SINGAPORE: With food prices on the rise, the pressing question in Singapore is – can people still afford to dine out? Will delivery services like Grab and Deliveroo become the new norm?
As we delve into this issue, a recent Yahoo Finance report cites six reasons the middle class finds it increasingly challenging to dine out as even the people in the US grapple with these challenges:
Reasons the Middle Class can’t afford to dine out anymore
- Diminishing Discretionary Cash: Post-pandemic inflation reduces discretionary funds, making dining out a target for budget cuts. The rising basic costs, like housing and healthcare, also contribute to shrinking monthly spending flexibility.
- Overspending on Eating Out: The trend away from dining out may be a correction, as inflation forces households to confront past overspending. In 2015, restaurant sales surpassed grocery spending, leading to a blurred line between essential and discretionary spending.
- Inflation Hits Restaurateurs Hard: Thin profit margins of 5% for restaurants make it challenging to absorb cost increases without raising prices. Inflation-related factors, including higher costs for food, labour, energy, and overheads, impact restaurant profitability.
- Menu Prices on the Rise: Full-service restaurants faced significant challenges, with 92% citing rising food costs and 90% increased labour costs. To cope, 89% of full-service restaurants raised menu prices, with a 5.5% increase reported between November 2022 and November 2023.
- Surcharges as a Solution: 17% of full-service restaurants add surcharges to offset rising prices. Surcharges cover inflation, healthcare, utilities, and credit card transaction fees and may become a permanent fixture.
- Tipflation: Tip expectations increase (“tipflation”) across various services, putting added financial pressure on diners. Customers feel compelled to tip higher, impacting the overall cost of dining out.
Food price inflation in Singapore
Inflation has been a global phenomenon, especially since the pandemic.
According to a report from the United Nations dated Aug 1, 2023:
“Globally, year-on-year domestic food inflation averaged 13.0 per cent in June 2023, down from a peak of 16.9 per cent in December 2022, with significant differences among regions and countries (figure 2). In June 2023, average domestic food prices were 38.3 per cent higher than in January 2019.”
In Singapore specifically, the prices of food, transport & education have risen the most in Singapore in the last 20 years.
According to data from Dollars and Sense, food prices have increased by 58.9% since 2022.
With this, it is understandable why there are a lot of complaints from Singaporeans about high prices, even at hawker centres. Others complain about dining experiences where restaurants now impose a 10% service charge for ordering via QR codes.
However, we cannot blame it all on inflation. Sometimes, lifestyle changes can make Singaporeans lean into delivery options instead of eating out.
Although food delivery statistics grew during the pandemic, according to Deliveroo’s consumer survey (Sept 2022), Singaporeans have sustained a “growing appetite for delivery services” even after the pandemic and the return of dine-in restaurants.
The survey of 1,000 Singaporean respondents revealed that “More than 60% say they use food delivery services more regularly now, compared to pre-pandemic times.”
In addition, “70% anticipate they will use food delivery services at least once a week.”
“On average, Singaporeans spend $108 a month on food delivery services, a 62% increase from 2019’s average monthly spend of $67.54,” the survey notes.
So, although the delivery services may have the same prices as what’s offered in restaurants, the convenience may make the price worth more than dining in.
Perhaps the question of affordability for the lower middle class is more complex, influenced by both economic factors and changing consumer behaviours. /TISG