Why Singapore needs Project Jewel (and more malls)

Guan Chong Today Online 23 Apr 14;

Announced by Prime Minister Lee Hsien Loong in his National Day Rally speech in August last year, Project Jewel at Changi Airport will become another iconic international attraction when it opens in 2018. It will cement Singapore’s position as a top tourist destination and also better serve domestic consumers.

Project Jewel will also join other recent retail developments in Singapore, namely Westgate and Jem in Jurong East and Bedok Mall. With the iconic Orchard Road area and the many heartland malls already in existence, it begs the question: Does Singapore need so many malls? The answer is yes.

IMPORTANCE OF RETAIL SECTOR

Tourism is an important part of Singapore’s economy, representing 4 per cent of its gross domestic product and supporting about 160,000 jobs. Singapore Tourism Board data show that, from 2002 to 2012, the tourism industry has witnessed a strong annual growth rate of 10 per cent in tourism receipts and 6.6 per cent annual growth in visitor arrivals. The rapid growth in international visitor arrivals has been fuelled by the completion of a number of tourist-oriented developments, such as Marina Bay Sands and Resorts World Sentosa, as well as the growth in popularity of internationally renowned events, examples of which are the Formula 1 Singapore Grand Prix and the Singapore Arts Festival.

It is estimated that tourists’ retail spending in Singapore for 2012 reached S$7.4 billion, accounting for around 17.6 per cent of total retail sales, property consulting firm Urbis said. Furthermore, international visitor arrivals are expected to continue to grow over the next few years, translating into an increase in the proportion of tourists’ spending in total retail sales over time, reaching 19 per cent in 2016. The high proportion of total retail sales contributed by international tourists highlights the importance of tourism to the overall retail market here.

Domestically, the Republic has recorded strong economic growth since 2000, with an average annual real GDP growth rate of 5.3 per cent over the 2001 to 2012 period. Driven by the growth in household disposable income and a developed market with sophisticated consumers, Singapore’s retail industry has been transformed over the last decade, with department stores and hypermarkets appearing in all parts of the island.

For Singaporeans, although housing, utilities and transport still account for the largest proportion of household expenditure, there is a significant amount being spent on lifestyle goods and services. The Business Monitor International’s 2014 Singapore Retail Report showed household expenditure on recreation and culture is projected to hit US$17.5 billion (S$22 billion). Spending in hotels and restaurants is expected to reach US$11.1 billion and will continue to grow by an average of 10.3 per cent a year between this year and 2018, hitting the US$16.4 billion mark by 2018.

As incomes continue to rise, household spending is expected to grow over the next five years across all areas of the retail sector, including product categories such as clothing and footwear, household goods, food, drink and tobacco, and personal care.

GROWING CONSUMER DEMAND

The rapidly growing needs of international tourists and local consumers in the lifestyle sector have imposed growing pressure on the capacity of the retail sector. For example, Orchard Road used to be the place where one could shop and hang out leisurely, but it is getting increasingly crowded for anyone to truly enjoy.

This can be partially explained by the constraints on retail floor space per capita in Singapore. Urbis said retail floor space per capita was approximately 10.7sqf in 2012 and is expected to grow marginally to 11.0sqf by next year. This provision is relatively lower than other developed Asian economies such as South Korea (14.4sqf in 2010) and Japan (16.6sqf in 2009) and Western developed countries such as Australia (23.7sqf in 2012) and the United States (50.5sqf in 2010).

Yet, with recent new developments such as Westgate in Jurong East, Singapore is slowly catching up with Hong Kong (11.3sqf in 2012) and mainland China (12.9sqf in 2012) in retail space to satisfy consumers’ increasing demand.

With resilient domestic demand and strong growth in the number of international tourists, the outlook for the Singapore retail sector is relatively positive. The completion of Project Jewel will better serve local and international consumers in the lifestyle sector. Located close to the Changi residential heartlands, Project Jewel is very well connected by the public transport system and Singaporeans who are willing to travel a little bit more will benefit greatly from it. Connected seamlessly to 275 cities worldwide, this new world-class destination will also capture the heart of international travellers.

That said, for Project Jewel to effectively satisfy the rapidly growing needs of consumers, its retail concepts need to be carefully chosen to appeal to specific consumer segments.

ABOUT THE AUTHOR:

Dr Guan Chong is a marketing lecturer at SIM University.

More malls add up to a zero-sum game
Donald Koh Today Online 25 Apr 14;

The perspective on “Why S’pore needs Project Jewel (and more malls)” (April 23) should be re-examined. Tourism and consumerism do generate money for Singapore, and if we were a corporation, then more malls would indeed mean more growth.

However, we are a nation and although many treat this country like Singapore Inc, such a numbers game would have a negative impact on us.

Firstly, we are facing a labour crunch in the retail and food and beverage sectors. With Singaporeans becoming more educated and affluent, many have shunned this line of work, known for its long hours and low pay.

Businesses have relied on foreigners to fill the gap, but it is widening and will continue to widen if the writer’s suggestion is adopted rapidly. Retail and F&B sectors are still labour-intensive industries where automation cannot easily be applied.

Businesses would be fighting even more for precious headcount, leading to inflated wages. The ones to suffer would be sole proprietors and small businesses.

Multinational corporations and big competitors would have the funds and synergy to pay well and offer better benefits, but small businesses would face a more daunting task in trying to recruit or retain employees.

Levies would continue to rise as the Government tries to contain the over-reliance on foreign workers. This would contribute to higher labour costs, which are then passed on to consumers. In time, it would be an upward trend.

Secondly, with a land area of 716 sq km, Singapore’s land use must be planned carefully. We are not China nor Australia, but a little red dot.

A country with such limited space must consider residential needs, essential services such as hospitals and schools, as well as open spaces such as parks and nature trails, which contribute intrinsically to citizens’ well-being. I would exchange some malls for public hospitals.

Also, we are losing our identity as a nation due to rapid development. Who would we be if we trade our heritage sites, old neighbourhoods and memories for homogeneous malls with the same brands and F&B outlets?

There is also the issue of rising rentals, which would force small businesses to relocate, or worse, close for good. I agree that Singapore should continue to grow, but more is at stake than only chasing numbers.

More malls, restaurants and shops would mean bringing in more people and more spending, but resulting also in higher rentals, labour and food costs, as well as a lower quality of life and decreasing sense of identity, adding up to a zero-sum game.