Last year was a challenging one for the Singapore retail market. The island-wide vacancy rate for retail space climbed to 8.4% in 3Q2016 — the highest level in more than five years since the time series commenced in 1Q2011. Meanwhile, for the whole of 2016, rents in the Central area slid 8.5%, according to statistics from URA. The soft retail market is partially cyclical, stemming from the generally sluggish economic growth and uncertainty in the employment market that led to the tightening in consumer spending. However, the bigger culprit is the structural change in shopping habits and patterns brought on by technological advances.
There is a need for retailers and mall landlords to innovate and differentiate themselves in the face of increased competition
Eroding relevance of bricks-and mortar stores
Singapore’s oldest department store, John Little, recently shuttered all its stores after 174 years in business. It cited that it arrived at the decision after “evaluating the relevancy and sustainability of the John Little bricksand- mortar business” in light of the current retail landscape.
This phenomenon is not unique to Singapore. All around the world, competition from online retailers is eroding the profitability of bricksand- mortar businesses. Many are rationalising their store portfolios, opting to maintain and focus only on the profitable ones. American retail giant Macy’s recently announced the closure of 68 stores as part of a plan to streamline its store portfolio and increase cost efficiency in the face of competition from online retailing, among other factors.
Meanwhile, Marks & Spencer announced last November that it was shutting 30 UK stores and converting 45 more into food only shops as part of a major business overhaul that will see it devoting less shop-floor space to clothing. Besides the conventional method of consolidating and maintaining only profitable outlets, how else can retailers and mall landlords adapt to bring in the footfall and/or to stay afloat?
Need to innovate
First and foremost, there is a need for retailers and mall landlords to innovate and differentiate themselves in the face of increased competition. Talk of rebranding and introducing a “lifestyle concept” may be old news, but retailers and landlords can take it to the next level by enhancing the experiential factor.
One way is to incorporate more “retail-tainment” tenants, for instance, Ganso Manekineko, Japan’s leading karaoke chain, which opened a facility on the eighth floor of Orchard Cineleisure last August. It even offers weekend buffets for customers.
Retail-tainment is not a new concept and has taken off in Thailand on an even larger scale. For example, in November 2015, Future Park Rangsit, a 20-year-old mall located in Pathum Thani in the north of Bangkok, expanded its space to include “Zpell”, a centre for sports that includes a futsal park, an ice-skating rink, a ski park and an indoor park called the Blossom Garden. The expansion brings the total retail space at Future Park Rangsit to 600,000 sq m, making it not only the largest shopping centre in Thailand, but one of the largest in Asia.
However, landlords should also be mindful that such retailers and operators take up large spaces in malls and their overall impact on foot traffic could be limited, as they draw patronage only from a specific interest group.
Another trend that has been gaining traction locally is multi-concept stores that tend to offer unique lifestyle-related experiences, combining the best elements of retailing, fitness and food to cater for a broader spectrum of interests. For instance, Mahota Commune at Kitchener Complex combines multiple experiences within its 20,000 sq ft space. These include a café serving organic food, a traditional Chinese medicine clinic, a supermarket and organic products store, as well as an activity space that hosts yoga and meditation sessions.