Industry Outlook Growth % Retail (Singapore)

Industry Outlook

Retail (Singapore)

Refer to important disclaimers at the end of this report

DBS Group Research . Asian Insights Office 17 September 2015 9 March 2017

Page 1 .

Macro Outlook

Singapore’s GDP growth to accelerate to 2.8% in 2017. We have upgraded our 2017 growth forecast for Singapore to

2.8% (up 1.5 percentage points) on the back of the upward GDP revision for previous quarters and a robust 2016

fourth quarter, which registered the strongest quarterly growth in six years at 12.3% on-quarter, seasonally adjusted

annual rate. This translates to 2.9% on-year growth, with GDP growth for 2016 coming in at 2.0%, substantially

above expectations and backed by significant upward revision to previous quarters’ data as well. The key driver in the

2016 fourth quarter was an 11.5% on-year surge in manufacturing growth, driven by semiconductor (up 62% on-year)

and pharmaceutical (up 34% on-year) manufacturing. The services sector grew by 8.4% on-quarter, seasonally

adjusted annual rate, or by 1% on-year, led by financial (up 36.5% on-quarter) and trade-related services – transport

and storage services rose by 12.4%. Loan growth has bottomed and will likely trend higher. Container throughput and

re-export growth have continued to creep higher too.

Expect spillover from the manufacturing and services sectors into the rest of the economy. GDP performance from the

2016 fourth quarter bodes well for overall GDP and employment growth. We see the positive impact from

semiconductor and pharmaceutical clusters spilling over to the rest of the economy, e.g. into the precision engineering

cluster, transport and warehousing for exports, financial, other supporting services and small- to medium-sized

enterprises. This should drive more broad-based improvement in the rest of the economy.

GDP growth rate: Year-on-year change Remarks

1. GDP growth is set to

accelerate to 2.8% in 2017

2. 2016 fourth quarter driven

by semiconductor and

pharmaceutical

manufacturing

3. Services sector is improving

– led by financial and

trade-related services

Source: ThomsonReuters, DBS Bank

-4

-2

0

2

4

6

8

10

12

14

16

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017F

Growth %

Industry Outlook Retail (Singapore)

Page 2 .

Singapore retail sales (ex-motor vehicles) Remarks

1. Overall retail sales (ex-

motor vehicles) have, since

2012, trended on a gentle

decline. This is largely in

line with decelerating GDP

growth

2. Retail sales growth

negative in 2016, in line

with lower private

consumption and higher

unemployment rate

Source: Bloomberg Finance L.P., DBS Bank

Singapore shop rental Remarks

1. Retail rents have fallen in

2016 due to weak

consumption and GDP

growth

Source: CEIC, DBS Bank

-15

-10

-5

0

5

10

15

Jan-1

2

Mar-

12

May-

12

Jul-12

Sep-1

2

Nov-

12

Jan-1

3

Mar-

13

May-

13

Jul-13

Sep-1

3

Nov-

13

Jan-1

4

Mar-

14

May-

14

Jul-14

Sep-1

4

Nov-

14

Jan-1

5

Mar-

15

May-

15

Jul-15

Sep-1

5

Nov-

15

Jan-1

6

Mar-

16

May-

16

Jul-16

Sep-1

6

Nov-

16

% chg


Page 3 .

Private consumption tapered off as unemployment rate increased. Post-financial crisis recovery has led to growth in

consumption expenditure. However, the decline in 2012 was due to a reduction in tourist arrivals and non-resident

expenditure, as well as recreation and culture. In 2015, consumption growth expanded sharply on increased

transportation costs, attributable to the high cost of certificates of entitlement (COE, vehicle ownership licenses) and

the number of new and used car sales. It, however, tapered off in 2016 due to a higher unemployment rate of 2.1%.

Private consumption expenditure growth Remarks

1. Increase in private

consumption in 2015 was

led by the transportation

sector

2. In 2015, the number of

new vehicle registrations

increased 54% while

vehicle transfers increased

20% at a time when COE

prices ranged between

S$54,000 and S$78,000

Source: DBS Bank

The age distribution of cars in Singapore is lumpy. COE prices currently stand at around S$50,000. According to the

age distribution of cars in Singapore, close to 100,000 cars will reach the age of nine to ten years and will be due to be

scrapped this year, compared to 30,000 to 50,000 per year for cars aged two to nine years. Motor vehicle taxes and

vehicle quota premiums revenue for the Singapore government in 2017 are estimated to total S$9.3 billion (up 0.8%

from S$9.2 billion in 2016). COE quotas are expected to expand, driving up motor vehicle tax, estimated at S$2.7

billion, by 18.2%.

COE price, Category A (S$) Remarks

1. Vehicle population

growth rate is currently

0.35%


0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017F

Growth %

0

10000

20000

30000

40000

50000

60000

70000

80000

90000

100000

S$


Page 4 .

Singaporeans’ nominal and real wages continue to increase. According to Ministry of Manpower statistics, the median

monthly wage grew from S$2,543 in 2007 to S$4,056 in 2016. The nominal wage has never declined. Workers

between the 25th and 75

th percentile generally draw a monthly salary of between S$2,000 and S$6,999 per month.

Mean gross monthly income (RHS) and real wage increase (LHS) Remarks

1. Real wage growth was

3.1% from 2010 to 2016

and 3.3% from 2015 to

2016

2. Average bonus between

2005 and 2015 was 2.2

months

Source: Ministry of Manpower, DBS Bank

According to the Monetary Authority of Singapore’s (MAS) Financial Stability Review 2016, Singapore’s household

debt-to-GDP was close to 80% in 2015, making it the fourth highest among Asia-10 nations, behind Malaysia,

Thailand and Korea. High-ticket items such as home purchases and cars require loans. Driven partially by low interest

rates, the property market price increase during 2010 to 2013 had also caused the increase in household indebtedness.

The TDSR (total debt servicing ratio), introduced in 2013, will help to keep household leverage in check.

Household debt-to-GDP ratio Remarks

1. Higher than Taiwan,

Philippines, Indonesia,

India Hong Kong and

China

2. Lower than Malaysia,

Thailand, and Korea’s

debt-to-GDP ratio

1.

Source: Singstat, DBS Bank

0

600

1200

1800

2400

3000

3600

4200

4800

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

S$Growth %

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

%


Page 5 .

TDSR and mortgage servicing ratios (MSR) relaxed in 2016. A series of property cooling measures have been introduced

since 2010, including adjustments to loan-to-value (LTV) ratios. Two key measures were the additional buyer stamp

duty (ABSD) and TDSR introduced in December 2011 and June 2013 respectively. Additional buyer stamp duties were

imposed on second and subsequent properties, while debt and MSRs limit how much buyers can borrow and repay to

fund their property purchases in relation to their income and total indebtedness. In September 2016, MAS allowed the

refinancing of property loans above the TDSR threshold and MSR threshold of 30% for owner-occupied HDB flats and

executive condominiums (ECs).

Singapore housing index Remarks

1. ABSD currently ranges

from 7-15% depending

on citizenship status and

the number of properties

already owned

2. TDSR cannot exceed 60%

of buyer’s net income

while MSR cannot exceed

30% of income for new

properties


Singapore’s interest rates, in particular the three-month swap offer rate (SOR), are foreign exchange-implied rates that

take into account the US dollar/Singapore dollar forward swap. The SOR is used as a benchmark to price commercial

loans. The forwards typically reflect short-term interest rate differentials between Singapore and the US. As a foreign

exchange-implied rate, the SOR is susceptible to changes in demand and supply for the Singapore dollar, and usually

comes under downward pressure when the Singapore dollar strengthens against the US dollar, and vice versa. When

the Singapore dollar is strengthening, demand for the Singapore dollar results in narrowing forward points and a lower

SOR. Essentially, if a foreign investor can profit from narrower US dollar/Singapore dollar forward swap points

(strengthening Singapore dollar), he or she will be able to accept lower returns from Singapore dollar interest rates

(SOR).

Singapore interest rates Remarks

1. Interest rates expected to

increase in view of four

rate hikes in the US this

year

2. Interest rate increase had

led to sluggish retail sales

in 2015

3. Low interest costs also

fuelled the property

market from 2009 to

2013


60

70

80

90

100

110

120

130

140

150

160

Mar-

94

Dec

-94

Sep-9

5

Jun-9

6

Mar-

97

Dec

-97

Sep-9

8

Jun-9

9

Mar-

00

Dec

-00

Sep-0

1

Jun-0

2

Mar-

03

Dec

-03

Sep-0

4

Jun-0

5

Mar-

06

Dec

-06

Sep-0

7

Jun-0

8

Mar-

09

Dec

-09

Sep-1

0

Jun-1

1

Mar-

12

Dec

-12

Sep-1

3

Jun-1

4

Mar-

15

Dec

-15

Sep-1

6

Index 2000=100

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

Index 1998=100


Page 6 .

Population growth rate of 1.5%. Singapore is targeting a population of 6.9 million by 2030, according to its latest

planning parameter. Based on the June 2016 population of 5.6 million, Singapore’s population growth rate would

have to be at a compound annual growth rate (CAGR) of 1.5% per annum for the population to reach 6.9 million by

2030.

Singapore’s resident population pyramid 2016 Remarks

1. There were close to 4

million Singapore

residents in 2016

2. Over 50% of Singapore’s

population is between 30

and 60 years of age

3. Gender split is 51% to

49%, in favour of females

2.

Source: Singstat, DBS Bank

Singapore’s inflation bottoming out. Singapore does not have natural resources and a huge agriculture community. As

such, most goods and raw materials are imported for manufacturing or consumption. Inflation is typically led by supply

and less commonly from the demand side. Singapore experienced two years of negative inflation led by the slump in oil

prices and, to a lesser extent, property cooling measures. The MAS manages the Singapore dollar to keep inflation in

check. It has maintained a zero Singapore dollar nominal effective exchange rate appreciation policy stance since April

2016 and will likely continue doing so in view of the slow growth.

Inflation rate: Year-on-year change Remarks

1. Slump in oil prices led to

negative inflation in 2015

and 2016

2. Inflation increase in 2008

due to food, transport and

housing, before declining

to a negative figure in

2009 due to the global

financial crisis

3. 2010 inflation was largely

due to increasing COE

prices


-4

-2

0

2

4

6

8

10

Jan-0

2

Aug-0

2

Mar-

03

Oct

-03

May-

04

Dec

-04

Jul-05

Feb-0

6

Sep-0

6

Apr-

07

Nov-

07

Jun-0

8

Jan-0

9

Aug-0

9

Mar-

10

Oct

-10

May-

11

Dec

-11

Jul-12

Feb-1

3

Sep-1

3

Apr-

14

Nov-

14

Jun-1

5

Jan-1

6

Aug-1

6

% chg

200,000 100,000 0 100,000 200,000

0 - 4

5 - 9

10 - 14

15 - 19

20 - 24

25 - 29

30 - 34

35 - 39

40 - 44

45 - 49

50 - 54

55 - 59

60 - 64

65 - 69

70 - 74

75 - 79

80 - 84

>84 Male

Female


Page 7 .

Singapore has rejuvenated over the years into a destination for visitors for both leisure and events. In 2008, Singapore

hosted its first edition of Singapore Formula 1 Grand Prix, with the Asia-Pacific Economic Cooperation Summit

following closely in 2009. The opening of Resorts World Sentosa and Marina Bay Sands in 2010 injected life into

Singapore and tourist arrivals crossed 15 million in 2013. By 2016, tourist arrivals crossed the 16 million mark, as

Chinese visitors, who stayed away following the MH370 incident, returned.

Singapore visitor arrivals Remarks

1. 2014 decline in visitor

arrivals due to decline in

Chinese visitors over loss of

MH370 aircraft

2. 2015 visitor arrivals picked

up due to events such as

South East Asian games

and lower 2014 base

3. 2016 saw a recovery in

Chinese visitors

Source: Singapore Tourism Board, DBS Bank

0

2

4

6

8

10

12

14

16

18

2009 2010 2011 2012 2013 2014 2015 2016

m


Page 8 .

Sub-segment Outlook

Luxury retail

Singapore’s luxury retail market represents 4.4% of Singapore’s store-based retail market. Singapore’s luxury retail

segment was worth S$1.3 billion in 2016. The luxury retail segment grew at a five-year CAGR of 2% between 2011

and 2016. Growth was dominated by luxury bag and luggage specialists (up 2.2%), luxury department stores (up

2.5%), and luxury jewellery and watch retailers (up 2.2%). Luxury apparel and footwear declined by 1.1%. The

number of outlets has moderated from the peak of 83 in 2014 to 79 in 2016. Luxury retailing peaked in 2014 and has

dipped in recent years, mainly attributed to the falling numbers of inbound tourists, the strength of the Singapore

dollar, locals spending overseas and reduced shopping expenditure.

Singapore’s luxury retail market breakdown 2016 Remarks

1. Department stores and bags

and luggage specialists

dominate the Singapore

luxury retail market with

close to 80% share

2. Department store

contribution was largely by

Takashimaya

Source: Euromonitor, DBS Bank

2.0% CAGR for Singapore’s luxury retail market from 2011 to 2016 Remarks

1. Growth led by department

stores, jewellery and

watches, and bag and

luggage specialists

2. Luxury apparel and

footwear declined, losing

growth to mid- to low-end

luxury apparel and

footwear retailers

3. Weakening tourist spending

has also a resulted in lower

luxury sales in recent years


Apparel and footwear

11%

Bags and Luggage specialist

33%

Department stores44%

Jewellery and watch retailers

12%

0

200

400

600

800

1000

1200

1400

1600

2011 2012 2013 2014 2015 2016

S$m

Apparel and footwear Bags and Luggage specialist

Department stores Jewellery and watch retailers


Page 9 .

Four players dominate around 70% of Singapore’s luxury retail market Remarks

1. Luxury department store

segment is dominated by

Takashimaya

2. Market share is fragmented

across other luxury retail

players who are mainly

luxury bag retailers


Prada shrank in retail area, while Tod’s, Takashimaya, Tiffany, Burberry, and Richemont saw sales areas remain

constant. Players continued to expand their physical presence in Singapore. There were a 4% increase in number of

stores and around a 50% increase in luxury retail selling area between 2011 and 2016. Only Prada decreased its selling

area by 3%, closing down one store in 2015. Those with increased selling area saw net store increases of between one

to four stores and floor area increase of 3-18%, namely LVMH, Hermes, Kering-PPR, Coach, Salvatore Ferragamo,

Ralph Lauren and Mulberry.

LVMH, Takashimaya, and Burberry dominate around 75% of Singapore’s luxury

retail floor area

Remarks

1. Takashimaya has the

biggest selling area in

Singapore

2. Luxury retail companies

take up an estimated

800,000 square feet of

selling space in Singapore


Leverage growth on existing outlets. Based on the estimated market revenue of 14 companies across the past five

years, ten players registered positive CAGR growth of 1.5-6.4%. LVMH, Kering, Burberry and Lacoste were the four

that saw sales declines of between 0.5% and 7.8%. While selling space for these four companies had generally

increased, sales efficiency per store and per square foot declined, which could signal overexpansion. The ten players

which grew revenue did so in two ways: (i) Takashimaya, Prada, Tiffany, Richemont and Tod’s grew sales per square

foot while maintaining or reducing total sales area; (ii) the rest of the companies grew their revenues by increasing

Takashimaya Co Ltd

45%

LVMH12%

Hermès International

SCA7%

Prada SpA7%

Tiffany & Co6%

Kering SA5%

Burberry Group Plc5%

Others13%

Takashimaya39%

Burberry Group20%

LVMH15%

Others26%


Page 10 .

selling areas via store or outlet expansion. However, they registered a decline in sales per square foot due to the

increased selling space.

Apparel and Footwear Growing at 1.5% CAGR led by internet retailing. Singapore's apparel and footwear segment was S$3.8 billion in 2016,

comprising of luxury apparel and footwear retailers and internet retail. The share of internet retailing for apparel and

footwear has crept up to 8% of the total market, growing at a CAGR of 6.4% over the past five years. There were

3,348 apparel and footwear specialist retail outlets and 23 luxury apparel and footwear retailers in Singapore in 2016,

lower than the total of 3,386 outlets five years ago.

1.5% CAGR growth for Singapore’s apparel and footwear market Remarks

1. Internet apparel and

footwear is now 10% of

the market

2. CAGR growth of internet

retailing versus brick-and-

mortar retailers was 6.4%

to minus 1% over the past

five years

3. While luxury footwear and

apparel declined from

2011 to 2016, mid- to

low-end apparel and

footwear retail sales

increased


Mainly small independent retailers. Singapore's apparel and footwear segment is largely fragmented with many

independent specialist retailers. Entry barriers are low with some level of differentiation. Key fashion retailers are either

local distributors of various brands (Melwani Group, RSH Holdings, FJ Benjamin) or international groups operating their

own brands (Fast Retailing, H&M, LVMH).

2016 share of apparel and footwear market Remarks

1. Market size of S$3.8 billion

2. Approximately 88% of

sales are through specialist

retailers even though the

internet channel is

growing


0

500

1000

1500

2000

2500

3000

3500

4000

4500

2011 2012 2013 2014 2015 2016

S$m Apparel and Footwear through Internet Retailing

Luxury Apparel and Footwear Retailers

Apparel and Footwear Specialist Retailers

A&F Specialist Retailers

88%

Luxury Apparel and Footwear

Retailers4%

A&F Internet Retailing

8%


Page 11 .

Fast fashion taking over traditional fashion retail players. Fast fashion retailers with mid-priced positioning, including

Uniqlo, Forever21 and H&M, have seen their market shares growing over traditional retailers such as Charles & Keith,

Giordano and Esprit. The rise of online retailing and blogshops has also shaped consumer behaviour to be less brand

conscious, while paying much less online for designs similar or comparable to the branded designs found in stores. Fast

fashion outlets offer value, branding and the latest designs in this respect.

Key apparel & footwear retailers’ market share in 2016 Remarks

Brand Company Outlets Sales psf $ Share

1. Segment remains

fragmented with market

leaders holding market

share of less than 6%

2. Largest chain stores have

over 20 outlets

Uniqlo Fast Retailing Co Ltd 23 660 5.6%

H&M H&M Hennes & Mauritz AB 10 1,090 4.6%

Mango Punto Fa SL (Mango) 13 2,910 2.9%

Zara Inditex, Industria de Diseño Textil SA 8 1,688 2.6%

Burberry Burberry Group Plc 3 395 1.8%

Giordano Giordano International Ltd 41 1,287 1.6%

Esprit Esprit Holdings Ltd 21 551 1.4%

Topshop Arcadia Group Ltd 6 1,085 1.2%

Charles & Keith Charles & Keith Holdings Pte Ltd 26 2,074 1.1%

Others - 3,023 949 77.1%

Total 3,348 933 100.0%


Internet retailing to increase while retailers shift to provide new retail experiences. Sales growth of apparel and

footwear specialist retailers and internet retailing is forecast to be at 2.2% CAGR for the next five years, largely led by

internet retailing. Growth will be driven by new retail spaces in new shopping malls, attracting online and overseas

players seeking to take advantage of the opportunity to develop seamless omnichannel operations encompassing

online and retail experiences. As consumers continue to be influenced online, a pick-up will also be seen in mobile

retailing, online fashion blogshops and on social media platforms. This is expected to drive more fashion-tech start-ups

during this period.

2.2% CAGR for specialist retailers and internet retailing over the next five years Remarks

1. Growth is expected to

continue being led by

online retailing

2. Expect new retail

experiences to kick in to

sustain growth in store

retailing


0

500

1000

1500

2000

2500

3000

3500

4000

4500

2016 2017F 2018F 2019F 2020F 2021F

S$mA&F Specialist Retailers A&F Internet Retailing


Page 12 .

Recreational Goods Leisure and personal goods market largely driven by jewellery and watches. The leisure and personal goods market

grew at a 5.5% CAGR from S$5.8 billion between 2011 and 2014 but fell 4.6% from 2014 to 2106 to S$5.9 billion.

More particularly, the market fell 11% on-year from 2015 to 2016 on the back of poor economic performance and

driven by a 17% decline in jewellery and watch sales. The declining trend was in line with slowing GDP growth, albeit

with a one-year lag. Growth going forward is not expected to be robust, dipping slightly over the next few years before

ending flat at S$5.9 billion in 2021.

Flat growth forecasted for the next five years Remarks


1. Growth between 2011 and

2015 was driven by higher

sales per square foot for

watch and branded goods

retailers

2. In 2016, stores consolidated

due to competition from

online channels and cost

pressures

Between 2011 and 2015, sales per square foot of watch, jewellery and branded goods retailers experienced a surge. In

particular, names including Prada, Stelux, Sincere, Aspial, Soo Kee, Tiffany, Richemont, World of Sports and RSH saw

over a 5% CAGR increase in sales per square foot. Sales per square foot of the market declined in 2016 by 9.6%, on

high rents, softening tourist spending and the rise of internet retailing.

Singapore's leisure and personal goods market composition 2016 Remarks


1. 80% of Singapore’s leisure

and personal goods market

is dominated by jewellery

and watches, bags and

luggage, media and sports

goods

2. Other leisure and personal

goods segments include

toys and games, pet shops,

stationery shops Jewellery and

Watch Specialist Retailers

57%Bags and Luggage Specialist Retailers

11%

Media Products Stores12%

Sports Goods Stores

8%

Other Leisure and Personal

Goods Specialist Retailers

12%


Page 13 .

Online channels are expected to become more prevalent. These will generally hamper the growth of leisure and

personal goods sales in Singapore. Jewellery and watch specialists are poised for negative growth as retailers migrate to

online channels with more digital marketing. Bags and luggage specialists have seen falling tourist spending, while

marketplaces like Reebonz and Asos offer alternative channels for consumers to purchase similar products online at

more competitive prices. Media consumption in recent years has gone online with more books, music and video

content becoming downloadable as e-content into platforms such as smartphones and tablets. Sporting goods

continue to be stable and are forecast to grow at a CAGR of 1% over the next five years supported by the market’s

active lifestyle and sporting events. Competition, nonetheless, is keen with price discounts and promotions commonly

offered by retailers in the market.

2016 leisure and personal goods players

Players in Singapore Outlets Sales psf $ Share

Hour Glass Ltd, The 9 12,313 4.0%

Sincere Watch Ltd 4 16,219 2.6%

LVMH Moët Hennessy Louis Vuitton SA 17 1,436 2.5%

Popular Holdings Ltd 27 812 2.3%

Aspial Corp Ltd 42 4,132 1.9%

Cortina Holdings Ltd 6 7,143 1.8%

Soo Kee Jewellery Pte Ltd 32 3,124 1.6%

Hermès International SCA 3 8,169 1.6%

Prada SpA 5 2,640 1.6%

Toys "R" Us Inc 9 695 1.5%

Tiffany & Co 3 10,380 1.3%

Pet Lovers Centre Pte Ltd 69 446 1.1%

Kering SA 9 1,610 0.9%

Richemont SA, Cie Financière 5 2,035 0.8%

Kinokuniya Co Ltd 4 846 0.8%

Coach Inc 7 1,861 0.7%

Stelux Holdings International Ltd 18 2,592 0.7%

Poh Heng Jewellery Pte Ltd 15 2,937 0.6%

World of Sports Holdings Pte Ltd 19 546 0.6%

Taka Jewellery Pte Ltd 13 4,077 0.6%

Royal Sporting House (RSH) Ltd 22 921 0.6%

Nike Inc 13 1,867 0.5%

Adidas Group 11 1,943 0.4%

Samsonite International SA 16 839 0.4%

Mothercare Plc 17 374 0.4%

Ludendo Groupe 2 1,045 0.3%

Asian Jewellery Pte Ltd 6 1,845 0.3%

Pandora A/S 11 916 0.3%

Thai Beverage PCL 7 383 0.3%

Kiddy Palace Pte Ltd 15 108 0.2%

Mulberry Group Plc 3 1,504 0.2%

Rimowa GmbH 3 1,081 0.1%

Meyson Holdings Pte Ltd 6 1,184 0.1%

MPH Group Malaysia Snd Bhd 3 574 0.1%

Pets' Station Holding Pte Ltd 5 830 0.1%

Princess Jewellery 3 1,833 0.1%

Mini Toons Pte Ltd 7 298 0.0%

MJ Multimedia Holdings Pte Ltd 1 376 0.0%

Folli Follie Group 2 0 0.0%

Others 3,587 1,242 66.3%

Total 4,056 1,310 100.0%



Page 14 .

Furniture and household equipment The Singapore market for furniture and household products grew at a CAGR of 1.2% from 2011 to 2016 to S$2.2

billion. There were a total of 1,422 outlets in 2016. Sales of furniture and household equipment for the next five years

are expected to remain flat at S$2.2 billion. More notably, its non-internet retail component is expected to decline

marginally by a CAGR of minus 0.5% over the next five years, displaced by internet sales. Internet sales for 2016 made

up 3% of total sales and are expected to creep up to 5% by 2021. Homeware and furnishing sales peaked in 2013, in

tandem with the property market’s peak.

1.2% CAGR for Singapore furniture and household sales Remarks

1. Property cooling

measures introduced in

2013 have led to sales

decline in homeware and

home furnishing sales

2. Internet sales will make

up around 5% of total

sales by 2021


Homeware and home furnishing stores are responsible for the majority (around 80%) of Singapore’s furniture and

household sales. A smaller proportion come from home improvement and gardening stores. Internet retail for furniture

and household products contribute 3% of total sales. The prevalence of internet shopping makes it necessary for

retailers with physical stores to evolve to provide a better shopper experience and provide a higher level of engagement

with customers.

Singapore furniture and household product categories 2016 Remarks


1. With the rise of online

retailing, retailers will need

to look for more creative

methods to engage with

customers when they are

shopping in physical stores

2. Internet retailing comprises

of homewares and home

furnishings, home care

and home improvement

and gardening

1900

1950

2000

2050

2100

2150

2200

2250

2300

2011 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F 2021F

S$m Home Improvement and Gardening Internet Retailing

Home Care Internet Retailing

Homewares and Home Furnishings Internet Retailing

Home and Garden Specialist Retailers

Homewares and Home Furnishing

Stores79%

Home Improvement

and Gardening Stores18%

Internet sales3%


Page 15 .

Courts and IKEA are key furniture players in Singapore. Courts Singapore and IKEA are Singapore’s largest furniture

and household players and collectively dominate 35% of the market. Both have large flagship stores and total sales

area of 40,000 to 50,000 square feet. Courts has been deploying experiential in-store product displays to enhance

interaction with customers. It also has solutions-oriented services and high-definition LED screens, digital in-store

signage, modular display tables and magnetic panels for in-store displays as part of the package. Value added bolt-on

services (loyalty programmes, installation, connection, warranty, after sales service, etc.) and customer experience areas

enhance customer engagement and improve customer stickiness.

Singapore furniture and household market share 2016 Remarks

1. Furniture market is

dominated by just Courts

and IKEA

2. Newer entrants are

adopting a low cost model

by cutting warehousing

and store expenditure

while focusing on online

sales as their key

distribution channel


Omnichannel marketing is becoming increasingly more important due to the market’s connectivity to online retail

channels. Market leaders are building up internet retail business to compete with newer entrants. The new generation

of retail stores need to also provide shopper experience and lifestyle elements. Store-based retailers such as Harvey

Norman and TT International have continued to expand selling space while developing their online business

simultaneously despite sluggish sales. For the more established retailers entering the online space, their logistical and

fulfilment functions will need to develop over time if they decide to insource. As online players are able to pass on cost

savings to consumers, pricing should, therefore, become more competitive over time.

Singapore store count 2016 Remarks

1. Property cooling measures

introduced in 2013 have

led to store count decline

from 2012

2. Expect less aggressive

store area increase while

internet retailing of home

products is expected to

increase


Courts Asia Ltd23%

Inter Ikea Systems BV

12%

TT Int'l. Nobel Design, Home-

Fix DIY3%

Others62%


Page 16 .

Department store Department stores grew by a flat CAGR of 0.7% from 2011 to 2016. Growth was much higher over 2011 to 2014 at

3.5%. However, in 2015 and 2016, outlets were rationalised with store closures by Metro, Robinson’s, Isetan and

Marks & Spencer. The market size of department stores in Singapore in 2016 was S$2.7 billion with 39 outlets.

0.7% CAGR for Singapore department stores from 2011 to 2016 Remarks

1. Spending in department

stores has tracked GDP

growth closely, peaking in

2013

2. Weak economic

fundamentals and growth

of online retailing have

resulted in poor

profitability and store

closures in recent years


The combination of a slowing economy, high operational costs, a tight labour market, the strong Singapore dollar and

the growing popularity of the online retail scene have led to lower retail sales at department stores. Firms like Al

Futtaim, which owns Robinson’s, Marks & Spencer and John Little, for example, are consolidating and closing off loss-

making stores while looking to expand in lower-cost markets outside of Singapore. Metro closed its Compass Point and

City Square outlets due to their underperformance. Smaller players like BHG and Yue Hwa have instead expanded

between 2011 and 2016.

Singapore department stores market share 2016 Remarks

1. Market share evenly

distributed among key

department store players in

Singapore

2. Smaller-scale players are

expanding while larger and

more established players

with more outlets are

downsizing

3. Players with single flagship

locations continue to grow

their sales per square foot


2500

2600

2700

2800

2900

3000

2011 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F 2021F

S$m

Takashimaya21%

Mustafa19%

Isetan13%

OG11%

CK Tang10%

Al Futtaim9%

Metro6%

Beijing Hualian5%

Marks & Spencer5%

Yue Hwa 1%


Page 17 .

Number of department store outlets has fallen Remarks

1. Store closures from

Metro, Al Futtaim

Robinson’s, Marks &

Spencer and Isetan in

2015 due to difficult

operating environment

2. Those which expanded in

2013 – Isetan, Al Futtaim

Robinson’s and Marks &

Spencer – ended up

downsizing by 2016


In recent years, retailers have been facing the challenge of drawing traffic to their stores to improve sales, as customer

traffic is spread across various malls located in suburban areas and in the city. While promotions help to drive volume

sales, more competitive pricing also lowers margins. Competition with online retailers is also thinning out sales. As such,

retailers such as Yue Hwa, Robinson’s, Marks & Spencer and Tangs have ventured into online retail. The challenge for

these retailers is to integrate their physical and online stores. New retail experiences in stores include interactive in-store

features such as virtual fitting rooms, which allow customers to preview their looks with their selected apparel.

Key department stores’ market share in 2016

Store Outlets Sales psf $ Share

Takashimaya 1 1,974 21%

Mustafa 1 3,746 19%

Isetan 5 1,342 13%

OG 3 799 11%

CK Tang 2 1,043 10%

Al Futtaim (Robinson’s) 4 810 9%

Metro 3 8,69 6%

Beijing Hualian 6 2,363 5%

Marks & Spencer 9 1,378 5%

Yue Hwa 5 321 1%

Total 39 1,305 100.0%


34

35

36

37

38

39

40

41

42

43

44

2011 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F 2021F


Page 18 .

0

100

200

300

400

500

600

700

800

900

1,000

1,100

1,200

1,300

1,400

2011 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F 2021F

S$m Convenience stores Independent grocers

Minimart & Convenience Store Singapore’s market for convenience stores and independent grocers was S$975 million in 2016, split at 54% to 46%

in favour of convenience stores. There were 607 convenience stores and 583 independent grocers in 2016. The market

size for this segment has shrunk by a 1.2% CAGR between 2011 and 2016, undermined by supermarkets in Singapore.

The alcohol restriction in Little India and after-hours has contributed to the decline in convenience store sales in the

past few years.

Minus 1.2% CAGR from 2011 to 2016 for convenience store and independent

grocer sales

Remarks


1. Market size is undermined

by growth of

supermarkets, due to their

increasing convenience

2. Split between convenience

stores is 54% to 46%

independent grocers

We expect convenience stores to decline over time due to the emergence of supermarkets, which carry a wider variety

of items and can be found conveniently at high-traffic locations. Some even open 24 hours. Supplementing purchases

from convenience stores can now be commonly carried out at supermarkets.

Outlets expected to shrink in favour of supermarkets Remarks

Source:


1. Independent grocers,

generally owned by senior

citizens, are expected to

decline in the coming

years

0

100

200

300

400

500

600

700

800

900

1,000

1,100

2011 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F 2021F

S$m Convenience stores Independent grocers


Page 19 .

Convenience stores like 7-eleven have moved into more ready-to-eat food and services. They also offer cash

withdrawals, e-commerce payments and collection points for online retail orders. Seating areas have been created in

some stores in addition to the introduction of fresh food items, chilled ready meals and a range of premium products.

Singapore convenience stores’ market share 2016 Remarks


1. 7-eleven is the largest with

close to 500 stores

2. Cheers has 90 stores and

iEcon has 29 outlets

3. There are 583

independent grocers

Consumer behaviour. Most consumers among the older generation, with the luxury of time, will purchase fresh

products from wet markets. However, because wet markets operate in the mornings, the grocery shopping alternative

for the working crowd is supermarkets. Supermarkets in Singapore are conveniently located across multiple locations

and enable people to shop after office hours. The role of convenience stores is typically for consumers to supplement

their purchases of grocery and food items – including snacks, medication, personal care items, tobacco, packaged food,

etc. – after-hours. Convenience stores these days have moved away from being publication, alcohol and tobacco

businesses to offer more services, fresh/ready-to-eat/packaged food and other necessities.

Convenience stores in Singapore are mainly controlled by large grocery retailers that also operate other formats of

supermarkets and hypermarkets. These groups have distribution centres and centralised purchasing that enables them

to gain economies of scale and price their products higher at their convenience stores than at their supermarkets for

better margins. Due to the scale of these large players and the credit days given to them by suppliers, it is often difficult

for the large minimarts to compete in terms of pricing and working capital generation. Unlike listed players, smaller

independent grocery retailers do not have economies of scale in terms of volume. They are typically offered poorer or

no credit terms by the suppliers.

7-Eleven46%

Cheers5%

iEcon3%

Independent grocers

46%


Page 20 .

Online Retail Singapore's internet retailing market was estimated to be worth S$1.5 billion in 2016. Growth has been robust at a 22%

CAGR for the past five years and the market is set to grow further by another 18% CAGR from 2015 to 2021. Growth

has been led by apparel and footwear, personal accessories and food and beverage. Going forward, the growth of the

internet market is expected to be driven by apparel and footwear, food and beverage, and media products.

22% CAGR growth for Singapore online sales from 2011 to 2016 Remarks

1. Internet retail is expected

to grow exponentially at a

CAGR of 18% from 2015

to 2021

2. Growth to be led by

apparel and footwear,

and media products


Market leaders in Singapore include Giosis Group’s Qoo10, which recorded sales of S$500 million in 2016 and

completed close to 15 million transactions in 2015. At the end of 2016, Qoo10 had a total of 2.2 million registered

shoppers, becoming the largest online marketplace in Singapore. The majority of Qoo10 customers are women, with

an average age of 27. Others like Lazada have 5.7 million daily visitors to their sites.

Singapore online market share 2016 Remarks

1. Market dominated by less

than ten players

2. Giosis Qoo10, Rocket

Internet’s Zalora, and

Apple’s online sales

dominate over 50% of

Singapore online sales

3. Rakuten shut its Singapore

website in 2016 and

moved into a consumer-

to-consumer business

model


0

500

1000

1500

2000

2500

3000

3500

2011 2012 2013 2014 2015 2016F 2017F 2018F 2019F 2020F 2021F

S$m

Giosis Group33%

Apple Inc12%

Rocket Internet GmbH9%

Reebonz Pte Ltd7%

Amazon.com Inc7%

RedMart Pte Ltd3%

Asos Plc3%

Others26%


Page 21 .

The Singapore online market will be driven by the consumer’s ease of access to (i) cheaper and wide-ranging products;

and (ii) convenience of payment and delivery services. Retail brands are increasing their collaboration with platforms

such as Lazada and Qoo10 as an alternative channel to target customers. Retailers including Watsons, Samsung,

Xiaomi, Lenovo, HP, Best Denki, Gain City and Audio House have partnered with Lazada to have their products sold

through the platform. There has been an increase in importer/online retailer type start-up companies fuelled by higher

demand for online shopping. These companies put their products up for sale at online marketplaces and fulfil

purchases via a delivery or self-pick-up mechanism. Marketing through social media has also grown in importance as

consumers increasingly conduct reviews, feedback, recommendation and research through this mode. Larger retailers

and brands tend to have their own websites through which they conduct e-commerce, unlike smaller start-ups that

leverage online marketplaces to trade.

Singapore online category breakdown 2016 Remarks

1. Marketplace platforms

like Lazada offer 17

categories of goods

including apparel and

footwear, and

consumer electronics,

from over 5,000

merchants


Our In-House Experts

Andy Sim

SVP, Group Research [email protected]

Alfie Yeo AVP, Group Research

[email protected]

Please note that DBS Bank Ltd may have research coverage in the companies mentioned in this industry report, that

have been produced prior to or subsequent to its publication. Please refer to the links below for the latest specific

equity research reports published on below-mentioned companies and the accompanying disclaimer/disclosure of DBS’

interest in the companies mentioned in the respective reports.

Apparel and Footwear

21%

Media Products16%

Personal Accessories and

Eyewear10%

Food and Drink9%

Consumer electronics

4%

Consumer Health

3%

Others37%

mailto:[email protected]

mailto:[email protected]


Page 22 .

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Documents

Industry Outlook Growth % Retail (Singapore)