SINGAPORE ECONOMY

Online retail sales spike points to sustained structural shift

Thu, Aug 06, 2020

Annabeth Leow

https://www.businesstimes.com.sg/gov...ructural-shift

RETAIL takings jumped in June on a partial reopening from the two-month "circuit breaker", but the sector is far from out of the woods.

Receipts have not returned to where they were before the deadly novel coronavirus pandemic shook up everyday lifestyles and put the crimp on non-essential businesses. In fact, till takings fell by 27.8 per cent year on year in June - making for the fourth straight month of double-digit decline - despite improving from the record plunge of 52 per cent in May.

The share of online sales stayed elevated - in what watchers hailed as a harbinger of sustained structural shifts in shopping behaviour, amid the Covid-19 outbreak.

On a seasonally adjusted, month-on-month basis, retail sales grew by 51.1 per cent in June.

The Department of Statistics (SingStat), which published the sales figures on Wednesday, attributed the rise to a low base from the store closures in May.



Similarly, food and beverage (F&B) services sales were down by 43.5 per cent year on year - easing a tad from the drop of 50.1 per cent in May - but rose 18.9 per cent month on month.

One bright spot has been the e-commerce front - though United Overseas Bank economist Barnabas Gan noted that growth in online sales "is likely inadequate to offset the decline in other retail sales clusters".

Online purchases were 18.1 per cent of the S$2.6 billion in retail sales in June, easing slightly from a spike to 24.4 per cent in May. E-commerce had made up 17.7 per cent of all sales in April and 8.9 per cent in March.(See Amendment Note)

Computer and telecommunications equipment led the pack, with 69.9 per cent of such purchases done online, followed by furniture and household items at 45.6 per cent and supermarket goods at 10.7 per cent.

On an annual basis, online retail sales more than doubled, up by 151.2 per cent year on year in what Mr Gan called "a new record level of gain".

Similarly, Web transactions made up 32.7 per cent of June's S$496 million in F&B sales, against 44.6 per cent in May and 39.2 per cent in April.



"We expect online sales to stay elevated as long as telecommuting and work-from-home arrangements remain the norm for most," Mr Gan told The Business Times. "This is a structural change in the economy, affecting the way we work and consume."

Chu Junhong, associate professor of marketing at the National University of Singapore, also said online sales will not return to pre-circuit breaker levels as "consumers have passively formed the habit of shopping online".

Online spend on essential categories such as groceries and household goods should continue even after Covid-19 is over, Bain partner Praneeth Yendamuri, who covers consumer products and retail, told BT.

He cited more choices for consumers as new e-grocers join the fray, as well as the value propositions on the market, such as low prices, fast deliveries and easy payment methods.

"Not everybody is used to the digital experience, but Covid-19 levelled that out," added Lynda Wee, adjunct associate professor at Nanyang Technological University's Nanyang Business School.

Still, Prof Chu warned that there is a ceiling to e-commerce adoption, with even the more advanced market of China seeing online sales make up 20.7 per cent of all retail in 2019. Singapore e-commerce likely peaked in May and will not hit those heights again for one to two years, she told BT.

Dr Wee also drew a line between the e-commerce strategy needed to sell staple goods - "just order-taking" - and discretionary items - a sales approach of "I need to seduce you".

That might entail omni-channel tactics where customers are lured by online engagements before they head to the store to check out bigger-ticket items such as high fashion, she said.

But Dr Wee was mixed on whether campaigns like the ongoing digital Great Singapore Sale, or eGSS, can drive online sales in the near term. She cited a cautious climate as a possible barrier to discretionary spend.

Taranjeet Singh, managing director for South-east Asia and India at Web advertising firm Criteo, advised retailers to stay relevant by focusing on segments "that continue to matter", such as remote work, home-based fitness and entertainment.

Overall June data had pegged supermarkets and hypermarkets, minimarts and convenience stores, and computer and telecoms equipment as the only retail segments to expand year on year. SingStat attributed this sales growth to "continued demand for groceries and computers from work-from-home arrangements".

But Mr Gan, who projects full-year retail sales to shrink by 5 per cent year on year, added: "Barring a re-introduction of social-distancing measures, the return of domestic consumer demand should also cushion the rate of contraction on a year-on-year perspective for the rest of 2020."

Amendment Note: The online share of retail sales from March to May has been updated from preliminary figures, as they were revised by SingStat on the back of late survey returns.