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Great Singapore Sale is no longer attractive
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Singapore’s Great Sale That Wasn’t: China Tourists Staying Away
By Brian Leonal - Aug 3, 2014
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 biggest pressure since the Asian financial crisis, Singapore Retailers Association Honorary Treasurer Kesri Singh Kapur said.
“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.”
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 won among major Asian currencies tracked by Bloomberg. The Hong Kong dollar has gained 0.9 percent.
“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.
Singapore imposes a 7 percent goods and services tax. While tourists can claim back part of that on departure, “there is still differential of 2 to 3 percent,” said Kapur, who is also the 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.
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.
“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.
“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.”
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