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Can Singapore Steal Hong Kong’s Thunder?

As Comme des Garçons prepares to open its latest Dover Street Market in Singapore, there's evidence that the island city-state is becoming increasingly important on the global retail map.
Dover Street Market's Singapore store | Source: Courtesy
  • Alexandra Kohut-Cole

SINGAPORE — A short drive from the buzz and blustering air con of Orchard Road's retail strip lies Dempsey Hill's bohemian enclave of art galleries, cafés and wine bars. Nestled serenely in lush, tropical greenery, this is a shopping and dining destination with a difference. For an Asian metropolis like Singapore, a retail district without malls or mobs is a rare find indeed.

Dempsey Hill will be the setting for Comme des Garçons' latest Dover Street Market flagship, when it opens its doors to the public this weekend. The Singapore branch is the latest in the firm's stable of achingly cool multi-brand concept stores in London, New York, Tokyo and Beijing. (A future Dover Street Market is also planned for Los Angeles).

On the back of news earlier this week that Amazon entered Singapore with the launch of its ultra-fast “Prime Now” service, the opening of Dover Street Market (DSM) here is yet another coup for Singapore over its long-time retail hub rival Hong Kong.

"We don't really plan where the next DSM will be," explains Adrian Joffe, president of both Dover Street Market International and Comme des Garçons International, the Japanese fashion brand behind the concept store chain. "We were offered this amazing building in Dempsey [Hill] in Singapore and just went for it. It's just about feeling the right thing at the right time. And we think DSM could be an exciting addition to the Singapore retail scene."

While Joffe doesn’t explicitly state that launching in Singapore was a choice over Hong Kong, his decision to open there could be seen as a critical move for Singapore’s retail landscape.

“We think it might change it considerably since nothing like it exists really,” he says. “We love Singapore and all the changes that are happening. Singaporeans have a very keen sense of fashion and [are] incredibly open to new things.”

The new DSM will undoubtedly draw more tourists and help to reinforce Singapore as a fashion shopping destination within the region, while giving a boost to the local retail market — which has, of late, been in the doldrums.

The opening of Dover Street Market is yet another coup for Singapore over its long-time retail hub rival Hong Kong.

A fashion retail hub for a region of over 600 million people, Singapore has long been a magnet for the wealthy elites of Indonesia, Malaysia, Thailand, Vietnam and, more recently, emerging Southeast Asian nations like Myanmar who like to venture there for lavish shopping sprees. Its status as a MICE (meetings, incentive travel, conventions and exhibitions) hub has helped it attract additional investment from nearly every major global brand looking for a gateway into the region or a place to set up regional headquarters.

At a time when the future of Hong Kong’s retail pre-eminence looks increasingly uncertain due to political tensions with mainland China and growing competition from other Asian shopping destinations, Singapore appears to be in a good position to steal some of Hong Kong’s thunder.

Singapore ranked fifth in CBRE’s global city rankings of international retailer presence between 2016 and 2017, while Hong Kong ranked seventh. But even though Hong Kong and Singapore are two of the most attractive shopping locations in Asia-Pacific, both cities’ retail sectors have been facing challenges as of late.

The rise of e-commerce, costly commercial rents, and volatile tourism volume are just a few of the challenges that have conspired with economic headwinds to compel some brands to reduce their footprint or withdraw altogether. No wonder consumer confidence fell 20.9 points in Singapore and 16.8 in Hong Kong last year, according to the MasterCard Index of Consumer Confidence.

So when Joffe confirms that DSM will “definitely be working with local and regional talent,” it should be a morale boost to the local fashion scene. E-commerce platform The Salvages is the first local player to showcase alongside the DSM global brand, with its own-label items being sold via the DSM e-shop. The concept store’s e-commerce arm launched in the Singapore region ahead of the physical outpost; Joffe claims demand has already been “very swift.”

Increasingly Complex Regional Rivalries

Singapore has become increasingly reliant on tourists from mainland China, while arrivals to Hong Kong have declined in recent years. Singapore’s tax-free sales were up 9 percent in June (calendar-year-to-date) with Chinese tourists still acting as the main driver of growth, according to Global Blue.

"The Chinese government works hard on fighting corruption," says Gloria Lam, editor-in-chief of the Hong Kong edition of Elle magazine. "Consequently the [number of] high-spending mainland visitors [to Hong Kong] has dropped since then, [with] competition from the K-trend [attracting mainlanders away to Seoul, South Korea]. So it’s hard for Hong Kong to maintain [leading] status as a fashion shopping destination in the region."

With the K-trend, attracting mainlanders away to Seoul, it's hard for Hong Kong to maintain leading status as a fashion shopping destination.

More recently, there have been some optimistic signs for Hong Kong. The latest figures from the Hong Kong Tourist Board showed a surge of 10.4 percent in mainland arrivals in March, a much-needed rebound after news in February that retail spending had plunged to a 17-year low. Consequently, the retail outlook was upgraded by the Hong Kong Retail Management Association (HKRMA) as sales beat estimates to rise 0.1 percent in April; this prompted a forecast of mild positive growth for 2018.

However, the recent upheaval and arrests that took place during street protests last month amid the 20th anniversary of the handover of Hong Kong from Britain to China were a reminder to visitors that the city has become far more unstable than Singapore.

Interestingly, it was Singapore that attracted the highest-spending tourists between 2015 and 2016 — followed by Beijing, Shanghai, Hong Kong and Taipei — in the MasterCard Asia Pacific Destinations Index 2017. Not surprisingly, Lagardere Travel Retail launched a 500-square-metre Fashion Gallery concept at Singapore's Changi Airport last year, and recently Louis Vuitton, Coach and Furla have opened new stores across the city.

However, other Asian cities like Tokyo, Seoul and Bangkok have begun to claim some of Singapore’s tourist customers as they become increasingly popular destinations. Meanwhile, mainland Chinese cities are also attracting more locals to shop at home as developers like CapitaLand China open new retail projects in places like Shenzhen, Hangzhou and Wuhan.

Mixed Messages From the Local Market

Emerging market intelligence provider BMI forecasts economic growth of 1.9 percent to 2.6 percent for Singapore over the next three years. And after four months of decline, Singapore’s retail sales (excluding motor vehicles) recorded a 0.8 percent month-on-month improvement in December, according to a report by Savills.

“For the past three years the [Singapore] retail business has gone through a very tough time,” explains R. Dhinakaran, president of the Singapore Retailers Association and managing director of Jay Gee Melwani Group, distributors for mass-market brands such as Levi’s, Converse and Dockers. “There are lots of new brands, but competition from the international brands has been tough and [rent has] been very high. Too many players have come into the market so rentals are up and business [is] sinking.”

New Look and Celio, both distributed by Jay Gee Melwani Group, withdrew from the market last year. “The franchises with lower margins can’t afford the rentals at high-end locations, but the high-end global luxury brands can, so most of those are still holding up,” adds Dhinakaran. “All of the above applied to Jay Gee, we closed many brands over the last three years.”

Sending further shockwaves through an already nervous market, Singapore’s 174-year-old department store John Little and internationally acclaimed local label Raoul both shuttered their physical stores in the country.

Despite the gloom at the lower end of the Singapore market, and challenges for travel retail in Hong Kong, the luxury segment continues to thrive in both cities. Michael Kors and Victoria's Secret both launched flagship stores in Singapore last year, while Versace and Valentino opened in Hong Kong this year. Reebonz, one of Southeast Asia's largest online luxury retailers, recently opened a US$29 million Singapore headquarters to spearhead its US$150 million Asian expansion.

“Singapore and Hong Kong are both well-developed international cities. Both cities are important to [our] group’s sales growth in the Asian market,” says Alberto Camerlengo, chief executive officer of Furla. The group’s Singapore sales grew 9 percent between 2015 and 2016; in Hong Kong and Macau sales were up 11 percent in the same timeframe. With eight stores in Singapore and 11 in Hong Kong, the luxury leather goods heritage brand continues to expand at a brisk pace.

And it is not alone. As part of The Shoppes at Marina Bay Sands' expansion this year, Chanel's Peter Marino-designed duplex is increasing to 11,000 square feet and its latest coup is Balmain which is opening its only standalone store in South East Asia. Italian luxury outerwear brand Moncler, is also looking for a second location there.

Growth of Online, Lifestyle Malls and the Integrated Resort

According to Savills, the supply of retail space in Singapore will increase from 1.8 million square-feet in 2017 to 4.6 million square-feet by 2021. Big projects in the pipeline include Marina One The Heart, Singapore Post Centre, Vision Exchange, Royal Square and others in suburban shopping districts.

Experiential malls are a now a priority in what is already a very mature and sophisticated retail market. When it opens this year, the S$150 million (US$110 million) e-commerce SingPost mall will incorporate the “02 concept” where online and offline shopping merge, a spokesperson for SingPost explains. The revamped S$560 million (US$411 million) Funan Mall, set for 2019, will offer drive-through shopping and an indoor cycling lane.

Like everywhere else, traditional players in Singapore are feeling the pressure of e-commerce in a very big way. Zalora, one of South East Asia’s digital pioneers, has successfully launched physical pop-up stores across the city and wider region.

Almost all retailers are working on some sort of 'offline to online' or 'online to offline' strategy to stay connected to their customer.

“I think almost all retailers are working on some sort of ‘offline to online’ or ‘online to offline’ strategy to stay connected to their customer as they switch between the two channels,” says Zalora chief executive Parker Gundersen.

Perhaps surprisingly, Hong Kong lags behind Singapore in Forrester’s Global E-Commerce Readiness Index; the report found that Singapore’s online buyer penetration is twice that of Hong Kong’s.

According to Kenneth Goh, editor-in-chief of Harper’s Bazaar Singapore, this may signal the local retail market’s strengths and weaknesses rolled into one: “While we live in a robust, young and growing economy like Singapore, we understand that shop experiences are chipped away by savvy consumers looking for cheaper, quicker, [more] convenient options to shop abroad and on the web.”

But if Singaporean players can manage to harness more of their local market through online innovation while attracting more well-heeled foreigners to splash out in new neighbourhoods like Dempsey Hill, then long-time rival Hong Kong may one day find itself looking on enviously at Singapore’s rising retail fortunes.

Editor's Note: This article was revised on 28 July 2017. An earlier version of this article misstated that Comme des Garçons has opened its latest flagship store in Singapore. It has not. Comme des Garçons, which owns the multi-brand retailer Dover Street Market, has opened the latest branch of Dover Street Market in Singapore.

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