Where have all the customers gone?

May 11, 2008

Where have all the customers gone?

Many are cutting back on spending in wake of rising food prices, possible US recession

By Shuli Sudderuddin

When private banker Jeremy Ching went to Robinsons' yearly sale last week, he found the crowd at the Centrepoint outlet thinner than last year's.

'Last year, it was so crowded that I didn't get to try on anything. This year, I actually bought something,' said Mr Ching, 24.

The Sunday Times did a check with 20 shoppers in various city locations and found that, like Mr Ching, many were holding on more tightly to their wallets.

Fifteen said they had been going out less often in the last two months. Reason? Gloomy news about rising food prices and a possible recession in the United States.

When we spoke to 100 retailers and food and beverage outlet managers, 59 said they were seeing fewer customers, and at least 10 said business was down by 10 per cent or more.

The rest - 41 shops in large shopping malls, especially beauty and retail electronics outlets - still saw brisk business.

A spokesman for movie memorabilia shop PopcornPop in Suntec City said weekend sales have dropped by up to 50 per cent.

Noting that the Great Singapore Sale will start in two weeks' time, he said: 'I'm sceptical about spending going up during the Great Singapore Sale. Spending won't increase.'

Some shoppers echoed this view. Photographer Colin Koh, 28, said: 'Why buy during the sale? I have to prioritise and pay for necessities like petrol for my car.'

At Raffles City, customer service agent Christina Simon said: 'There used to be more people in malls but things are getting more expensive. I tend to eat out less now - twice a month rather than every weekend as I used to.'

Department of Statistics' figures show that on a year-on-year basis, retail sales declined by 1.3 per cent over a year ago for the month of February.

Also, the latest Business Expectations Survey shows that the services sector is generally cautious about business outlook for April to September this year.

From the survey, 29 per cent of retail firms predicted slower business during this period.

At Suntec City, accessories pushcart operator Wendy Lee has noticed a steep drop in takings compared to the same period last year.

'We could make about $400 daily last year but this has decreased by about 40 per cent,' she lamented.

Mr Suzuki Nobuaki, manager of Tonkichi Japanese restaurant, which has outlets in Ngee Ann City, Isetan Scotts and Suntec City, said: 'Our customers have decreased by 5 to 10 per cent compared to last year. It looks like people are saving on food to cope with the cost of living.'

At Clarke Quay, walkways and restaurants were empty approaching dinner time last week.

Ms Junydah Madon, marketing, event and operation manager for the Tapas Tree, cited the heatwave as one reason for the empty seats outside the restaurant. 'Customers prefer the air-conditioning inside.'

But she added: 'Business has been quite slow at Clarke Quay and customer flow dropped last week because it is the off-peak season.'

Mr Benny Lee, marketing manager for Zingrill which runs restaurants such as Breeks, said there has been a 10 to 15 per cent drop in sales in Breeks outlets in town.

'Our pricing is not expensive, so it could be that fewer people are eating in town because fewer are shopping there,' he speculated.

New retail entrants are also feeling the pinch. At least three new businesses contacted said that they were not doing as well as projected.

Mr Sreeram Muthiah, shift manager at smoothie and coffee cafe Maui Wowi in Suntec City, said that weekends see more business, but sales have not picked up as quickly as anticipated since the cafe opened three months ago.

'On Sundays at lunch time, we are sometimes only half-full,' he said.

Economist Selena Ling, head of treasury research at OCBC, felt that the pessimism could be due to the impression that the global economy is in bad shape.

'Last year's optimism is wearing off. Because people have to pay more for staples, they'll cut down on discretionary spending like shopping and eating out,' she said.

Ms Lau Chuen Wei, executive director of the Singapore Retailers Association, said March, April and May traditionally see seasonal dips. But she added that higher domestic spending would be a booster.

'Higher economic activity within a country will not only boost sales but also the entire nation's economy,' she said.

One shopper seemed to be in tune with that view. Mr Eric Xu, 25, who works in advertising, still goes out to restaurants and shops.

'I'm not going to let gloomy predictions change my life,' he said.

Additional reporting by Becky Lo and Stacey Chia

shulis@sph.com.sg