DBS warns JB-SG RTS link could lead to significant retail value leakage
SINGAPORE: The Johor Bahru-Singapore Rapid Transit System (RTS) Link is set to transform travel between the two cities, but DBS warns it could lead to significant retail value leakage.
According to Singapore Business Review, DBS forecasts a 5.4% leakage in retail value and a 3% to 4% impact on local retail sales in Singapore, pushing retailers to enhance their offerings to remain competitive.
Goods and services in Johor Bahru have become more affordable, thanks to the weaker Malaysian Ringgit (MYR) and the recent Goods and Services Tax (GST) hikes in Singapore.
This, combined with reduced travel times due to the RTS, will likely draw Singaporeans across the border in search of better deals.
DBS expects that the average daily spend per person could drop to as low as S$100, with more frequent trips to Johor Bahru.
This results in a total retail sales outflow between S$1.5 billion and S$2.1 billion, equivalent to 3%-4% of Singapore’s total retail sales in 2023.
In the food and beverage (F&B) sector, DBS expects sales to drop by S$450 million to S$620 million, around 4% to 5% of 2023 sales, once the RTS starts operating.
To counter this potential revenue loss, local establishments are encouraged to differentiate themselves with premium offerings.
DBS suggests that malls could onboard eateries famous in Johor Bahru to attract curious customers who may be hesitant about the commute.
Service providers are also expected to feel the impact, with potential losses of S$580 million to S$820 million, or 15%-21% of 2023 receipts.
To stay competitive, these providers may adopt attractive pricing strategies, while high-end providers might focus on improving service quality.
Supermarkets expecting to lose S$45 million, less than 1% of the expected 2024 modern grocery market, should focus on high-end offerings to attract shoppers less concerned about prices.
DBS also recommends that supermarkets market online services and provide free shipping to sell convenience to a broader audience.
Despite the RTS link’s “relatively subdued impact,” DBS advises Singaporean drugstores to step up their offerings, similar to what established health and beauty stores like Guardian are doing in major Johor Bahru malls, to stay competitive.
DBS highlights that Guardian has recently introduced new Korean skincare brands in its stores. /TISG
Featured image by Depositphotos
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