Orchard Road is Perishing: What is Next for Singapore Retail

Share on LinkedIn4Tweet about this on TwitterShare on Facebook0

As Orchard Road loses relevance, what lies ahead for Singapore’s retail industry?

By Oliver Ward

Orchard Road, once the pinnacle of Singaporean retail, is dying. Empty storefronts look out over ever dwindling crowds of shoppers. In 2016 vacancy rates reached a five-year high for the 2.2km shopping boulevard.

The Urban Redevelopment Authority’s Retail Rental Index has been in decline for nine consecutive quarters and 7.7% of Singapore’s retail space now sits vacant.

As the boom of online retail stores takes consumers away from traditional brick and mortar establishments, what will the retail industry of the future look like?

Orchard Road didn’t meet consumer demands

Some shopping malls have been hit harder than others. Orchard Road didn’t modernise and innovate to keep the customers interested. The high prices appeal to wealthy Chinese tourists looking for designer brands, yet Orchard Road has no left luggage service and no airport shuttle bus. The stronger Singaporean dollar also means more expensive prices for foreign tourists, which has put them off heading to Orchard Road.

Orchard Road is not family friendly either. Parking is not easy around Orchard Road and prices are expensive. To park at Orchard Gateway, for example, costs S$4.80 (US$3.50) for two and a half hours in the evenings and at weekend. Then there is the food to think about. While there are places to eat cheaply, it isn’t unheard of to pay S$30 (US$22)  for a hotpot.

There is also little to keep younger customers entertained. The young people in Singapore no longer linger around Orchard Road. There are other shopping malls which cater for their tastes and have become much cooler to hang out at, like Bugis, Marina or Sentosa.

The shop owners blame the government

The shop owners lament the high rental costs which plague the boulevard and the unachievable price of development, from paying submission fees, engineer fees, government charges and high labour costs. Rents can go for as much as S$60 (US$44) per square foot per month.

Choo Meileen, the executive director of Cathay Organisation, believes that the government are the ones strangling stores to closure on Orchard Road. She said, “unfortunately, it is the usual suspects who can afford to pay the rents to give developers a chance to recover costs and have some form of return for the risk they take”.

Rents might be high, but the government has tried to inject life back into Orchard Road. They have offered to hold more street activities there and suggested pedestrianising the area to increase footfall.

The shop owners have to accept some of the responsibility. With online retail offering a competitive customer experience, there needs to be some incentive for customers to step out of their homes to do their shopping. For example, Artbox Singapore offers live music and street art. Shopping malls need to get creative and innovative to get customers through the doors. Orchard Road has not modernised and does not offer anything except the traditional, outdated shopping experience, which has taken its toll on business.

This is even more necessary now. As Jurong and Paya Lebar undergo expansion to become secondary hubs, Singapore is becoming more decentralised. Malls outside District 10 are now able to compete with Orchard Road. Retail giant, Uniqlo, decided to open its new store in Tampines instead of Orchard Road, a real indication of how strong the satellite areas are becoming.

What is next for Singapore’s retail market?

Chinese e-commerce goliath, Alibaba, is preparing to usher in the age of Virtual and Augmented reality shopping. Using virtual reality headsets, consumers will be able to shop from home, but walk around a virtual store, view the shelves, pick up and inspect products then pay virtually. Macy’s, Target, Costco and Tokyo Otaku Mode are already collaborating with Alibaba to bring this model to realisation.

Faster payment systems are also revolutionising in store-shopping. Amazon Go is already being trialled, where customers use the app to enter the store, then just walk out with their purchases. Their Walk Out Technology detects when products are removed from the shelves and charges you as you walk out of the store, via the app. The payment systems of the future will remove the hassle of waiting in lines.

Retail outlets will also use drones and robotics to transport the product to the customer. Timbre @ The Substation now uses drones to take food and drink to customers. In a small island nation like Singapore, this would alleviate traffic congestion and we will likely see this adopted across Singapore far sooner than Virtual Reality.

Business models need to change

With the advent of all this new technology, the whole way the retail industry operates is about to undergo a major upheaval. Chains will be replaced by just one showroom store where customers can sample the product, but all the purchasing will be done online. Amazon already does this in the US, where it has a physical store in California to accompany its online presence.

The mall of the future is almost here. Pop-up, temporary stores where consumers can try new products will line the boulevards. Performances, art and live music will make shopping far more of a consumer experience and actual money won’t change hands, consumers will pay for purchases on their phone and a drone will deliver it to their door in a matter of hours. One thing is for sure, there is no room for the traditional Orchard Road model in Singapore’s future.