Magazines Archives - 2011 Jan
Retail Outlook 2011 – the Year Ahead : Retailers and mall operators in Singapore, Malaysia, the Philippines, Thailand and India share their views and expectations for this year.
Singapores retailers more customer-centric and tech-savvy after recession
While caution stalled the retail industry at the beginning of last year, the first 10 months of the year saw the sector inch its way out of the downturn, according to figures released by the Singapore Department of Statistics, with the latest data revealed for last October reflecting a positive 5.3% growth in retail sales from 2009, excluding motor vehicles.
The opening of the new malls along Orchard Road and the integrated resorts (IRs) at Marina Bay and Sentosa saw tourism pick up by 16.1% over 2009, to reach 963,000 in November last year. Meanwhile, the Singapore Tourism Board anticipates that tourist arrivals will hit the 12-million mark for the full year 2010. More good news came early this month when the Singapore Ministry of Trade and Industry disclosed that the local economy reversed its 1.3% contraction in 2009, climbing to a record 14.7% last year, breaking the city-states 40-year record of 13.8% in 1970.
The resultant impact of this upswing is evident in the numerous retail developments that have come onboard, observes Lester Quah, general manager of Retail Development at Cold Storage Singapore (1983) Pte Ltd, a division of Hong Kong-based retail group, Dairy Farm International.
These have attracted a number of big brands into the local retail market, heralding the return of consumer confidence and spending propensity, Quah continues, adding that in the food retail scene, players are beginning to increase their affluent offerings and differentiate themselves from the competition, which is expected to intensify.
Despite the positive buzz in the economy, challenges continue to lend a cautious optimism to the industry. Retail rents among the popular malls in Singapore continue to climb, notes Quah, despite the increase in retail space islandwide. Retailers are competing for space and landlords command an upper hand in the selection of preferred tenants, he says, adding that this, combined with the dwindling supply of big floor plates for supermarkets and hypermarkets, will continue to drive up rentals for these formats.
R Dhinakaran, managing director at Jay Gee Melwani Group, also points out that despite the latest mall openings and the increase in retail space, it is infinitesimally small compared to the new businesses and brands that arekeen to set foot in Singapore. This, he states, is another reason retail rents are creeping north.
Additionally, the quantity of space does not equate to quality, Courts Singapores CEO, Terry OConnor, observes, adding that there remains a shortage of quality malls in the suburbs. He also laments that space constraints and shortages limit the choices that consumers have, despite the growing number of brands available in the market.
At the mass-market level, there is still not enough choice for consumers, especially in the area of Big Box retailing, he elaborates, adding that more Big Box, boutique, bohemian and outlet retailing need to be introduced into the local scene, which is currently a bit too city-centric and cookie cutter.
Retailers in Malaysia anticipate a healthy year of growth
Barring any unforeseen circumstances, the Association for Shopping Complex and High-rise Management, familiarly known as PPK (short for Persatuan Pengurusan Kompleks Malaysia), is cautiously optimistic that this year will remain positive and achieve healthy growth where retailing is concerned. The return of consumer confidence since Q4 2009 has so far been sustainable throughout 2010 and is expected to remain so for 2011, says its president, H C Chan.
According to the Malaysia Retailer Association, expected sales for 2011 will be RM75 billion (US$24.3 billion). We foresee this is achievable.
Although there was initial negative reaction when the service tax was raised from 5% to 6% in the Malaysian Budget 2011, the increase is minimal and Chan believes it should not have a major effect on consumer spending. Another significant factor in play has been an increase in tourist arrivals, which has contributed to the shopping receipts.
Even with the underlying worries that the Malaysian economy may be less competitive in view of the developments in Europe and the US, it seems to be holding well so far. The effects have been minimum. The Malaysian retail industry is still largely local consumption driven 80% of its buyers are from the domestic market.
Says Chan: Consumer sentiment has definitely improved with more spending taking place. However, consumers are a discerning lot these days [and] retailers have to work extra hard to deliver value propositions that appeal to them.
In general, consumers look forvalue when they shop, and the large lowpriced fashion format as spearheaded by Uniqlo and Brands Outlet ... will continue to do well.
Patterns remain largely unchanged as consumer spending peaks during festive seasons in the second half. We dont expect to see large deviation in this area.
As for which sectors of the retail trade are doing better than others, Chan points out that growth rates will differ from each sub-sector with speciality retail stores showing potential double-digit growth while department store cum supermarkets are likely to see single-digit growth.
Philippine retailers optimistic about the New Year
A rebound in economic growth, a growing urban population, strengthening purchasing power, continued inflow in remittances from overseas Filipino workers (OFWs) and renewed interest of foreign investors these are just some of the factors that contribute to the general sense of heightened optimism in the growth prospects of the retail industry in the Philippines, where consumers and businesses have both indicated greater confidence in their financial prospects for this year.
According to the 65-page Philippines Retail Report released last November by consulting firm Business Monitor International, retail sales in the Philippines are expected to hit US$31.42 billion this year and should further grow to $37.06 billion by 2014.
Strong underlying economic growth, an expanding population (especially in urban areas), rising consumer spending and the continued development of organised retail infrastructure are key factors behind the forecast growth in the Philippines retail sales, the report states.
The Philippines nominal GDP is a forecast US$193 billion in 2011. Average annual GDP growth of 4.5% is predicted through to 2014, reaching US$275.65 billion. With the population expected to increase from an estimated 95.5 million in 2011 to 100.9 million by 2014, GDP per capita is forecast to rise by more than 35% by the end of the forecast period, reaching US$2,732. Our forecast for consumer spending per capita is an increase from US$1,439 in 2011 to US$1,931 by 2014.
Remittances from family members overseas are providing a big jolt to consumption, the report adds, and money coming in from OFWs is expected to grow by an average of 6%-8% this year. Already, in the first seven months of last year, remittances grew 7.1% y-o-y to US$10.68 billion.
With the majority of remittances going into consumption rather than investments, the retail industry is one of the beneficiaries. In urban areas, in particular, there are also increasing numbers of dual-income, middleclass families and young professionals who are boosting retail sales, the report reveals.
The bullish outlook is shared by most retail players, with the Philippine Retailers Association (PRA) estimating a 10%- 15% growth in the industry last year and at least another 10% growth this year.
I foresee continued growth in the retail sector in the vicinity of 10% for 2011. This is largely due to sustained remittances from OFWs plus the massive growth of the business process outsourcing (BPO) industry. Barring any major geopolitical incidents, our retail sector should mirror the growth in the GDP, says PRA president Bernie H Liu, who owns and operates such popular apparel brands as Penshoppe, Oxygen and Regatta.
Prospects brighten for Thailands mall and retail players
2010 is certainly a year that Thai retailers want to forget. It had started out as a potentially good year as the world economy was then slowly recovering, while on the home front a more stable government was in place after three years of political turmoil.
All signs at the time indicated that Thailands retail sector would bounce back strongly. But instead, it turned out to be a year of tragedy for the Bt1.4- trillion (US$45.3-billion) retail market in the kingdom that was looking towards a positive growth of 5% last year.
A prolonged demonstration by anti-government protesters in April and May that culminated in soldiers taking them on in street battles a month later stunned the world. Thousands of protesters, who had camped for weeks in the capitals business and tourist district retreated but not before setting fire to the countrys biggest shopping mall the CentralWorld as well as the nearby Big C and a few other malls. It resulted in massive losses to the owners and hundreds of outlet operators, and eventually, damaging the image of the countrys retail and tourism sectors.
But still, the retail sector did recover towards the end of last year, largely due to various incentives given by the government, as well as the tourist dollars flowing in during the high season beginning October.
This signals a positive year in 2011 as retailers churn out new strategies to get the industry back on track, backed by better purchasing power on the card.
While 2009 and 2010 saw workers losing jobs or facing reduced income, an opposite trend is expected this year.
Last month, the Central Wage Committee approved increases in minimum wage levels by an average of Bt11, rising about 5.3%. This, along with the 5% salary adjustment for civil servants, are likely to improve the quality of life for workers as they have better purchasing power.
Furthermore, the retail sector, which was also impacted by the drop in tourist numbers in the first half of last year, can look forward to a fruitful 2011. The Thai tourism authorities are projecting 15.5 million tourist arrivals this year, with an expected Bt600 billion in revenue.
Urbanisation of Indias consumers spurs growth in retailing
There are three major reasons for the growth in Indias organised retail sector: Urbanisation of consumers; the increase in the disposable income of consumers; and the interest of global retail giants in the countrys retail market.
The cost involved, increased competition among organised retail chains and evolving consumer preferences are just three of the challenges faced by retail outlets. Brand distinction, consumer identification and promotions are among the other major challenges facing those who wish for their companies to prosper from the surge of Indian retail activity.
Tie-ups with international retailers and brands, emphasis on profitable growth and increased focus on private labels are set to be the three big trends in the Indian retail sector this year.
A lot of international retailers and brands are most likely to look at India as global markets have stabilised and the Indian economy has proved to be better than most other countries. These factors give [them] a lot of confidence to invest in India, says Arvind Singhal, chairman of Technopak Advisors, an India-based business consultancy.
Wal-Mart has set up its first unit in the country and Tesco, the UKs largest retailer, is providing back-end support to Tatas hypermarket, Star Bazaar. Carrefour is said to be talking to Kishore Biyanis Future Group about a possible tie-up.
Industry sources said a number of international brands are also holding talks with Future Group, Reliance Retail and Spencers Retail for tie-ups.
Devangshu Dutta, chief executive of business consultancy Third Eyesight, believes franchise and licensing agreements could be a major avenue used by overseas brands to enter the country. Our research shows that 45% of fashion and lifestyle brands, which have entered India recently, have used this route because it gives a quick entry and allows tie-ups with partners who have good real estate capabilities.
Although retailers such as Reliance Retail, Aditya Birla Retail and Spencers Retail closed hundreds of stores or shifted stores to economical locations in 2009 and 2010 and took various steps to cut costs, they are likely to continue to focus on profits and boosting margins this year.
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