18-5-2024 (SINGAPORE) The allure of international travel and the fortified Singapore dollar have ignited a spending frenzy among Singaporeans, who are increasingly opting to splurge their hard-earned cash overseas. This trend has cast a formidable shadow over the nation’s already beleaguered retail industry, exacerbating the challenges faced by local merchants.
According to the Singapore Retailers Association (SRA), the sales figures for April paint a grim picture, with most retailers reporting a dismal performance compared to the same period last year. The culprit, the association contends, is the appreciating Singdollar. Singapore, which employs the exchange rate as its primary policy tool rather than interest rates, has permitted the local currency to strengthen against those of its major trading partners in a bid to combat escalating inflation.
“The increased value of our currency, coupled with Singaporeans’ penchant for globetrotting, has prompted consumers to seek more cost-effective alternatives, particularly in Japan, South Korea, and Malaysia,” the SRA stated.
The association highlighted that Singaporeans regard a day trip to Johor Bahru as a perfectly feasible weekend or public holiday excursion, often indulging in shopping and personal grooming services at a fraction of the cost compared to Singapore. For instance, a full manicure and pedicure can be procured for a mere $35 in Johor, while the same services in Singapore would set one back between $80 and $120.
“The stronger currency has also emboldened Singaporeans to embark on more frequent holidays, and they tend to reserve their disposable income for overseas expenditure, despite the additional costs incurred,” the SRA added.
Allison Chew, a 46-year-old professional in the financial services industry, epitomizes this trend, undertaking three to four international trips annually. Her purchases in Singapore are limited to essentials and tech items. “Dining in Singapore is becoming increasingly costly, and more importantly, it does not offer the same experience you would get when you travel to understand its provenance and culture,” she remarked.
Chew further elaborated that for the same amount spent on an extravagant meal in Singapore, she could embark on a weekend getaway in Southeast Asia. “Similarly, dollar for dollar, a European meal in Singapore can buy you several better meals in Europe, so your money goes further,” she added.
Ivan Chua, a 48-year-old IT executive, echoed similar sentiments, revealing that his overseas purchases are 15 to 30 percent cheaper, especially with tax refunds. He typically indulges in retail therapy coupled with overseas trips once or twice a year.
Addressing the notion that such endeavors necessitate additional expenditure on flights and accommodations, Chua dismissed it as a non-issue, asserting that most individuals incorporate shopping into their holiday plans or work trips. “Nowadays, most people will do at least one to two holiday trips a year, especially Singaporeans,” he added.
The SRA noted that consumers who have gone shopping overseas for items like luggage, shoes, and handbags are unlikely to repurchase such goods for an extended period.
The appreciation of the Singdollar has also rendered goods and services more expensive for tourists, adding further strain to Singapore’s retail businesses. “This is why the increase in tourist numbers did not translate into stronger retail sales,” the SRA remarked, alluding to the retail sales data released on May 3.
While takings at the till rose 2.7 percent in March compared to the same period last year, buoyed slightly by Taylor Swift concerts, retail sales dipped 1 percent month-on-month and seasonally adjusted from February – a telltale sign that consumer spending has waned despite a resurgence in tourist arrivals.
Sales at supermarkets, convenience stores, recreational goods outlets, furniture and household item retailers, as well as technology equipment vendors, all experienced month-on-month declines.
Economists have attributed the overall month-on-month dip to the Chinese New Year effect in February.
In response, the SRA revealed that retailers are now attempting to convert consumers to online and social shopping or engage regulars through events and workshops. However, such efforts necessitate additional resources and generally do not yield substantial returns, it conceded.
Professor Qian Wenlan, an expert in finance and real estate at the National University of Singapore Business School, posited that weak consumer demand could stem from the uncertain economic outlook, prompting individuals to exercise caution. “They may want to hold off shopping for a bit to have precautionary savings in case something happens to the economy, to their jobs, to the housing market or to their investments,” she explained.
Prof Qian asserted that a specific pull factor, such as a lower sales tax, might be necessary to entice more locals to prefer spending overseas – a practice they have engaged in even in the past.
While acknowledging that tourists contribute significantly to Singapore’s gross domestic product, Prof Qian emphasized that a substantial portion of consumption in the Republic is still driven by domestic spending. “Looking at the trend, it may raise some red flags or a reminder for us to keep an eye on the domestic demand, which is a strong indicator of economic health. So, if people are reluctant to spend overall, it’s not a very good sign,” she cautioned.
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