Sales growth the key priority in next phase of productivity

Singapore

AS the retail sector moves into its next phase of productivity improvements, businesses must focus not just on operational efficiency but also on driving top-line growth, says Senior Minister of State for Trade and Industry and National Development Lee Yi Shyan.

And with sales growth a key priority in the government's Second Retail Productivity Plan, support and know-how in the areas of e-commerce, branding and concept innovation will be provided to retailers over the next five years.

Said Mr Lee at the launch of the new plan on Tuesday: "While a good majority of our retailers could improve their productivity by improving operational efficiency, at least in the short term, I believe a vast number of our retailers will have to transform to become e-retailers quickly. The trend of shopping online is unlikely to reverse, and we have to be prepared for this."

The new productivity plan - developed by Spring Singapore in consultation with industry stakeholders - spans 2016-2020, and builds on the first five-year plan launched in 2011.

Mr Lee said that 1,900 retailers benefited from the first plan, which aimed to support businesses in improving operational efficiency.

"While we have made good progress, much more needs to be done. We need to deepen the transformation of leading players, and also bring on board a large number of retailers who may be slower to adapt to fast-changing consumer preferences and consumption patterns," added Mr Lee.

The government has identified the retail sector as one of the priority sectors for productivity improvement. It employs 5 per cent of Singapore's workforce and accounts for about one per cent of the country's gross domestic product (GDP). In 2014, the sector generated about S$35 billion in annual operating receipts and accounted for about 125,000 jobs.

Given the focus on driving sales growth, the new plan - dubbed Retail Productivity Plan 2.0 by Mr Lee - will place heavy emphasis on internationalisation and helping retailers sell online. In particular, support will be given to companies to invest in product development, brand-building, e-infrastructure, digital advertising, and channel fulfilment.

Noting the rising trend of e-commerce here, Mr Lee cited a 2015 study by Euromonitor International which showed that online spending in Singapore grew from S$1.08 billion in 2014 to S$1.22 billion in 2015 - marking growth of 13 per cent over a year.

"The choices before our retailers are clear. If we only play defensively, we would see our retail sector growing very slowly, or perhaps not at all. Our strategy therefore cannot be limited to cost-cutting and efficiency improvement. Our strategy has to be offensive, to include selling more, beyond the limitation of store-fronts and serving markets in the region and beyond," said Mr Lee.

Added Kee Ai Nah, group director of the Industry & Enterprise Group at Spring Singapore: "With the current economic outlook and targeted annualised productivity growth of 2-3 per cent until 2019, we hope to achieve a value-added per worker growth of one per cent over 2016-2020 for the retail sector, by focusing on the dual objectives of driving top-line growth and improving operational efficiency."

Beyond revenue growth, the Second Retail Productivity Plan will also strengthen firms' efforts to improve operational efficiency by encouraging retailers to adopt manpower-saving technologies such as self-checkout systems and electronic shelf-labelling.