Singapore retailers told to step up as RTS link with Johor Bahru looms

Shops should add value and cut costs to battle their lower-priced rivals.

Retailers in Singapore should step up their game including offering value-added services, as a rapid transit system with Johor Bahru that is expected to start operating in 2026 pits them against their lower-priced counterparts in Malaysia’s second-largest city.

“Try not to hold back consumers from what is going to be, ultimately, normal behaviour in the future,” Mário Braz de Matos, managing partner at Flying Fish Lab, told Singapore Business Review. “We’re not going to prevent people from going over to Johor. We have to live with it.”

He said Singaporean retailers could remain competitive by enticing consumers, whether Johoreans or locals, with additional services.

“What I think businesses have to do is to think from a challenger mindset perspective,” Braz de Matos said. “If you’re selling apparel, you can’t compete with the prices in Johor, but you can provide advice to customers for example.”

DBS expects Singaporean retailers to lose as much as 4% of their sales — equivalent to $2.1b in 2023 — as more citizens make more trips to Johor Bahru for shopping.

Food and beverage sales could drop by as much as 5% or $620m as the Johor Bahru–Singapore Rapid Transit System Link goes online, it said. Supermarkets may face $45m in potential losses.

Januel Koh, digital marketing and branding lecturer at Singapore Polytechnic, said it is impossible for Singapore to compete with Johor Bahru on price. But it can leverage the value of its goods and services because consumers don’t choose based on price alone.

He cited the case of Chinese hot pot chain Hai Di Lao, which is not the most budget-friendly option, yet it still attracts long queues in Singapore every weekend.

“The main reason for that is because people are buying experience,” Koh said.

“Consumers look at the quality of value that exceeds their expectation of perceived value than just purely prices. They want to buy something worth it and not just buy cheap stuff,” he added.

Braz de Matos noted that a car enthusiast would buy a BMW but go for a $2 chicken rice. In Africa, he said, people buy expensive phones not because they can afford these but because of the value they get from them.

“It’s down to the value delivered,” he said. “It’s not so much about the price… Because it delivers so much value, they’re willing to put in months of effort to acquire that.”

“I think this is an issue we’re still struggling with in Singapore, the mindset where value is about price and it’s not. It’s about what you give me in exchange for my dollars, and if you’re giving me a lot, I can put a lot of money towards that,” Braz de Matos said.

Cost-cutting

DBS analysts Geraldine Wong and Zheng Feng Chee have said Singaporean retailers, especially food and beverage establishments and supermarkets, should sell premium products and enhance service quality to stay in the game.

Malls in Singapore could onboard Johor Bahru-famous eateries for those curious but hesitant about the commute, they added. Meanwhile, supermarkets should focus on premium brands to appeal to less price-conscious shoppers.

Koh said Singapore retailers could “lock” their customers through different marketing strategies, including free membership for customers and discounts.

“We can have strategies such as giving consumers a 10% discount on their fifth visit, or when they purchase $100 worth of products, they get a free membership,” he added.

Braz de Matos said Malaysian competition can present opportunities for Singaporean retailers.

For one, Singaporean sellers can split the production of goods and services between the two borders, creating supply chains that cut overall costs, he said.

He cited the case of Gleneagles Hospital, which performs the consultation part in Singapore, while any backend work happens on the Johor Bahru side.

“This is a natural integration that will happen as communication and movement across countries and borders is made easier,” he added.