Singapore signals “huge opportunity” for Amazon

Singapore offers a “huge opportunity” for Amazon according to one analyst. But another is cautioning existing retailers against panic.

With the formal announcement of the US e-commerce giant’s plans finally company yesterday, ending months of speculation, reaction has been swift.

Local listed supermarket operator Sheng Siong saw its share price slide 4.5 per cent after the announcement, however rival Dairy Farm International, which operates Cold Storage supermarkets, Giant hypermarkets, 7-Eleven convenience stores and Guardian health & beauty outlets, slipped by a mere 0.4 per cent.

Shirley Zhu, program director at IGD Singapore, seemed the most bullish about Amazon’s prospects in the city state.

“Singapore has affluent consumers with busy lifestyles, a big expat population and high internet penetration. It is also the gateway to Southeast Asia’s 600 million consumers. Shoppers here also tend to be very open to innovation, all of which make this a very attractive market and a huge opportunity for a retailer like Amazon,” said Zhu.

“Indeed, there’s a huge opportunity in general for online grocery in Singapore. We’re forecasting sales to more than triple to approximately S$500 million by 2020. Although online is only a small part of the country’s grocery market today, with a 1.2 per cent share, we estimate that by 2020 online will have a 4 per cent share of Singapore’s grocery market, with a compound annual growth rate of 39 per cent.

“However, Singapore is also an extremely competitive market. Rumours have been circulating since the first quarter of 2017 about Amazon’s arrival, and both ecommerce companies and bricks and mortar retailers have upped their game accordingly.”

Jochen Krauss, a pricing specialist at consultancy Simon-Kucher & Partners, told the Straits Times that existing online grocers such as RedMart and Honestbee stand to be hit hardest by Amazon’s entry – and so could one-stop consumer electronics chains such as Harvey Norman and Courts.

“(Amazon’s) strategy is clear. It’s not making a price move, it’s making a quality move. In many markets, the bottleneck of e-commerce is fulfillment.”

Others observe that Amazon is launching with about 20,000 SKUs, a modest offer compared to that of larger supermarkets with 50,000.

Zhu concludes that the jury is still out on the success of Amazon’s launch in Singapore.

“But one thing’s for sure – in online grocery, Singapore’s shoppers are benefiting from more options, cheaper prices and faster deliveries than they ever have before.”

Singapore is the first of Amazon’s markets where it is rolling out the Amazon Now concept offering two-hour delivery windows on an as-available, pre-booked basis, ahead of its flagship Amazon Prime service, aggregating its entire product offer in a membership package including on demand digital entertainment.

Not everyone is onboard

Meanwhile, global think tank Fung Global Retail & Technology (FGRT) has observed that not all brands are jumping onto the e-commerce giant’s platform in its home market, suggesting brick-and-mortar retailers may maintain an edge over the online offer in Singapore.

Some are opting for no presence or only a limited presence on Amazon.com, says FGRT’s report The Anti-Amazoners.

“Amazon’s rigid requirements, lack of pricing control, private-label competing products and reluctance to share data analytics, along with concerns about sales of counterfeit products, have pushed some brands and retailers to decide not to sell on it,” explains MD Deborah Weinswig. Other companies, including Michael Kors, Calvin Klein and Kate Spade, offer only a limited range of items on Amazon.

“[This is] similar to the way they sell through department stores,” Weinswig notes.

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