SINGAPORE: With the retail industry “severely impacted” by COVID-19, there is a need for retailers to “break new ground” and transition to a new business model in order to survive, said Trade and Industry Minister Chan Chun Sing on Monday (Oct 12).
Speaking to the media after a visit to SK Jewellery Group, Mr Chan noted the “tremendous pressure” on the retail industry, with e-commerce shifting the traditional business model and retailers all over the world able to promote their products even without a physical shop front.
“What COVID-19 has accentuated is both the structural and the cyclical forces impacting the retail industry,” said Mr Chan.
He said that the cyclical forces will continue to impact the retail industry in the near-term amid lower consumer confidence and constrained purchasing power.
The rise of online shopping as well as changing consumer behaviour and technology innovation are also shaking up the industry.
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“The structural issues that we are talking about has to do with the ability for people to promote their products online, without a physical shop front. It also allows consumers to actually compare prices across a broad range of sellers, without even having to leave your house," said Mr Chan.
These have “severe and serious implications on the retail sector”, he added.
Given that the retail sector contributes 1.6 per cent to Singapore’s Gross Domestic Product (GDP) and employs about 4.1 per cent of the total workforce, any impact on the industry can have “very grave consequences” on the employment prospects of workers in Singapore, said Mr Chan.
As such, the previous model of of relying “mainly” on the domestic market “will still be necessarily, but insufficient going forward”.
“We need to work together to help our retailers to break new ground. And by this, we mean that we must go beyond the domestic market to the regional market, leveraging on the digital initiatives to help us to reach new markets and to promote new products and services.”
He added that retailers need to move beyond the current model of arbitrage and being a middleman, and focus on adding value to product and services.
"If we just depend on the traditional model ... it will be very, very difficult for our retailers to survive and thrive," said Mr Chan, noting the impact of high fixed costs such as rental on retailers.
As such, the Government is looking to help retailers transition to a new business model and expand their top line by digitalising, which can help retailers expand into the international market.
In addition, combining service, digitalisation and design would help retailers compete in a changing retail environment, he said.
“If rental of fixed space is a big component, the question is how can we reduce that?
“But more importantly, how do we increase the top line? This is why we have been encouraging our retailers not just to focus on minimising the fixed costs, which they must continue to do, but more importantly, how to have a new business model.”