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Mr Lee Yi Shyan at The Singapore Retail Industry Conference

Mr Lee Yi Shyan at The Singapore Retail Industry Conference

SPEECH BY MR LEE YI SHYAN, SENIOR MINISTER OF STATE, MINISTRY OF TRADE AND INDUSTRY AND MINISTRY OF NATIONAL DEVELOPMENT AT THE SINGAPORE RETAIL INDUSTRY CONFERENCE, ON TUESDAY, 22 SEPTEMBER 2015, 8.50AM, SUNTEC SINGAPORE CONVENTION AND EXHIBITION CENTRE

Distinguished guests,

Ladies and gentlemen,

Good morning.

 1.            I am pleased to join you this morning at the 24th Singapore Retail Industry Conference (SRIC). I am glad to note that the Singapore Retailers Association (SRA) and the Singapore Productivity Centre (SPC) have come together to jointly organise this conference for the second time. It reflects the growing synergy between the two organisations in helping our retail sector transform.

 Improved Productivity in the Retail Sector

 2.            The retail sector[1] is an important part of Singapore’s economy. It generated about S$35 billion in annual operating receipts[2] and accounted for about 125,000 jobs in 2014.

3.            Given that the retail sector hires many workers, we identified it as one of the priority sectors for productivity improvement. Higher productivity would lead to higher profitability for firms, higher wages for workers and a more competitive industry as a whole.

4.            In 2011, we launched Retail Productivity Plan 1.0 to support retailers in improving operational efficiency. These included technology adoption, human resource upgrading and customer-centric initiatives. I am happy to note that the plan has benefited over 1,900 retailers.

5.            Furthermore, since the introduction of the Productivity and Innovation Credit (PIC) in Budget 2010, many companies have made productivity-related investments and mitigated the adverse impact of a tight labour market. In the Year of Assessment 2014, 54,000 active companies benefitted from PIC.

The Second Retail Productivity Plan

6.            While we have made good progress, much more needs to be done. We need to deepen the transformation of leading players, and also bring on board a large number of retailers that may be slower to adapt to fast-changing consumer preferences and consumption patterns.

7.            Today, I am pleased to launch Retail Productivity Plan (RPP) 2.0, which aims to improve both top-line growth and operational efficiency. SPRING Singapore, SRA and the unions have worked together to produce this exciting plan. Let me share some key highlights with you.

Driving Top-Line Growth

8.            Everything else being equal, if a firm increases its sales, it also raises its profits and productivity. So the question is, how can we sell more?

9.            eMarketer estimated that on a worldwide basis, e-retail sales reached US$1.3 trillion and accounted for an increasing share of total retail sales in 2014. E-retail sales are also expected to grow by 56 per cent over the next three years[3].

10.         China and the US were by far the world’s leading e-retail markets, together accounting for more than 55 per cent of global internet retail sales in 2014. In particular, China is expected to exceed US$1 trillion in e-retail sales and account for more than 40 per cent of the worldwide total by 2018.

11.         Some may argue that these large markets offer economies of scale for e-retailing to thrive. Smaller economies like Singapore may therefore still rely on brick-and-mortar stores for a long time to come. Do you subscribe to this argument?

12.         I personally believe that it is a matter of time before e-retailing becomes commonplace in Singapore. This is because consumer preferences are changing. A study by Euromonitor International[4] shows that online spending in Singapore grew from S$1.08 billion in 2014 to S$1.22 billion in 2015. This is growth of 13 per cent over a year.

13.         Just a few days ago, the Straits Times published an article on the retail sector in China[5]. It said: “China’s booming online market is forcing some brick-and-mortar retailers to close while pushing up vacancy rates in malls across the country”. Meanwhile, Alibaba, the leading e-commerce player in China, reported year-on-year revenue growth of 28 per cent in the latest quarter[6]. Recent figures also indicate that it served 350 million customers and facilitated about US$400 billion worth of purchases[7]. The contrast is stark, and points to how e-retailers could take business away from brick-and-mortar stores.

14.         The choices before our retailers are clear. If we only play defensively, we would see our retail sector growing very slowly, or perhaps not at all.  Our strategy therefore cannot be limited to cost-cutting and efficiency improvement. Our strategy has to be offensive, to include selling beyond the limitation of store-fronts and serving markets in the region and beyond.

15.         This is why we will place great emphasis on internationalisation and helping retailers sell online in RPP 2.0. We will help companies acquire the relevant capabilities to sell online, such as investing in product development, brand-building, e-infrastructure, digital advertising, and channel fulfilment.

16.         We will encourage collaborations between our retailers and experienced logistics players such as SingPost to better perform order fulfilment in Singapore and the region. We will also encourage our e-retailers to explore partnering global platforms, such as eBay, Amazon and Alibaba, to market their products worldwide. For example, we worked with Google this year in February to organise the Great Online Shopping Festival.

17.         Our brick-and-mortar stores will not vanish overnight. However, they will have to compete much harder for a shrinking pie by offering better and more immersive in-store experiences. This can make a difference. For example, TANGS, has revamped itself to offer its shopping experience as a one-stop lifestyle destination. They extended their offerings beyond retail to include spa services and food offerings, and jazzed up their store with an area set aside for pop-up showcases for new brands.

Improving Operational Efficiency

18.         Apart from helping companies lift top-line growth, RPP 2.0 will continue to reach out to many more retailers that can benefit from efficiency improvements. The use of RFID (Radio Frequency Identification) for inventory management, automated retail services and cashier-less stores are proven ways to help retailers improve efficiency and save costs. Experience in the past suggests that such technologies could save more than 20 per cent in manpower costs.

19.         An interesting example of automated retail is SingVita – a fully automated store which sells health supplements. Beyond allowing for substantial manpower cost savings, the cloud-connected machines used in SingVita also enable the company to manage inventory and prices in real time.

20.         We will also support retailers that embark on projects to analyse and improve their existing business operations. Companies can, for instance, embark on time motion studies to optimise the time that workers spend on various tasks.

21.         Noel Gifts, an online floral and gift retailer, embarked on such a project with SPC to identify and reduce wastages in processes such as hamper wrapping and flower arrangement. This, in turn, enabled them to deploy their manpower to more value-adding services.

Conclusion

22.         Singapore is an open economy, and our retail sector would have to compete regionally and globally. Our retailers can sell to regional and international consumers if we have unique products and services to offer. To survive, we cannot remain defensive. We need to have growth strategies that tap on markets outside of Singapore.

23.         While a good majority of our retailers could improve their productivity by improving operational efficiency, at least in the short term, I believe a vast number of our retailers will have to transform to become e-retailers quickly. The trend of shopping online is unlikely to reverse, and we have to be prepared for this.

24.         Let us work together to retain and enhance the vibrancy of our retail sector. Thank you.



[1] Refers to retail trade excluding motor vehicles, petrol stations, hawkers and stall-holders.

[2] Defined as income earned from business operations (ie. income from services rendered and sale of good). Typically referred to as revenue.

[3] Source: http://www.emarketer.com/Article/Retail-Sales-Worldwide-Will-Top-22-Trillion-This-Year/1011765

[4] Singapore’s Internet Retailing Market by Subsector, Euromonitor International 2015

[5] Source: “In China, online retail spells death for malls”. The Straits Times, 18 Sep 2015

[6] Alibaba’s revenue in 2Q2015 was RMB 20.2 billion, compared to RMB 15.7 billion in 2Q2014.

[7] Figures are for the period Mar 2014 – Mar 2015.

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