Singapore’s retail landscape experienced a notable downturn in July, with sales figures dropping by 2.3 per cent after excluding motor vehicles from the data. A closer examination of the retail sector reveals a widespread impact across various categories. In July, nine out of the 14 retail categories monitored recorded a year-on-year decrease in sales. At the heart of these retail sector challenges lies the persistent issue of inflation, which has significantly dampened consumer spending. The rising cost of goods and services has outpaced wage growth for many Singaporeans, leading to a reduction in real purchasing power. The tangible impact of inflation on household finances was starkly illustrated by a recent YouGov survey, in which a substantial 49 per cent of consumers in Singapore reported a reduction in their disposable income over the past year due to inflationary pressures. This erosion of spending capacity has forced many consumers to reassess their purchasing habits and prioritise essential expenditures over discretionary spending.“Increased price awareness has significantly influenced consumer purchasing decisions in Singapore, particularly in the wake of recent economic challenges and price hikes,” Ervin Ha, consumer and marketing insights leader Singapore at NielsenIQ, told Inside Retail. NielsenIQ’s 2024 Shopper Trends survey found that 80 per cent of respondents said they are conscious of price and are prioritising essential purchases as well as seeking the best value for their money. According to Ha, consumers are now more carefully considering their shopping habits, including frequency, location, and purchase volume. This behavioural shift is indicative of a larger trend wherein consumers are adopting more calculated spending strategies, gravitating towards retail outlets that provide optimal value propositions or customer loyalty incentives.“They are now focusing on purchasing only essential items while cutting back on luxuries,” he said. “Consumers’ values are shifting, with a growing emphasis on making thoughtful, deliberate choices that maximise the value of each purchase.”Government stepping in In response to these economic pressures, the Singapore government introduced an enhanced Assurance Package, under which more than 2.4 million Singaporeans to receive up to S$400 (US$308 million) this month. The move is expected to alleviate some of the financial strain caused by rising costs and economic uncertainties. The payout will vary depending on the receiver’s assessable income. “The enhanced support packages will provide some near-term relief to Singaporean households and firms. These are needed during this period when inflation, while moderating, remains on the high side,” said Prime Minister Lawrence Wong. Retailers’ responseIn response to these changing consumer spending patterns, Ha said retailers are working to communicate value and structure promotions in ways that foster long-term customer loyalty and build sustainable growth. “As economic pressures and the rising cost of living have intensified in Singapore, consumers are increasingly prioritising value for money over brand loyalty, resulting in a growing preference for house brands and a willingness to shop around and visit more retailers to find better deals,” he added. “The appeal of house brands lies primarily in their lower prices, with 63 per cent of shoppers citing this as the key reason for choosing them over more established name brands while 48 per cent of consumers attribute the switch to the perceived value for money.”NielsenIQ’s report on the state of FMCG brands in Asia Pacific found that 89 per cent of Asia-Pacific shoppers, including those in Singapore, claim they would change where they shop if a different retailer could match their budgets.Ha said with GenAI, retailers can easily pick up on shoppers’ price preferences and purchasing habits which in turn helps to actively provide recommendations on items that are on sale. This further enhances product awareness and brand recall of low-priced or special offers or discounted items. “Though price and promotion sensitivity are on the rise, another crucial factor is that shoppers are on the hunt for value, be it the best deals or the newest innovations – and communicating value for money can be a key to retaining price-sensitive customers,” he concluded.