Pre-Budget 2019 Perspectives - Consumer Retail
Today, technologically-savvy consumer behaviour has evolved to adopt new models such as peer-to-peer sales and aggregator marketplace platforms. Hence, retailers must create seamless, frictionless, personalised and lifestyle-driven consumption experiences across multiple online and offline channels, so as to reduce cart abandonment by improving convenience.
While the wholesale & retail sector accounted for 17.6% of Singapore’s Gross Domestic Product in 2017, the Singapore Retail Sales Index has seen relatively flat growth in the last few years. It is worth noting that less than 5% of retail sales is attributable to online sales. Singapore urgently needs to move from traditional brick-and-mortar retail to e-commerce – or, better still – to a hybrid approach, to tackle regional and global competition, including from online players. Moving to online channels will help retailers manage productivity challenges by requiring fewer staff, keeping less stock and managing cash flow better.
To drive further growth, focus should be placed on cost efficiencies, strong digital presence and efficient supply chain networks. Retailers need to rethink business models with a focus on using data & analytics and AI, and even virtual, augmented or mixed reality, as well as other digital search means such as voice search engine optimisation. This will enhance customer engagement with more relevance and peer recommendations, and improve supply chain management and last-mile delivery fulfilment. Use of IoT devices can give data on profile and sentiment through video analytics and smart shopping trolleys, for instance.
Singapore is already well-suited to be a base and global headquarters for international retail brands with its strengths in logistics and technology. The possibilities and benefits of digital transformation are many. However, while modern consumers have been quick to embrace such new retail platforms and concepts, many brick-and-mortar retailers have not kept pace. It is essential that these retailers get support to innovate their business models to ensure the sector’s continued survival.
To encourage retailers to embark on their digitalisation journeys, more can be done to ensure they are incentivised to rethink their business models, get end-to-end support for digital transformation, and have better access to trained resources.
1. Make support for lifestyle innovation more pervasive.
Introduce automatic enhanced tax deductions on prescribed expenses, similar to the deductions for internationalisation:
- 250% tax deduction for local spending for prescribed expenses made to Singapore-based service providers/vendors.
- 200% tax deduction for payments for prescribed expenses made to overseas service providers/vendors.
This can cover activities such as using data & analytics and AI on e-commerce platforms, digital marketing, customer experience design, Asian consumer insights, engaging data & analytics consultants to develop omni-channel concepts, new equipment/technology to implement digital solutions, training retail staff to embrace digital technology, engaging logistics/supply chain management support for last-mile delivery, etc. Broad-based enhanced tax deductions would supplement targeted grant schemes like the SMEs Go Digital Programme.
2. Anchor key international consumer and lifestyle businesses, as well as supporting logistics.
We need to attract major foreign brands and encourage local brands to develop new retail concepts by heavily using digital platforms, undertaking retail R&D and customer experience design, as well as leveraging retail data analytics. Singapore is a good test bed for retail brands to explore such e-commerce technology before expanding overseas as part of their business strategy. In addition, we should encourage supporting logistics businesses (e.g. last mile delivery) to provide the necessary supply chain management support. All of this can be achieved through:
- A concessionary tax rate of 5% for international retail and lifestyle companies to set up international headquarters in Singapore and anchor upstream retail activities such as product development, e-commerce
anddigital marketing, retail experience design, customer analytics and strategy teams in Singapore, and to generate international sales through online channels.
- Enhancing certainty on the 250% R&D tax deduction scheme by specifying retail R&D (including online retailing-related concepts) and customer experience design as pre-approved areas under the scheme.
3. Give more financial support for upskilling the retail sector.
Employers in the retail sector should be provided with training grant support of up to 50% of the cost to implement the Skills Framework for Retail, while individuals should be provided with an increased 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.