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Are Singapore Brick-And-Mortar Shopping Malls Dead?

There has been much debate on the relevancy of brick-and-mortar retail malls with the proliferation of e-commerce. Using e-commerce, shoppers can purchase items with the click of a button in the comfort of their own homes. The purchases are then delivered to their doorstep without much hassle.

With such great convenience, brick-and-mortar shopping malls seem to be as good as dead. Or is that so? A recent investor presentation from Frasers Centrepoint Trust (SGX: J69U) shows that it’s a myth to say brick-and-mortar retail malls are dying out due to e-commerce.

Reasons for decline in some brick-and-mortar malls

According to Frasers Centrepoint Trust, there are other reasons for the decline in shopping malls, and e-commerce is not one of them. Those reasons include:

1) Competition/Oversupply;

2) Slowdown in the economy; and

3) Changing consumer preferences and lifestyles.

The misconception of the demise of retail malls is made worse due to the personal experiences of shoppers. Just because a handful of people shop online doesn’t mean that everyone has turned to online shopping. Many non-IT savvy folks still patronise retail malls to get their shopping fix.

Also, in Singapore, due to our relatively small size, it’s uncommon to travel long distances just to get to a shopping mall, unlike in large countries like the US. Most train stations here have at least one shopping mall once we exit them, making it extremely convenient to purchase goods before heading home after work. This convenience also means that we don’t have to wait for things to arrive in our post or have misplaced items, which can be common when shopping online.

Retail sales still doing well

The following chart shows Singapore’s monthly total retail sales and how much e-commerce contributes to that:Source: Frasers Centrepoint Trust investor presentation

The data show that online sales in Singapore represent less than 10% of total retail sales. I believe it will be a case of Simgapore retail sales growing together with e-commerce, just like the worldwide trend seen below.Source: Frasers Centrepoint Trust investor presentation

Convergence of offline and online

The growth of retail sales amid e-commerce adoption is not a one-off, in my opinion.

Many retailers are adopting an omni-channel model of sales, meaning retailers have both online and offline presences to cater to the busy consumer. Even pure online shops have gone offline to capture the offline market and create meaningful experiences. For example, e-commerce retailer Love, Bonito opened its first physical boutique at [email protected] in October 2017.

Love, Bonito’s co-founder Rachel Lim, said in an interview with The Straits Times in that year:

“A physical store provides a platform for us to enhance our customers’ touch point, provides a space for our community to mingle and learn, enables us to interact with our customers face-to-face and increases our customers’ brand loyalty.”

Physical shops are also adopting and integrating technology, on top of creating unique experiential elements in-store that consumers cannot get online. This draws shoppers to visit retail malls for a unique experience.

Experience matters

In Singapore, one of our favourite pastimes is visiting shopping malls with the family. Many shopping malls provide necessity shopping and entertainment options such as cinemas. Having a community hub such as a library also helps to draw the crowd. As such, local malls should still remain relevant in years to come.Source: Frasers Centrepoint Trust investor presentation

The Foolish takeaway

I agree with Frasers Centrepoint Trust that Singapore retail malls are not dead. In fact, shopping centres here are becoming increasingly relevant to patrons due to the convenience and experiences they provide. Online retailers are also forced to set up shops offline to capture various types of shoppers. The new norm is, therefore, “online + offline” instead of “online versus offline”.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended units of Frasers Centrepoint Trust. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.