As Singapore moves into the fourth quarter of the year, the retail sector recovery is likely to be slow and protracted.
In the first few months of 2020, various brands in Singapore left their shores and opted to move online instead.
It was announced that Singapore retail sales fell 52.1 percent in May – the largest drop since records began in 1986.
Associate Professor Lawrence Loh of the National University of Singapore Business School was quoted as saying that this was likely "just the beginning, not the end, of the selling point."
More recently, Singapore's beloved local bookstore BooksActually, as well as UK fashion brands Topshop and Topman, announced their closure and plans to go online.
Even as brands grow their online presence, online presence may not add much to their sales – consumer sentiment is still low and many are tightening their wallets.
Will Singapore's many "buy now, pay later" services solve this burgeoning retail problem?
What is "Buy Now, Pay Later"?
"Buy Now, Pay Later" (BNPL) is exactly what it sounds like – services that allow consumers to split payments for items into installments.
These services have already found their way into Singapore and are usually available as an option when shopping online.
With Rely Installment Payment, for example, customers can split a purchase into three interest-free monthly payments. It's available in stores like Secret Lab, Qoo10, and Omnidesk.
Another service, Atoms, offers similar services.
In September this year, the Singapore-based startup hoolah launched a unique buy-now-pay-later solution.
To purchase an item in-store with hoolah, consumers can simply scan a QR code with the hoolah mobile app. Then you enter the total order amount, which is divided into three monthly payments and automatically deducted.
As of August, hoolah's solutions have been implemented in over 150 retail stores across the island.
Even Singapore's hail giant Grab has jumped on the bandwagon with “PayLater installments”.
Reduce the abandoned basket rate
Photo credit: Nouragoma.com
How many times have you filled a shopping cart online to leave your items in it for weeks?
According to Singtel MyBusiness, 25 percent of consumers who abandoned their shopping carts did because of the high prices. Another 41 percent were “not ready to buy”.
This problem was also one of the determining factors that led to the establishment of the Hoolah in 2018.
According to Stuart Thornton, co-founder and CEO of hoolah, up to 75 percent of ecommerce consumers would exit their online shopping carts after searching and adding items.
"This is a massively missed opportunity for retailers," he said.
With the introduction of BNPL services in online stores, customers can get the items they need immediately without having to pay the full cost in advance.
Since most BNPL solutions keep interest rates at 0 percent, customers don't feel like they have to pay extra for the same product and are more willing to make the purchase.
According to a media statement from hoolah, visitors to the site have increased 500 percent over the past six months, with the total number of transactions made through the platform increasing seven-fold.
In addition, at the time of its introduction, Atome was already working with 500 dealers.
These numbers are proof that BNPL solutions are well received by customers and may be welcome as another lifeline for retail stores.
Improved shopping cart conversion rates also show that these solutions are actually showing results.
Hoolah said it managed to increase conversion and basket size by 20 to 40 percent, while Atome saw 230 percent growth in online transactions during the breaker period.
Switch online solutions offline
Orchard Road / Photo credit: Torque
A study conducted by the Singapore Tourism Board (STB) and payment technology company Visa found that local brands are losing out to online alternatives.
As retail brands scramble to carry out their digital transformation efforts, implementing in-store solutions can act as a temporary buffer to increase sales.
It is even more important to innovate in terms of traditional practices to help all businesses survive.
– Stuart Thornton, co-founder and CEO of Hoolah, in an interview with The Startup Growth
Hoolah aims to "be at the forefront of economic recovery" with its new physical in-store solutions.
According to Paulino Moreno, the regional executive director of the fashion lingerie and apparel retailer 6IXTY8IGHT, deploying BNPL solutions in their online and offline stores enables the brand to reach their target market more effectively.
"Buy now, pay later" cannot solve all problems
The BNPL service has long been common in Western markets, and some even believe it will keep some retailers alive.
Since BNPL services are typically targeted towards millennials, there is concern that this group of customers will run into more debt in the long run.
Additionally, Singapore has long promoted financial discipline and prudence as a path for government and consumers.
In a thread about BNPL services to the Seedly financial community, most of the contributors said they would prefer to pay upfront if they had the funds rather than paying in installments.
Many also recommended not making the purchase unless you had the means to pay for it in full.
This sheds light on consumer sentiment behind BNPL services.
While service has become more prominent among select groups of people, it is unlikely that retailers will find it the holy grail of increasing their sales.
Selected image source: Hoolah