SPEECH BY MR LEE YI SHYAN, MINISTER OF STATE FOR TRADE AND INDUSTRY AND MINISTER-IN-CHARGE OF ENTREPRENEURSHIP, AT SINGAPORE RETAILERS ASSOCIATION 30TH ANNIVERSARY BALL, 23 OCTOBER 2007, 8.00 PM AT MERITUS MANDARIN
Dato’ Dr Jannie Tay, President, Singapore Retailers Association,
Ladies and Gentlemen,
The Retail Scene
I am honored to be invited to this joyous celebration of the Singapore Retail Association’s 30th anniversary.30th anniversary is an important milestone that marks the many achievements of an association, it also gives us an opportunity to envision the future of our retail industry, to visualize our journey to reach the goals. It is a time to ask: where should we go from here?
For sure, our retail industry in Singapore has transformed and matured enormously in the past 3 decades. In 1995 for instance, the retail industry comprised 16,929 establishments, employed 75,496 workers and had an annual operating receipts of S$15.8 billion. Ten years later, in 2005, there were 18,600 establishments employing 92,727 workers with an annual operating receipts of S$21 billion. In fact, the value added contribution of the retail industry has increased from $2 billion to $3 billion over the span of 10 years.
Qualitatively, there were more profound changes in the industry. Firstly, we saw the increase in the size of retail operations in the form of larger departmental stores, mushrooming of super- and hyper-marts, proliferation of chain-stores and franchised operations. The increase in scale of retail operation clearly brings clear benefits such as economy of scale in sourcing and procurement, reduction in sales and admin overheads and the availability of resources for products and process development.
Secondly, the emergence of mall operators (that own and manage a network of shopping malls) is making shopping in centrally managed-malls a more unique lifestyle experience. The variety and range of products and service retail in these malls are carefully matched and selected, so that as a collection of retail concepts the mall stands out in theme and contents appealing to very specific segments of defined consumers.
Thirdly, our retail industry transformed on the tide of globalization. Globalization brought along with it level playing field. At the home front, retail players watch the infusion of foreign stores, franchises and new concepts. In overseas markets, we find our own well known stores establishing their footprints in cities near and far. Globalization promises larger markets and cheaper sourcing for those who know how to take advantage of it.
With these key trends in place, and being constantly exposed to international competition, our players are making constant adjustments to competition, they are faced with opportunities either to grow or wane. I must say that many of our players of have succeeded in overcoming the odds. Many have become sophisticated in their process, products and service offerings. They become profitable and have enough resources to open up multiple stores, and some even have established their brand-names in Asia and beyond.
We should be proud of the achievements of our retail industry. But as we gaze into the future and consider the next 5- 10 years, we want to know if our retail industry can be stronger, more competitive, more vibrant and more attractive. Can we become a must-visit and must-buy destination on tourist itinerary and on the business visitor’s agenda? We know a vibrant and strong retail industry would contribute positively to Singapore’s aspiration to be a destination for business and tourism interests. Let us consider two key trends.
Firstly, according to the World Wealth Report 2007 from Merrill Lynch and Cap Gemini, more than 2.6 million High Net-worth Individuals (HNWIs) reside in Asia Pacific and account for more than a quarter of global high net worth assets. These individuals possess tremendous spending and investment power. Naturally, riding on the back of this growth in private wealth will be the demand for consumer durables, luxury goods, real estate, lifestyle products and services, private banking services, healthcare services and so on.
Secondly, we expect to attract 17 million visitor arrivals by 2015, generating some $30 billion in tourism receipts. We are making significant investments into our tourism infrastructure. Under construction are many projects, including the two Integrated Resorts, the Singapore Flyer, Gardens by the Bay and the Singapore Sports Hub. The new integrated development Orchard Turn close by is being added to the fairly new Vivo City, in addition to other newly launched regional malls. Can we derive maximum values from these investments?
How many of these 17 million visitors that we are expecting to arrive in Singapore will include some of the 2.6mil HNWIs residing in Asia? Would they come here? What would they consume here?
Blue Ocean Strategy
To tap into the HNWI market, a good portion of our retail industry will have to remake themselves. Firstly we need to ask ourselves if we have a wide range of products and services suitable for the customers in this segment? What products and services would the HNWIs consume? Is it luxury yachts, watches, antique arts, real estate or fine dining? Or is it our medical and travel services, children education or investment services? Or would they prefer to use Singapore as a base for business and headquarters functions? Are these products and services linked? Who should link them together as a seamless range of offerings?
This brings me to the next point, which is the need for our players in different industry verticals to work together to create new, unique and seamless offerings of products and services customized for the HNWI segment. The more compartmentalized our vertical players are, the harder will be for the HNWI segment to find the products and services they need. The more integrated our verticals are, the more attractive it will be for the HNWIs to consume and invest in Singapore. In his book “The Blue Ocean Strategy”, the author Prof Chan Kim argued that one way for a business to leave the red ocean of bloody competition is to create a new market segment called the “blue ocean”. How to create a blue ocean for your business? He suggested that one way is to marry two unrelated industry verticals to create a new one, so that there is no competition. He quoted “Cirque de Soleil” as a new industry created by crossing theatre arts with circus.
Today’s consumers have high expectation of good and services they consume. Their satisfaction level, I believe, is increasingly being determined by the service component of the purchasing decision. In other words, world-class products ought to be delivered with world-class services. The service level in Singapore is therefore my next question. Do we have the level of service excellence that in it can become an attraction for tourists and consumers to come to Singapore? Would our level of service attain such high standards that it will attract repeated customers?
To cater to the HNWIs segment, our service staff would need to have deeper understanding of customers’ needs, and be able to serve them with sensitivity and anticipation. The service staff would need to understand their products and services very well. Only with deep product knowledge can they advise their clients to make the best decisions in consumption and purchases. We need a high standard of service excellence. We need a service excellence revolution.
Thankfully, many of our companies have taken service excellence as an urgent priority. Some companies for instance, Wing Tai Retail, which has participated in the Customer-Centric Initiative or CCI since September 2005, has rolled out a series of customer-friendly initiatives. In particular, Top shop saw a 30 per cent increase in weekly appointments after introducing their Style Advisor service, which helps customers to select outfits based on their tastes and preferences. We have many other retailers who are represented here, which are renowned for their service standards. I want to commend you for setting high standards for the industry, and for being the role models worthy of emulation.
Clearly, how strong our retail industry is going to be will depend on what kind of talents this industry is able to attract. Human capital is the key asset and determining factor for the retail industry’s future. Recognizing this, SRA, WDA and SPRING Singapore had initiated the National Retail Scholarships programme this year. I am heartened to note that several far-sighted retailers have already come forward to co-fund the scholarships for their staff. I firmly believe that this scholarship programme will enable us to attract and develop future leaders for the industry. This is a long term investment but it has to start now.
In a short while, I will have the pleasure of presenting the National Retail Scholarships to the very first batch of recipients. I would like to congratulate the winners, and I look forward to their contributions to our retail industry upon their graduation.
I have spoken much before urging that there be a focused strategy by the industry to serve the HNWI customer segment. If we are successful with this strategy, we would have created a category of very specialized retailers with vibrant business, high service standards, strong bottom lines and well paying jobs.
While this specialized retailer segment may be small, it will exert positive influence on the rest of the retail industry, in service standards, in retail concepts, in innovation and in customer segmentation. If we persist in our efforts in upgrading the remaining retailers outside the CBD, help them build new capability and modernize, we would have an overall vibrant retail industry.
When SRA celebrates its 40th anniversary in 10 years time, I hope to see a retail industry that is much bigger in size, wider in product range, stronger financially, more specialized and differentiated in offerings catering to different segments of the market, and above all, famed for its service level and innovation. If we put in our best efforts, there is no reason why Singapore should not become a preferred and premier retail destination in Asia.
Together, with SRA, we can make this vision a reality. Happy 30th birthday!