Retail giants knock on Singapore's door

Retailers are lured by low taxes and expansion opportunities.

When Japanese discount chain Don Quijote opened its first store in Singapore last November, it was the first step in its campaign to conquer the rest of Southeast Asia. More retail and e-commerce brands are establishing a base in Singapore from which they can eventually stage their expansion to the fast-growing and spend-happy consumer populations in Southeast Asia.

“We see the relatively low taxes in Singapore to continue being a factor that will drive the entry of retail and consumer companies in Singapore, as a means to break into Southeast Asia,” said Nainika Singh, consumer & retail analyst at BMI Research.

Aside from Don Quijote, which plans to use Singapore as a regional headquarters to sell its products ranging from fresh produce to luxury watches, fellow Japanese retailer and fashion mall operator LUMINE opened in Singapore in December last year. The company also said Singapore will serve as an important entry point to the Southeast Asian market and pivotal in positioning the brand on the world map.

Meanwhile, Regina Lim, head of capital markets research, Southeast Asia at JLL noted that as e-commerce continues to grow in Southeast Asia, more technology and business services firms supporting the sector will set up shop in Singapore. “In the last five years, these companies have been a strong contributor of office take-up in Singapore, in contrast to the dominance of financial institutions historically.”

The world’s top e-commerce players such as Amazon, Alibaba, and Tencent have recently set up in Singapore, said Singh. E-commerce sales in the country is projected to reach $5.6b in 2018, rising up to $6.7b by 2021, on the back of high 3G/4G penetration and a largely affluent population.

Despite a government budget initiative to raise the goods and service tax to 9% from 7% between 2021 and 2025, Singapore still has a lower value-added tax than South Korea (10%), Australia (10%), and New Zealand (15%), and this according to Singh will cement Singapore’s post as a springboard for international companies to break into Southeast Asia.