Department stores and disappearing shoppers

Department stores and disappearing shoppers

A TYPICAL weekday evening in town in a major department store will see empty floors and sometimes more staff than shoppers.

What ails retail in Singapore, especially in big department stores?

Major department stores are vocal in their complaints.

Metro Holdings chalked up what it called a "disappointing level of sales" that resulted in losses being incurred by its new department store at The Centrepoint in the final quarter of last year.

Isetan (Singapore) not only reported a net loss of $3.1 million for the year ended Dec 31 on the back of higher rents and slower sales, but also complained of the "challenging and competitive environment". The department store operator said that other than its new store at Jurong East, other outlets registered lower sales for last year compared with 2013.

It ceased its own retail operations at Wisma Atria earlier this month, preferring to rent out the premises instead.

Over at Al-Futtaim Group, the Dubai-based owner of Robinsons and John Little closed the Marks & Spencer outlet at The Centrepoint on March 29, after 28 years there. It had opened in 1987, formerly known as St Michael.

It will also close the John Little stores at Marina Square and Tiong Bahru Plaza to "focus manpower and resources on enhancing its Plaza Singapura and Jurong Point stores", the group said.

Just how bad is the situation?

Figures from the Department of Statistics show that sales at department stores fell 12.4 per cent in January, compared with a year ago. Total retail sales value has also fallen.

The value is estimated at $3.7 billion in January, a drop from $3.9 billion a year ago. Department store sales form part of total retail sales value.

Despite falling numbers, the retail sector continues to be important. As at Dec last year, it employed 173,000 workers, about 4.8 per cent of total employment.

More shopping options

EXPERTS say one reason for the lacklustre retail scene is the fall in visitor arrivals.

The Singapore Tourism Board reported a 3.1 per cent fall in visitor arrivals to 15.1 million last year, lower than its projection of 16.3 million to 16.8 million. This is also the first drop since 2009.

Nine out of Singapore's top 15 visitor-generating markets, including China, had falling visitor numbers. The first two months of this year saw only 2.4 million visitors, a 5 per cent dip compared with a year ago.

Department stores also face the challenges of rising rent and labour crunch, like all businesses in high-cost, labour-scarce Singapore.

On top of that, department stores face unique challenges.

Nanyang Technological University's Dr Lynda Wee, an adjunct associate professor specialising in retail management, says shoppers have more options to spend these days: Low-cost travel and a strong Singapore dollar make it cheaper to spend overseas; while online retailers and pop-up stores offer a wide variety of goods, often at lower prices.

SIM University's Dr Guan Chong, head of the marketing programme at the School of Business, says cities in the region, such as Bangkok and Hong Kong, are competing to be a regional shopping destination. Singapore's high prices and strong dollar do not help.

Indeed, Mr Kesri Kapur, Al-Futtaim Group's head of business in Asia, said the group's stores in Thailand and Malaysia see good business. Apart from price, he thinks service staff perform better in those countries, as they have a more positive attitude, which helps drive some of the sales.

Mr Kapur is not alone in saying poor sales service is one reason for poor performance in department stores here.

Insead's Professor Amitava Chattopadhyay, an expert in branding and consumer behaviour, compared shopping in Singapore with shopping in the United States.

Over in the US, places like high-end fashion retailer Nordstrom and outdoor gear and apparel retailers REI and LL Bean have no-questions-asked return policies, as well as retail staff who know several brands across one product category, for instance.

He said: "In most of the rest of the world I'm familiar with, such as the US, or even in other parts of Asia, you walk into the store, and you have sales people who are responsible for the section, like shoes or appliances.

"In Singapore, it's by brand in many stores, such as Takashimaya or Tangs. Recently, I chose a few pairs of shoes and when I looked for help, they told me: 'I'm dealing with brand X so I can help you with this pair, but for the other brands you have to find another sales person.'"

At Nordstrom, he would get recommendations across brands from one staff member.

He said: "There is a better understanding of what target customers want from the shopping experience in the US, but here it's become 'I have this thing that I want to peddle'. The quality of service is poor. Part of it is structural. Retailers are like gigantic real estate agents, they aren't really interested in the customer's experience."

Singapore still has to get the basics right, such as great service and differentiated shopper experiences, said Dr Prem Shamdasani, associate professor of marketing at the National University of Singapore Business School.

While some may argue that the problem is one of excess supply, Ms Alice Tan, Knight Frank Singapore's head of consultancy and research, begs to differ.

Singapore retail space per capita is 11.8 sq ft per person.

This is 38.2 per cent lower compared with Hong Kong, a strong retail competitor with a famed reputation, at 16.3 sq ft per person.

This could explain why retail sales per square metre of floor area are still healthy.

Figures released last month showed retail sales per sq m of floor area of the overall retail trade industry - including personal goods, and transport and household equipment, for instance - grew by 4.8 per cent over 2012 to $12,600 in 2013.

Retailers of personal goods registered the highest retail sales per sq m of $14,700, a 4.8 per cent increase over 2012.

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