"Our sales grew an average of 20 percent in the first few years, but when Covid-19 hit, it went south," says Alan Lee, founder of the local gift brand Klosh.
Founded in 2016, Klosh is a multi-label gift shop created to provide a "total lifestyle experience". It offers a wide range of products that give giving away an additional “swing”.
"My co-founder, Shermaine Wee, and I wanted to create a brand … where there is a story that runs through everything we offer."
Klosh has a department specializing in personalized items and sells everything from custom LED neon lights to “handwritten” cards created by a KLOSH robot.
The brand employs a lean team and works with local designers to create original products.
Photo credit: Shopify
In one of the most expensive cities in the world, Klosh was able to open six branches in just four years.
The franchise gained prominence among younger populations and was approached by overseas retailers with expansion opportunities.
"(But) these countries are in a dire situation because of Covid-19, and landlords are not reacting adequately during these difficult times," notes Alan.
Retail brands are biting the dust
It is common knowledge that retail was in a slump even before Covid-19.
International brands like Forever 21 and Barneys New York filed for bankruptcy and closed hundreds of stores, heralding fears of a “retail apocalypse”.
Singaporean multi-label retailer Naiise has stepped back from commitments like the Design Orchard Showcase to make up for its losses.
Naiise Store / Photo Credit: Female Singapore
The brand has reportedly delayed its payments to its suppliers and has closed three stores since January 2020.
Covid-19 catalyzed the decline. In Singapore, retail sales, which have been declining for over 16 months, hit a record low in May.
The decline in sales continued well into the second phase of Singapore's reopening.
According to the Singapore Department of Statistics, all sectors continued to see sales declines in June.
Discretionary goods were hardest hit, with the recreational goods sector down 40.7 percent.
Integration of retail and e-commerce
Retail seems to be dying, but it's not. In fact, it's changing.
Businesses can bring wet markets to e-commerce platforms and even automate kopi brewing.
However, the jury is not yet sure to what extent digitization can replace the shopping experience in the store.
Online-based brands create physical stores to appeal to consumers. These include brands like Nike and Zalora setting up pop-up stores to attract their customers and revitalize physical retail.
Zalora at Ion Orchard / Photo credit: The Smart Local
Companies learn that an online and offline presence is optimal. "We want KLOSH to do well in both areas," says Alan.
The key is to integrate both and deliver innovative retail experiences to the audience. This includes upgrading the business, implementing technology in the form of integrated marketing channels, and providing new digital payment options.
Reduce retail losses
Instead of a retail death, what is happening looks more like a massive cut in retail.
The Covid-19 pandemic resulted in a record vacancy rate of 8.0 to 9.6 percent as tenants withdraw from the large shopping centers.
Covid-19 has made it almost mandatory for every business to have an online presence in order to weather the retail drought. Still, it takes retailers some time to make the leap.
Currently, Klosh's main source of income continues to come from brick and mortar stores.
At the same time, it accelerates its linchpin for omnichannel marketing strategies through platforms like Shopify.
Alan Lee, Klosh Founder / Image Credit: Shopify
Like most companies adapting to Covid-19, Klosh has turned to e-commerce. The brand expanded its digital presence and trained its employees in digital marketing strategies.
During the first outbreak of the pandemic, store sales fell 80 percent and the Klosh stores now only have three stores. However, the brand managed to get out after the lease expired in order to reduce its losses.
"Covid-19 is a wake-up call for me," says Alan. "With God's blessing, we have adapted well to the pandemic."
Tenants argue with landlords during Covid-19
"Our experience with landlords during this pandemic has led me to rethink our retail strategy of having more stores in Singapore," notes Alan.
Prior to Covid-19, Alan stated that he was faced with "ever increasing rent" from landlords. The malls reportedly asked for rent increases of up to 40 percent when it came time to renew their contracts.
Covid-19 has not encouraged landlords to lower rental prices. The Singapore Tenants United For Fairness Group and the Restaurant Association of Singapore were among the groups that expressed their displeasure at the landlords' "pulling feet" in early 2020 to relieve rent.
Photo credit: South China Morning Post
In February the Singapore government issued a S $ 4 billion budget that gave landlords a 15 percent property tax rebate. The hope was that the discount would lead to lower business rents – but that didn't work out.
In April, the government later waived up to 100 percent of property taxes on eligible properties, and a new law was passed to force landlords to pass the discounts on to their tenants.
However, landlords were dragging their feet and complaints from tenants were abundant on social media about the delay in rent relief.
A long battle
Observers have commented that the dispute between landlords and tenants is not specific to a Covid-19 economy.
The asymmetrical performance dynamics has been emerging for a long time. Landlords tend to have more power over tenants. Practices such as Real Estate Investment Trusts (REITS) motivate landlords to focus on rent extraction rather than tenant welfare.
“Aggressive rental search behavior” is understandable in shopping centers that invest heavily in the maintenance and upgrading of their properties. But the behavior was picked up by other landlords.
Retailers pay exorbitant amounts under the popular gross sales rental models that extract a percentage of store sales.
This resulted in a rent of S $ 36,000 for a shop along Orchard Road. Over a fifth of the commentator's total revenue went to his landlord in 2018, up from 15 percent in 2015.
Photo credit: mothership
The general power imbalance between landlords and tenants extends to everything from contract terms to asymmetrical access to information about malls' profits relative to tenant rents, according to a CNA article.
The newly formed Fair Tenancy Framework Industry Committee (FTFIC) published a 64-page paper to the government on May 21, which set out 15 recommendations for fair rental laws.
At the end of June the framework for rent relief was set up to support SMEs. Eligible SMEs can waive the basic rent for qualified commercial properties for up to four months.
What is the plight of retail?
Digitization is typically used as a blanket statement touted as an answer to retail problems in a pandemic-hit economy.
However, the answer is not that straightforward.
If retail continues to be critical to businesses, it is not possible to propose introducing “digitization” in wholesale as the solution to all of our problems.
“I think it's still important to maintain a brick and mortar retail presence,” says Alan.
“(But) I think when the dust settles, the retail landscape will change drastically and irreversibly, customer behavior will change and there will be a whole new world. I am preparing for that. "
Selected image source: Klosh