What's keeping shoppers away from retail malls in Singapore?

Nothing says more about the state of Singapore's retail industry than stretches of shuttered shops and hoarding in otherwise upscale malls in the heart of the downtown shopping belt. The situation may not seem as dire in shopping centres in the heartlands, although the buzz is more around food and beverage joints, or from commuter traffic to and from the trains.

Yet, the poor retail sentiment is no recent phenomenon; the industry has been in the doldrums for some years, driven by a host of factors.

For a while now, high rents, especially in the prime Orchard Road area, and manpower issues have made running a shop downtown a bit of a challenge.

The drop in footfall of late - amid weak consumer and economic sentiment, and strong competition from various sources - have turned maintaining a brick-and-mortar retail business into perhaps something of a feat for only those with strong holding power, both financial and mental. Hence the rise in retail vacancy rates in the downtown malls of late.

For the small enterprise retailer in town - and even for some of the mid-size chains - there is enormous competition. If it's fortunate enough not to have another retailer plying the same or similar products two units away or on the floor above, there surely is tussle for the retail dollar from malls in the suburbs, many of which boast more or less the same mix of common brands and products.

And not least, shoppers have gone online - sourcing not only from the likes of Amazon for products not available in Singapore, but in fact buying and selling, even bartering, via local websites.

No tenants, and no shoppers

  • Empty shopfronts and hoardings are not what you would expect to see at newly renovated shopping complexes, and even less so along Singapore's premier shopping street.
  • Yet that is what you will find when you walk into many of the malls in town.
  • From Orchard Road to the Marina Bay area, malls are struggling with too much retail space, as landlords scramble to attract and retain tenants.
  • This dire retail pickle has made hoardings with stock phrases "Working to serve you better" and "A new shopping experience awaits" the default decor in many malls.
  • It is a classic chicken-and-egg situation. Empty and boarded-up spaces give a poor first impression and attract few customers. Low footfall is bad news for existing tenants and fails to attract new ones.
  • At Shaw Centre, which reopened in 2014 following a massive renovation, about half of the units in the five-storey mall are behind colourful hoardings displaying contact details for leasing inquiries.
  • Next door at Pacific Plaza - once home to Tower Records and fashion brands Miu Miu and Prada - the same dismal scene beckons. Save for an Adidas Originals store, all units on the ground floor are vacant.
  • Stretches of vacant units can be seen in Claymore Connect, the former Orchard Hotel Shopping Arcade. It reopened last October after a revamp and two F&B units have already opened and shuttered in the four- storey mall.
  • Millenia Walk's management says the mall has increased occupancy by more than 20 per cent in the last year and is on track to achieve its occupancy goal of more than 90 per cent by the end of the year.
  • Potted plants are used to fill up space on level two, where there appears to be more empty units than occupied ones.
  • The entire section where Harvey Norman used to be has been cordoned off. A fitness and performance centre is slated to take over the space in October.
  • Bank executive Melissa Tan, 31, who works at one of the nearby office towers, says she goes to the mall for lunch with her colleagues. "Apart from the food, there's nothing much for me to buy or see here."
  • Over at Suntec City, a $410- million redevelopment plan, which took three years to finish, does not seem to have attracted enough tenants to fill up the vast expanse of retail space.
  • One section between Towers 2 and 3 on level three is almost a deadzone. Kiddy rides fill some of the empty spaces.
  • Vacated shops have paper crudely pasted over their signboards and some tenants seem to have left hastily, leaving behind store furniture and display shelves.
  • A store assistant at a furniture shop on that level, who wants to be known only as Mr C. Ho, 38, says he has seen tenants come and go in just the six months that he has been working there.
  • With The Centrepoint currently undergoing renovations, bright red and white hoardings can be seen on nearly every level.
  • While the boards feature happy faces and mouth- watering food pictures, they also make the place feel like a building in stasis.
  • Orchard Road has been especially hard-hit by a dip in tourism spending, which declined 6.8 per cent to $22 billion last year.
  • At Orchard Central, tenant Michael Chen, 35, says: "From levels one to four, there're so many hoardings because of renovation, it's like a dead mall."
  • The renovations are scheduled to be completed later this year. The shops on the lower levels are open for business, but the hoardings make these stores more difficult to find.
  • The many hoardings also give the impression that the entire mall is closed for renovation.
  • A salesman at a boutique on level five, who declines to be named, says: "Sales have dropped by more than 50 per cent since the renovations started."
  • "People think the mall is closed. Especially tourists. When shoppers see that level two has so many hoardings, they don't go to the higher levels."
  • Walking around Wisma Atria, the units are fully filled at basement one and there is a healthy crowd at Food Republic on level four.
  • But levels two and three are rather quiet, after department store Isetan closed last year. It is in the midst of renovations and leasing out the space.
  • From now till June 30, level one where Isetan used to occupy, is taken up by a pop-up flea market by Workshop Element (W.E.) and Togetherly.
  • Though the higher levels of the mall are mostly filled with various tenants that include fashion outlets, jewellery stores and hair and nail salons, the first level of Far East Plaza looks almost deserted.
  • While levels two through five have the odd handful of shuttered units, level one has at least 20 empty units.
  • The only busy spaces on the level are the F&B outlets which include bubble tea store Gong Cha and noodle restaurant Eat.
  • In spite of the many vacant units and stretches of hoardings, landlords contacted say their malls have a healthy occupancy rate: Mandarin Gallery says it is 94 per cent occupied while Orchard Gateway is 98 per cent occupied.
  • But tenants tell a different story. A tenant who wants to be known only as Mr Ho, 52, has a store in basement two in Orchard Gateway. "We see fewer than 10 walk-ins a day. Some days, we don't even make any sales."
  • At Mandarin Gallery, there are many empty units on levels two and three. Some have concrete flooring showing, while others are dusty. The busiest-looking areas of the mall are the rest areas, where the couches are usually fully occupied.
  • Landlords are trying various ways to fill quiet aisles, from offering space to pop-up stores to cutting rentals. Orchard Gateway and Orchard Central offer some tenants rental rebates of between 20 and 30 per cent a month.

A paradigm shift in shopping is underway, which calls for a change in tack by retailers and mall operators in response.

It's clear that online and mobile "stores" mark the trend, and entrepreneurs who are still keen to retain a brick-and-mortar presence would likely add an online arm, or in fact build the business around the e-store. The physical shop would serve as the place where customers can go browse and touch samples, and then collect the wares bought online.

Indeed, various brands are already into this so-called "omni-channel" retailing - which incidentally was already prevalent back in the pre-Internet decades, in the form of catalogue and mail order shopping, popularised by pioneers such as American clothing companies L L Bean and Lands' End.

On their part, property developers and mall operators, particularly the real estate investment trusts (Reits), must do their bit to enhance the retail experience in their mall and make it a recurring destination for customers.

While the suburban malls generally cater to the heartland masses and all in the family, others, including some of the upmarket ones downtown, are targeted at particular segments - shoppers for high-end designer brands, or outdoor/sports gear, for instance - which gives scope for special activities to draw in the traffic.

Yet, it may not be all doom and gloom for the retail sector. A recent JLL study of the world's top luxury retail destinations sees Singapore among seven Asia-Pacific cities in the top 10 - in terms of highest presence of luxury retailers, Singapore is behind Hong Kong, Tokyo and Shanghai, but ahead of Beijing, Osaka and Taipei.

The fundamentals that draw the high-end big brands - an affluent city with a growing middle class; a cosmopolitan market with flows of visitors - are fairly intact. But the soft economic outlook and weak sentiment are keeping shoppers, including tourists, away.

This article was first published on May 13, 2016.
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