International Business & Economy Floundering local retailers face stiff competition from foreign e-commerce companies

Floundering local retailers face stiff competition from foreign e-commerce companies

Local retailers folding their business due to high rentals and stiff competition from Lazada, Amazon and Alibaba. A love for status quo, inertia and a prevailing compliant business culture to be blamed.

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Laura Zhang

While stores that are offering steep discounts on their closing down sales are a boon for shoppers, the rise of e-commerce players may soon challenge Singapore’s title of ‘Mecca of shopping.’

Online shopping has been an alternative for a while, but not for long – its rapid rise will soon disrupt conventional malls and has ushered a new era of shopping.

By simply scrolling through social media apps, Singaporeans can browse the most affordable items efficiently and customers get a more transparent shopping system. Through the listings on the various comparison sites, they are enjoying competitive prices and offerings from across the world.

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This switch of consumer preferences and habit has hit conventional retailers badly.

Why E-commerce?

Being one of the most affluent cities in Asia, Singapore is filled with consumers of high purchasing power and is one of the first target markets of e-commerce players globally.

Brick-and-mortar shopping consumes time, energy, parking fees and is often associated with impulse purchases and for some it needs to come with the right shopping buddy. Moreover, retail prices tend to be higher to cover rental and maintenance cost of their shops.

In comparison, all that boils down to a smartphone and an e-wallet when it comes to mobile shopping and you can do it from the comfort of your bed.

Estimated e-commerce user penetration in Singapore was 57.31% in 2015 and is expected to hit 74.2% in 2020, according to Go-globe. 26% of Singaporeans shop online at least once a week, and 58% make a purchase online at least once a month.

More than 50% of Singaporeans would do all their shoppings online if possible.

Entry of foreign players

Taobao is China’s biggest e-commerce platform, operated by Alibaba under Mr Jack Ma. Alibaba’s shares have risen 28.8 per cent in 2016 to US$261 billion, according to Bloomberg data.

Taobao’s penetration into Singapore’s market is no surprise, with items easily up to ten times cheaper than what you see in a mall.

Daigou (代购) is a channel of commerce in which an overseas person purchases commodities for a customer in China. This concept is no longer new to Singaporeans.

In fact, Taobao’s penetration has been perpetuated by the supports of our local agencies, such as Lazada and Ezbuy.

The agents only earn a tiny bit from each purchase, which becomes lucrative when in bulks. By doing so, shoppers are benefiting from lower shipping fees and cross-border taxes or tariffs.

Screenshot of Taobao listings on local e-commerce retailer Lazada

Singapore Blog-shops

Young bloggers also get into the act. Love, Bonito (pictured above) tops the list as Singapore’s leading online fashion boutique. And it’s easy to see why: besides its widely-popular selection of stylish and on-trend apparel that regularly sell out within days (take note, shoppers!), Love, Bonito has also collaborated with celebrated designers such as Julien Fournié, Tex Saverio, and even graced the runway of Singapore Fashion Week – a first for any local blogshop. Free local shipping. Other leading blogshops also include MDS, The Editor’s Market.

Blogshops are found in malls

Sluggish Singaporean Economy

According to Bloomberg, the retail rental index released by Singapore’s Urban Redevelopment Authority for the first quarter of 2017 posted a 2.9% decrease, making it the ninth consecutive dip per quarter since the end of 2014.

Vacancy rates also spiked up to 7.7 per cent this quarter, compared to 7.5 per cent in the last quarter.

“They eat, they drink but they don’t buy anything,” said Madam Woo, who works at fashion store Le Pommier in Clarke Quay Central, along the Singapore River.

Online shops are replacing previous household brands like Isetan and Metro. And last month, the goliath of online shopping Amazon hit Singapore’s market. Amazon Prime Now, which promises delivery within two hours free of charge, was so popular that the American company resorted to booking taxis and recruiting freelance drivers to carry out delivery services.

Globally, classic brands have suffered

Michael Kors and Ralph Lauren have been two of the biggest victims, according to Bloomberg.

“We had to compete to be able to move our inventories,” Michael Kors’s Idol said on a conference call earlier this month. “That’s the whole cycle we are going to get ourselves out of.”

Department stores face fierce competition and are heavily reliant on discounts now.

No Solution in Sight!

Many trusting brands may still have the upper hand over department stores, which are struggling to stay relevant.

Brands can sell more merchandise online or in their stores. At the same time, they also come out with online shopping options with free-shipping and coupon giveaways, which are believed to be modern and tech-savvy.

With no reprieve in sight for retailers and their inability to innovate, retail malls may end up with just high end eateries. The million dollar question is, will it also spell an end to our hawker culture as we move upmarket?

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