Retail in Singapore – how COVID-19 has changed the industry
Retail | 24 Nov 2021
The year-end shopping festival has kicked off in Singapore with various mega sale campaigns advertised for the upcoming holiday season. During this period, retailers have ample opportunities to boost their competitive edge through innovative business strategies to capture new avenues of growth and retain a loyal customer base. To achieve these goals, retailers must be mindful about implementing strategies aligned with consumers’ shifting preferences that are accelerated by COVID-19, such as globalisation and the digital revolution. The rise of such trends has created an avalanche of shopping options for consumers through alternative platforms, including websites, mobile applications, and e-marketplaces, beyond the traditional brick-and-mortar stores, making the retail industry in Singapore and across the world vastly different from what it was a decade ago.
Although these new shopping channels have opened markets and provided more customer engagement opportunities for retailers, they are also the perfect grounds for new competitors to set foot in the already saturated retail landscape. In light of the growing competition, retailers have struggled with declining revenues, sometimes to the point of closure, as with Robinsons’ (the departmental store) exit from Singapore after 162 years of operations due in part to falling demand brought about by the rise of e-commerce, exacerbated by COVID-19. Other notable retail brands which shuttered their Singapore outlets in 2020 include Topshop, Esprit, and Sportslink.
In this article, we shall explore more about the evolving retail landscape in Singapore and around the world, how COVID-19 is reshaping the industry, and what retailers can do to safeguard their businesses in an increasingly saturated market.
READ ALSO: Singapore SMEs weather the COVID-19 storm
The impact of COVID-19 on the retail sector
Nobody would have predicted that COVID-19 would go on to infect more than 250 million people worldwide since its debut at the end of 2019, leading to a global recession and change of trajectory for many businesses. In a concerted effort to battle one of modern history’s greatest health crises, governments around the world imposed stringent travel restrictions and measures to safeguard public health interest, invariably shaking up the retail industry overnight and accelerating the adoption of e-commerce among consumers and businesses. Based on PwC’s June 2021 Global Consumer Insights Pulse Survey, more than 50 percent of global consumers have become more digital since October 2020. A report by the United Nations Conference on Trade and Development also revealed that global e-commerce sales have jumped by 22 percent due to a rise in demand for online goods amid nationwide lockdowns, safe distancing measures, and personal safety concerns. To further illustrate the growth of e-commerce, more than 25 percent of 15,000 Indonesian retailers joined Shopee after the onset of COVID-19.
Meanwhile in Singapore, a survey by iPrice Group found that nearly three in four consumers shopped online more frequently since the start of COVID-19, such that the total visits to e-commerce platforms during the first half of 2020 grew by an average of 23 percent. Although the retail industry in Singapore, which contributes about 1.4 percent to the GDP and three percent of the country’s workforce, has struggled with multiple challenges over the last decade – such as shortage of manpower, increase in occupancy costs, and rise in competition – the footprint of food and beverage as well as sport and fitness retailers have risen remarkedly, spurred by an increase in social media usage and emphasis on personal wellness among consumers. Conversely, footfall at department stores, supermarkets, and leisure and entertainment outlets have dropped with the rise of e-commerce.
What retailers can do to remain competitive
There are some silver linings to be found within the retail industry in Singapore and across the world despite the challenges compounded by COVID-19. Retailers can look to the following strategies to remain competitive:
a) Adopt an omni-channel retail strategy
It is not sufficient for retailers to only have an online presence for transactional purpose as the e-commerce market trends towards maturation. To stay competitive, retailers need to adopt an omni-channel retail strategy – for instance, to integrate both online and offline experiences over multi-channels – to provide customers with a seamless shopping experience through establishing an online presence while sustaining footfall in physical stores. Such strategy requires retailers to reinvent their business models, improve supply-chain management, last-mile deliveries, technology capabilities, and marketing techniques. For instance, Amazon launched a grocery store in United States in 2020 to pilot its cashier-less technology “Just Walk Out”, which powered 25 Amazon Go convenience stores. Meanwhile in Southeast Asia, Bata Primavera upgraded its website to provide customers with the choice to order an item online and to collect their purchase at a preferred Bata store thereafter.
b) Develop environmentally sustainable business model
The retail industry has also been under intense criticism for its heavy use of plastic packaging, especially as e-commerce takes off during COVID-19. As consumers become increasingly eco-conscious and want to be part of the sustainability movement, retail players across the world are pressured to reduce their carbon footprint and establish more sustainable practices focused on climate change, biodiversity, and scarce resources.
According to a survey conducted by McKinsey & Company with more than 2,000 consumers from Germany and United Kingdom, 57 percent of respondents shared that they have already made significant changes to their lifestyles to lessen their environmental impact during COVID-19, while 88 percent of them believed that more attention should be channelled towards reducing pollution. Closer to home, about 60 percent of consumers in Singapore preferred socially-conscious brands and would like brands to be more eco-friendly and sustainable. Eight in 10 Singapore residents also ranked “sustainable living” as the most important, according to a Climate Index survey published by OCBC Bank and digital media company, Eco-Business.
Singapore has also intensified her efforts through initiatives, such as the Zero Waste Masterplan and the Singapore Green Plan 2030, to promote a more sustainable future in the city-state. Additionally, Enterprise Singapore will be setting aside up to $180 million to support the Enterprise Sustainability Programme, expecting to benefit at least 6,000 enterprises over the next four years by providing training workshops and financing support to help firms develop sustainability capabilities and seize opportunities in the green economy.
Advocating the push for a more sustainable business practice in the retail sector, Singapore’s homegrown e-commerce fashion retailer, Zalora, is also pushing ahead with its green commitment by reducing its environmental footprint. “We decided that the best way to do it is to make commitments public because that creates a degree of accountability that you can’t shy away from. We’ve now made sure that all of our packaging is at least 80 percent recycled,” said Gunjan Soni, CEO of Zalora Group.
Going green is certainly a win-win situation for consumers, retailers, and the environment. By actively pivoting to environment-friendly business practices, retailers can benefit from a boost in public reputation, leading to business growth.
c) Implement a “Buy Now, Pay Later” payment option
The “Buy Now, Pay Later” (BNPL) payment scheme offers consumers the convenience to make a purchase and defer payment without incurring any interest charge within a specified timeframe, and without the need to own a credit card. Given such flexibility, BNPL has grown increasingly popular among consumers who are cautious about spending in times of economic uncertainty during COVID-19.
The BNPL option at checkout has also proved to be useful at expediting purchase decisions among consumers. According to a research by Mastercard, 43 percent of consumers in the Asia Pacific region were willing to increase spending by at least 15 percent if they were allowed to pay for their purchases via instalments.
In Singapore, the BNPL payment scheme has gained traction in recent years, with COVID-19 being one of the reasons for its unabated growth as more people turned to buying and selling online during this period. A survey conducted by financial comparison platform, Finder, found that 38 percent of Singaporeans have used a BNPL service as of October 2020. Meanwhile, companies such as Citibank, Fave, and convertCASH have also jumped on the bandwagon by launching their own BNPL services to capture a share of the digital lending market in Southeast Asia, estimated to be valued at US$92 billion by 2025.
d) Leverage on the power of technology and data analytics
Technologies play a crucial role in helping retailers enhance customer engagement and product offerings, as well as streamlining back-end capabilities to boost operational efficiency. A survey by Accenture found that nearly seven in 10 consumers in Singapore are more inclined to support a retailer that utilises immersive technologies, such as virtual dressing rooms using augmented reality; three in five respondents also reported to having better brand recall of companies that regularly engage them with such technologies. Retailers can also save on costs when they are able to accurately track inventory and sales activity across multiple channels in real time and reduce dependence on manual labour through the use of technology.
However, technology alone is less powerful without big data. Retailers who capitalise on software to capture consumer data and generate consumption insights would benefit more from such an investment in the long term. By mixing technology with big data, retailers can glean better knowledge of consumers’ shopping behaviours, qualify leads, and fine-tune marketing strategies to boost retail sales. For instance, point-of-sale data analysis can assist retailers in deploying the right marketing techniques by providing retailers with insights to identify consumers’ spending patterns. As such, retailers would find it easier to upsell, for example, a pair of earpiece to someone who regularly purchases phone covers, by presenting the opportunity as a promotional bundle.
From matching consumer preferences with spending patterns derived from big data, to leveraging immersive technologies to enhance customer engagement, opportunities in the retail scene are boundless – if retailers are able to innovate and identify consumer trends.
Shifts in consumer behaviours a permanent phenomenon beyond COVID-19
The influence of e-commerce will continue to dominate consumers’ retail habits beyond COVID-19. According to Ms Stephanie Davis, vice president for Southeast Asia at Google, consumers chose e-commerce amid the pandemic not just because they wished to avoid potential exposures to the virus, but also because e-commerce made their lives more productive with the convenience it offered. Echoing these sentiments, Mr Kunal Chatterjee, Visa country manager for Singapore and Brunei agreed that it is unlikely for consumer behaviours to reverse, even after vaccines become more widely available. Based on a recent study by Visa, nearly 50 percent of consumers in Singapore have shopped frequently at stores near their homes through online orders via mobile applications, and 20 percent of respondents expect to continue shopping on e-marketplaces beyond COVID-19.
While brick and mortar retail stores will never cease to exist, e-commerce is expected to continue evolving to increase convenience for consumers. Beyond COVID-19, seamless integration of online and in-store retail experiences is likely to become commonplace. It is imperative for retailers to adapt their business strategies to keep up with consumer behaviours, preferences, and trends in order to remain competitive.
READ ALSO: Trends in Singapore’s food services industry
Support for companies in Singapore’s retail industry
Aligned to the Retail Industry Transformation Map, the Retail Industry Digital Plan aims to make going digital simple for small and medium-sized enterprises (SMEs). The plan provides a step-by-step guide on the different types of digital solutions which local SMEs at different stages of growth can adopt.
At the Digital Tech Hub, SMEs can build their digital capabilities through the workshops and seminars offered, including digital transformation workshops for retail businesses. Experts will provide SMEs with information in areas like data analytics, data protection, cybersecurity, and internet-of-things, as well as guidance on using advanced technologies.
The Retail Best Practices Masterclass Series provides companies the opportunities to access world-class tools in decision sciences, data analytics, and insights to solve challenges more efficiently.
Start Digital was launched in January 2019 by Infocomm Media Development Authority and Enterprise Singapore to help new SMEs deploy fundamental digital solutions that are easy to implement. The Start Digital solutions also include digital collaboration tools to enable remote working, social media marketing, and integrated digital applications such as e-invoicing and e-payment.
READ ALSO: Resources page
- Bala, S. (2021, July 1). Singapore online retailers go green by merging fashion with sustainability. CNBC. Retrieved from: https://www.cnbc.com/2021/07/02/singapore-online-retailers-go-green-by-merging-fashion-with-sustainability.html
- Hsu, E., Nor, A. (2021, April 1). The retail scene in post-pandemic Singapore. The Business Times. Retrieved from: https://www.businesstimes.com.sg/hub-projects/property-2021-april-issue/the-retail-scene-in-post-pandemic-singapore
- Hutton, J. (2021, July 2). As pandemic drags on, South-east Asia’s retailers accelerate their shift online. The Straits Times. Retrieved from: https://www.straitstimes.com/asia/se-asia/as-pandemic-drags-on-south-east-asias-retailers-accelerate-their-shift-online
- Ministry of Trade and Industry. (n.d.). Retail Redefined An Industry Transformation Guide. Retrieved from: https://www.mti.gov.sg/-/media/MTI/ITM/Lifestyle/Retail/Retail-ITM—booklet.pdf
- Neoh, J. (2021, October). Finding the silver lining in Singapore’s retail story. Singapore Business Review. Retrieved from: https://sbr.com.sg/retail/commentary/finding-silver-lining-in-singapores-retail-story
- Reagan, C. (2021, September 27). Retailers bid farewell to layaway, as shoppers embrace buy now, pay later options. CNBC. Retrieved from: https://www.cnbc.com/2021/09/25/why-retailers-are-embracing-buy-now-pay-later-financing-services.html
- The Business Times. (2021, October 7). The changing face of Singapore retail. Retrieved from: https://www.businesstimes.com.sg/real-estate/the-changing-face-of-singapore-retail
This article is contributed by Cheng Ee Shan, Senior Executive (Engagement), IndSights Research.