Hard slog for retail in winning customers

Hard slog for retail in winning customers

SINGAPORE - The retail industry is battling rising costs, a slowing economy and stiffening competition for a share of the consumer dollar.

The strong Singapore dollar, too, could drive away tourists and lead to lower tourism receipts, while giving locals an incentive to shop overseas.

"Rentals are still going up, albeit at a slower rate, and more recently, the shortage of manpower and the ensuing increase in labour costs weigh heavily on retailers' shoulders," said Lau Chuen Wei, executive director at the Singapore Retailers Association. "In order to survive, retailers will have no choice but to increase prices, which will in turn affect the Retail Sales Index in a very price-sensitive market where consumers are spoilt for choice."

Still, data released this week showed that retail sales bounced back in August, rising 3.2 per cent year-on-year and 0.9 per cent month-on-month, after registering a 2.9 per cent fall year-on-year in July from the same period a year ago and inching up 0.4 per cent month-on-month from June.

Citi economist Kit Wei Zheng expects headline retail sales growth to stabilise in coming months, with full-year sales growth projected at 4 per cent, partially due to the tight labour market and a boost in sentiment from the stockmarket rally in the third quarter.

"Looking ahead, consumers will expectedly remain cautious in light of the high level of global economic uncertainty, which will keep retail sales growth moderate," said Leif Eskesen, chief economist (Asean) at HSBC Global Research. "The slowdown in wage growth since last year and still firm inflation are also likely to dampen consumer spending."

The strong Singapore dollar may also dissuade tourists from visiting the country. The Monetary Authority of Singapore (MAS) last week announced that it was keeping monetary policy unchanged to help battle inflation. Inflation could creep slightly higher than 4.5 per cent this year, MAS said.

"The Singapore dollar continues to strengthen, making it more attractive for Singaporeans to travel, reducing the size of the wallet for discretionary spending within Singapore," Ms Lau continued. "The growth of online shopping has offered yet another option for consumers, further eroding the sales in brick-and-mortar stores."

While topline is a key indicator of performance, margins also have to be taken into account, especially as retailers contend with more cautious consumers, higher foreign worker levies and tighter foreign worker quotas.

At Best Denki, sales fell 9 per cent year-on-year in Q2 and Q3. Managing director CJ Raj said sales since the beginning of October have looked "quite bleak", though the company still hopes to buck the market trend.

On one hand, the higher-income group is still shopping, as evidenced by strong demand for Sharp's new 80-inch LED television which Best Denki launched in mid-August. On the other hand, the mass market is looking for more bang for their buck, he said.

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