The Dilemma of Digitalisation: Understanding the Challenges, Needs and Support for SME Retailers in Singapore

Abstract

Retail small and medium-sized enterprises (SMEs) are pivotal to the Singaporean economy and society. SMEs face more obstacles than their larger counterparts particularly in funding, resource-management, manpower and access to technology, thus compromising their resilience in the face of adversity. The value of SME retailers is too great to lose and the invaluable vibrancy that they bring to Singapore’s society is one that must be safeguarded.

The two main and current trends in retail are e-commerce and omni-channel retail. Larger retailers have successfully adopted these two approaches, allowing for a larger reach, greater flexibility and stronger resilience amidst changing consumer preferences and the paradigm shift towards digitalisation. However, due to their limitations in funding, resources, manpower and expertise, SMEs struggle to hop on the bandwagon of these trends, losing out on the opportunities they offer. Both trends require a strong foundation in digitalisation capabilities, and this requirement has been noted by the Singaporean government.

While digitalisation is essential for retailers in today’s day and age and moving onto digital platforms is a must, it is also crucial to consider the physical retail environment and the importance of brick-and-mortar stores, that are the backbone of retail centres and city centres. Against the backdrop of economic downturns and market changes exacerbated by the pandemic, SME retailers are struggling to keep up with the financial demands of maintaining a physical store and face competition from larger retailers, who have better locations and economies of scale. As such, while many of the government schemes are in support of SME retailers transitioning online, more needs to be done to ensure a complementary physical presence such that the vibrancy and diversity they bring to the city is not lost.

There is a need to strike a balance between a physical and digital presences, and judiciously apply both models. A recommendation for SME retailers that will allow them to establish a physical presence in addition to their online one would be the use of pop-up stores in malls or retail centres. Concurrently, better mobility and urban planning could be developed to ensure these small retailers are given visibility and a chance to engage with more shoppers in retail areas and continue contributing to the variety, diversity and vibrancy of these otherwise monopolised areas. Lastly, Singapore shoppers should be encouraged to shop at smaller retailers where possible, understanding that their patronage is essential to keeping these small mom-and-pop stores running.

Keywords: SME, Digitalisation, Retail

JEL Classification: L81, O33