Price and promotion strategies need a rebuild in Singapore

NIELSEN MARKET SNAPSHOT: SINGAPORE

The island city in Southeast Asia, Singapore, known for its cultural diversity and highly organised city infrastructure, is reeling under recession with it’s GDP shrinking by 12.6% in the second quarter of 2020 as compared to negative 0.3% GDP recorded in the previous quarter. The economic crisis caused by the aftermath of coronavirus has posed multiple challenges for Singapore, with not just tourism but also other service industries like food and retail suffering, along with declines in construction (-95.6%), services (-37.7%), and manufacturing (-23.1%)[1].

Singapore now is the only growing market in Southeast Asia and is +21% in the first half of 2020, compared to only 2% growth in 2019 and even in the month of June it is +29% vs YA. Among the FMCG categories, hygiene-related ones are the most benefited such as hand sanitizer (1196% in H1 growth, on+offline), liquid antiseptic (177%), and home-cleaning products (household cleaner, 104%). Singaporeans also consume more health supplements (multi vitamin, 99%) to strengthen their immune system. Categories in beauty and cosmetics such as make up, lip care and sun care saw a decline as consumers reacted to the pandemic outbreak.

According to the latest data on consumer confidence for Singapore, the CCI index[2] for Q2 2020 is at 68 (dropping 23% from Q4 2019), with over half of consumers concerned about the economy and job security. Consumers are also concerned about health (26%) and increasing food prices (20%) and have indicated that they would allocate their monthly budgets on food at home, housing and invest in savings.

Online FMCG shopping experienced a spike with it now contributing to 11% of sales[3] as compared to 9% in 2019, however physical stores remained relatively important for food categories. FMCG ecommerce penetration gained momentum with the addition of new customers shopping online. Nielsen survey[4] data revealed that 69% of consumers who participated in the survey and who had also shopped household items online for the first time said they will continue to do so in the next 12 months.

Consumers have been price conscious even prior to the COVID-19 event wherein they shopped at personal stores for value and service, and given their wallets were constrained amid the pandemic crisis there was heightened price sensitivity in the mind of consumers. Nielsen study[5] highlighted that more than 8 in 10 consumers perceived food prices to have increased and switched to cheaper house brands (87% consumers switched to house brands versus 79% in 2018). While shopping at physical stores consumers considered store experience to be of great importance apart from price reductions and promotions, with key attributes like store ambience (85% of consumers strongly agreeing) and customer service (74%) playing taking the front seat.

Singaporeans will continue to crave convenience and innovation from FMCG players in their journey to the new normal post COVID-19. Looking forward, manufacturers and retailers will need to understand the consumer behaviour arising from changed habits and also whether they like a combination of offline and online, omni-channel platforms depending upon the product categories to save shopping time and avoid multiple store trips. Price and promotion strategies also need to be rebuilt according to the global recession situation and consumers’ mindset change on spending. In terms of communication, creative and innovative ways through social media and digital platforms will be required to reach out to the digital consumer.