All over the world, retailers are closing their businesses one after another. They blame the internet, the e-commerce sites, and the ruthless consumers etc.
In Singapore, we share the same retail problems. We used to have queues for retail space in all our shopping malls. But now they are just like ghost towns to me. You can literally see empty retail spaces left empty for months to see a tenant come in and to see the same tenant leave the same premises in 12 months or less.
The Singapore authorities claimed that it is the internet that is killing off the retailers. As such, they have implemented many schemes to help encourage retailers to go online. Is this the right strategy to revive our dismal retail scene? What about the high cost of rental, labour, and poor customer service?
Based on my observation on the ground, I see internet has served as another distribution channel for retailers and NOT a death trap as the majority of them has claimed. The internet and all e-commerce sites do not kill retailers. High cost of rental, high cost of labour, and poor customer service are some of the culprits.
Having a website for your business does not mean people will come and buy your stuff. This is a fallacy in the thinking of most people including our authorities. They have forgotten that to gain traction for any website, massive social media, and internet marketing as well as offline advertising are needed to even get the attention of the consumers that you now have a website or an app or both. In addition, sufficient traction will come only after years and tons of marketing and advertising money before people start to buy things from you on your website or on the mobile phone. This is the part where most retailers fail financially on the net. In fact the failure rate is so much higher that traditional brick-and-mortar retail shops. They just fail silently and go without a trace.
Having turned around countless retailers in Singapore, I have come to the following conclusions that cause the failure of most retailers.
Over expansion – Having some moderate success in one outlet, retailers would quickly launched in expansion plan to have outlets covering the whole of Singapore. This decision is usually caused by the inflated egos of its owners as well as cheap loans from the banks. Having expanded to numerous outlets, they then start to feel the stress of high cost of rental, labour, and loan repayments. They caved in after some time of struggling. They bowed out of the retail scene as another statistical number.
Poor customer service – Have you ever asked a salesperson at a retail shop if they have a different colour or size of the dress that you wanted to purchase? I bet you must have. What are some of their “routine” answers from the salesperson? “It is all there”, or “We don’t keep stock”. Or at times you may come across salesperson that stay so close behind you like a pet dog. Or they may be watching you like a hawk from the cashier’s counter thinking that you would steal something from them. Now, as a consumer, who wants to have such shopping experience? You? Of course not.
This is one strong reason why consumers are shopping online from established e-commerce sites because our retail customer service experience sucks. However, luxury brands names like Jimmy Choo, LV, Chanel, Prada, and Guess do not have such problems because they know the importance of excellent customer experience to retain their customers. I always have a great experience whenever I shop there with my wife. When can our local retailers learn from them?
High rental costs – This has a lot to do with the greed of our landlords whether REITs or private. I shall not comment here on my blog. Sorry.
Commoditized products – Most retailers in Singapore sell almost the same stuff all over Singapore. There is very little differentiation between and among them. They only compete on price to get in the business. This is one sure way to fail in any business.
Poor target audience – Because of their lack in their competitive edge over their competitors, they have no clear target audience for their business. They just sell to anyone who is willing to buy and has failed to exercise Revenue Management on each sale and thus they sell themselves short. Leaving too much money on the table.
In our consulting experience, we believe in getting smaller to grow bigger. As such, we shrink our clients’ operations and improve their top and bottom lines concurrently. We believe in profitable growth and not just grow for the sake of “growth”.
I hope this article would shed some light in your thinking whether as a retailer or a business owner. I can be contacted to answer any of your questions here Victor@CrossbowConsultingGroup.com.