Both Frasers Centrepoint Trust (FCT) and CapitaLand Mall Trust (CMT) have reported spectacular recoveries in shopper traffic for the month of July. This is borne out by anecdotal evidence during the week of Sept 7–11 where Jewel was reportedly packed with shoppers. Similarly, Jem, owned by Lendlease; JCube owned by CMT; and Waterway Point which is part owned by FCT, saw crowds too.
Richard Ng, CEO of FCT’s manager, said in a recent briefing that tenant sales in July have on average rebounded to pre-Covid levels, while shopper traffic has rebounded to 60–70% of pre-Covid levels.
Despite this rebound, the retail sector is unlikely to get any help from tourists. Singapore’s tourism industry will continue to be hamstrung as border reopenings are taking place very gradually. “Reopening of international borders is envisioned to happen more gradually than earlier anticipated given the protracted Covid-19 situation globally,” says CBRE in a retail sector update.
Moreover, retail demand continues to slump y-o-y despite sharp rebounds on a month-to-month basis. According to the Singapore Department of Statistics, for the month of July, total retail sales excluding motor vehicles, fell 7.7% y-o-y but rebounded 19.5% month-on-month.
Interestingly, online retail sales, which amounted to 11% of total sales in July, has been declining since it peaked at 24.8% of total retail sales in May. July’s 11% figure is the lowest since March this year when online sales were 9.1% of total retail sales. This could be because people were dying to go out following the implementation of Phase Two after the “circuit breaker” — Singapore’s own version of the Covid-19 lockdown.
Not much supply in next four years
With the onset of ecommerce about 10 years ago, new retail space supply has dwindled. From 2020 to 2024, islandwide new retail supply is projected at 1.2 million sq ft, or an average of around 300,000 sq ft a year, which is significantly lower than the last five-year historical annual average supply of 1.4 million sq ft.
On the flip side, tenant retention has been challenging. International retailers who are experiencing cash flow difficulties are also reassessing their store footprint, placing higher priority on better-performing stores in higher footfall locations. Fast fashion brands Topshop and Topman stores have closed in Singapore and instead gone completely online.
Rents may fall further as landlords have begun lowering their rental expectations as they place priority on maintaining occupancy, CBRE notes, in particular for city fringe and downtown core locations. In 2Q2020, prime rents in Orchard Road fell by 1.9% q-o-q to $31.05 psf per month, while prime rents in the suburban market fell just 0.5% to $29.00 psf per month.
The future of retailing
Retail space owners are increasingly adopting an offline-to-online (O2O) approach to retail. In June, CapitaLand launched ecommerce platform eCapitaMall and online food ordering platform Capita3Eats to complement sales of its shopping malls in Singapore. Shoppers can now browse online before purchasing in-store or vice versa by accessing the platforms via the CapitaStar app. Retailers on the platforms can tap CapitaStar’s 1.1 million members for in-store and online sales.
“Increasingly, digital sales will become an important source of revenue. Shopping centres and retailers that embrace an omnichannel strategy are likely to be more resilient,” CBRE says of the future of retail. Additionally, activity themed-based destination malls like Funan are likely to be more attractive to shoppers, compared to malls that are poorly managed or have a tenant mix that is less curated to current demands of shoppers, the consultancy adds.
“Now we have a holistic solution for our tenants who had problems accessing their customers during the circuit breaker. In the longer run, they will look at how to toggle between these two platforms — digital or physical. We have the [digital] ecosystem to capture the flows,” says Tony Tan, CEO of CMT’s manager. “The narrative that will probably surface more prominently [in the future] will be how we are able to capitalise on both virtual and physical space.”
Tan says consumer behaviour could change over time and consumers may want both options. So why not build an ecosystem to do transactions online or offline, or go online, do a search and go to the physical shop and touch and feel the product, he suggests.
Tan sees retailing in the future to be combination of a few approaches. How it works with eCapitaMall is customers can do the transaction on the CapitaStar app, then either have the product delivered, or pick it up from the shop. “We would steer them towards our own shop and that transaction can becomes visible through the [CapitaStar] platform,” Tan says.
The transactions are store-linked. For example, a Robinsons product from eCapitaMall would have the sales directed to the Robinsons store in a CapitaLand mall. “This platform helps in order fulfilment and is a net benefit to the retailers as they have access to 1.1 million customers,” says Tan.
And O2O is clearly a regional trend. “Obviously, offline and online purchases are increasingly prevalent but we noticed in Thailand, Indonesia and Vietnam where we have operations that once the lockdown is lifted, people still want to go back to buy from offline places. So, I think the integration of offline and online is increasingly critical,” said Soon Sze Meng, president, Southeast Asia for JD.com, during DBS Bank’s Digital Day on Sept 16.
Soon says JD is the largest retailer in China and it is not just an ecommerce company. “It’s actually an offline, online retailer, and it also has one of the most extensive logistics network in China, serving almost all of China with same-day delivery,” he adds.
That is exactly how REIT managers such as Tan and Ng see the future of retail, an amalgam of offline and online transactions, complementing each other. The immediate sharp rebound of shopper traffic into shopping malls may recede, but shopping in physical and digital forms are likely to continue.
