Singapore’s online retail market grew from SGD717 million in 2010 to about SGD1.08 billion in 2014, and is projected to reach SGD2.06 billion by 2019. Will traditional retailers change their business strategies in response? Japnit Singh, Senior Director of Spire Research and Consulting, Singapore and India, shared his insights on Channel News Asia – Today Online.
As online retail continues to record increasing sales in Singapore, traditional retailers are struggling to keep up with the fierce competition. As the retail sector is a major component of Singapore’s Gross Domestic Product (GDP), this results in money and tax revenue flowing out of the Republic, since e-commerce is dominated by overseas merchants.
Many Singaporeans now prefer online shopping. Singh highlighted that out of the estimated SGD4.5 billion generated in the e-commerce space, 55% involves cross-border transactions. The obvious benefits include Goods and Services Tax (GST) savings as well as lower prices, benefitting from the relatively strong Singapore dollar.
E-commerce is picking up in other countries too but in Singapore, bricks-and-mortar retailers also suffer from manpower shortages and rising rentals. Ironically, overseas e-retailers do not have to pay income taxes on their sales revenue from Singapore but Singapore-based bricks-and-mortar retailers have to do so.
All is not lost – yet. Changes in the business model might address these challenges. Studies have shown that a majority of shoppers still value the experience of shopping in bricks-and-mortar outlets. Consumers still wish to touch and feel a product before purchase.
However, it would be beneficial that physical stores give customers an option to collect, to exchange or return online purchases and thus allow them to opt for delivery of an in-store purchase. Interestingly, SPRING Singapore has taken steps to support small and medium enterprise (SME) retailers to leverage e-commerce platforms.
Singh opined that in the wake of steady e-tailing growth, bricks-and-mortar shops will have to revamp their business model to stay competitive. Singapore already enjoys a compact geography and a mature third party logistics provider sector to support e-tailing. Nevertheless, retailers would have to develop solutions for persistent supply chain issues.
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