_Property Bites Episode 9: Adapting to Retail’s New Normal (Phase 3)
Speakers:
Hector Tan | Head, Marketing and Communications | hector.tan@sg.knightfrank.com | +65 6228 7337
Ethan Hsu | Head, Retail | ethan.hsu@sg.knightfrank.com | +65 6228 6832
Edited Transcript:
Q: Previously, we discussed the retail situation on the ground and how it has been affected by the Phase 2 reopening of our nation. How do you think consumers and retailers have coped?
We have been doing rather well, looking at the low number of cases in the community. At the start of the year, May saw a 21% decline in retail sales, on a month-on-month basis. When the circuit breaker ended in June, there was a huge jump to 51.1% in retail sales transacted that month.
This increase shows how much activity was generated since the lift of the circuit breaker, as consumers returned to retail shops. By now, most consumers should be familiar with the various safe distancing and contact tracing measures such as using safe entry, seating capacities at food outlets, and the need to mask up. We are looking forward to Phase 3, as more measures open up.
Q: Consumer patterns have shifted during the pandemic – online retailers and heartland malls are seeing an increase in activity, compared to the CBD and city areas. What are some reasons for this trend and how do you foresee this panning out, post-pandemic?
Most consumers have gotten comfortable working from home (WFH), and corporations have witnessed the feasibility of this arrangement, making it a trend only set to continue into the future. The WFH phenomena has been a main, contributing factor for the increase in activity in suburban malls.
Q: What are some of the difficulties experienced by landlords and tenants during Phase 2?
Landlords have had to pay close attention to ensure safe management measures are upkept (regular cleaning of premises, queue control, safe distancing measures). Retailers had to get comfortable with the measures, with some repurposing their retail stalls into logistical backend operations (storage, fulfilment). Other retailers such as beauty stores, who relied heavily on samples or testers in their physical premises, had to remove them. It has been a challenge for retailers to work around the measures that have been implemented yet create an experience that continues to draw customers.
Q: The spotlight has been on the larger department stores, as Phase 2 saw some closures. The growth of e-commerce is said to be the major cause of this decline – what are your views on that?
The relevance of large department stores has been called into question before Covid. Department stores first started on the premise of convenience, with numerous products under one roof. Before e-commerce, department stores were the go-to location for consumers to get products from varying categories. However e-commerce disrupted that convenience, as consumers are now able to attain multiple, varied products at their fingertips. They have access to a global marketplace, and to brands unavailable in their home country, made possible with the integration of logistics that have enabled worldwide shipping. There isn't a product that consumers are only able to find in department stores. For department stores to stay relevant, they need to find a new value proposition for shoppers. Shoppers need to have an experience in department stores that is unattainable online, such as fitting rooms with augmented reality features to better guide their purchase decisions.
Departments stores need to understand the importance of this new value and be able to shift their business model, to match these new shopping expectations.
Q: How do you think department stores should adapt?
We are talking about department stores moving forward with a digitally driven model that is augmented with a compelling in-store, sensory experience for shoppers. If department stores are able to evolve and create new value, the business would then be relevant in the future. Currently, it seems tough for department stores to move quickly, due to the nature of the business. Department stores are huge and carry multiple product lines – this model is hard to modify. I believe this model will have to be relooked at in the future.
Q: We have seen retail malls opening during Phase 2, as well as more in the pipeline to be opened. What are some of the things retailers and landlords are doing differently this time round, to cope with the pandemic?
For projects still under construction, there are opportunities for landlords to adjust the design to better accommodate the safe distancing measures required. Design modifications include positioning F&B outlets closer to public amenities, such as washrooms or street exits. Other landlords have also taken the effort to provide curb side delivery services, allowing delivery service providers to easily pick up orders from retailers. These are some of the initiatives we have seen landlords and tenants working together on, to smoothen out processes during this period. I believe these initiatives will be brought forward post pandemic.
As we look at the long-term implications for landlords and tenants, right sizing units would be a concern. Prior to the pandemic, most did not pay much attention to the space required. However, with the proliferation of digitalization, retailers have begun re-evaluating their spaces, realising that they may not require large shop fronts. They have taken into consideration what may be required to create an engaging experience for their customers, not just to convert sales.
Moving forward, the repurposing and rightsizing of space is set to be one of major concerns for both retailers and landlords.
Q: Let’s cover Safe Entry and contact tracing. How have malls adapted to these extra management requirements? Could you run through the facilitation of regulations on the ground (Safe Entry and temperature taking) and how it has evolved over the past few months?
Many malls have adopted new technologies to enable faster and more seamless contact tracing. They are taking up new software that can process large groups of people quickly, and at the same time. Most retailers and mall owners have implemented such safe management measures without major problems, to comply with the safety management regulations.
Retailers found in breach of safety management regulations will be penalized with suspension orders, of which several cases have been reported so far. These act as learning experiences for all retailers to comply with the safety management regulations, moving forward.
Q: With the pandemic under control and Phase 3 coming up, any advice for retail operators?
Shoppers will want a safe environment to shop, dine and entertain in, so hygiene as well as security regimes will need to be maintained and upkept rigorously. Online shopping is here to stay, so digital adoption must be sustained and enhanced with an offline presence, to compliment these platforms in building up a brand connection with customers. It is important for retailers to recognize the importance of investing in the collection of customer data, which can give meaningful insight on how customer interact with the brand, its products and services. Analysing the data to understand which touch points will be the most effective in creating the most impactful experiences, and channeling resources towards building those platforms will be important, in surviving this pandemic situation.