Asia, January 2011
Singapores retailers more customer-centric and tech-savvy
While caution stalled the retail industry at the beginning of
last year, the first 10 months of the year saw the sector inch
its way out of the downturn, according to figures released by
the Singapore Department of Statistics, with the latest data revealed
for last October reflecting a positive 5.3% growth in retail sales
from 2009, excluding motor vehicles.
The opening of the new malls along Orchard Road and the integrated
resorts (IRs) at Marina Bay and Sentosa saw tourism pick up by
16.1% over 2009, to reach 963,000 in November last year. Meanwhile,
the Singapore Tourism Board anticipates that tourist arrivals
will hit the 12-million mark for the full year 2010. More good
news came early this month when the Singapore Ministry of Trade
and Industry disclosed that the local economy reversed its 1.3%
contraction in 2009, climbing to a record 14.7% last year, breaking
the city-states 40-year record of 13.8% in 1970.
The resultant impact of this upswing is evident in the
numerous retail developments that have come onboard, observes
Lester Quah, general manager of Retail Development at Cold Storage
Singapore (1983) Pte Ltd, a division of Hong Kong-based retail
group, Dairy Farm International.
These have attracted a number of big brands into the local retail
market, heralding the return of consumer confidence and spending
propensity, Quah continues, adding that in the food retail scene,
players are beginning to increase their affluent offerings and
differentiate themselves from the competition, which is expected
Despite the positive buzz in the economy, challenges continue
to lend a cautious optimism to the industry. Retail rents among
the popular malls in Singapore continue to climb, notes Quah,
despite the increase in retail space islandwide. Retailers
are competing for space and landlords command an upper hand in
the selection of preferred tenants, he says, adding that
this, combined with the dwindling supply of big floor plates for
supermarkets and hypermarkets, will continue to drive up rentals
for these formats.
R Dhinakaran, managing director at Jay Gee Melwani Group, also
points out that despite the latest mall openings and the increase
in retail space, it is infinitesimally small compared to
the new businesses and brands that arekeen to set foot in Singapore.
This, he states, is another reason retail rents are creeping
Additionally, the quantity of space does not equate to quality,
Courts Singapores CEO, Terry OConnor, observes, adding
that there remains a shortage of quality malls in the suburbs.
He also laments that space constraints and shortages limit the
choices that consumers have, despite the growing number of brands
available in the market.
At the mass-market level, there is still not enough choice
for consumers, especially in the area of Big Box retailing,
he elaborates, adding that more Big Box, boutique, bohemian and
outlet retailing need to be introduced into the local scene, which
is currently a bit too city-centric and cookie cutter.
Retailers in Malaysia anticipate a healthy year of growth
Barring any unforeseen circumstances, the Association for Shopping
Complex and High-rise Management, familiarly known as PPK (short
for Persatuan Pengurusan Kompleks Malaysia), is cautiously optimistic
that this year will remain positive and achieve healthy growth
where retailing is concerned. The return of consumer confidence
since Q4 2009 has so far been sustainable throughout 2010 and
is expected to remain so for 2011, says its president, H
According to the Malaysia Retailer Association, expected
sales for 2011 will be RM75 billion (US$24.3 billion). We foresee
this is achievable.
Although there was initial negative reaction when the service
tax was raised from 5% to 6% in the Malaysian Budget 2011, the
increase is minimal and Chan believes it should not have a major
effect on consumer spending. Another significant factor in play
has been an increase in tourist arrivals, which has contributed
to the shopping receipts.
Even with the underlying worries that the Malaysian economy may
be less competitive in view of the developments in Europe and
the US, it seems to be holding well so far. The effects have been
minimum. The Malaysian retail industry is still largely local
consumption driven 80% of its buyers are from the domestic
Says Chan: Consumer sentiment has definitely improved with
more spending taking place. However, consumers are a discerning
lot these days [and] retailers have to work extra hard to deliver
value propositions that appeal to them.
In general, consumers look forvalue when they shop, and
the large lowpriced fashion format as spearheaded by Uniqlo and
Brands Outlet ... will continue to do well.
Patterns remain largely unchanged as consumer spending
peaks during festive seasons in the second half. We dont
expect to see large deviation in this area.
As for which sectors of the retail trade are doing better than
others, Chan points out that growth rates will differ from each
sub-sector with speciality retail stores showing potential double-digit
growth while department store cum supermarkets are likely to see
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Philippine retailers optimistic about the New Year
A rebound in economic growth, a growing urban population, strengthening
purchasing power, continued inflow in remittances from overseas
Filipino workers (OFWs) and renewed interest of foreign investors
these are just some of the factors that contribute to the
general sense of heightened optimism in the growth prospects of
the retail industry in the Philippines, where consumers and businesses
have both indicated greater confidence in their financial prospects
for this year.
According to the 65-page Philippines Retail Report released last
November by consulting firm Business Monitor International, retail
sales in the Philippines are expected to hit US$31.42 billion
this year and should further grow to $37.06 billion by 2014.
Strong underlying economic growth, an expanding population
(especially in urban areas), rising consumer spending and the
continued development of organised retail infrastructure are key
factors behind the forecast growth in the Philippines retail
sales, the report states.
The Philippines nominal GDP is a forecast US$193
billion in 2011. Average annual GDP growth of 4.5% is predicted
through to 2014, reaching US$275.65 billion. With the population
expected to increase from an estimated 95.5 million in 2011 to
100.9 million by 2014, GDP per capita is forecast to rise by more
than 35% by the end of the forecast period, reaching US$2,732.
Our forecast for consumer spending per capita is an increase from
US$1,439 in 2011 to US$1,931 by 2014.
Remittances from family members overseas are providing a big
jolt to consumption, the report adds, and money coming in from
OFWs is expected to grow by an average of 6%-8% this year. Already,
in the first seven months of last year, remittances grew 7.1%
y-o-y to US$10.68 billion.
With the majority of remittances going into consumption
rather than investments, the retail industry is one of the beneficiaries.
In urban areas, in particular, there are also increasing numbers
of dual-income, middleclass families and young professionals who
are boosting retail sales, the report reveals.
The bullish outlook is shared by most retail players, with the
Philippine Retailers Association (PRA) estimating a 10%- 15% growth
in the industry last year and at least another 10% growth this
I foresee continued growth in the retail sector in the
vicinity of 10% for 2011. This is largely due to sustained remittances
from OFWs plus the massive growth of the business process outsourcing
(BPO) industry. Barring any major geopolitical incidents, our
retail sector should mirror the growth in the GDP, says
PRA president Bernie H Liu, who owns and operates such popular
apparel brands as Penshoppe, Oxygen and Regatta.
Prospects brighten for Thailands mall and retail players
2010 is certainly a year that Thai retailers want to forget.
It had started out as a potentially good year as the world economy
was then slowly recovering, while on the home front a more stable
government was in place after three years of political turmoil.
All signs at the time indicated that Thailands retail sector
would bounce back strongly. But instead, it turned out to be a
year of tragedy for the Bt1.4- trillion (US$45.3-billion) retail
market in the kingdom that was looking towards a positive growth
of 5% last year.
A prolonged demonstration by anti-government protesters in April
and May that culminated in soldiers taking them on in street battles
a month later stunned the world. Thousands of protesters, who
had camped for weeks in the capitals business and tourist
district retreated but not before setting fire to the countrys
biggest shopping mall the CentralWorld as well as
the nearby Big C and a few other malls. It resulted in massive
losses to the owners and hundreds of outlet operators, and eventually,
damaging the image of the countrys retail and tourism sectors.
But still, the retail sector did recover towards the end of last
year, largely due to various incentives given by the government,
as well as the tourist dollars flowing in during the high season
This signals a positive year in 2011 as retailers churn out new
strategies to get the industry back on track, backed by better
purchasing power on the card.
While 2009 and 2010 saw workers losing jobs or facing reduced
income, an opposite trend is expected this year.
Last month, the Central Wage Committee approved increases in
minimum wage levels by an average of Bt11, rising about 5.3%.
This, along with the 5% salary adjustment for civil servants,
are likely to improve the quality of life for workers as they
have better purchasing power.
Furthermore, the retail sector, which was also impacted by the
drop in tourist numbers in the first half of last year, can look
forward to a fruitful 2011. The Thai tourism authorities are projecting
15.5 million tourist arrivals this year, with an expected Bt600
billion in revenue.
Urbanisation of Indias consumers spurs growth in retailing
There are three major reasons for the growth in Indias
organised retail sector: Urbanisation of consumers; the increase
in the disposable income of consumers; and the interest of global
retail giants in the countrys retail market.
The cost involved, increased competition among organised retail
chains and evolving consumer preferences are just three of the
challenges faced by retail outlets. Brand distinction, consumer
identification and promotions are among the other major challenges
facing those who wish for their companies to prosper from the
surge of Indian retail activity.
Tie-ups with international retailers and brands, emphasis on
profitable growth and increased focus on private labels are set
to be the three big trends in the Indian retail sector this year.
A lot of international retailers and brands are most likely
to look at India as global markets have stabilised and the Indian
economy has proved to be better than most other countries. These
factors give [them] a lot of confidence to invest in India,
says Arvind Singhal, chairman of Technopak Advisors, an India-based
Wal-Mart has set up its first unit in the country and Tesco,
the UKs largest retailer, is providing back-end support
to Tatas hypermarket, Star Bazaar. Carrefour is said to
be talking to Kishore Biyanis Future Group about a possible
Industry sources said a number of international brands are also
holding talks with Future Group, Reliance Retail and Spencers
Retail for tie-ups.
Devangshu Dutta, chief executive of business consultancy Third
Eyesight, believes franchise and licensing agreements could be
a major avenue used by overseas brands to enter the country. Our
research shows that 45% of fashion and lifestyle brands, which
have entered India recently, have used this route because it gives
a quick entry and allows tie-ups with partners who have good real
Although retailers such as Reliance Retail, Aditya Birla Retail
and Spencers Retail closed hundreds of stores or shifted
stores to economical locations in 2009 and 2010 and took various
steps to cut costs, they are likely to continue to focus on profits
and boosting margins this year.
(This extract is from the article that originally appeared
in Retail Asia (January 2011) - the extract is also available
on Retail Asia's website here.)