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Singapore’s economy is expected to grow by around 3.5% in 2014, supported by healthy domestic demand and a strong service sector. Economic growth is expected to gain momentum between 2015 and 2018 as external demand strengthens.

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Singapore is an open and friendly economy. For the ninth year in a row, the World Bank ranked Singapore number 1 for ease of doing business. It is an advanced country with strong supply chains and developed infrastructure. The franchise industry is very well controlled and transparent, so there are few regulatory hurdles compared to its Asian neighbors. Due to the reliable system, there is some peace of mind in dealing with potential partners from Singapore.

According to McKinsey, Singapore is ranked as the fourth most connected country in the world, thus providing a good hub for its regional headquarters and a springboard to expand into Asia. There are around 7,000 multinational corporations and more than half of them use Singapore as their regional headquarters.

Out of 20 private economists surveyed by the Monetary Authority of Singapore (MAS), the expected GDP growth for 2014 is 3.8% and is projected to grow more and more over the next 5 years.

Despite comparatively slower Asian growth, retail sales increased by 5.5% in July 2014 (Statistics Singapore) and are projected to increase by almost 20% between 2014 and 2016 (PwC).

The food and beverage industry contributed approximately 3.2% to GDP in 2013 and Singapore had the highest per capita food consumption in Southeast Asia (Research and Markets). The retail and wholesale trade sector represented 16% of GDP, 5% more than the previous year; the financial services sector grew 10.6% and business services 5.1% (HKTDC). The service sector is by far the largest employer, adding around 60% to GDP.

The government has a very global attitude and relies on global business and imported goods. There are a large number of global and regional free trade agreements with hardly any tariffs for most agri-food products. Franchise information (including financial incentives) can be found through the following government-supported organizations:

PRIMAVERA-Council for Standards, Productivity and Innovation.

International Company (IE) Singapore.

Singapore has a very multicultural and globally conscious population and is therefore a great place to test marketing before committing to a regional launch. The population is small and predominantly urban, but it has an enviably low unemployment rate. As a result, it is one of the richest countries in Asia in terms of consumers, the level of wealth per capita is one of the highest in the region and has increased steadily in previous years.

The average monthly household income of Singaporeans increased from $8,110 in 2007/08 to $10,500 in 2012/13 and households spend an average of $4,720 per month on goods and services. Total consumer spending is forecast to grow at a CAGR of 5% between 2011 and 2016, and 36% of Singaporeans believe the next 12 months would be a good time to buy the things they need or want (Nielsen 2014).

Food is the second largest expense behind housing and, interestingly, private education accounts for a high percentage of spending equivalent to spending on university education (Statistics Singapore).

Given the higher income, the average consumer travels a lot and is very knowledgeable about the brand. They have a good level of sophistication and are very receptive to foreign products and services. The generally higher footfall means there is a less price resistant market, a useful point for premium brand companies to keep in mind.

The franchise business in Singapore is healthy; there are more than 600 concepts with more than 35,000 franchisees. Franchises and licenses represent 18% of the total national retail sales volume and generate a turnover of around $6 billion. Franchisors from a variety of countries are present, in a variety of sectors. Most of the brands are from the United States, although Singapore remains the most popular Asian destination for Australian franchisors.

Singaporeans are eager to find new franchise opportunities and are adept at dealing with foreign franchisors. They not only have a good knowledge of their domestic market, but also of the regional market. This, combined with the strategic location, creates opportunities for foreign brands to partner with knowledgeable Singaporean companies to extend their brand across the region.

A successful foreign concept proven in the Singapore market has the potential to be taken over by the domestic partner and developed throughout the region, thereby significantly mitigating risk and cost to the foreign company.

Snapshots of useful information:

  • Consumers will be very conscious of food safety and health.

  • Singapore’s consumer foodservice industry reported US$7.5 billion in total retail sales in 2011, a growth of 3.3% over the previous year.

  • Singaporeans spend around US$5 billion a year on dining out. Restaurants as a group account for 37%, while fast food outlets account for 13% of total revenue in the food and beverage service industry.

  • Nearly two-thirds of Singaporeans (61%) surveyed ate out more frequently in the past year than in the previous two years (Weber Shandwick 2014).

  • The Singapore confectionery market is promising, having shown a steady growth of 20% over the past 5 years. The US$210 million market is led mainly by sugar and chocolate products (Government of Canada).

  • The profitability ratio of the overall food and beverage service industry was 7.3% in 2012. All food and beverage services recorded increases in operating income in 2012 (Statistics Singapore).

  • Tuition and private education is a thriving sector and represents a growing expense for Singaporeans. However, they have a greater respect for reputable and proven brands.

  • Two large supermarket chains dominate the Singapore retail industry: Cold Storage (Dairy Farm) and NTUC Fairprice. On top of this, Singapore has another 1,300 specialty food and drink outlets, and these businesses are all the rage.

  • Singapore is considered one of the most aggressive discount societies (Reed).

  • An estimated US$3.5 billion will be spent online in 2015. (asianewsnet.com). The 2014 Weber Shandwick survey reported that more than half of respondents (53%) shop for groceries online at least once and 15% shop between one and three times a month.

Industry trends:

  • Specialized products will emerge, such as artisan bakeries, organic groceries and natural cosmetics.

  • Tailor-made beauty products and services are a growing sector.

  • Unprocessed and functional foods will increase in popularity as consumers become more health conscious.

  • Guess what, cupcakes are the big new trend in Singapore.

  • Fresh and healthy juices will be an emerging sector.

  • Restaurants that have a differentiated atmosphere and offer a unique gastronomic experience are a present and future trend.

Singapore Consumer

Sinagpore consumers are very open to buying foreign products and services. They are generally loyal to a brand so it is essential to offer some type of retention scheme. However, Singaporeans like to experiment and will try new products, especially if they saw the concept while traveling or heard about the quality or customer service.

Although they have a high standard of living, by nature they are very price conscious. The price point has to be attractive and match the market, so extensive research is recommended – pricing to exit this market could prove to be a catastrophic mistake.

Analyzing the behavior of Singaporean consumers does not seem so difficult, since there seems to be a general consensus on why they buy. It is suggested to boost your brand through initial price promotions, thereby generating initial customers and retaining them (while creating a great word of mouth campaign) with your level of quality and service.

Similar to the rest of Asia, convenience is becoming the number one purchase motivator. Modern business formats, lack of time, and overwork are factors that support this change in behavior. Brands that make the buying process easier and/or offer a variety of delivery channels will have a higher chance of success.

Lastly, Singaporeans like to have an emotional connection to a brand, so a story behind the brand can be a key marketing point. Emphasize your heritage or the quality of your product/service. Make a lot of your customers, endorsements and your national image.

The bottom line

A safe market that doesn’t leave much to the imagination, don’t read this as a negative. Clear regulations and trustworthy partners make the process simpler and more professional than in other Asian countries, and there’s a lot to be said for that.

In conclusion: A mature, solid market and a well-regulated, but small industry.

Rating: 6/10.