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Singapore

'Our costs have not stopped increasing': Some service providers in Singapore raising prices to stay afloat

03:13 Min
Singaporeans may have to fork out up to 30 per cent more for services such as car washes and house cleaning as inflation and the ongoing labour crunch take a toll on the industry. But some companies are trying to find long-term solutions. Clara Lee reports.   

SINGAPORE: From hair salons to home repair works, service providers have been raising their prices in recent months to cope with rising costs.

Sharp spikes in the cost of raw materials, logistics, manpower, as well as utilities due to the COVID-19 pandemic and more recently, Russia’s invasion of Ukraine, have left a handful of businesses with “little choice” but to pass on the rapidly rising costs to their customers.

Mr Wilson Ng, who runs W&S Handyman Services, said that he has made slight increases to his fees since the end of March this year.

This is mainly due to rising fuel costs, which have also affected profit margins, said Mr Ng. Where he used to spend S$80 for a full tank of petrol for his van, which would last him between four to five days, it now costs about S$130. 

Local pump prices have risen steadily this year amid the Ukraine conflict. According to fuel price comparison website Fuel Kaki on Friday afternoon (Jun 3), the most popular 95-octane grade petrol now costs between S$3.26 and S$3.33 a litre. 

The same product a year ago was almost a dollar cheaper, in the S$2.38 to S$2.48 price range.

And it is not just petrol, the prices of materials essential to Mr Ng's handyman business have also shot up since the start of the year.  

A box of screws used to cost Mr Ng about S$10. Now he pays anything from S$16 to S$18. The price of a pack of wall plugs has also increased from S$11 to about S$16.

While he has not increased his transport fee of S$20, Mr Ng has bumped up his minimum charge from S$40 to S$45. He has also implemented new fees for specific services like the drawing of markings for the installation of particular household items that need specific alignments.

These have helped to offset rising costs, said Mr Ng, while charging for services that used to be free also ensures he is compensated fairly for a task which can take a substantial amount of his time.

Latest data showed Singapore's services inflation dipped slightly to 2.5 per cent in April as airfares, which have been one of the major drivers in recent months, moderated.

Prices of personal care services, such as hairdressing, inched up 0.5 per cent year-on-year in April, from 0 per cent in March. Household services and supplies rose from 1.2 per cent to 1.4 per cent in April, according to the latest data.

So while official data points to limited gains in inflation in such businesses, those that CNA spoke to say on the ground realities paint a different picture.

Hair care company Bee Choo Origin raised the prices of its products and salon treatments in April - a decision the company said it had to make after two long years of relentless cost increases.

For example, the cost of shipping a container from Europe to Singapore has tripled to S$6,000, said general manager Estee Lim. This excludes additional fees incurred due to delays, which have become frequent occurrences.

Prices of raw materials, such as Chinese herbs used in hair treatments, have also gone up by as much as 45 per cent, while packaging materials now cost about 30 per cent more.

“Since the start of COVID-19, we have had many manufacturers and suppliers telling us that they will be increasing prices because their own raw materials (costs) have also been going up,” Ms Lim said.

“To be fair, I think they have also been trying to push back (price hikes) as much as possible but you will come to a point when everyone in the supply chain will no longer be able to sustain (such cost pressures).”

Meanwhile, the company has been raising the wages of its employees amid a manpower crunch in the services industry, especially in customer-facing roles.

The last straw came at the start of this year when its electricity bill shot up by nearly five times, when its power retailer exited the market and its plan was transferred back to SP Group. The company has since signed up for a fixed-price plan with another power retailer, but its electricity expenses are still three times higher than before.

In all, its operating costs have gone up by at least 30 to 40 per cent, said Ms Lim, adding that the price adjustment is hence “a necessary thing to do” for the business to remain sustainable.

It is a similar situation at gym chain Ritual, which will “most likely” increase its fees soon, according to chief executive officer Brad Robinson.

Packages range from S$199 to S$259 or S$280 to S$1,200, depending on the number of sessions or duration of the membership.

However, with the chain planning to open another four outlets by next year - bringing its total to nine - Mr Robinson said fees will have to be adjusted to match higher operating costs.

“It may cost us 25 to 30 per cent more to build a gym than it did two years ago based on what my contractors are saying and the current supply chain situation, so we will need to increase the prices to recoup our costs,” he said.

“It's a balancing act because we do have to keep in mind that consumers are being pinched now with (the prices of) food, fuel, utilities and everything going up, so we don't want to pour on the pain and we’ll try to do a reasonable and responsible price increase,” he said.

"TAKES ME A LOT OF COURAGE"

Business operators said the decision to raise prices is not an easy one.

Mr Ng, who runs the handyman business, said some people have asked why he added the additional marking fee. 

“You will still face the music of some customers (asking) why it is so expensive … It’s standard in Singapore,” he added. “(But my prices are such that) I believe I will give the (best) quality versus the price.”

But he is also mindful that to stay competitive and continue getting referrals, he needs to keep his prices affordable.

“I believe a lot of people are also struggling with earnings too … Everybody is also trying to make a living in Singapore (and) the standard of living is getting higher and higher,” he explained, noting that he has no plans to increase prices further.

“It takes me a lot of courage to increase (prices). Because I have a lot of regulars, and I have to explain to them also. If I can, I will try … not to increase.”

Meanwhile, Bee Choo Origin, the hair care company, said it began informing customers about possible price adjustments as early as January. While most “reacted well” to the decision, some questioned the need for a price hike now that the worst of the pandemic was over.

“We can only say that even though the Government has done a good job in managing COVID-19, our costs have not stopped increasing,” Ms Lim said. “Even up till now, some of our suppliers are still raising their prices.”

She added that the company has not had a major price increase in at least four to five years and has no plans to change prices "as much as (it) can" for the next two to three years, even with an impending hike in Goods and Services Tax.

The homegrown haircare brand said it feels the pressure of competing in an increasingly crowded field where newer firms have been trying to jostle for market share with much lower prices.

“Right now, my industry is in a bit of a price war,” said Ms Lim. "But we evaluated for a very long time ... and (a price increase) is necessary to sustain our business for the longer run.”

REMAINING COMPETITIVE 

That said, there are others who have not decided on price hikes despite feeling the heat of rising costs.

Ms Angela Lee, who manages a manicure salon in Boon Keng, said raising prices can be “tricky” and that she is taking a “wait and see” approach for now.

Competition is stiff in her industry, she said, pointing to at least three nail salons nearby and similar businesses that provide house-call services.

With that, pricing can be a “very important” factor for customers, she said.

Dr Kevin Chua, who runs a medical and aesthetics clinic in Orchard Road, told CNA that he had to lower the prices for treatments by 5 to 8 per cent last month to attract more customers, despite his operating costs increasing by 4 per cent.

“(Other businesses) are dropping their prices, and so I need to remain competitive,” he said.

“We are very much reliant on (people’s) expendable income and as that decreases - because salaries aren’t exactly increasing in line with inflation - we’re expecting our treatment numbers to be reduced.” He currently charges S$150 for facials and up to S$5,000 for more premium procedures such as cosmetic fat-reduction treatments.

But with running costs of utilities and biopharmaceutical products expected to continue climbing, the clinic might be forced to increase its prices in the next three to six months, said Dr Chua.

“Of course, I’m concerned about raising the prices, because whoever moves first generally loses because you run the risk of alienating your business.” 

“But we might not have a choice because it's not sustainable,” he said. “We need to maintain the staff’s salaries and to try and keep up with a reasonable profit margin to keep the business sustainable and to allow for growth.”

Source: CNA/mt(ac)

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