Call me old-fashioned, but I still meander through the city malls here in Singapore, usually to purge the cache in my brain to be ready for the next wave of work that demands creativity.
Yet, when I visit malls these days, it’s common to see walls boarding up what used to be vibrant retail shops, and it is worrying. It reminds me of when I was in Melbourne, Australia some years ago and there were streets of vacant shops and plenty of “for lease” signs. We are now facing that here.
Retailers and brand owners tell me that one of their laments is 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 in London. The shop offered to ship the product to him in Singapore, and after paying shipping costs (the product was heavy) and local goods and services tax in Singapore, he still ended up paying 30% less than if he had bought the same product 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 good for consumers as it means not having to worry about where they buy products.
However, there are many more brand owners with different retail pricing in 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 worldwide would solve this discrepancy. This would endear consumers to 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
In the past, consumers bought goods locally at whatever prices the sellers demanded. This was before affordable air travel. Today, you can fly to far-flung locations on low-cost carriers. People are no longer constrained by the myopic retail view of local outlets in Singapore. They are mobile, widely traveled, knowledgeable.
Often, because of their digital proficiency and travels, consumers are often much more knowledgeable compared to local retail employees. Try this experiment. Go into most retail outlets here in Singapore, and you soon realize that many employees need product training and customer-service training.
Solution? Customer service and product training are critical for brand owners here, to boost the competitiveness of their local outlets. Working out more compatible pricing with global offerings is equally important.
3. Rental costs
Granted, retail lease rates in Singapore, like some other metro cities, can be costly, 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 lease rates 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 short-term gains and lose a good retail presence.
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 rates 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 established customer base.
There are many more examples which encompass all these three trends which culminate in the decay of local retail, but it takes wisdom to recognize these. Collegially, stakeholders should and can work together to resolve these difficulties, to revive the retail scene here. It is not too late.