Retailers billed it as the Great Singapore Sale. Chinese tourist Zhu Liang bought it, only to regret afterward.
“We will never come here again to shop on purpose,” said Zhu, a 35-year-old businessman from Hangzhou. Visiting the city during the final days of the summer sale season in July, he purchased a Loewe handbag for his wife, only to discover he could have paid less in Hong Kong.
Behind the mark-up: a strengthening exchange rate, rising labour costs and a sales tax Chinese tourists don’t encounter in neighbouring Hong Kong. A reduction in visitors from Asia’s largest economy contributed to a sales slide of as much as four per cent in Royal Sporting House and Robinsons groups during Singapore’s annual shopping festival, according to the operator of those retail chains.
Visitors from China to Singapore dropped 27 per cent in the five months through May from a year earlier amid slower economic growth on the mainland and the impact of a new Chinese law that clamped down on cut-price shopping tours. Total tourist arrivals slid 1.7 per cent, according to the Singapore Tourism Board.
‘That grim’
Singapore’s retailers, already facing growing regional competition, are under the most pressure since the Asian financial crisis, said Singapore Retailers Association Honorary Treasurer Kesri Singh Kapur, who is also Asia head of Dubai-based Al-Futtaim Group, one of Singapore’s largest retailers with chains such as Royal Sporting House, Marks & Spencer, and Robinsons department store.
“It is that grim,” Kapur, 47, said in a July 29 interview in Singapore. “Both the sides of consumption, which are the domestic customers and tourists, are not spending. I anticipate that at least for the next 12 months, the market will be sluggish.”
Shares of Singapore retailers including Metro Holdings Ltd fell along with the benchmark stock index today. Metro, which operates department stores, slid 0.5 per cent to S$0.925, the lowest level since May 21. Isetan (Singapore) Ltd fell 0.4 per cent to S$4.80, the lowest price since May 14. The Straits Times Index dropped 0.8 per cent to a two-week low.
Broader decline
While China’s anti-corruption campaign against extravagant spending by government officials and state-owned companies has also damped spending by Chinese at home and in Hong Kong, retailers in Singapore are grappling with the threat of a broader decline in appeal.
Singapore’s average retail sales growth dwindled to less than one per cent in the two years through May, according to government data that excludes motor vehicles.
In Hong Kong, the average was 6.9 per cent in the 24 months through June.
The Southeast Asian island, home to an Asian leg of the Formula 1 series and two casino resorts, has seen its currency strengthen almost three per cent against China’s yuan in the past year, the most after the Korean won among major Asian currencies tracked by Bloomberg.
The Hong Kong dollar has gained 0.9 per cent.
“If we change our renminbi to Hong Kong dollar, it seems like we have a huge amount of money. With Singapore dollar, you just feel like it is little money,” Zhu said last week as he walked empty handed out of the Paragon mall on Orchard Road with his family.
Singapore retail goods are generally about 10 per cent more expensive than in Hong Kong, he said.
Sales tax
Singapore imposes a seven per cent goods and services tax. While tourists can claim back part of that on departure, “there is still a differential of two to three per cent,” said Kapur.
International tourists including those from China, Indonesia and India account for at least 20 per cent of Singapore retail sales, with Chinese accounting for about half of that, Kapur estimated. Tourism Board data show Chinese visitors spent S$800 million (US$640 million) in Singapore in the first quarter, of which almost half was on shopping.
Retail brands have expanded into other markets in China, Indonesia, and Malaysia, making Singapore a less unique shopping destination, said Kapur.
“Singapore had this aura and advantage of being slightly different from its neighbours” five or 10 years back, he said. “Yes we have a great Orchard Road, we have a great environment where people can walk and shop, but availability of brands has come at parity now.”
Closing stores
Al-Futtaim has closed stores for brands including Shana and Vince Camuto in Singapore, and is closing Mango Touch, he said, estimating front-end retail staff costs have gone up as much as 30 per cent in the last two to three years.
The tourist dollar is also being stretched harder. Sightseeing, entertainment, and gaming income from visitors rose 19 percent in the first quarter from a year earlier, Tourism Board data showed. Shopping revenue slid six per cent.
“Hotels are a little more expensive, entertainment is galore in Singapore, the dollar is getting diverted into other areas and not so much into retail,” Kapur said. — Bloomberg