Retailers’ expansion plans dampened by tighter Covid-19 restrictions: survey

By Charlene Chin

/ EdgeProp Singapore |

September 9, 2021 12:36 PM SGT

A big percentage of retailers are either reviewing, postponing or dropping plans to seek new physical retail space in Singapore this year, according to a survey by Knight Frank (Credit: Albert Chua/ The Edge Singapore)

A big percentage of retailers (46.7%) are either reviewing, postponing or dropping plans to seek new physical retail space in Singapore this year, after more stringent control measures were enacted by the government this May, according to Knight Frank’s retailers sentiment survey.

However, some 43.3% of retailers remain undeterred about such plans, while the remaining 10% did not have such expansion plans to begin with.

Brands that have been undeterred by tighter restrictions include apparel brand Benjamin Barker, which opened its new flagship lifestyle store in Ngee Ann City this August and is currently in the midst of negotiating a potential new franchisee in a Southeast Asian country. It aims to open new stores in that country, says Knight Frank.

The survey took into account the opinions of 30 retailers and F&B operators in late June to July, following tighter restrictions that took place from May 1 to June 13. Under the Phase Two (Heightened Alert), tighter restrictions included prohibition on dining in and lower capacity limit in malls, attractions, events and social gatherings.

(Source: KNIGHT FRANK SINGAPORE RETAILERS’ SENTIMENT SURVEY 2021)

Tighter restrictions dampen retailers’ expansion plans, outlook

Before the restrictions were announced, more retailers were thinking of physical expansion. In an earlier survey that was conducted in February and March, some 40.2% of respondents had expressed interest in expanding their physical presence in the city-state, while 7.5% were considering relocation. The earlier survey was carried out on 100 respondents.

Retailers also have a dimmer future outlook. Half of the respondents who took part in both surveys reported a decline in their profitability outlook for 2021 compared to their earlier projections in the first survey. They expect either a smaller increase in net profit than earlier projected, a larger drop in net profit than previously forecast, or a fall in net profit instead of having no change in profit.

The proportion of respondents who expect to remain in the black for 2021 has also fallen to 76.7% in the June–July survey from 85.4% in the February–March survey.

(Source: KNIGHT FRANK SINGAPORE RETAILERS’ SENTIMENT SURVEY 2021)

Suburban locations in the limelight

Retailers cited suburban locations as their preferred place for expansion or relocation given the prolonged period of work-from-home arrangements, with the Northeast and North Regions as the top choices.

With expansion, the retailers aimed to broaden their customer base by positioning themselves in areas with a larger residential catchment, therefore drawing in higher footfall, or being in an established mall that carried out proactive initiatives to draw footfall.

Retailers also cited lower rents or incentives from landlords as their top selection criteria for their next retail outlet.

On the other hand, the top reasons driving retailers’ decision to consolidate, downsize or repurpose their retail outlets were reducing operating costs (66%), lack of manpower, and a decline in customers since the onset of Covid-19.

(Source: KNIGHT FRANK SINGAPORE RETAILERS’ SENTIMENT SURVEY 2021)

Pivot to digital

One in every five respondents in the June–July survey drew 100% of their sales from online platforms with the tighter restrictions in May. On average, online sales contributed to 34.5% of total sales for retailers during that month, up from 11.6% pre-Covid.

Since the onslaught of the pandemic, retailers have ramped up their efforts to advertise digitally and hold online promotions. Undeniably, Covid-19 has sped up the adoption of omni-

channelling, which is the use of both online and offline means to attract consumers.

To that end, some 60.8% of respondents said that they were able to glean insights from data analytics from their online and offline channels to improve sales. About 45.8% of respondents also shared that they were able to provide customers with an integrated experience across their in-store and online channels.

The most common tools to engage customers include social media, website, emails and mobile messaging.

However, about 33.6% of retailers have yet to establish an online sales platform, based on findings from the February–March survey.

Government grants help

Most retailers have found that government grants have eased their journey into digital retail. About 42.1% of the respondents said in the February–March survey that they have applied for and benefitted from at least one of the government grants for digitalisation.

These include the e-commerce Booster Package, which allows local retailers to receive a one-time 80% support on qualifying costs for service fees charged by online platforms; the Digital Resilience Bonus, which awards payouts of up to $10,000 to help businesses in food services and retail adopt e-commerce payment solutions, e-invoicing, data mining and analytics; and the SMEs Go Digital Programme, which awards government grants to SMEs digitising their business operations.

Besides support for digitisation, a larger 68.2% of respondents said they have gained from at least one of the government support measures to help SMEs and retailers tide through the Covid-19 pandemic, through dedicated job and wage support schemes, rental relief and waiver of foreign worker levies.

Many retailers, however, hope that support can be further simplified. A Singapore-based regional retail player noted in the survey that there are “too many government agencies, too many people who create many diverse support schemes which are absolutely confusing and not user-friendly to digest, not to mention to apply for”.

Respondents suggested consolidating similar schemes into one or two major schemes and doing away with the “microspecific ones” to minimise confusion.

A majority of retailers also hope for more advisories and guidance, with 65.7% seeking government grant advisories, 58.8% looking for digital marketing advisories, and 48% seeking advisories and tools to improve current digital platforms and applications, and leverage data analytics.

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Retail outlook knight frank

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