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SPECIAL REPORT

With the Marina Bay district...

FRIDAY, DECEMBER 21, 2012

SPECIAL REPORT

FRIDAY, DECEMBER 21, 2012

... suburban malls...

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... and global competition

PHOTOS: DESMOND LIM, RAJ NADARAJAN, AGENCE FRANCE-PRESSE

Glitz and gardens at Marina Bay There’s the laser show, the crystal pavilions, the Avalon nightspot, and Gardens by the Bay is next to it. When you look at Orchard Road, it’s just a traditional shopping street.

ORCHARD ROAD FEELS THE HEAT On the surface, Orchard Road may look like a thriving shopping street, but dig deeper and one will find there is a need for a revamp,

say building developers and experts. In the first of a two-part series, Jessica Lim looks at the street’s competitors, both local and foreign.

By JESSICA LIM

Rise of the suburban mall WHETHER it is Jurong, Sengkang or Woodlands, the future is in the suburbs, say major retailers, who are moving quickly to secure prime suburban shop space. Japanese retailer Francfranc, which made its South-east Asia debut here in May, chose to open its first outlet at JCube in Jurong East. Luxury watch store Cortina opened its first outlet outside the Orchard Road and Marina Bay precincts at 112 Katong last year; and Swedish retail giant H&M’s third local store will open in Jurong East’s Jem next year. Wing Tai Retail has 136 stores here across 16 brands including G2000, Topshop and Dorothy Perkins. Currently, 51 per cent of the outlets are city stores – down from 70 per cent a decade ago. The group’s high-end brands like Karen Millen, however, are still available only in the city for now. It says its Dorothy Perkins and Topshop outlets in the suburbs still ring in only 60 per cent of the sales at a similar-sized outlet in the city. But this is expected to change. “The Government is developing these regional hubs, where people live, study and play. We expect these shopping hubs to grow and we want to be there for that,” says Wing Tai Retail executive director Helen Khoo. Mall developers have been eager to ride on this momentum. Last year, at least five major suburban malls – 112 Katong, Changi City Point, Junction 10, Rochester Mall and Alexandra Retail Centre – opened in the suburbs. More malls are being planned or constructed in areas like Jurong East, Sengkang and Paya Lebar. In contrast, the Scotts Square project was the only Orchard Road retail property that opened its doors last year and the only new mall for the foreseeable future is Orchard Gateway at Somerset. Retailers’ enthusiasm for the suburbs has translated to higher rents, despite the influx of mall space. According to property consultancy CBRE, prime suburban rents remained at an all-time high in the third quarter of this year at $29.75 per sq ft. Orchard Road rents stood at $31.60 psf, down from their peak of $36.76 psf in the third quarter of 2009. In the first quarter of last year, the rental gap between prime Orchard Road retail space and top suburban locations narrowed to $1 – the lowest level on record. Five years ago, the gap hovered around $7. Industry players and analysts think this points to a natural evolution in the Singapore retail scene. The phenomenon of the rise of shopping enclaves in the suburbs, said SLP International research head Nicholas Mak, can be seen as far back as 20 years ago in developed cities like Melbourne and Sydney. “These cities have big, spread-out suburban areas, serviced by train lines. Near these stations are malls that serve the suburbs and their residents. The city malls catered more to the working crowd and tourists,” added Mr Mak, who has advised the Government on projects to revitalise Orchard Road. “We are moving towards that trend.” Frasers Centrepoint Trust’s top performing mall in terms of shopper traffic is NorthPoint in Yishun, with an average 3.4 million visitors monthly. Its $72 million renovation of Causeway Point in Woodlands is in the final stages. “Malls in the suburbs really offer the convenience factor,” said its spokesman. “We find that shoppers visit our suburban malls regularly. They take their

Shoppers outside Ngee Ann City in the heart of Orchard Road yesterday. Shopping enclaves in the suburbs, buzzing Marina Bay, the Internet and overseas markets have helped lure shoppers away from the famous street. ST PHOTO: KEVIN LIM meals there and drop off their children there after “It’s a very well-planned development, with supschool. porting facilities,” said Orba director Steven Goh. “Orchard Road, on the other hand, is becoming “They have an advantage, as it is a vast piece of more like a destination, not a place people visit every land, part and parcel of an overall plan that the Urday.” ban Redevelopment Authority (URA) has for the arAt CapitaMall Trust malls, shopper traffic last ea.” year was higher at Junction 8 (28 million) and TampiBy comparison, Orchard Road cannot start with a nes Mall (27.4 million), than at Clarke Quay (12.6 mil- clean sheet and so faces numerous constraints. Only lion) and Plaza Singapura (23.3 million). two undeveloped land parcels are left, and 13 of its “Orchard Road used to boast of the most modern 49 malls are strata-titled – a form of ownership for malls, but now we find the same hardware in subur- multi-level blocks that can make redevelopment diffiban areas. MRT stations also make suburban malls cult. much more accessible,” said Dr Lynda Wee, adjunct Mr Goh said he is pushing the Government to widassociate professor in retailing at Nanyang Techno- en Orchard Road’s emphasis beyond shopping, by inlogical University’s Nanyang Business School. cluding more leisure components. Proximity to homes and access via MRT have But plans to rejuvenate the street – such as by dehelped most suburban malls surmount parking prob- veloping underground shop-filled linkways or “pelems, which have plagued most of them since their destrianising” sections – have remained just plans. opening. To some degree, developers and landlords have onSingapore Polytechnic senior retail ly themselves to blame. Underground lecturer Sarah Lim said that while tourlinks, for instance, have not been built ists will continue to visit Orchard Road, because of the worry that they could funTOMORROW: the local crowds will be harder to please. nel customers out of one mall into anothIdeas to “The question is, what can Orchard er. remake offer that is different from what you get There are also concerns about unexOrchard in the suburbs?” she said. pected costs when weaving over and unRoad Ms Chua Ping Wei, 29, is one local der utility pipes. shopper who has stopped going to the In contrast, the masterplan for the Orchard Road area. Instead, she prefers Marina Bay area was laid out as early as to shop at Clementi Mall – a stone’s throw away the 1990s, as the land was left to settle post-reclamafrom where she lives. tion. “It’s now so difficult to find parking in Orchard As a result, a mix of commercial, residential, hotel Road. It is mayhem at the weekend,” said the fitness and entertainment facilities ensures that the area is trainer, who works in the Orchard area. vibrant round the clock. “Why go out there, when you can find everything Supporting developments, including the Marina so nearby?” Bay Sands integrated resort, Gardens by the Bay, Marina Bay Financial Centre and the Marina Bay Cruise Centre have opened. The up-and-coming Building heights are kept low along the waterMarina Bay precinct front. A common services tunnel housing utility serMEANWHILE, in the city centre, the buzz in the Ma- vices was also built, ensuring no repeated road digrina Bay area is growing and attracting its fair share ging, and the underground Marina Bay Link Mall of the tourist crowd. links Raffles City MRT to the Marina Bay Financial The big advantage that Marina Bay has, according Centre. to the Orchard Road Business Association (Orba), URA’s Place Management Department is also fowhich represents the interests of mall developers in cusing on the “software” for the area. Orchard Road, is the “top-down approach” taken This includes coming up with a calendar of events with the new precinct. for public spaces and water bodies in partnership

with the private sector. Signature events like the Marina Bay Singapore Countdown and i-Light Marina Bay have been held as a result. The potential of the area has been marred by some problems, such as inadequate and prohibitively expensive parking. But while Orchard Road still clearly trumps Marina Bay as the main shopping area in Singapore, it has to stand for more than that to stay relevant, said Professor Bernd Schmitt, executive director of the Institute on Asian Consumer Insight. “The Marina Bay area is an interesting one. There’s the laser show, the crystal pavilions, the Avalon nightspot, and Gardens by the Bay is next to it,” he noted. “When you look at Orchard Road, it’s just a traditional shopping street. “Is Orchard Road broken? No. But over time, people might view it as the old shopping street, as ‘old Singapore’,” he said. In the meantime, owners of high-end shops like Limited Edt Vault, which sells designer trainers, view the Marina Bay precinct as the place to be. Owner Mandeep Chopra, 35, who originally had two outlets in Orchard Road, decided to move out of The Heeren in 2010 and into Marina Bay Sands that same year. “The area has a luxurious feel and we felt it had a good fit with our brand. The precinct also gets a lot of tourists,” he said.

Global competition for consumer dollars TO MAKE things worse, the shopping landscape in Asia is evolving rapidly and regional competition is becoming more intense. Shanghai, Tokyo, Hong Kong and Seoul have attracted international brands to set up flagship stores in their cities – many of which do not exist in Singapore. American label J.Crew will open its first Asian store in Hong Kong next year to target tourists from mainland China. Its US counterpart American Eagle has outlets in Japan, Hong Kong and Shanghai, while Hollister – which already has stores in Hong Kong and China – opened a store in South Korea in August. At the high end, Belgian designer Ann Demeulemeester has stores in Hong Kong, Seoul and Tokyo and Graff Diamond has stores in Hong Kong, Shanghai and Beijing. International brands decide on their first port of call depending on the markets they hope to eventually penetrate, said the managing director of retail services at Knight Frank, Mr Peter See-Toh. “Few international brands are unique to Singapore. I can only think of British jewellery chain Solange Azagury-Partridge and Aeropostle,” he said, adding that it was noteworthy that mega brands like Uniqlo and H&M chose to expand to Hong Kong first. “We are just not the preferred choice with brands which are looking to expand into North Asia. Our domestic market is small. Many brands choose Hong Kong and then expand into its hinterland, China.” Singapore is, however, the first stop for brands looking to expand into South-east Asia. The Republic managed to snag Abercrombie and Fitch before Hong Kong, for example, partly for that reason. “We are the springboard for the South-east Asian market, but the problem is that our competition is currently with other financial centres like Hong Kong, Shanghai, Seoul and Tokyo. We need to benchmark against these cities,” said Mr See-Toh. An emerging issue is affordability. High retail rents and other operating costs have

pushed prices up here, say experts. A Julius Baer Lifestyle index released in September found that a pair of classic Louboutin pumps costs US$2,714 (S$3,308) here, compared with US$1,005 in Hong Kong and US$1,460 in Shanghai. A Chanel quilted bag is priced at US$5,781 in Singapore, higher than the US$4,921 in Hong Kong and $4,888 in Shanghai. A gold Rolex Oyster is priced more competitively, costing US$33,341 in Singapore, US$32,207 in Hong Kong and $38,572 in Shanghai. “Shoppers are more well-travelled and are becoming more savvy. Prices are compared and more often than not, Singapore cannot compete,” said Singapore Polytechnic senior retail lecturer Sarah Lim. “The strong Singdollar makes the price difference even more stark, so we lose out by being so much more expensive.” The Singdollar is currently at $1.22 to the US dollar, which is near its record high. In the meantime, the South Korean won and Japanese yen are hovering around record lows against the greenback, and the Hong Kong dollar is pegged to it.

Without the burden of high start-up and operating costs, online stores are also giving retailers a run for their money, even though the majority of customers still baulk at shelling out money for luxury designer clothes that they are unable to try on. A recent PayPal study showed that Singapore’s online commerce market grew from $1.1 billion in 2010 to $1.4 billion last year. Online shopping portals and blogshops have sprung up in recent years. Livejournal, which hosts more than 50,000 blogshops online, reported that its transactions reached $100 million last year. Famous online stores which have gained popularity among Singaporeans are United Kingdom-based Asos, Singapore-based Reebonz, and Zalora Singapore. “Online stores don’t pay rent. This means that products are more affordable. Many are also very sophisticated now. They deliver items in three working days and allow for returns,” said Ms Lim. “These stores directly compete for the local consumer dollar.” [email protected]

– Professor Bernd Schmitt, executive director of the Institute on Asian Consumer Insight, comparing Orchard Road with the Marina Bay area, which features The Shoppes at Marina Bay Sands (top, left)

Suburban malls more than a match Orchard Road used to boast of the most modern malls, but now we find the same hardware in suburban areas. – Dr Lynda Wee, adjunct associate professor in retailing at Nanyang Technological University’s Nanyang Business School. JCube in Jurong boasts Singapore’s first Olympic-sized ice-skating rink (top, centre).

Well-travelled, savvy shoppers Shoppers are more well-travelled and are becoming more savvy. Prices are compared and, more often than not, Singapore cannot compete. – Singapore Polytechnic senior retail lecturer Sarah Lim. Overseas shopping districts, like Ginza district in Tokyo (top, right), have as much to offer as Orchard and can often provide the shopper with lower prices.