Singapore"s Great Sale That Wasn"t: China Tourists Stay Away

Retailers billed it as the Great

Singapore Sale. Chinese tourist Zhu Liang bought it, only to

regret afterward.

“We will never come here again to shop on purpose,” said

Zhu, a 35-year-old businessman from Hangzhou. Visiting the city

during the final days of the summer sale season in July, he

purchased a Loewe handbag for his wife, only to discover he

could have paid less in Hong Kong.

Behind the mark-up: a strengthening exchange rate, rising

labor costs and a sales tax Chinese tourists don’t encounter in

neighboring Hong Kong. A reduction in visitors from Asia’s

largest economy contributed to a sales slide of as much as 4

percent in Singapore’s annual shopping festival, according to

the retailers’ association.

Visitors from China to Singapore dropped 27 percent in the

five months through May from a year earlier amid slower economic

growth on the mainland and the impact of a new Chinese law that

clamped down on cut-price shopping tours. Total tourist arrivals

slid 1.7 percent, according to the Singapore Tourism Board.

Singapore’s retailers, already facing growing regional

competition, are under the most pressure since the Asian

financial crisis, Singapore Retailers Association Honorary

Treasurer Kesri Singh Kapur said.

Photographer: Bryan van der Beek/Bloomberg

Kesri Singh Kapur, head of business in Asia at Al-Futtaim Group and honorary treasurer of the Singapore Retailers Association. Close

Kesri Singh Kapur, head of business in Asia at Al-Futtaim Group and honorary treasurer… Read More

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Photographer: Bryan van der Beek/Bloomberg

Kesri Singh Kapur, head of business in Asia at Al-Futtaim Group and honorary treasurer of the Singapore Retailers Association.

“It is that grim,” Kapur, 47, said in a July 29 interview

in Singapore. “Both the sides of consumption, which are the

domestic customers and tourists, are not spending. I anticipate

that at least for the next 12 months, the market will be

sluggish.”

Losing Allure

While China’s anti-corruption campaign against extravagant

spending by government officials and state-owned companies has

also damped spending by Chinese at home and in Hong Kong (HKRSVANY),

retailers in Singapore are grappling with the threat of a

broader decline in appeal.

Singapore’s average retail sales growth dwindled to less

than 1 percent in the two years through May, according to

government data that excludes motor vehicles. In Hong Kong, the

average was 6.9 percent in the 24 months through June.

The Southeast Asian island, home to an Asian leg of the

Formula 1 race and two casino resorts, has seen its currency

strengthen about 3 percent against China’s yuan in the past

year, the most after the Korean won among major Asian currencies

tracked by Bloomberg. The Hong Kong dollar has gained 0.9

percent.

Little Money

“If we change our renminbi to Hong Kong dollar, it seems

like we have a huge amount of money. With Singapore dollar, you

just feel like it is little money,” Zhu said last week as he

walked empty handed out of the Paragon mall on Orchard Road with

his family. Singapore retail goods are generally about 10

percent more expensive than in Hong Kong, he said.

Photographer: Bryan van der Beek/Bloomberg

Shoppers inside the Robinsons department store in Singapore. International tourists contribute about 20 percent of Singapore retail revenue, Kapur estimated. Close

Shoppers inside the Robinsons department store in Singapore. International tourists… Read More

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Photographer: Bryan van der Beek/Bloomberg

Shoppers inside the Robinsons department store in Singapore. International tourists contribute about 20 percent of Singapore retail revenue, Kapur estimated.

Singapore imposes a 7 percent goods and services tax. While

tourists can claim back part of that on departure, “there is

still a differential of 2 to 3 percent,” said Kapur, who is

also Asia head of Dubai-based Al-Futtaim Group, the operator of

retail chains such as Royal Sporting House, Marks Spencer, and

Robinsons department store in Singapore.

International tourists including those from China,
Indonesia and India account for at least 20 percent of Singapore

retail sales, with Chinese accounting for about half of that,

Kapur estimated. Tourism Board data show Chinese visitors spent

S$800 million ($640 million) in Singapore in the first quarter,

of which almost half was on shopping.

Regional Competition

Retail brands have expanded into other markets in China,

Indonesia, and Malaysia, making Singapore a less unique shopping

destination, said Kapur.

“Singapore had this aura and advantage of being slightly

different from its neighbors” five or 10 years back, he said.

“Yes we have a great Orchard Road, we have a great environment

where people can walk and shop, but availability of brands has

come at parity now.”

Al-Futtaim has closed stores for brands including Shana and

Vince Camuto in Singapore, and is closing Mango Touch, he said,

estimating front-end retail staff costs have gone up as much as

30 percent in the last two to three years.

The tourist dollar is also being stretched harder.

Sightseeing, entertainment, and gaming income from visitors rose

19 percent in the first quarter from a year earlier, Tourism

Board data showed. Shopping revenue slid 6 percent.

Entertainment ‘Galore’

“Hotels are a little more expensive, entertainment is

galore in Singapore, the dollar is getting diverted into other

areas and not so much into retail,” Kapur said.

Revenue during the Great Singapore Sale that ran from May

30 to July 27 showed a 2 percent to 4 percent decline from the

2013 period, Kapur estimated. In contrast, Genting Singapore

Plc (GENS), Southeast Asia’s largest casino operator by market value,

said in May that gaming revenue from its venue on Sentosa island

rose 29 percent in the first quarter from a year earlier to

S$671.94 million.

Arrivals from China have also been hurt by political

turmoil in Thailand and the March disappearance of a Malaysian

plane carrying many citizens from China, whose travelers often

include Singapore as part of a broader Southeast Asian holiday,

according to Song Seng Wun, a Singapore-based regional economist

for CIMB Research.

“It all adds up to a fairly bearish picture for the retail

sector,” said Selena Ling, an economist at Oversea-Chinese

Banking Corp. in Singapore. “It’s hard to see immediate light

at the end of the tunnel.”

To contact the reporter on this story:

Brian Leonal in Singapore at

bleonal@bloomberg.net

To contact the editors responsible for this story:

Stephanie Phang at

sphang@bloomberg.net;

Linus Chua at

lchua@bloomberg.net

Rina Chandran

Singapore"s Great Sale That Wasn"t: China Tourists Stay Away