SINGAPORE: In-store cafés have become a popular tool for retailers in Singapore, helping them engage customers and build brand awareness. However, as the market becomes increasingly crowded, experts warn that relying solely on coffee might no longer be enough to stand out. In a recent Retail Asia article, retail analysts suggest that retailers may need to consider unique experiences, such as gaming elements or other creative offerings, to stay ahead of the competition.
A coffee culture under pressure
In Singapore, coffee is more than just a drink; it’s a part of the culture. According to a YouGov report from July 2024, nearly 80% of Singaporeans drink coffee at least once a month, with 58% enjoying it daily. However, while coffee consumption is high across the population, younger generations are drinking less. Only 59% of Gen Z drink coffee regularly, compared to 79% of Millennials and 85% of Gen X. Despite this, retailers continue to open in-store cafés to tap into the city’s strong café and foodie culture, with even those who are not frequent shoppers eager to spend on a good café experience.
Luxury brands, including Prada and Louis Vuitton, have recently joined the trend, opening cafés in their Singapore locations. These cafés not only serve as a branding tool but also offer luxury experiences at a lower cost, appealing to younger consumers who may not be able to afford high-end products. “Luxury brands use cafés to connect with younger Gen Z customers by providing a more accessible way to engage with the brand,” explained Sulian Tan-Wijaya, Executive Director of Retail and Lifestyle at Savills Singapore.
The growing costs and challenges of in-store cafés
Despite the allure of adding a café to a retail space, the challenges of running one are significant. Analysts caution that opening an in-store café requires a major investment in space, licenses, and certifications. Moreover, the ongoing manpower shortage and high rent in Singapore can make the operation of such cafés difficult and costly.
Matthew Crabbe, Vice President of Trends for the Asia-Pacific region at Mintel, noted that poor-quality service or coffee could harm a retailer’s reputation. “If you’re not a coffee expert, poor execution can damage your brand’s image,” he said. Retailers need to ensure that their in-store café is seamlessly integrated with their overall brand identity to avoid it feeling like a disconnected afterthought.
Innovation is key to standing out
As more retailers open cafés, the market is quickly reaching a point of saturation. To remain relevant, brands will need to innovate and create unique experiences for customers. “Once everyone has a café, what will the next step be?” asked Tan-Wijaya. Some retailers might look to integrate more interactive elements, such as gaming, to differentiate their spaces. Those who invest in distinctive, high-quality experiences will likely continue to lead the market, while others risk blending in with the crowd.
As the in-store café trend evolves, it’s clear that retailers must find new ways to engage customers or risk falling behind.