When I walk through many of the city malls here, it is common to see white boarded walls in what used to be vibrant retail shops. There seems more and more white walled up spaces than there are active retail shops these days, and it is worrying. It reminds me of many years ago when I was in Melbourne, and there are streets of vacant shops, and plenty of “for lease” signs everywhere. We are now facing that here.
I chat with retailers and brand owners often, and one of the laments seem to be that online sales (such as Amazon and Taobao) are killing retail sales here. But the rot is much deeper than that. It has to do with local pricing and rental costs, and globalized consumers.
A colleague’s friend, a high flier who travels often, was looking at a high-end audio product and found it displayed at the brand’s retail shop in an upmarket mall in Singapore. He considered this product, but did not buy it immediately.
He recently traveled to Britain, and found the same product at the same brand owner’s retail shop in upmarket Harrods. The shop offered to ship the product to him in Singapore, and after paying shipping costs (and the products are hefty and heavy) and local GST (goods and services tax in Singapore), he still ended up paying 30% CHEAPER than if he bought the same product from the same brand here. What gives?
Three trends have changed retail shopping and consumer behavior.
1) Different retail pricing
Some brand owners have consistent pricing around the world, and protect their retail pricing worldwide. This is great for consumers as it means not having to worry about where they buy the products.
However, there are many more brand owners with different retail pricing around different countries. This makes the globalized consumers “hunt” for the best prices whether they purchase at retail, or online. This hurts the local retail outlets if their prices happen to be much higher than the same product by the same brand owner offered elsewhere.
Solution? A consistent retail pricing protection worldwide would solve this discrepancy. This would endear consumers with the brand, since consumers need not worry about different prices and know that the brand is consistent everywhere. At the very least, a smaller discrepancy in pricing may also dissuade the consumers from hunting elsewhere in the world or online, since local support and service are valuable to consumers too.
2) Globalized consumers
Decades ago, consumers bought goods locally, at a local outlet, at whatever prices the sellers demand. This was before affordable air travel came into the picture. Today, you can fly to remote locations on affordable tickets on LCCs (low cost carriers), and even mainstream carriers offer steep discounts because of fierce competition. Consumers today travel to many locations, and travel often. They are no longer constrained by the myopic retail view of the local outlets in Singapore. They are mobile, widely traveled, knowledgeable.
Often, because of their digital native proficiency and travels, they are often much more knowledgeable compared to the local retail employees. Try this experiment. Go into most retail outlets here in Singapore, and you soon realize that many retail employees need a serious case of product training (and customer service training).
Solution? Customer service and product training are critical tasks for brand owners here, to boost the competitiveness of their local outlets, while working out more compatible pricing with global offerings will be equally important.
3) Rental costs
Granted, Singapore, like some other metro cities, are expensive spaces where retail leasing costs can be expensive, even prohibitively so for some retailers. However, this is the very reason why retailers find it hard to survive if their rapidly thinning margins have to go towards paying rental costs, and leave little financial reason to sustain their retail presence. There must be a delicate balance between rental costs and profitability, where landlords should understand that a sustainable and vibrant retail presence actually helps the mall, rather than going for myopic short-term gains and lose a good retail presence and vibrancy.
Sustainability theories dictate that co-existing parties must maintain a symbiotic and mutually beneficial existence, and not have one party cannibalize its co-existing parties to their demise. There is no good reason for cannibalism in such environments.
Solution? Landlords can work closely with their leasing customers for mutually beneficial rentals to ensure the best sustainable outcomes. Find the right rental rates that would ensure your leasing customers’ long-term survival, and they will be grateful. No business likes to move often, and lose a painstakingly built up retail customer base.
There are many more examples which encompass all these 3 trends which culminate in the decay of local retail, but it takes an incisive wisdom to recognize these, and collegially, stakeholders should and can work together to resolve these difficulties, to hopefully revive the retail scene here. It is not too late.