Internet Retailing in Singapore

INTERNET RETAILING IN SINGAPORE
Euromonitor International March 2013
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LIST OF CONTENTS AND TABLES

Headlines ..................................................................................................................................... 1 Trends .......................................................................................................................................... 1 Competitive Landscape ................................................................................................................ 2 Prospects ..................................................................................................................................... 3 Channel Data ............................................................................................................................... 4 Table 1 Table 2 Table 3 Table 4 Table 5 Table 6 Internet Retailing by Channel: Value 2007-2012 .......................................... 4 Internet Retailing by Channel: % Value Growth 2007-2012 ......................... 4 Internet Retailing Company Shares: % Value 2008-2012 ............................ 5 Internet Retailing Brand Shares: % Value 2009-2012 .................................. 5 Internet Retailing Forecasts by Channel: Value 2012-2017 ......................... 5 Internet Retailing Forecasts by Channel: % Value Growth 2012-2017......... 6
Euromonitor International
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HEADLINES
Internet retailing grows by 10% in 2012, with total value sales reaching S$855 million New and upcoming smaller retailers help the healthy growth of internet retailing The most successful type of internet retailing in 2012 is apparel with S$146 million in value sales Amazon.com Inc retains its position as the leading internet retailer in 2012 Internet retailing is expected to see a constant value CAGR of 10% over the forecast period
TRENDS
New and upcoming retailers are helping to grow Singapores internet retailing channel. Within apparel, the biggest channel for internet retailing in 2012, in additional to major players like Asos Plc, numerous smaller retailers of apparel exist for consumers in Singapore. Newcomer Zalora.com has also racked up significant brand awareness by advertising aggressively since its launch in the year. Apples iTunes stores started selling music to Singapore consumers in mid-2012, which helped to boost media product sales during the year. 2012s growth of 10% in sales is higher than the current value CAGR of 8% recorded over the review period. This increasing growth is due to further market penetration in internet retail. While the channel has been dominated by apparel, consumer electronics and media products, more retailers are coming online with other offerings, such as consumer healthcare and toys and games. According to Singapores Infocomm Development Authority, Singapore has a household broadband penetration rate of 106.4%, making it the most connected country in Southeast Asia. Wifi and 3G connections are readily available in public areas. Apparel products show the strongest performance in 2012 in term of absolute growth, with a 10% increase to reach value sales of S$146 million. Consumers in Singapore are very used to purchasing apparel online, and are familiar with sizing, brands as well as return policies. Internet retailing for apparel also allows a degree of convenience and products are usually priced more competitively than apparel from physical stores in the country. Housewares and home furnishings saw the strongest growth of almost 15% in 2012 due to growing from a very small base. Compared to the overall 10% growth in internet retailing, products such as beauty and personal care and food and drink did not perform as well but still managed to garner about 8% growth each. The slight lag in terms of growth compared to overall growth in internet retailing may be due to the fact that food and drink products, as well as beauty and personal care items are still widely available and can be purchased very conveniently in Singapore, often at very competitive prices depending on the brands. However, internet retailing of these products still shows a slight improvement over their 2011 growth, signalling further room for growth as buyers of these products switch to online shopping. Internet retailing is moving manufacturers to distribute more products for online purchases; in particular, consumer electronics and video games hardware where buyers do online research, seek reviews and verify specifications before making their purchases. Consumers may still browse physical stores to get a feel for the product, but most established brand names will
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either carry a kind of cache that assures consumers that online transactions are equally safe and cost-efficient, or be highly competitive in pricing. Smaller retail outlets selling apparel are also most affected by the migration to online shopping. This excludes larger chains such as H&M and Forever21, which are often priced within the mid-range and have a large retail space to showcase a wide variety of apparel. Major grocery retailers have also set up direct online sales operations to give greater convenience to shoppers. This is particularly good for non-fresh products that consumers do not feel the need to pick out themselves at the outlets. Cold Storage, NTUC and Isetan supermarkets all have their own online portals for sales. Commerce via mobile devices, or m-commerce, in Singapore has been growing, and these are often complementary platforms to internet retailers. According to PayPal which conducted a study, m-commerce grew by 660% in 2011. Almost a quarter of mobile shoppers prefer to purchase fashion items, airline and cinema tickets with their mobile devices and these are often done outside of the home as much as within the home. Consumers also like to make purchases while commuting on buses and trains, for instance. While smaller store-based retailers can be hard hit by the pervasiveness of internet retail and sometimes cannot compete on price discounts, those that have set up online channels for sales are mitigating this by extending their sales channels to compete with pure internet retailers. Store-based retailers that are established are more likely to make a successful transition by mixing online and physical store operations.
COMPETITIVE LANDSCAPE
Amazon.com Inc leads sales in 2012 with total sales at S$96 million. The internet retail giant sells all manner of products from books to watches and has frequent promotions and warehouse sales. It is also a trusted retailer in terms of delivery, product quality and returns and has a strong following among its customers. eBay Inc sees a 42% increase in value sales in 2012, the biggest jump amongst the top five internet retailers. Driven by a strong community of independent sellers and buyers, eBay has a reputable peer review system that builds high consumer trust. Products range from budget items to luxury goods and can sometimes be driven by impulse purchases due to its auction format, driving value up at times. Dell Singapore Pte Ltd lost ground in 2012, with a 4% fall in value sales in 2012. The intense competition from international brands such as Apple in the computer electronics channel and higher income and spending power has side-lined affordable Dell products. In terms of positioning and pricing in internet retailing, this varies from company to company. Internet giants like eBay Inc and Rakuten Inc sell a wide variety of goods which includes used items. Auction functions for eBay makes it a unique and major player in the field. Other companies such as Dell and Apple sell proprietary products that they manufacture and these are priced similar to brick-and-mortar shops. Apparel remains the largest driver of growth, taking the lions share in internet retailing. Apparel retailers in internet retailing can range fr om small blogshops to large-scale ones like Asos Plc, from budget priced items to premium brand name ones. The majority of the top internet retailers in Singapore are international operators. With the exception of Noel Gifts International Ltd and NTUC FairPrice Co-operative Pte Ltd, all other operators within the top 10 retailers are international. Domestic operators are seeing healthy growth given the overall rosy outlook for internet retailers, although international operators tend to enjoy more economies of scale as well as greater brand awareness.
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The sales performance of pure internet retailers typically exceed that of bricks and clicks retailers, which include grocery retailers like Cold Storage by Dairy Farm International Holdings Ltd and NTUC FairPrice Co-operatives Pte Ltd. One exception is Apple which has a wide network of offline stores managed by third-party operators throughout the country while online purchases are equally popular. Apple iTunes shop was launched in 2012, allowing iTunes users to purchase music online. This has positively impacted the media products channel, particularly since consumers more often than not download music rather than buy physical copies from stores. The newcomer Zalora.com, an internet retailer in fashion and footwear which also sells products from brands retailing in physical stores in Singapore. Both new entrants have advertised very aggressively online and are mainly pitched at the youth and tech-savvy market, although some teething problems have been experienced in terms of transactions, after-sales servicing as well as the complexity in using tokens for bidding in the case of Sold.sg.
PROSPECTS
Internet retailing is expected to see a constant value CAGR of 10% over the forecast period. Due to competitive pricing, convenience and increasing internet transaction security, consumers will become more attuned to online purchases. With hectic lifestyles and schedules, and rising physical congestion in the country, consumers often choose to beat the crowds as well as shop in their own time through the internet. Thus, internet retailing is projected to grow faster over the forecast period compared to the review period, when a CAGR of 4% in constant value terms was recorded. Growth can be expected for all channels in internet retailing. This is due to the competitive pricing and relative ease of purchase and excellent after-sales services already available within the channel. For toys and games in particular, forecast performance is expected to grow at a double-digit rate, with a constant value CAGR of 12%. This is due to the relatively low penetration rate for the channel within internet retailing. Telcos are rolling out 4G networks from 2012, and this is expected to significantly increase the speed of connection. With over 100% internet penetration in the country, this means that consumers can shop faster and may even do so more frequently depending on the economic outlook. With the increased use of mobile devices for online purchases, retailers need to enhance and update their user interfaces to allow for a more seamless shopping experience, available for many different device types being used. Consumers also want greater range and choice and price discounts may come into play when attracting customers to proceed with a purchase. The strongest performance will likely come from consumer electronics, followed by media products, with a forecast constant value CAGR of 9%. Being highly connected, Singapore consumers have come to not only rely on such products for work, but also for entertainment. Products such as food and drink, and home care are expected to underperform. These items are still traditionally sought out at physical stores that enable consumers to experience and pick out the products and check for quality. To stay competitive, unit prices for internet sales will likely remain lower than stores, largely due to rental overheads, which have been increasing in Singapore. Consumers are also more drawn to bargains online rather than jostling with crowds at outlets for deals. Advertising costs also play a role in terms of jacking up pricing; stores traditionally rely on print advertisements while online stores have the cheaper alternative of electronic mailers and social media marketing.
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Operators such as Apple, eBay Inc and Asos Plc will continue to perform well during the forecast period. The standard pricing of Apple makes the online retailer a strong competitor to store distributors. Other factors such as free shipping or discounts in shipping, in eBay and Asos, are also frequently used to encourage purchases.
CHANNEL DATA
Table 1 Internet Retailing by Channel: Value 2007-2012
S$ million, retail value rsp excl sales tax 2007 Beauty and Personal Care Apparel Consumer Electronics and Video Games Hardware Consumer Healthcare Consumer Appliances Home Care Home Improvement and Gardening Furniture and Homewares Media Products Food and Drink Toys and Games Other Internet Retailing Internet Retailing
Source:
2008 10.1 94.6 38.8 13.0 0.7 1.4 0.2 31.7 50.2 2.0 421.4 664.1
2009 10.6 103.3 42.4 13.7 0.7 1.5 0.2 34.3 51.0 2.3 429.3 689.4
2010 12.4 119.0 45.5 14.7 0.8 1.6 0.2 37.2 51.9 2.6 431.1 716.9
2011 13.3 132.7 48.8 15.9 0.9 1.7 0.2 41.3 56.1 3.0 463.7 777.6
2012 14.1 147.2 55.4 17.2 0.9 1.9 0.3 45.7 59.8 3.3 509.7 855.4
9.4 80.8 32.1 12.3 0.7 1.2 0.2 29.6 45.2 1.8 362.1 575.2
Euromonitor International from official statistics, trade associations, trade press, company research, trade interviews, trade sources
Table 2
Internet Retailing by Channel: % Value Growth 2007-2012
% current value growth, retail value rsp excl sales tax 2011/12 Beauty and Personal Care Apparel Consumer Electronics and Video Games Hardware Consumer Healthcare Consumer Appliances Home Care Home Improvement and Gardening Furniture and Homewares Media Products Food and Drink Toys and Games Other Internet Retailing Internet Retailing
Source:
2007-12 CAGR 8.5 12.8 11.6 6.9 5.0 10.1 5.7 9.1 5.8 13.3 7.1 8.3
2007/12 Total 50.6 82.2 72.7 39.4 27.4 61.6 31.9 54.4 32.3 86.9 40.8 48.7
5.8 11.0 13.6 8.2 3.4 8.6 14.0 10.5 6.5 9.4 9.9 10.0
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Table 3
Internet Retailing Company Shares: % Value 2008-2012
% retail value rsp excl sales tax Company Amazon.com Inc Apple Inc eBay Inc Noel Gifts International Ltd NTUC FairPrice Cooperative Pte Ltd Dell Singapore Pte Ltd Dairy Farm International Holdings Ltd Asos Plc Rakuten Inc Carrefour Singapore Pte Ltd Others Total
Source:
2008 5.6 3.5 1.2 1.9 2.3 3.5 1.4
2009 7.1 4.3 1.9 2.8 2.5 3.5 1.5
2010 8.6 5.1 2.4 3.1 2.5 3.5 1.5
2011 10.8 5.8 2.9 3.3 2.8 3.2 1.7
2012 11.2 6.3 3.8 3.5 3.1 2.8 1.7
0.0 0.8 79.7 100.0
0.1 0.1 0.7 75.5 100.0
0.1 0.9 0.6 71.7 100.0
0.4 0.7 0.5 67.8 100.0
1.1 0.8 0.5 65.3 100.0
Table 4
Internet Retailing Brand Shares: % Value 2009-2012
% retail value rsp excl sales tax Brand Company Amazon Apple eBay Noel NTUC FairPrice Dell Cold Storage Asos Rakuten Carrefour Others Total
Source:
2009 7.1 4.3 1.9 2.8 2.5 3.5 1.5 0.1 0.1 0.7 75.5 100.0
2010 8.6 5.1 2.4 3.1 2.5 3.5 1.5 0.1 0.9 0.6 71.7 100.0
2011 10.8 5.8 2.9 3.3 2.8 3.2 1.7 0.4 0.7 0.5 67.8 100.0
2012 11.2 6.3 3.8 3.5 3.1 2.8 1.7 1.1 0.8 0.5 65.3 100.0
Amazon.com Inc Apple Inc eBay Inc Noel Gifts International Ltd NTUC FairPrice Cooperative Pte Ltd Dell Singapore Pte Ltd Dairy Farm International Holdings Ltd Asos Plc Rakuten Inc Carrefour Singapore Pte Ltd
Table 5
Internet Retailing Forecasts by Channel: Value 2012-2017
S$ million, retail value rsp excl sales tax 2012 Beauty and Personal Care Apparel 14.1 147.2 2013 14.6 154.8 2014 15.1 162.2 2015 15.5 169.4 2016 15.8 176.3 2017 16.6 183.0
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Consumer Electronics and Video Games Hardware Consumer Healthcare Consumer Appliances Home Care Home Improvement and Gardening Furniture and Homewares Media Products Food and Drink Toys and Games Other Internet Retailing Internet Retailing
Source:
55.4 17.2 0.9 1.9 0.3 45.7 59.8 3.3 509.7 855.4
57.1 18.2 0.9 2.0 0.3 49.1 61.8 3.7 561.3 923.8
58.8 19.1 0.9 2.1 0.3 53.0 63.7 4.2 627.4 1,006.9
60.9 20.0 1.0 2.2 0.3 57.5 65.3 4.7 710.9 1,107.6
63.0 20.8 1.0 2.3 0.3 62.7 66.8 5.2 809.7 1,223.9
65.3 21.7 1.0 2.4 0.3 68.7 68.1 5.7 925.6 1,358.6
Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources
Table 6
Internet Retailing Forecasts by Channel: % Value Growth 2012-2017
% constant value growth, retail value rsp excl sales tax 2012-17 CAGR Beauty and Personal Care Apparel Consumer Electronics and Video Games Hardware Consumer Healthcare Consumer Appliances Home Care Home Improvement and Gardening Furniture and Homewares Media Products Food and Drink Toys and Games Other Internet Retailing Internet Retailing
Source:
2012/17 TOTAL 17.7 24.3 17.8 26.5 13.2 26.1 28.1 50.3 14.0 75.4 81.6 58.8
3.3 4.5 3.3 4.8 2.5 4.7 5.1 8.5 2.7 11.9 12.7 9.7
Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources

Internet Retailing in Singapore

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INTERNET RETAILING IN SINGAPORE

Euromonitor International March 2013