IT used to be that the buzz along Orchard Road was a gauge of the health of Singapore's retail industry. Those days are long gone in today's high-tech retail world, where more of the action is moving online.
As a smart nation, Singapore needs to move from traditional retail to e-commerce - or, better still, adopt a hybrid approach, to tackle regional and global competition. The move into e-commerce will also generate spinoffs to other sectors, including logistics and transport, fintech and consumer analytics.
Increasingly, tech-savvy consumer behaviour has led to the evolution of peer-to-peer sales and aggregator marketplace platforms. To thrive, retailers must now create seamless, frictionless, personalised and lifestyle-driven consumption experiences both online and offline. Moving more to online channels will also boost retailers' productivity by requiring less pressure on talent resourcing, keeping less stock and managing cash flow better.
To encourage retailers to embark on their digitalisation journeys, we suggest three key areas to support retailers to rethink their business models, get end-to-end support for digital transformation, and have better access to trained resources.
- Make support for lifestyle innovation more pervasive
Firstly, tax incentives can offer support to make lifestyle innovation more pervasive. For example, a 250 per cent automatic tax deduction for "local" spending for prescribed expenses made to Singapore-based service vendors, and a 200 per cent automatic tax deduction for payments to overseas service vendors, similar to the deductions for internationalisation, could be considered.
The scope of such deductions could cover activities such as using data and analytics and artificial intelligence on e-commerce platforms, digital marketing, customer experience design and Asian consumer insights. These activities can also include engaging data and analytics consultants to develop omni-channel concepts, and acquiring new equipment and technology to implement digital solutions.
They could also include training for retail staff to embrace digital technology in the first place or last-mile logistics and supply chain management players to boost their delivery service.
Such broad-based enhanced deductions would also supplement targeted grant schemes like the SMEs Go Digital Programme, to reach all industry players big or small.
- Anchor key international businesses
Secondly, more can be done to anchor key international consumer and lifestyle businesses, towards making Singapore a global retail hub.
With its strengths in logistics and technology, Singapore is already well-suited to be a base and headquarter for international retail brands, as well as a good test bed for retail brands to explore e-commerce before expanding into other regional markets.
To attract more major foreign brands to base themselves here, we suggest a concessionary tax rate be made for international retail and lifestyle companies to set up their headquarters in Singapore and to anchor upstream retail activities such as product development, e-commerce and digital marketing, retail experience design, customer analytics and strategy teams in Singapore, and to generate international sales through online channels
Furthermore, enhancement certainty can be made on the 250 per cent R&D tax deduction schemes by specifying retail R&D (including online retailing-related concepts) and customer experience design as pre-approved areas under the scheme.
- Give more financial support for upskilling the retail sector
Thirdly, as a service industry, the retail sector will always rely heavily on the skills of its workforce.
A more digitalised retail environment will require staff to keep up to date with the rapid changes in technology, consumer trends and marketplace processes.
Hence, employers in the retail sector should have avenues to seek training grants that support the cost to implement the Skills Framework for Retail while individuals should be provided with an increasing quantum of SkillsFuture Credits to develop skillsets that can prepare them for retail careers of the future. These skills can include e-commerce, emerging technology and digital marketing, to name a few.
To sum up, Singapore's retailers need to embrace technology as an enabler, with a unified data strategy that emphasises turning data into actionable insights. A digital and data-driven approach will create a more vibrant retail scene which in turn will boost Singapore's retail sector.
- The writer is Head of Consumer & Retail, KPMG in Singapore. Views expressed are his own.