News of the adverse effect of the novel coronavirus (COVID-19) outbreak on Singapore retailers has been hitting the front pages of dailies and social media feeds. The retail sector has just experienced its worst year since 2013, with more challenges to come as the full impact from COVID-19 unfolds.
In December 2019, retail sales dropped 3.4% year on year, higher than the forecast of a 2.5 % decrease by economists. The fragility of retail sales and the COVID-19 outbreak are a double whammy for retailers in Singapore. As the alert level of the disease was raised earlier this month to DORSCON Orange, consumers are taking precautionary measures which has led to reduced visits to the shopping malls and a drop in discretionary spending. In addition, revenue from tourists has declined sharply as some travel advisories have been issued about travelling to Singapore due to the high number of confirmed COVID-19 cases in Singapore relative to other countries (excluding China).
Reduction in foot traffic, thin margins and supply-chain disruptions are impacting regional economies and businesses – especially businesses that are located in central business districts (CBD) that are now starved of their regular customers as more companies are having their employees work from home in a bid to reduce exposure to COVID-19.
One of the retail segments that has been badly affected is the food & beverage (F&B) sector. The Restaurant Association of Singapore (RAS) recently indicated that close to 60% of its members are not prepared nor equipped to deal with the impact of COVID-19 on their operations. 57% of the restaurants expected a 50% loss in revenue in the next three months as the F&B sector is facing a 50-80% plunge in business.
Landlords have tried to soften the impact on retailers by extending rental rebates to tenants, rolling out a marketing support program for retailer-driven promotions and mall-wide marketing initiatives, reducing mall operating hours. The Singapore Budget is expected to have measures in place to aid businesses affected by the COVID-19 outbreak.
The impact of COVID-19 on the economy will be short term, and a recovery phase is expected once the spread of the virus is contained, and there is a fuller understanding of the nature of the virus. This will reduce consumer anxiety and it will be back to business as usual. However, most retailers may have to double or triple sales once the market recovers from the outbreak, just to make up for lost time. This leaves little room for error in the remaining months of the year.
During this recovery phase, we anticipate a highly competitive marketplace as retailers begin to engage in aggressive advertising and promotion campaigns, leading to an inevitable uptick in the cost of advertising and promotions at this time.
So, what can retailers do NOW to out-perform the competition during the recovery phase:
- Don’t wait until the market recovers to take action – With the shift away from offline retail during this period, the low hanging fruit for retailers would be to divert resources to focus on E-commerce Sales Channels
- Identify who your Existing Brick-and-Mortar Customers Are – these are people who work or live around your Store
- Leverage on Promotions and Digital Vouchers to Collect Customer Data from this segment e.g., use of mobile and email for these initiative.
- Build a Customer Database from the data collected from your online marketing activities
- Lock-in Customer Demand ahead of time by designing long-dated promotions
- Re-engage your existing Brick-and-Mortar Customers upon market recovery using Low Cost Communication Channels e.g., SMS and emails using the information that was collected from the marketing activities above.
These are some strategies to stay ahead of the game in an Over-saturated and Competitive Market.
Together, We WILL get through this!
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