Singapore’s tourism industry has been a key support to their retail sector.
In 2016, international visitor arrivals and tourism receipts scaled to a new high of 16.4 million and S$24.6 million respectively, proving Singapore’s importance as one of Asia’s leading retail destinations.
However, in 2017, a decrease in retail spend was seen despite the growth of Singapore’s tourism industry.
Though recently retail sales data has shown constructive signs of recovery. However, weak retail sentiments continue to persist. Despite retail sales increasing by 1.8% in July, other lackluster indicators were seen in the first half of 2017.
The Retail Sales Index (RSI), which has been trending downwards since 2014, reported a fall of 4.2 percent in Q2 2017 compared to end 2016.
Island-wide occupancy depressed to 91.9% in the second quarter of 2017, while the Urban Redevelopment Authority’s Retail Rental Index for the Central Region declined by 7.1% year on year, in the same quarter.
With global and political uncertainties arising, the weaker retail sentiment is expected to linger as local consumers continue to restrict their expenses.
What is causing the performance of the country’s tourism and retail sector to flow in opposing directions?
1. The Transition from Offline Retail to E-commerce
Although Singapore is innovating and coming to terms with E-commerce, according to business analysts, the country can move even faster to adapt to “new retail”.
The term was recently coined by e-commerce giant Alibaba, which involves combining offline and online businesses, and leveraging the Internet and customer data to improve sales.
Adrian Lee, research director at IT research firm Gartner, told The Business Times that local retailers have not quickly enough adapted to “new retail”, where they are able to provide a true omnichannel (a combination of physical and digital) shopping experience to customers.
As e-commerce grows in Singapore and in Southeast Asia, investors fear their malls could follow a downfall like with the US, thinktank Urban Land Institute (ULI) and PwC revealed.
In their “Emerging Trends in Real Estate Asia Pacific 2018” report, the projected compounded total return of Singapore’s suburban and prime retail assets for 2017 to 2022 played around 5%. This is lower than Sydney’s 8% and Kuala Lumpur’s 7.5%, some of the highest in the Asia Pacific region.
Jack Ma, the founder of Ali Baba, has urged Internet entrepreneurs to embrace “new retail” by tapping the Internet and big data so as to obtain and analyse customer data, draw market insights and adapt their manufacturing processes accordingly.
Click here for 3 Insights To Engaging Baby Boomers in E-commerce.
The rapid growth of e-commerce also adds another layer of challenges to Singapore’s urban logistics framework with the fragmented last-mile delivery and shorter delivery time offered to customers.
2. Change in Tourists Spending Preferences
Despite a 7.3% hike in tourist arrivals, there was a dip in their spending by half a percent.
An abrupt shift in tourists spending preferences was observed of late. According to the Singapore Tourist Board, around 4.6 million visitors arrived in the country this year in the first quarter and was observed to have spent less on shopping, accommodation and on FNB.
Tourists are showing increased preferences of spending on sightseeing, entertainment, and gambling, with a collective increment of 6% to $1.5 million in these areas, and lesser spending in shops.
The government data has revealed that tourist spending on shopping declined by 9 percent, with accommodation spending down 13% and food and beverage down by 16%.
Data derived from Knight Frank revealed that the amount spent per tourist fell 3.1% from US$386 (RM1,650) to US$374 between 2012 and 2016.
According to Bloomberg, Singapore’s reputation as a shoppers’ paradise, which saw investors pour S$10 billion into retail developments here in the past five years, is taking a pummelling because of weakness in the local economy and a drop in spending by tourists.
Commercial space has increased by a tenth in that period, but vacancy rates have risen to 7.3% from 5.0% and industry analysts expect them to keep rising.
Moreover, the sluggish global economy has put a brake on spending by Singaporeans, especially workers in hard-hit export sectors. Shoppers from abroad, meanwhile, spent 7% less in the first nine months of 2015 than they did in the same period of 2014.
Wealthy consumers from China, hit by an economic slowdown and a corruption crackdown at home, have less appetite for the luxury items as they flocked to Singapore to buy during the boom years.
3. Growing Inflation Rate
Find this useful? share it with your employees or peers in the industry