Faced with a challenging retail environment, the Al-Futtaim group will continue to close stores in Singapore, but expand its footprint elsewhere in promising Asian markets.
The group, which owns Robinsons, will shutter at least ten stores this year as it restructures its bleeding Singapore operations. This comes after it announced a number of closures last year, including its Marks & Spencer (M&S) outlet at Centrepoint, John Little at Marina Square and Tiong Bahru Plaza, along with several other Royal Sporting House (RSH) outlets.
"For retailers, everyone is facing tough competition," said group chief executive officer (Asia) of Al-Futtaim, Christophe Cann, who assumed the position in January.
"We are going to close the loss-making stores - at least 10 - across the brands," he added. The 60-80 affected full-time staff will be offered other positions across the group.
Singapore retailers are facing headwinds on multiple fronts, including high operating costs, a tight labour market and the strong Singapore dollar vis-a-vis regional currencies, not to mention the growing popularity of online shopping. In response to the latter, the group will launch an online shopping site in Q316, with pricing that's similar to those in its brick-and-mortar outlets.
With the slowing economy, attractive discounts are needed to lure customers, which continues to put pressure on margins.
To keep a tight lid on costs, Al-Futtaim is cutting back on recruitment, boosting staff efficiency and trimming capital expenditure as well as general and marketing expenses. "If we could get a bit of help from landlords to cross this difficult period, it will give me more incentive to go faster in getting new brands (and) investing," Mr Cann said.
He warned that the situation could deteriorate if more retailers close shop with the additional capacity from new malls coming onstream.
For its part, the retail industry needs a change in mindset to think out of the box and should work closely with partners such as government agencies, he suggested.
Today, Al-Futtaim has some 850 stores across South-east Asia, of which 125 are in Singapore. In addition to the Robinsons Group of stores and RSH, it also carries brands such as John Little, Zara, Massimo Dutti, Bebe and Ted Baker in its portfolio.
"At the moment, for big players like us, there is no real incentive to bring new brands into the Singapore market. It's a pity because that means we don't rejuvenate the fashion scene here and customers are waiting for that," he highlighted.
While the group is currently in talks with a number of Asian and European brands, he is looking for a "win-win" deal with landlords before taking on the risk of introducing new entrants to the market. Mr Cann suggests landlords consider a lower rent per square foot but take a higher cut of sales; negotiations with its landlords thus far are going slowly.
"If I can't find deals with landlords, I am more interested to invest in Indonesia, Malaysia or Thailand," he said. This is because costs in these markets are lower.
Last year, ebit (earnings before interest and taxes) for its South-east Asian operations rose 4 per cent although the group is losing money in Singapore, said Mr Cann, without divulging figures. But that is not stopping the group from investing in the city-state for fear of losing ground to its competitors.
Robinsons at Raffles City will undergo a S$12 million renovation in stages starting from July, while a facelift is also planned for its M&S stores at Raffles City, Parkway Parade and Paragon. In addition, it will, together with a local partner, introduce new food outlets at Robinsons at The Heeren, and will also launch an M&S cafe at its flagship M&S store in Wheelock Place. In addition, there are plans to bring in a new RSH concept in VivoCity.
Elsewhere in the region, it will launch three new M&S stores and potentially a new Robinsons store in Malaysia next year, while it will introduce retail brand Old Navy in Indonesia this April, before rolling the brand out in Malaysia and potentially, Singapore.
Overall, Al-Futtaim will put aside some S$80 million per year over the next five years to grow its presence and enhance its existing stores in the region. Aside from Malaysia and Indonesia, it is also eyeing emerging markets such as Vietnam.
This article was first published on March 30, 2016.
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