Wholesale and Retail Trading in Singapore - Essay Example

ABC Mini-Mart Introduction: ABC mini-mart is a well-established retail chain in Singapore, selling grocery and household goods. Currently, it has 20 outlets and mostly they are located in the central areas. ABC mini-mart covers areas such as Cityhall, Suntec, Marina Square, Junction 8, Clementi, Toa Payoh and Orchard Road with its retail outlets. Industry Overview: From Economy Survey of Singapore 2007, statistics have shown that the retail trade increased on the back of higher sales of telecommunications and computers, as well as furniture and household equipment (Ministry of Trade and Industry, 2008). The wholesale and retail trading is a flouring industry in Singapore. The first quarter of 2007 registered 5.6% rise in income over the corresponding quarter of the previous year. The other three quarters also recorded significantly higher rise in income relative to that of the previous year [Table A2.7] (Central Provident Fund Board, 2008). These details indicate that the retail sector is growing in the recent years to a great extent. It is clear that there are a number of opportunities for ABC to expand its activities in the retail sector. Hence it is essential that ABC should concentrate on more number of localities in order to gain the first mover advantage (Jobber, 2004). It also has the added advantage of providing expendable items such as food products, beverages and tobacco products, in addition to the household goods. Market Potential: It is noticeable from the data in the Private Consumption Expenditure [Table A1.6] that there is a 4.3% increase in demand for Foods & Non-Alcoholic Beverages, 1.6% more on Clothing & Footwear, 2.2% more on Alcoholic Beverages & Tobacco, 3.4% more on Furnishing, Household equipment & Maintenance (Statistics Singapore, 2008). The data on private consumption indicates that the market is growing in Singapore and that the demand for goods is increasing as people are ready to spend more on their household expenditures. The important thing to notice is that all most of the products that have shown an increase in consumption are covered by ABC mini-mart. Hence it is evident that ABC mini-mart can gain more market share by expanding its operations to other feasible locations. Target Markets: The ABC mini-mart has to analyze the market segments it serves in order to arrive at a conclusion on their user behaviour and expectations (Evans and Moutinho, 1999). Another important thing to be considered is their spending power (Sloman and Sutcliffe, 2004). The younger age group of Singapore, i.e., age 15 and over, are the main target market segments for ABC mini-mart. This is because the younger generation expect a better service and product quality and convenience over price and other constraints (Fisk et al, 2000). Table A2.2 lists the data on economically active residents age 15 and over by age, group, activity status and sex, June 2007 (Ministry of Manpower, 2008). It is worth noticing that out of 36.9 thousand teenagers, 33.7 thousand are employed. Hence the younger age group (15 – 19) have higher spending powers. Hence ABC mini-mart has a high potential in this segment. Moreover, the teenagers prefer one stop shopping, i.e., prefer to shop for many products from a single store rather than to search for products at various stores (Fergusen and Hlavinka, 2006). Hence it is essential that ABC mini-mart positions itself as a cheap option for products without compromising on quality (Deighton, 1996). Inflation and Buying Power in Singapore: According to the Department of Statistics, Singapores consumer prices rose faster-than-expected in November 2007, underpinned by higher costs for food and housing, the consumer price index - a non-core measure of costs for goods and services - rose 4.2% from a year earlier, after rising 3.6% in October (Department of Statistics, 2008). On November 2007, the government raised its inflation forecast for next year to 3.5-4.5%, with a peak at around 5% at the start of 2008. Rising costs of imported goods and a robust real estate market sparked a pickup in inflation late this year, prompting the central bank to tighten monetary policy in October. Singapores consumer prices rose at a slower-than-expected pace last month [May 2008], reducing the need for further currency gains to rein in inflation. According to the Department of Statistics, the consumer price index [CPI] jumped 7.5% from a year earlier, matching Aprils 26-year high record (Department of Statistics, 2008). The Monetary Authority of Singapore [MAS] had forecast a 5-6% inflation rate for 2008. The central bank has allowed its currency to strengthen against the US dollar, saying the exchange rate remains its most effective tool to fight inflation. The Singapore inflation rate is reportedly stabilizing and analysts are already predicting that it will come down in the second half of 2008. Singapore M3 money supply figures also appear to be stabilizing around the 12-13% level in the past half year, down from a high of 23.62% in 2007. But the money supply growth rate is only half the story - the other half is its relationship to the growth of available goods and services in the economy. For the inflation rate to be stable, economic growth has to at least keep up with money supply growth. With a looming global economic slowdown and imminent worldwide recession, the economic growth factor is the big wildcard (Department of Statistics, 2008). Hence the way inflation is rising in Singapore, it is evident that the wages are increasing and the demand for goods is also on the rise. However, it also serves as a drawback as the upper middle class segment will find it difficult to cope up with the rise in prices. External Factors: Gold and crude oil prices may have paused from breaking new all-time record highs for the time being, but the inflationary storm is far from over as yet. Housing costs increased on account of higher rents. Prices for food were higher as a result of more expensive vegetables, bread, and fresh pork. Transport expenses also increased, mainly as a result of more costly gasoline. Government is encouraging people to take public transport by increasing the ERP cost (Yahoo News1, 2008) by doing so the government also allow their own citizen to encash PARF and COE rebates (from Sep 1) (Yahoo News2, 2008) by doing so they will only left public transport to work or central area. Commuter will try to avoid cab as it is already expensive and recently it going to be increase again due to ComfortDelGro, said this is to help its cabbies cope with increases in diesel costs. Therefore number of consumers may buy groceries without a car or by taking cab. As a result, this may affect the number of consumers. The consumers may prefer to buy groceries from mini marts nearer to their home which may not be of their preferred choice. Finance Minister Tharman Shanmugaratnam has warned that Singapore could face another round of inflation if companies increase wages to help workers cope with the higher cost of living (Radio Singapore International, 2008). Based on the discussions above, it can be concluded that these external factors are in favour of expansion for ABC mini-mart, indicating that there is great potential for income in Singapore for retail outlets focussing on household consumer goods. Conclusion: The report has clearly shown that there are a number of opportunities for ABC mini-mart to explore. The industry overview indicated that the retail sector is growing in Singapore and also to a great extent. The next section, market potential indicated that the spending power of the consumer population in Singapore has increased to a great extent and especially the consumer goods which are covered by ABC mini-mart have recorded increase in consumption in the last year by a high percentage. The target market section discussed the increase in spending power of the 15 and over age group in Singapore and their expectations from mini-marts. The inflation, buying power and the other external factors are all analyzed and they all prove favourable for expansion of ABC mini-mart. The next step for ABC mini-mart is to analyze potential areas (where competition is comparatively lesser and the target market density is higher) via. field research, strategically decide the location of the stores, distribution facilities and the logistical operations. The financial position of the company should also be analyzed and the additional capital required should be raised by either borrowing the money or by going public. Once these decisions are taken, the ABC mini-mart then has to devise a marketing strategy (4 Ps – Products, Place, Price and Promotion) to effectively acquire new customers and gain more market share. Hence ABC mini-mart can expand its retail chain in an effective manner in other locations in Singapore and increase its market share as well as the net income by a significant amount. Bibliography: Central Provident Fund Board, 2008, Average Monthly Earnings by Industry, Accessed on 27 July 2008, Retrieved from http://mycpf.cpf.gov.sg/Members/home.htm Department of Statistics, 2008, Statistics: Demography, Accessed on 28 July 2008, Retrieved from http://www.singstat.gov.sg/stats/themes/people/demo.html Deighton, J., 1996, ‘The Future of Interactive Marketing’, Harvard Business Review, November 1996, p151-160 Evans, M. and Moutinho, L., 1999, Contemporary Issues in Marketing, Palgrave Macmillan, New York Ferguson, R. and Hlavinka, K., 2006, ‘Loyalty Trends 2006: Three Evolutionary Trends to transform your Loyalty Strategy’, Journal of Consumer Marketing, Nov 5, 2006, Vol. 23, p292-299 Fisk, R. P., Grove, S. J. and John, J., 2000, Interactive Services Marketing, Houghton Mifflin, Boston Jobber, D., 2004, Principles and Practice of Marketing, 4th edn, McGraw-Hill International, Berkshire Ministry of Manpower, 2008, Economically active residents aged 15 and over by age group, activity, status and sex, June 2007 Ministry of Trade and Industry, 2008, Economic Survey of Singapore 2007, Accessed on 27 July 2008, Retrieved from http://app.mti.gov.sg/default.asp?id=148&articleID=12381 Radio Service International, 2008, ‘Why Wage Increase may Contribute to Inflation in Singapore’, Accessed on 28 July 2008, Retrieved from http://www.rsi.sg/english/newsline/view/20080710134320/1/.html Sloman, J. and Sutcliffe, M., 2004, Economics for Business, 3rd edn, Prentice Hall, Essex Statistics Singapore, 2008, Private Consumption Expenditure, Accessed on 27 July 2008, Retrieved from http://www.singstat.gov.sg/hes0708/index.html#data Yahoo News1, 2008, Accessed on 28 July 2008, Retrieved from http://sg.news.yahoo.com/cna/20080701/tap-357200-231650b.html Yahoo News2, 2008, Accessed on 28 July 2008, Retrieved from http://sg.news.yahoo.com/cna/20080702/tap-357513-231650b.html Read More