e-spaces

By Dhara Ranasinghe in Singapore

Shopping is a national obsession in Singapore, yet this Lunar New Year retailers are struggling to get the city’s insatiable shoppers to part with their cash as a cloud of economic gloom hangs over Asia.

“Even though there’s a 50 percent sale on here, look at the sales counter, there’s no one queuing. That’s not normal,” said Mrs Them, a housewife browsing at a department store in the renowned Orchard Road shopping district.

The Lunar New Year, which starts next Monday, comes soon after Christmas, signalling a two-month shopping frenzy in most of east Asia as consumers splash out on seasonal foods as well as gifts and new clothes.

This year, though, shoppers are showing restraint as a global economic crisis knocks consumer confidence across Asia and prompts governments and retailers to conjure up new ways to bolster spending.

“It’s going to be tough for Asian retailers, perhaps not quite as tough as in Europe and the US, but we will see slower growth,” said Paul McKenzie, the head of consumer research at CLSA in Hong Kong.

He expected retail sales growth in Hong Kong and Singapore to be negative this year, or flat at best, compared with rises of about 11.5 percent and 5 percent, respectively, in 2008.

Slower growth in tourism, which accounts for up to 30 percent of Hong Kong retail sales, is expected to hurt its retailers.

In China, HSBC forecasts annual retail sales growth to slow to a nominal 15 percent this year from about 18 percent last year as consumers tighten their belts amid a slowdown.

To stimulate its economy, China will give its neediest citizens hand-outs of up to 180 yuan (R263), while Taiwan will dole out the equivalent of R1 090 in shopping vouchers to brighten the mood before the Chinese new year holiday.

Retailers globally have been hurt by a poor economic outlook. US stores had their most dismal holiday sales in 40 years, while a growing list of household names have disappeared off Britain’s high street.

Yet analysts say retailers in Asia have an advantage as the economic crisis is far less severe than in the US and EU.

Consumer spending is likely to benefit from sizeable government fiscal packages of about $640 billion in Asia excluding Japan, hefty interest rate cuts and lower fuel prices.

Still, with Hong Kong, Japan and Singapore all in recession, and South Korea’s economy tipped to contract this year for the first time in 11 years, this shopping season could prove critical.

“Everyone is worried about what will happen after Chinese New Year,” said Terry O’Connor, the regional chief executive for Courts, an electronic and furniture retailer with 80 stores in southeast Asia. “Consumers are cautious, but it’s not a disaster in Asia.”

Asia has enjoyed surging growth in recent years, which has expanded the ranks of a middle class keen to acquire the trappings of their newfound affluence.

But in a region heavily dependent on exports, which fell sharply last months, cuts in orders are leading to lay-offs in factories across the region.

The International Monetary Fund predicts that Asia’s economy will grow 4.9 percent this year compared with a forecast of 6 percent for last year.

The mood in Japan is mostly glum as it enters what some economists say might be its longest recession on record.

Japan’s third-biggest department store chain, Takashimaya, said sales at its flagship store in Tokyo fell 5 percent year on year in the first two trading days of 2009, a period that traditionally marks an annual ritual of bargain hunting.

Items such as designer clothes and electronics are being hit, while stores report relatively solid sales of food as people spend more time at home.

“Our immediate goal is just to survive,” said Ichiro Fukuyama, an associate director at J Front Retailing, the second-largest department store chain.