Glitzy Orchard Road losing some retail shine. More heartland malls, higher rents, labour crunch among reasons, say industry players and experts

Glitzy Orchard Road losing some retail shine. More heartland malls, higher rents, labour crunch among reasons, say industry players and experts 


ALES UP: Robinsons The Heeren reported a 32.7 per cent growth in sales in January compared with a year earlier. -- ST PHOTO: KUA CHEE SIONG

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The shine has come off the glitzy Orchard Road retail strip as shopowners report weaker results, owing to ever-popular heartland shopping centres, higher rents and pricey manpower.

Metro Holdings, which opened a new department store in The Centrepoint in the final quarter of last year, said a "disappointing level of sales resulted in losses being incurred by the new store".

Department store operator Isetan (Singapore) had earlier reported a net loss of $3.1 million for the year ended Dec 31 on the back of higher rents and slower sales.

Other than Isetan's new store at Jurong East, other outlets registered lower sales for last year compared with 2013, "due to the challenging and competitive environment".

Dr Guan Chong, head of the marketing programme at SIM University's School of Business, said competition from e-commerce firms and a tighter labour supply have hit profits.

Associate Professor Tan Soo Jiuan of the National University of Singapore Business School said the labour crunch means sales staff often do not stay long enough in the job to accumulate good product knowledge "nor become well-trained to give the kind of good retail service that you can get in places like Japan, Taiwan and Hong Kong".

Prof Tan suggested that firms invest in training and improve the image or professional status of those in retail or sales, while rewarding staff for good service, on top of sales performance.

Despite the gloom, there are still retailers that have something to cheer about.

Robinsons The Heeren, which opened in November 2013, reported a 32.7 per cent growth in sales in January compared with a year earlier, while last month's turnover expanded 33 per cent.

Ms Angeline Ng, the outlet's manager, attributed the growth to the store keeping up with trends and responding appropriately to competition.

"There has been improvement in terms of merchandising as we are bringing in more relevant merchandise for our clientele."

However, she acknowledges that business in the once-busy Orchard Road stretch has been affected.

"The surge of heartland malls springing up over the past couple of years has impacted us in Orchard Road. Consumers no longer have to come to Orchard Road for the latest offerings."

Isetan's Jurong East store helped lift group sales for the year to $340.3 million, an increase of 2.18 per cent compared with a year earlier.

Ms Ng also noted that many mass brands have started to move to heartland malls as they see opportunities there.

"By doing so, the brands have lost some form of exclusiveness in Orchard Road, unless the brands differentiate their merchandise offerings in the heartland from Orchard Road," she said.

Rents will always be an issue, said Ms Ng, adding that the solution is to work with landlords to re-invent the retail scene.

Courts Singapore has only one store in Orchard Road and so is less affected by higher rents, but its chief executive, Mr Terry O'Connor, said it is still a prevailing issue that could be addressed through more real estate zoning and proactive government action.

"Lower rental costs will manifest in lower consumer prices, as exemplified by retailers such as Walmart and Tesco through retail park zoning," he added.

Dr Guan noted that retail sales in prime areas may have been affected by the falling number of Chinese visitors to Singapore, although the number of overall international tourist arrivals is stable.

And shopping is no longer confined to locations, thanks to multi-channel retailing, said Dr Lynda Wee, adjunct associate professor specialising in retail management at Nanyang Technological University.

Customers now buy on their own terms, with an array of online shopping features, such as reviews, at their disposal, and with mobile devices, "consumers will shop any time, anywhere", she added.

Retail experts call for retailers to find ways to use new technology to improve business and stay creative. Dr Wee said: "They should embrace technology in retail, adopt a blended approach and engage the right talent.

They need to rethink the competencies needed in offline to online retailing. Consumer insights is key."

The Straits Times / Business                 Published on 12 March, 2015

By Rachael Boon                                   rachaelb@sph.com.sg