Getting More Out Of A Store
Beleaguered retailers are looking to grow their online presence even as they squeeze more from their physical stores to counter unforgiving rental rates.
Walk into a shopping mall in Singapore, and it is not unusual to see For Rent signs hanging outside multiple store fronts. With landlords unwilling to yield on rental rates, many retailers are choosing to give up their physical outlets in the face of slowing demand and intense competition.
For the whole of 2014, the average monthly gross rents of prime retail space in Orchard Road slipped by 0.8 per cent year-on-year, while those in the regional centres edged up by 1.1 per cent, according to property consultancy Colliers. The firm expects rates to be roughly the same in 2015.
"There are too many shopping centres around but rentals have not come down. We will see a lot of shops closing when their lease ends," said Mr R Dhinakaran, Managing Director at Jay Gee Melwani Group. Indeed, Jay Gee – which distributes a host of lifestyle brands including Levis and Dockers – will be more than 10 stores this year, he revealed.
While some are turning to online sales for salvation, others are looking to squeeze more utility out of their existing physical stores. Star360, a Singapore-based distributor for brands such as Birkenstocks, Cole Haan, American Eagles Outfitters and MBT in the region, is using their outlets as a fulfillment centre and to handle returns for its recently launched ecommerce platform. Shoppers who order from the retailer's online store will get their purchases delivered from one of Star360's outlets, rather than a warehouse.
According to Star 360 founder Andy Chaw, this is part of a broader "O2O" (online to offline) strategy to integrate his digital and physical channels into a seamless experience for his customers. He expects online sales for his group to reach 30 per cent of total revenue in a few years time, although he still believes that brick-and-mortar outlets will remain the key channel to reach customers.
Some industry players are also using their brick and mortar stores as tools for brand building and engagement, and not merely to generate sales. These "concept stores" reimagine the physical space they inhabit, populating it with both online and offline features in one experience.
In the US, General Electric has opened a 2,000 sq foot retail space in Manhattan called STORY that "takes the point of view of a magazine, changes like a gallery and sells things like a store". Every four to eight weeks, STORY will completely change everything from its design to the merchandise it sells based on a theme.
Other retailers are going to the end of the spectrum, and looking to generate sales by opening bare bones discount or factory outlets in less prime locations. Homegrown electronics retailer Gain City, for instance, opened a warehouse retail outlet in the industrial estate of Sungei Kadut in June.
Contrary to popular perception, Star360's Mr Chaw said that factory outlets are no longer a platform to unload ageing stock, but a front line sales channel for many brands. "Factory outlets are the ones generating good sales for brands like Cole Haan"
The discount sore has even taken hold online, with ecommerce players like Reebonz and Zalora in Singapore, and JD.com in China, opening digital versions of this retail concept.
To keep rental costs at bay, some players in Singapore are opting to open temporary, or pop up stores in prime areas in order to reach their target audience, albeit for a limited period.
In the U.K, the temporary store concept has been taken a step further. A novel online platform called Appear Hear provides short-term retail spaces that can be rented for a day, a week or a month. Retailers can book spaces that are listed by their owners through this service.If rentals rates here persist at current rates, it may be a matter of time before such innovative space sharing platforms pop up in Singapore.
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