A bright future ahead for Singapore’s retail sector

Why Singapore’s retail industry can expect a future upturn.

BI-min
June 6, 2016

Singapore is one of the world’s top 10 destinations for luxury retailers, with 69 per cent of global luxury and business fashion brands having a presence here.

This makes Singapore a big player in the global retail scene, alongside other major cities like New York, London, Paris and Tokyo.

Singapore’s retail success looks set to continue, with major international labels like Hong Kong brand Pedder Group and French womenswear label Maje opening new flagship stores. Japanese brands, like Muji, Uniqlo and Owndays, are also making extensive expansion plans in the country.

And there is much more potential in retail. The sector has seen many recent changes, from the arrival of quality shopping malls in the heartlands to the increasing popularity of e-commerce.

With these changes come growth opportunities, whether from the standpoint of an investor or a retail operator. Here is a look at what’s to come for Singapore’s retail sector.

High-level support from the government

Forecast of Singapore’s retail industry shows promise. Sales rose in March 2016 by 5.1 per cent over the same month last year, and the retail trade sector is also expected to post a 4 per cent growth this year.

In 2015, the government unveiled a new five-year retail productivity plan to help retailers snag a larger slice of the global sales pie. With tie-ups to capture the e-commerce market, and branding and concept innovations, the plan builds on a 2011 initiative to improve operational efficiency with technology.

The Singapore Tourism Board (STB) is also intensifying its efforts to promote Singapore as a leisure and MICE destination of choice. It is also working to develop the industry with innovation and new talents. As a result, tourism receipts in 2016 are expected to grow up to 2 per cent.

Exciting events such as the Great Singapore Sale, fashion festivals and consumer technology events, many of which enjoy backing by government agencies, also help foster a vibrant, healthy retail industry.

With these high-level strategies in play, Singapore is not about to relinquish its title as a shopper’s paradise anytime soon.

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The annual Great Singapore Sale adds excitement to Singapore’s retail scene, attracting tourists as well as locals. Photo: ST

Hope floats for the economy

Another reason to rejoice: signs of an improving economy, both on a global and local scale.

Analysts at Morgan Stanley began the year predicting that the American economy will not only withstand the global economic turmoil, it could even keep growing until at least 2020. That augurs well for the global economy.

As for Singapore, economists in the private sector who were polled in a Monetary Authority of Singapore (MAS) survey in December 2015 say they expect the economy to grow by 2.2 per cent in 2016, with inflation turning positive at 0.5%.

Finally, according to a PricewaterhouseCoopers report in December 2015, over a third of Singapore households are expected to earn more than US$150,000 by 2018, which means that demand for higher-quality retail goods is likely to climb.

Shopping will come back in style

You can’t discuss the future of retail without mentioning the rise of e-commerce.

While online shopping is sometimes seen as a threat to brick-and-mortar retailers, a closer look at the situation suggests otherwise. Rather than stealing their business, innovative shopping platforms and apps are partnering traditional retailers.

Take fashion giant Zalora for example. While it began as an online shopping website, more recently the company has been experimenting with pop-up “click-and-mortar” stores which blend virtual and traditional shopping.

Meanwhile, other disrupters connect technology with brick-and-mortar retailers in unprecedented ways. For instance, on-demand grocery delivery service Honestbee works with traditional grocery stores and supermarkets, generating additional revenue for these retailers.

The emergence of technologies means new possibilities for retail, making shopping even more convenient than ever before.

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Grocery concierge startup Honestbee works with brick-and-mortar businesses to fulfill customers’ orders. Photo: BH

Strike while the iron is hot

With all these signs pointing to a potential upturn in the sector, now may be one of the best times to invest in retail property.

For small businesses, owning a shop is the best insurance against rising rents as economic recovery goes into full swing. For landlords, expect a substantial chance of benefitting from rental yield or capital gain.

Investors will find attractive opportunities in the rapidly developing city fringe, such as the Beach Road/Ophir-Rochor Corridor at the cusp of the financial district. Near enough to the city centre to benefit from the catchment population, yet without the hefty price tag of city centre properties, it is a great potential growth area.

With the arrival of strata-titled developments like City Gate, investors now have the rare chance to own individual retail units. This is an appealing investment option – it is affordable, attracts fewer stamp duties than other types of property investments, and offers healthy potential yields.

When City Gate is built, its dazzling façade and iconic architecture will bring a dose of glamour to Beach Road. Moreover, it will be the only sizeable shopping mall in the vicinity – an area that’s set to boom with the development of nearby districts already under way.

But investors must act fast, as the supply of such units is limited in Singapore.

So seize the moment and make your move – the time is right for an advantageous investment in retail.

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Strata-titled developments like City Gate are a good opportunity for investors keen on a slice of the retail pie.