Retailers had a great fall over the bricks-and-mortar wall but they’re getting up
At the start of the “circuit breaker”, most retailers were hit immediately, as the non-essential businesses were forced to close temporarily. Business was not as usual, but all their running costs were. It took the government a while to respond and give retailers rebates and grants to help offset costs for rental, manpower and the rush to digitalise. Unfortunately, that was not enough to help many tide through the rough period. In September, retail business closures in Singapore reached a 10-month high, with 457 companies calling it quits, according to data from the Accounting and Corporate Regulatory Authority. Retailers, especially the smaller companies that relied heavily on their bricks-and-mortar stores, needed more help than just rebates.
With most of the retail stores located in malls, some landlords have stepped up to help their tenants. For example, apart from passing down rental rebates, CapitaLand has created online platforms eCapitaMall and Capita3Eats to help its tenants go online and generate online sales. Chris Chong, managing director, retail, CapitaLand Singapore, calls such platforms the next “evolution” to drive more bricks and click sales for the retailers. Launched in July this year, the two platforms have already signed more than 400 online merchants.
In May this year, during the circuit breaker, the proportion of online sales out of total retail sales was 24.8% — a sharp spike from 9.1% in March. But, in Phase Two, shops have reopened and for September, the proportion of online sales, according to the Department of Statistics, has moderated back to around 10%. In August, it was 10.9% and the following month, 11.2%.
As several retailers pointed out to The Edge Singapore, upon the start of Phase Two, more consumers are indulging in some physical retail therapy, leading to higher revenue at physical stores and lower online sales.
Going online may have helped during the circuit breaker, but with safe distancing measures gradually relaxing, is physical shopping in again?
From the perspective of Douglas Benjamin, vice president of the Singapore Retail Association , much has been said about the effect of e-commerce and how this can help augment business. “This is very true and most retailers have spent the last six months or so trying to fast-track the development of their e-commerce business to provide a robust and attractive platform for their customers,” says Benjamin, who is also the COO of FJ Benjamin.
“However, it must be noted that for most retailers, this is not a magic pill that will solve all ails immediately. Many reported brisk sales during the circuit breaker but that once stores opened up, business on e-commerce dropped a fair bit. Therefore, e-commerce must be seen as a mid-to long-term strategy to diversify the bricks-andmortar business, and take advantage of (and in fact mould) consumer behaviour,” he adds.
Even as Singapore prepares itself for Phase Three, managing director Ng Aik-Phong of payments and rewards platform Fave does not believe that retailers might be a direct beneficiary from the relaxed safe distancing measures. “I think the main beneficiaries will be the F&B players, as Phase Three is likely to allow larger gatherings and more people will be back in their offices. But retailers could be a secondary beneficiary from that, as more people are likely to be out more frequently,” he says.
Ironic situation
With malls now sporting crowds and queues again, retailers are facing a paradoxical dilemma. As much as retailers want to drive traffic to their stores, Singapore’s Ministry of Health has released an advisory that allows businesses to resume, but with certain restrictions and requirements.
For example, retailers are to avoid activities that would attract large crowds inside and outside of the retail establishment, and this includes “aggressive shopping deals” and “closed-door members sales”; implementing contact tracing and health checks for every individual before entering the store; as well as limiting the store’s density to one person per 10 sq m of gross floor area.
Apart from that, retailers have to limit the display and testing of products, all of which have to be sanitised frequently with the costs to be borne by them. “Everyone is in a difficult situation because there is no tried and tested playbook for the times we find ourselves in. Everyone is doing what they feel is best and sometimes, as with everything in the real world , one thing may be at the expense of the other,” says Benjamin.
So, if retailers cannot promote their stores and cannot maximise their retail space, what can they do to attract more customers?
According to Phil Pomford of Fidelity National Information Services (FIS), loyalty programmes that are hosted by retailers are a good way to not just attract new customers but more importantly, retain existing customers.
Be it dishing out member promotions, points or other sorts of incentives, shoppers like to know that they are getting something more than what they are purchasing, says Pomford, who is managing director for international markets, merchant solutions, at FIS.
Lawrence Teo, head of operations at local departmental store chain BHG, estimates that shopper traffic will continue to be 20% to 50% below that of last year. “And since we are not able to host atrium sales too, the only way to increase our sales is to increase our conversion and average transaction.”
“Times are hard and we have to also be empathetic towards consumers’ needs and constraints. Hence, we make it a point to offer value-for-money products and instalment plans to better empower consumers,” says Teo, who has partnered with Fave to provide cashback and e-cards offerings, as well as Hoolah to offer three-month interest-free instalment plans.
Demand and supply
Retailers also need to tweak their offerings to meet consumers’ needs. Currently, home-related and hygiene products, as well as comfortable loungewear (considering many are still working from home) are popular.
Local custom fragrance retailer Scent by Six used to sell mainly perfumes. However, it has expanded its home fragrance range. “People are spending more time at home and want their personal space to be more comfortable and a more conducive space to work in. And that was how we adapted to the changing environment — we identified that this was what the customer wants and we shifted our marketing focus,” says its business development manager, Zac Leow.
Similarly, Kelvyn Chee, CEO and founder of Decks, the retail group which manages brands such as Hang Ten, Surfers Paradise and Island Shop, noted that since Phase Two, sales related to office wear declined by 30% to 50%; anything related to travelling dropped from 50% to 70%, compared to the pre-circuit breaker period. While Hang Ten and Surfer’s Paradise saw an increase in sales due to its affordable and comfortable home and sportswear wear range, it still has not reached pre-Covid levels as it is losing out on mall and department store atrium promotional sales.
Chee has always kept a keen eye on what is to come. Before Singapore announced DORSCON Orange, he was worried about the cost and availability of disposable masks for his company’s staff. “During the start of the pandemic around February, everyone was panic-buying masks and the prices were so high because of the demand. So, I decided to bring in reusable cloth masks. I was also one of the first few companies to sell cloth masks in Singapore,” says Chee, who eventually worked with the various Singapore government agencies to bring in reusable masks for national distribution. They also worked with supermarkets, pharmacies and departmental stores to sell their reusable masks.
Yuki Yamada, CEO of Japanese apparel brand Uniqlo Singapore and Malaysia, has also noticed a pivot in consumer behaviour towards essentials and the increasing prioritisation of comfort, value and quality. After all, this is the new normal. “What has been most important to us is that we continue to meet our consumer’s needs with our products,” he says.
Last-mile delivery will improve and further enhance online shopping. Yet, physical retailers will continue to have a place to hang their hats. “Broadly, we continue to experience structural changes within the retail landscape and are of the view that online sales will continue to grow,” says OCBC credit research analyst Seow Zhi Qi. “We think our society would arrive at a new equilibrium where one engages to some extent in online shopping as well as physical shopping depending on their preferences and needs. With that, we can expect the offerings available in shopping mall to evolve.”