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SINGAPORE: Rising overhead costs are continuing to hurt retailers in Singapore. According to the Singapore Retailers Association, high rents in particular are weighing on the bottomlines.
They noted that rental rates have been increasing despite the poor economy.
New malls along Orchard Road have been drawing in the crowds. But industry leaders said it is not necessarily a sign that the retail trade is booming.
They noted that sales have been on a downward trend since the fourth quarter of last year, hurt by depressed consumer sentiment amid the recession.
And although recent data suggests that the decline has been easing, sales this year are still expected to come in lower than the S$35 billion seen in 2008. And high rental rates are not helping with profit margins.
Lau Chuen Wei, executive director, Singapore Retailers Association, said: "One would have thought that with additional supply, the rates will go down. But of course that only works in a perfect market. Although there are new malls coming up, new square footages, we have not seen rents go down.
"From members' feedback, what they're telling us is that on renewal of leases, they're looking at at least 20 per cent to 30 per cent, and some even 50 per cent, increase over the last sign-on."
The other significant cost factor for retailers is wages. But given the profit margins, retailers said it's very hard to raise salaries. This has made such jobs less popular for Singaporeans.
Speaking at the opening of the Singapore Retail Industry Conference 2009 on Tuesday, Minister of State for Trade and Industry Lee Yi Shyan said one way to boost competitiveness is to focus on productivity.
He noted that Singapore's retail sector is only half as productive as that in the United States and Britain.
Mr Lee said: "One reason has to do with how the industry operates. We observed that retail sectors in Hong Kong, Japan, Australia and the US leverage on technology, innovation and flexible deployment of manpower to achieve higher productivity."
He noted that one way to kickstart a productivity drive is to develop industry-specific productivity indicators to help companies benchmark themselves.
Enterprise development agency SPRING Singapore is working on this. - CNA/vm
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