take a look
Singapore’s economy is expected to grow by around 3.5% in 2014, thanks to healthy domestic demand and a strong services sector. Economic growth is expected to gain momentum between 2015 and 2018 as external demand strengthens.
Franchise Gaze
Singapore is an open and friendly economy. For the ninth year in a row, the World Bank ranked Singapore #1 for ease of doing business. It is an advanced country with strong supply chains and developed infrastructure. The franchise industry is very well controlled and transparent, so there are few regulatory hurdles compared to its Asian neighbors. Due to the reliable system, there is a certain peace of mind when dealing with potential partners from Singapore.
According to McKinsey, Singapore is ranked as the fourth most connected country in the world, providing a good hub for your regional headquarters and a springboard for expanding across Asia. There are about 7,000 multinational corporations and more than half of them use Singapore as their regional headquarters.
From 20 private economists surveyed by the Monetary Authority of Singapore (MAS), the expected GDP growth for 2014 is 3.8% and is projected to grow increasingly over the next 5 years.
Despite comparatively slower Asian growth, retail sales increased by 5.5% in July 2014 (Statistics Singapore) and are forecast to rise by almost 20% between 2014 and 2016 (PwC).
The food and beverage industry contributed approximately 3.2% to GDP in 2013, and Singapore had the highest food consumption per capita in Southeast Asia (Research and Markets). The retail and wholesale trade sector represented 16% of GDP, 5% more than the previous year; the financial services sector grew by 10.6% and business services by 5.1% (HKTDC). The service sector is by far the largest employer, adding around 60% to GDP.
The government has a very global attitude and relies on global business and imported goods. There are a large number of global and regional free trade agreements with hardly any tariffs for most agri-food products. Franchise information (including financial incentives) can be found through the following government-backed organizations:
SPRING-Standards, Productivity and Innovation Council.
International Company (IE) Singapore.
Singapore has a very multi-cultural and globally conscious population and is therefore a great marketing test location before committing to a regional launch. The population is small and predominantly urban, but it has an enviably low unemployment rate. As a result, it is one of the richest countries in Asia in terms of consumers, the level of wealth per capita is one of the highest in the region and has risen steadily in previous years.
Singaporeans’ median monthly household income increased from $8,110 in 2007/08 to $10,500 in 2012/13 with households spending an average of $4,720 per month on goods and services. Total consumer spending is forecast to grow at a CAGR of 5% between 2011 and 2016 and 36% of Singaporeans believe the next 12 months would be a good time to buy the things they need or want (Nielsen 2014).
Food is the second largest expense behind housing and, interestingly, private education accounts for a high percentage of spending equivalent to spending on university education (Statistics Singapore).
Given the higher income, the average consumer travels a lot and is very brand-aware. They have a good level of sophistication and are very receptive to foreign products and services. The generally higher footfall means there is a less price resistant market, a useful point for premium brand companies to consider.
The franchise business in Singapore is in good health; there are more than 600 concepts with more than 35,000 franchisees. Franchises and licenses represent 18% of the total volume of national retail sales and generate a turnover of around $6 billion. Franchisors from a variety of countries are present, in a variety of sectors. Most of the brands are from the United States, although Singapore remains the most popular Asian destination for Australian franchisors.
Singaporeans are eager to find new franchise opportunities and are adept at dealing with foreign franchisors. They not only have a good knowledge of their national market, but also the regional market. This, combined with the strategic location, creates opportunities for foreign brands to partner with knowledgeable Singaporean companies to extend their brand throughout the region.
A successful foreign concept proven in the Singapore market has the potential to be taken over by the domestic partner and developed throughout the region, thus significantly mitigating the risk and cost to the foreign company.
Snapshots of useful information:
- Consumers will be very conscious about food safety and health.
- Singapore’s consumer food service industry reported US$7.5 billion in total retail sales in 2011, a 3.3% growth from the previous year.
- Singaporeans spend around US$5 billion a year on eating out. Restaurants as a group account for 37%, while fast food outlets account for 13% of total revenue in the food and beverage service industry.
- Nearly two-thirds of Singaporeans (61%) surveyed ate out more frequently in the past year than in the previous two years (Weber Shandwick 2014).
- The Singapore sweets market is promising as it has shown a steady growth of 20% in the last 5 years. The US$210 million market is led primarily by sugar and chocolate products (Government of Canada).
- The profitability ratio for the overall food and beverage service industry was 7.3% in 2012. All food and beverage services posted increases in operating income in 2012 (Statistics Singapore).
- Tuition and private education is a thriving sector and represents a growing expense for Singaporeans. However, they have a higher respect for reputable and proven brands.
- Two large supermarket chains dominate the retail industry in Singapore: Cold Storage (Dairy Farm) and NTUC Fairprice. In addition to this, Singapore has another 1,300 specialty food and drink outlets, and these businesses are all the rage.
- Singapore is considered one of the most aggressive discount companies (Reed).
- It is estimated that US$3.5 billion will be spent online in 2015. (asianewsnet.com). The 2014 Weber Shandwick survey reported that more than half of respondents (53%) shopped for groceries online at least once, and 15% shop between one and three times a month.
Industry Trends:
- Specialized products will emerge, such as artisan bakeries, organic groceries and natural cosmetics.
- Bespoke beauty products and services are a growing sector.
- Unprocessed and functional foods will increase in popularity as consumers become more health conscious.
- Guess what, cupcakes are the new big trend in Singapore.
- Fresh and healthy juices will be an emerging sector.
- Restaurants that have a differentiated atmosphere and offer a unique gastronomic experience are a current and future trend.
Singapore consumer
Sinagpore consumers are very open to buying foreign products and services. They are generally brand loyal so offering some kind of retention scheme is essential. However, Singaporeans like to experiment and will try new products, especially if they saw the concept while traveling or heard about the quality or customer service.
Although they have a high standard of living, they are by nature very price conscious. The price point needs to be attractive and match the market, so extensive research is recommended – pricing out of this market could be a catastrophic mistake.
Analyzing consumer behavior in Singapore doesn’t seem that difficult, as there seems to be a general consensus on why they buy. It is suggested to boost your brand through initial price promotions, thus generating initial consumers and retaining them (while creating a great word of mouth campaign) with your level of quality and service.
As in the rest of Asia, comfort is becoming the main purchase motivator. Modern business formats, lack of time and overwork are factors that support this change in behavior. Brands that make the buying process easy and/or offer a variety of delivery channels will have a higher chance of success.
Lastly, Singaporeans like to have an emotional connection with a brand, so a story behind the brand can be a key marketing point. Emphasize your heritage or the quality of your product/service. Make a lot of your clients, endorsements and your national image.
The bottom line
A safe market that does not leave much to the imagination, do not read this as something negative. Clear regulations and reliable partners make the process simpler and more professional than in other Asian countries, and there’s a lot to be said for that.
In conclusion: A mature, solid market and a well-regulated but small industry.
Rating: 6/10.