Over the past few days I came across some interesting news that would make anyone think twice before opening any type of retail store in Singapore or Hong Kong, especially in the F&B space.
Lyn Lee, founder of the popular Singapore chain, Awfully Chocolate, was on CNBC”s Managing Asia program. Profits for her business have declined over the past 5 years with the continued increase in rents. She is now moving into the fast-moving consumer goods (FMCG) segment with her chocolate products to diversify the business. She described the retail scene in Singapore as a “War of Attrition” that only global chains with deep pockets can survive. Local Singapore concepts will likely die off and the city-state will lose much of its unique retail character. Sounds like Hong Kong to me!!
Today I was in a luggage shop on Queen’s Road in Central and the sales lady told me they were scared to death about a potential rental increase from the existing level of US$65,000 per month. The shop is only 800 sq ft!! I also notice all the drinks and snacks shops disappearing on Haiphong Rd in Tsim Sha Tsui. One merchant told me they raised the rent on her small space of 600 sq ft to US$150,000 per month!!! You read it right – $150,000!!
So I now expand my original proposition to the following.
“You must be crazy to open a retail shop in Singapore or Hong Kong unless you are a big global player with long-term staying power who needs to build brand awareness with wealthy tourists.”