Rising rents and electricity prices are shrinking Singapore retailers’ margins

The Singapore Retailers Association said retail businesses in Singapore are battling high costs due to rising rents and rising energy prices.

Cost pressure is a major concern for many Singapore retailers, which have not fully passed the price hike on to consumers, and are currently feeling a “margin squeeze”, Ernie Koh, president of the association, told CNBC. street signs asia Tuesday

Singapore Utilities Company SP group announced that electricity rates will be increased About 8% compared to the previous quarter from July to September.

“This increase is mainly due to increased energy costs due to the conflict in Ukraine over rising global gas and oil prices,” SP Group said.

Energy prices are expected to remain high in the second half of 2022 and residents should be prepared to remain elevated before inflation stabilizes, The Finance Ministry said in June.

The Singapore Retailers Association said retail businesses in Singapore are battling high costs due to rising rents and rising energy prices.

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Last month, Deputy Prime Minister and Finance Minister Lawrence Wong Announces $1.5 billion support package To provide immediate relief to vulnerable groups and local businesses facing high operating costs.

The government has been proactive in responding to the volatile environment and stands ready to help retailers manage their electricity bills and rent increases, Koh said.

Not everyone agrees that higher electricity prices are affecting retailers.

Song Seung Woon, economist at CIMB Private Banking, said electricity contributes only a small part to rising costs for retailers.

He said rent, labor costs and utility charges have all gone up, and it is “affecting everyone”, including retail businesses. “For retail businesses, as far as energy costs go, it’s just electricity to turn the lights on and off. So we see that’s a small part of the total cost,” Song said.

retail sales growth

All the tourism and travel that is coming back is clearly helping to boost consumption in Singapore.

Brian Tanu

Senior Economist, Barclays

Brian Tan, a senior economist at Barclays, said, “It’s not too surprising that we see demand on such a large scale.”

He said the demand for reduction in expenditure is coming from tourists rather than residents of Singapore.

“All the tourism and travel that is coming back is clearly helping to boost consumption in Singapore,” Tan said.

He dismissed suggestions that this was due to “revenge spending” from Singapore residents, adding that “there is no point” now that demand has increased, as they have been able to buy those goods anyway over the past six months. were able.

Department stores that were severely affected by the Covid-19 restrictions in 2021 saw a 73.1% increase in sales as consumer confidence bounced back. But supermarket and hypermarket sales declined 10.3% as there was higher demand for groceries in May 2021 when residents were staying home, Singstat reported.

Motor vehicle sales declined 10.2% from last year and 5.7% on a month-on-month basis.

Tan said this is mainly due to the rising cost of car ownership. Apart from paying for the car, automobile owners also have to pay for the license, which is known as a Certificate of Entitlement. COE for a range of cars This week reached a record high of $110,524 Singapore Dollar ($78,820) – surpassing the previous high in 1994, according to local report.

Although sales of furniture and home appliances grew by 4.7% over the previous year, it declined by 1.7% on a month-on-month basis.

“If you think about the last two years, a lot of the demand in this area was due to people being forced to work from home and study from home,” Tan said. “Now that they’re all going back to offices and people are able to travel, it’s probably a little less in demand.”