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Is Online Shopping Taking Over The Singapore Mall?

shoppingWith the pending initial public offering of the Alibaba Group, the world is awaiting what could be the largest internet IPO in history. Alibaba Group, the leading online retail platform in China. Recently, Taobao.com, the consumer retail platform of Alibaba entered the South East Asia market, including Singapore.  With the growth of online shopping, brick-and-mortar shops have been given a run for their money.  Let’s take a look at what this could mean for existing retailers in Singapore.

Retail Malls

An online retail platform is like a virtual shopping mall, andcan be considered a direct competitor of retail malls. Retail REITs and retail mall owners like CapitaMall Asia (SGX: JS8), Parkson Retail Asia (SGX: O9E), Frasers Centrepoint Trust (SGX: J69U) might see their tenants facing competition from their online counterparts. This could affect the mix of tenants in the malls, to products and services that are less affected by online competition.  This might include service businesses such as food and beverage outlets.

Retailers

Brick-and-mortar retailers might also be affected.  It isn’t easy competing with an online retailer selling the same product at a cheaper price, due to its lower operating cost. Companies such as Courts Asia (SGX: RE2) might face challenges in the long-term unless it manages to address the online competition.  Interestingly, Tesco, a UK-based grocery chain, has managed to grow itself into the largest online retailer in the country.

If you can’t beat them, join them

Some brick-and-mortar retailers have already hopped onto the boat, and established an online presence. Popular Holdings (SGX: P29) has already started an online store to sell its books. In the services industry, Asiatravel.com Holdings (SGX: 5AM), was voted the best online travel agent in 2013 by TTG Travel Awards.

Foolish Bottom Line

Consumers will still require services provided by brick-and-mortar stores. A day out at the mall is also an experience enjoyed by many Singaporeans. While there is a demand for the physical brick-and-mortar stores, the threat of online retailers still remain, and physical retailers will require a robust business strategy to deal with this genuine threat.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.