SINGAPORE's retail scene may be buzzing with glitzy new malls springing up and the arrival of more international brands. But behind those shiny mall facades, retailers are battling stiffer competition, rising costs and a tight labour market. It is against this backdrop that the prickly issue of low productivity needs to be tackled, and, the government argues, can be tackled.
Singapore's retail productivity lags far behind that of other global cities, a point Deputy Prime Minister Tharman Shanmugaratnam highlighted in his Budget speech earlier this year as he argued the salience of the economy's wider productivity push. "In retail, we are two-thirds the level of Hong Kong and 45 per cent the level of New York in terms of productivity," he said then.
Retail lags other sectors in Singapore too. Latest statistics from the Department of Statistics show that in 2010, retail productivity, as measured by value-added per worker stood at $46,434, less than the services sector's average of $111,400, which is itself lower than the economy's average.
Retailers employed 120,600 workers in 2010 and about 85 per cent of the 19,700 retail outlets hired fewer than 10 workers. However, some are not using the manpower resources as effectively as they can - workers lack opportunities to upgrade their skills and technology is not being harnessed to help workers get more productive.
These were some challenges the National Productivity and Continuing Education Council identified and came up with a blueprint to address. Its retail productivity roadmap, rolled out in April 2011, aims to ring up 25 per cent more value-added per retail worker by 2015.
To provide support and know-how to retailers, enterprise promotion agency Spring Singapore will be pumping out $86 million over the five years till 2015.
Other metrics have also been developed to measure retail productivity, such as sales per worker per hour, sales per square foot, value-added per worker per hour and annual inventory turns.
The plan is not a complex one. The three areas it targets are not ones retailers are unaware of too: Process excellence, people and service excellence. Since the retail productivity plan was launched in April 2011, more than 200 retailers have benefited in various ways.
"It is a work in progress," says Spring Singapore's deputy director (lifestyle), Yeo Meow Ling. "With the current economic situation and the increasingly limited resources, our SMEs understand the need for productivity improvement to stay competitive," she says, adding that the plan aims to arm SMEs with the knowledge, tools and technology they lack.
For instance, 21 of the 72 companies which took part in Spring's Customer Centric Initiative since April 2011 are from the retail sector. The others are in F&B, hospitality, healthcare, transport and travel services. The CCI, which funds up to 70 per cent of costs of service-betterment projects such as service audits, mystery shopping and technology, has drawn 430 participants since 2005.
Training of retail workers appears to be picking up speed too, with 14,000 workers trained under Workforce Development Agency programmes from April 2011 to June 2012, more than half of whom were trained in the first half of this year. So far, WDA programmes have also trained 50 productivity managers from 23 companies, people whom the government hopes will return to their firms excited and better equipped to champion productivity improvements.
Productivity improvements - necessity or luxury?
However, the tension between focusing on the here-and-now and investing for the future remains. "Many retailers are struggling to keep themselves afloat what with rapidly rising costs and stiffer competition," says Singapore Retailers Association executive director Lau Chuen Wei.
Larger players with a strong team of operators may be able to take stock, examine processes and improve productivity, while keeping the business going. "The smaller ones will probably have less of a luxury as they concentrate on fighting fires just to keep going," Ms Lau says.
That is something Spring acknowledges too. "The toughest challenge is to change the SME's mindset on workforce training. SMEs need to invest considerable amounts of time and money in upskilling their workforce through training," says Ms Yeo.
To make it worth the SME's while, government agencies such as Spring and WDA continue to provide funding support for training. They have also ramped up efforts to get companies to notice and make use of these incentives.
Luxasia country manager Angela Ho, for one, has seen in the past six months a noticeable increase in the number of e-mails from government agencies requesting meet-ups or introducing various grants and schemes.
But for retailers like Jay Gee Melwani Group, which manages brands like Aldo, Levi's and New Look, the trial of the moment is still labour. Locals shun long shifts that require them to stay on their feet, and quotas for hiring foreigners are tightened, retailers say.
"Jay Gee, like all other retailers, is affected by the manpower crunch. The recent round of tightening of rules for foreign workers has added to the woes," says its managing director R Dhinakaran.
His real challenge is finding enough of the right talent, especially people to work at the front-line. "Our continued efforts in training, together with automation, is likely to enhance productivity only when combined with the right talent at the store level," says Mr Dhinakaran, who is also vice-president of the SRA.
Ms Lau adds that the competitive retail scene in Singapore means most retailers operate on slim margins and are unable to attract the people they need to drive productivity improvements. To cope, retailers can choose to downsize, and some have already done so, says Ms Lau. But many have also started to raise the proportion of part-timers they hire, cutting back on their full-time workforce.
Jay Gee has taken steps too, says Mr Dhinakaran. Recruitment fairs and career paths for management trainees, as well as better entry-level pay packages target the young talent the company hopes to hire. It has also been adopting technology in its retail outlets.
In fact, Spring says that the adoption of information and communication technology is the move deemed to yield the strongest productivity dividend for retailers. "This is because the market offers easy-to-access solutions that can either be bought off-the-shelf or customised according to the needs of retailers. With the proliferation of technology, it has become increasingly more economical for our retailers to invest in technology," says Ms Yeo.
Crucially, technology can also reduce a company's need for more workers. "Retailers can adopt automation and tools that cut down manual labour," says Ms Yeo.
"For example, a mobile point-of-sale system allows the salesperson to manage payment wirelessly, away from the physical cashier. They can also explore online stores which takes the pressure off the brick-and-mortar stores," she says.
Mr Dhinakaran, a nominated member of parliament, also hopes the productivity plan "goes deeper to dissect the service sector, particularly the retail sector into categories", as each has its own constraints and labour needs.
Spring Singapore recognises that to an extent. "Different-sized SMEs have different needs," says Ms Yeo.
So while supply chain management makes economic sense to larger fashion chains and departmental stores and a self-checkout system suits supermarkets, smaller retailers are now being encouraged to tap on enterprise resource planning systems, mobile payment and cloud computing. Grants such as the innovation and capability voucher can help subsidise investments into such projects, she says.