Singapore Retail Sales Slump 2.9% in December 2024: Opportunities Amidst Moderation

Singapore's retail sales took a nosedive in December 2024, plummeting by 2.9% year-on-year to SGD 4.6 billion (USD 3.4 billion), according to data released by the Singapore Department of Statistics. This decline follows a 0.5% dip in November and a 2.3% growth in 2023. On a seasonally adjusted month-on-month basis, retail sales dipped 1.5% in December. The slowdown in retail sales growth is expected to continue in 2024, with Alvin Liew, senior economist at UOB, projecting a growth rate of just 1.0%.

The primary factors contributing to the decline in Singapore's retail sales in December 2024 are the post-major online shopping events slowdown and slower growth in food and beverage services. In November 2024, retail sales were boosted by major online shopping events such as Singles' Day and Black Friday. However, in December, the online retail sales share dropped from 14.7% to 13.4% of total sales, indicating a slowdown in online spending after these events. Additionally, sales of food and beverage services grew by 1.0% year-on-year in December, slowing from the 4.0% increase recorded in November.



The shift in consumer behavior, particularly the increase in online retail, has had a significant impact on the overall retail sales performance in Singapore. According to the data, online retail sales accounted for an estimated 13.4 percent of total sales in December 2024. This decrease can be attributed to the end of major online shopping events, which boosted spending in the previous month. The increase in online retail has implications for brick-and-mortar retailers, who may face a decline in foot traffic and sales as consumers increasingly prefer the convenience and accessibility of online shopping.

To capitalize on potential opportunities in the Singapore retail sector, investors should consider the following strategic adjustments to their portfolios:

1. Diversify investments across sub-sectors: While overall retail sales growth may slow down, certain sub-sectors might still perform well. For instance, food and beverage services grew by 1.0% year-on-year in December 2024, albeit at a slower pace than the previous month. Investors could allocate a portion of their portfolio to companies operating in this sub-sector, such as food and beverage retailers or restaurant chains.
2. Focus on online retail: Although online retail sales accounted for a smaller proportion of total sales in December 2024 (13.4%) compared to November (14.7%), it still represents a significant portion of the market. Investors could consider allocating resources to e-commerce platforms or companies with strong online presence, as they may continue to grow even as overall retail sales growth moderates.
3. Invest in companies with strong balance sheets: With the expected moderation in retail sales growth, companies with strong financial positions will be better equipped to weather the slowdown. Investors should focus on companies with robust cash flows, low debt levels, and strong earnings growth prospects. This can help mitigate the risks associated with a potential slowdown in the retail sector.
4. Consider consumer staples and discount retailers: As consumers become more price-sensitive due to the cost-of-living increases, they may shift their spending towards essential items and discount retailers. Investors could allocate a portion of their portfolio to consumer staples companies or discount retailers, which may continue to perform well even in a slower-growth retail environment.
5. Monitor government policies and cost-of-living relief measures: Alvin Liew expects cost-of-living relief measures to be sustained in the 2024 Budget, which could provide an incremental lift to retail sales. Investors should keep an eye on government policies and any enhancements to the Assurance Package (AP) or one-off cost-of-living special cash payments, as these could create opportunities in the retail sector.

In conclusion, the decline in Singapore's retail sales in December 2024 can be attributed to the post-major online shopping events slowdown, slower growth in food and beverage services, and broader economic trends such as easing labour market conditions, dissipation of post-pandemic boom tailwinds, and the GST increase. To capitalize on potential opportunities in the Singapore retail sector, investors should consider diversifying their portfolios, focusing on online retail, investing in companies with strong balance sheets, and monitoring government policies. By implementing these strategic adjustments, investors can better position their portfolios to navigate the expected moderation in retail sales growth in 2024.