce as its largest advertising vertical, and the company has 10 million small businesses using the social media platform to advertise, as at Sept 30.

During the circuit breaker, more than three in five small businesses on Facebook in Singapore had made at least 25 per cent of the past month's sales digitally, company data found.

Says Karen Teo, Facebook's global business group vice-president of small and medium-sized businesses in the Asia-Pacific: "We believe that these contact-less and home-consumption habits are here to stay even with the easing of physical restrictions. These mark new opportunities for not only HBBs, but also other brands to venture into the digital platforms. We believe that there's still room for HBBs in Singapore to continue growing on the digital front as more consumers pivot online."

Wendy Tang, who uses online platforms such as Pinterest and YouTube to pitch home bakery Bakabee, says social media helped to "keep people knowing Bakabee is still in Singapore" - even when sales were forced to go quiet during the circuit breaker.

"Important, right? And when it resumed, people could start ordering cakes from me," Ms Tang tells BT. "So all the YouTube channels, writing blogposts and everything, were like planting seeds to keep me present."

Says Ms Lee: "There is a generation of entrepreneurs who are digital natives... Digitalised marketing communication is par for the course."

Yet, even with the roll-out of business-friendly social media features such as Facebook Shops, which enables a single storefront across Facebook and Instagram, HBBs may rely on other channels to seal the deal.

"Facebook is a good platform for retailers looking to kickstart their social commerce strategy," says Sega Cheng, chief executive of customer engagement startup iKala. "These businesses often try to leverage the organic reach that Facebook provides for live video content... and then direct potential shoppers with buying intent to the brand's website."

Just over half of the 1,500 Internet users polled by Nielsen had shopped on social commerce. These buyers skewed younger and were typically aged 18 to 29, according to Ms Chia.

But Nielsen notes that "social commerce is weaker across most aspects, especially on delivery and price", compared with marketplaces such as Lazada, Qoo10, Shopee and Taobao.

These platforms are also stepping up outreach to micro-entrepreneurs, with Shopee's Mr Zhou touting a S$1 million package - complete with training, lower fees and free shipping - to bring small local retailers on board.

"Shopee's aim is to make digitalisation as straightforward as possible," he tells BT. "We also provide a pay-and-go structure so new sellers can try out Shopee to make sure it works for them, and don't have to commit to a package immediately."

But, though social media seems like a great equaliser, new businesses must actually compete fiercely for attention in cyberspace, Prof Ng says.

"If I'm on Instagram eight hours ago, I'm going to stare at what's already popular or what's shared by my friends," he explains, adding that HBBs are fuelled by social capital - which cannot be gained just by improving digital marketing skills.

Baker Aron Ho, who has been running cake shop Layere since 2019, also says "the main challenge is the level of customer engagement".

"With an online storefront, each post has to be carefully worded and curated to maximise potential outreach and engagement," says Mr Ho, who uses Instagram and Facebook for marketing. "Even though user interaction (views and likes) can be tracked, satisfaction or effectiveness of the posts can be difficult to determine."

On top of that, Ms Tang notes that social media comes with a learning curve, plus the need to keep updating can be "quite overwhelming".

Keeping it casual

While the economic contribution of HBBs may not be very significant in the grand scheme of things, OCBC chief economist Selena Ling tells BT that the cottage industry "provides a buffer and alternative to formal employment at a time when job displacements became more visible".

"As such, it may be a viable trade-off for the interim when the global and domestic economies are still on a less-than-firm footing," she says.

Sharad Lad, Procter & Gamble's regional vice-president of purchases, names "a distribution of income that is more evenly spread for the country as well as within the family" as another social advantage, since many micro-enterprises are women-owned.

"The biggest benefit, apart from the obvious economic ones I see, is the skill-building that eventually percolates down generations," says Mr Lad, who is involved in corporate efforts to diversify its supply chain with local, small businesses.

Yet HBBs may not have the grand scheme in mind as they muddle on.

Melanie Perera, who opened Mel's Bakeology in September last year, thinks her business would stay fully online even if it expanded beyond the average of 10 orders a month.

"We like the flexibility that it gives, and also don't have to stress about having to pay rent and people," says Ms Perera, despite plans to standardise the menu and invest in equipment to enable larger-batch production.

Meanwhile, Mr Soong says that he is content with monthly profits of about S$500 to $600, "but I don't think we try and chiong (rush) to say, 'Let's hit S$2,000 to S$3,000'".

"Because it's the two of us running the business while having to do our day jobs, it is difficult... The part we are treading carefully on is over-promising and under-delivering," he says.

Roger Chung, director of technology, media and telecommunications research at Deloitte, adds "there's not a lot of room left for too many micro, small and medium-sized enterprises to survive" in e-commerce here.

That's even as buyers fret over low product quality and merchant reliability as the top two deterrents to online shopping, according to a recent poll from the firm. Thus, "the majority of the e-commerce market in Singapore is dominated by large established e-commerce players", he says.

Noting that HBBs can span a gamut of industries and entrepreneurs, Prof Ng says: "It depends on what your goals are. Some people do it as a hobby, and that's fine. Some people do it as a service to the community."

Micro-businesses need to be tech savvy to grow

NOT all home-based businesses (HBBs) harbour ambitions of scaling up and making it big. Most, in fact, are content to stay in cottage industries.

After all, Sea Group, parent of marketplace Shopee, found in a poll last year that most e-commerce sellers were not household breadwinners.

Still, more professionalism may not be amiss for micro-businesses.

Labour economist Walter Theseira tells BT: "There is no issue with micro-HBBs that people don't rely on for a living - for example, weekend bakers - and large HBBs should be encouraged to formalise and expand.

"But I do think there is a long-run social problem with HBBs that people rely on for a living, because those HBBs provide no social protection to the workers or their families.

"That's why formalisation of the economy is considered a good thing for economic development!"

To be sure, rules on the use of residential property limit HBBs' ability to expand in house. For example, the Housing Board prohibits advertising for businesses based in public flats. HBBs also cannot hire workers from outside the household.

Yet venturing offline is also a tough sell, with Ms Lee citing the high brick-and-mortar overheads as one reason that "most micro-businesses are likely to remain purely online to enjoy the benefits of staying virtual".

Therefore, tech-enabled skill-building can be key for micro-businesses.

That's the case especially during the economic challenge of Covid-19, suggests Minnie Venkatachalam, regional director for non-profit WEConnect International, which builds up women entrepreneurs.

"They have to typically scale the size of their clientele, and one of the ways is obviously how can they best leverage technology, how can they best improve their marketing and communication skills," she says.

Samuel Tan, course chair for Temasek Polytechnic's diploma in retail management, notes that small online businesses must work hard to stand out in a crowded e-tail market.

"Smaller players have to be sensitive to market needs and be price-sensitive as well," he advises. "To be sustainable, they need to be constantly touching base with their customers, via the online platform."

Indeed, Pauline Sim, head of UOB-backed startup accelerator The FinLab, tells BT that "e-commerce is their lifeline for sustainable business growth and a majority of them are keen to improve their digital marketing and e-commerce capabilities".

For example, pastry chef Aron Ho, who runs home-based bakery Layere, turned to The FinLab for lessons on how to create animated videos to raise his online profile.

"As the majority of customer engagements are through Instagram and Facebook, I wanted to enhance Layere's marketing capabilities via social media," he recounts.

Highlighting how business owners can form networks and scale up, Ms Minnie adds: "That becomes an amplified movement, where they're creating economic opportunities beyond just their individual businesses."

But Ng Weiyi, assistant professor of strategy and policy at NUS Business School, adds: "Non-online channels are invisible but that doesn't mean they are not there...

"There are definitely networks that are not online. The auntie who has loyal customers who buy her pineapple tarts every year - you probably wouldn't know about these people, unless you know her personally."

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