The push towards digitalisation is ever so evident within the retail industry. During Singapore’s two-month-long “circuit breaker” period, physical retail stores were forced to shut, and although the stores and malls have reopened since, the damage has already been done and retailers are struggling to climb back into profitability.
As it is, the retail industry is a competitive one. With brands fighting for mind and wallet share of consumers, retailers also have to compete with other tenants within the same mall as consumers weigh between buying a new dress and having a fancier meal. And there is the ever-growing competition from online, where consumers can compare prices worldwide before making their purchasing decisions.
With consumer trends constantly changing, brands too have to keep up and make sure that their product mix stays relevant.
Luckily for retailers, as Singapore announced Phase Two reopening and allowed stores to open up again, consumers were eager to release their pent-up demand for shopping. Kenny Teo, managing director of electronics mart Gain City, saw an immediate improvement in business when stores reopened. “We did see strong demand from consumers due to the ‘pent-up demand’ from the circuit breaker period. We noted that consumers also spent less time at our stores, but the average ticket size has increased,” says Teo in an interview with The Edge Singapore.
At a glance, the year-end holiday season seems to have a positive effect on consumer sentiment, with Singapore’s shopping districts now constantly crowded. Since borders are still largely closed and Singaporeans cannot spend their year-end holidays overseas, what better way to pamper themselves than to go shopping?
Singapore’s retail sales remained in the red for yet another month in October, but narrowing from the month before. This shows a slight pick-up in consumer spending on a month-onmonth basis, albeit at a slower pace. The total sales value was down 8.6% year-on-year in October, making this the metric’s eighth consecutive month in the red. Still, this is an improvement from the 10.7% fall in September, data released by the Department of Statistics (SingStat) on Dec 4 revealed. The total sales volume came in at $3.2 billion, of which 10.5% of sales was made online. Excluding motor vehicle sales, the volume came in at $2.7 billion in October.
To Selena Ling, head of treasury research and strategy at OCBC Bank, the month-on-month increase “marks a glimmer of light at the end of the tunnel”. With restrictions on overseas travel and sales such as 11.11 and 12.12, she expects e-commerce sales to increase month-on-month in November and December. Still, she reckons retail sales may only recover with a positive year-on-year growth during Chinese New Year in February 2021.
Big sales, big spending
In any case, the retail scene is falling back to a couple of by-now-familiar trends. The end of the year usually signals big retail sales. From 11.11 to Black Friday and Christmas sales, this is the shopping season.
As it is, Chinese tech giant Alibaba saw 11.11 sales once again reach an all-time high, as it breaks records every year for the same sale season. Its 11.11 Global Shopping Festival generated RMB498.2 billion ($101.5 billion) in gross merchandise volume (GMV) during the 11-day campaign from Nov 1 to 11, an increase of 26% compared to the same timeframe in 2019.
During this sales campaign, Alibaba also saw over 470 brands achieving more than RMB100 million in GMV, as its online platform handled some 583,000 orders per second during the peak of activity. With shoppers taking advantage of sales, Alibaba’s logistics arm Cainiao Network processed more than 2.32 billion delivery orders cumulatively over the 11-day period.
Lazada, Alibaba’s Southeast Asian arm, also experienced a phenomenal response during the 11.11 sales. “We continue to raise the bar every year and have surpassed last year’s 11.11 sales as of 5pm on Nov 11,” says James Chang, CEO of Lazada Singapore. “The phenomenal results reflect the excitement in the lead-up to our annual flagship event and the joy that 11.11 has brought consumers, especially in this current climate.”
Although Singapore Retailers Association (SRA) tried to drive sales with the launch of the eGSS, an online version of its yearly Great Singapore Sale (GSS), it did not seem to match the hype of the 11.11 and Black Friday sales seasons.
Ng Aik-Phong, managing director of Fave Singapore, notes: “Consumers are now marking their calendars and waiting for sales dates such as 11.11 and 12.12. They would already have the items ready in their carts or wishlist before the dates, just waiting to check out once the clock strikes 12am and the prices of the items are slashed.”
To be sure, a survey by American Express found that almost half of Singapore businesses reported improved sales in September and October 2020, compared to the same period last year — which is in line with the official SingStat numbers that were published later.
The research report, titled American Express Business Recovery Research for Singapore, published on Nov 23, however, also noted that survivability concerns remain, with more than half of the 300 respondents saying their business cannot stay open for more than six months if sales do not recover to pre-Covid levels by end-December 2020.
Mall operator CapitaLand noticed the digital buzz and has helped its tenants go online through its online platforms — eCapitaMall for its retail tenants and Capita3Eats for F&B tenants.
Sales and promotions may draw more shoppers, but they end up harming the retailer’s margins and profitability. Although revenue is coming in, the retailers might end up taking a longer time to recover.
Closures and casualties
Despite the attractive promotions and recordbreaking sales, several brands are still struggling. Due to the extremely competitive landscape, many were already finding it hard to stay afloat before Covid-19 struck.
The growing popularity of online shopping has hurt physical retailers, with department stores, trying to be all things to most people, significantly impacted. In November, 162-yearold Robinsons announced it is calling it a day, as the invisible Covid-19 virus became the straw that broke the camel’s back.
“Without radical transformation, many of these stores have reached a point of no return that the final option of closing down has to be exercised. It’s a persistent perennial lesson for all retail outlets, big and small — the tiny window for change is now, or never,” says Lawrence Loh, director at Centre for Governance, Institutions & Organisations, and associate professor at National University of Singapore, of Robinsons’ closure. The retailer’s debts amounted to about $31.7 million from 440 creditors.
“Any business faced with adversity and crisis will need good strategic planning, solid partnerships and some luck to overcome the situation,” said Douglas Benjamin, vice president of SRA, in a previous interview with The Edge Singapore.
“It has been acknowledged that some operators are so far behind normal trading that it is impossible for them to recover and will be so for the foreseeable future, due to constraints of public gatherings, different consumption behaviour and restrictions. For these businesses, unless an alternative path can be forged, and quickly, it seems that they may not be able to recover,” he warns.
“For the balance of the businesses, of course, this situation will not last forever; and with a combination of the three attributes mentioned above, there is the possibility that they can ride out the storm. However, this will require that everyone handhold,” adds Benjamin, who is also the chief operating officer of listed retailer F J Benjamin (FJB).
Unfortunately, FJB itself is somewhat stuck in a rut, as it once again has applied to the Singapore Exchange (SGX) to extend the period to meet the watch-list exit requirements for another three months until March 4, 2021. FJB has been on SGX’s watchlist since December 2016.
Initially, Mainboard-listed FJB explored the possibility of transferring its listing to the Catalist board in early 2020. But its first appointed sponsor for the listing transfer was unable to continue acting for the company due to an impending internal restructuring. It then appointed Zico Capital to complete the transfer, but the change in sponsor caused a delay in the transfer progress.
In the event that FJB is unable to meet the financial exit criteria within the cure period, the group will either delist, or suspend the trading of its shares with a view to delisting.
Before Covid-19 struck, things were looking up for FJB, as it reversed out of the red with earnings of $177,000 for the financial year ended June 2019 after it ditched loss-making businesses. And it also seemed that FJB was able to finally get out of the watchlist.
But Covid-19 came around in FY2020 and the group sank back into the red with a loss of $15.0 million, as revenue declined by 29% y-o-y to $92.9 million.
Glittery investment?
On the other hand, luxury retailers that target a more niche — and perhaps less price-sensitive — market, were not as badly hit.
On Nov 5, The Hour Glass reported earnings of $29.7 million, down 15% y-o-y, for the six months ended Sept 30, 2020. The luxury watch boutique chain reported revenue of $289.8 million, down 24% y-o-y in the same period. The company is careful to maintain a cautious tone. “The full impact of the Covid19 outbreak is difficult to quantify at this juncture,” it said.
Nevertheless, it is rewarding shareholders with an interim dividend of two cents per share, versus none that was paid in the year-earlier period despite higher earnings.
In another sign that there is plenty of latent appetite in this sector, Cortina Watch, another listed luxury watch chain, on Nov 17 announced the acquisition of parts of another industry compatriot, Sincere Watch, for $85.4 million.
Perhaps, with luxury watches seen as an alternative investment asset class by some, there is enough smart money that is willing to buy into the glittery timepieces, and ride the recovery.
