THE RETAIL INDUSTRY IN SINGAPORE

Abstract

The retail industry in Singapore has been languishing for the past few years with many retailers going into the red. Given its significant contribution to the economy in terms of employment and value-added, such a development is a cause for serious concern. The need to implement suitable stimulus policies has gained greater currency with the advent of the Asian financial crisis, which has sent retail sales in Singapore plummeting. However, for the implementation of appropriate and effective measures to help the worsening retail climate, it is essential to identify the main driving force behind the retail industry. To identify the factors responsible for the retail slump, an analysis of retail supply and demand using a combination of time series analysis, cross country comparisons and econometric modelling was attempted. The study finds that the perceived oversupply of retail space and consequently, excessive competition is unsubstantiated. An international comparison of the retail space situation in Singapore actually reveals no sign of a retail space glut when the impact of tourism was taken into account. The analysis thus runs counter to the popular belief of a retail glut in Singapore. Econometric results further reveal that tourist arrival rates have a significant impact on retail sales, despite the importance of domestic variables like GDP growth and inflation. Another key result was that GST has a significant negative impact on retailers.

In conclusion, reducing competition is not the key to reviving the retail sector. On the contrary, greater competition may increase the breadth and depth of the retail industry and contribute to making Singapore the shopping paradise of Asia.