The FMCG and retail industry has never been more dynamic in Singapore. FMCG sales in April were the highest in the history of Nielsen Singapore Retail Measurement, as Singaporeans purchased more as they stayed at home during the lockdown of the Circuit Breaker period.
The increased purchasing has caused Singapore to shift from being the slowest-growing FMCG market in Southeast Asia in 2019 to the fastest-growing market year-to-date in May 2020. So as we move from Phase 2 to Phase 3, what will the future of FMCG look like in Singapore?
Channel behaviours will change
We have seen a rise in consumers looking for convenience in the past few years, and the COVID-19 pandemic has amplified that desire significantly. Over the last couple of years, this growth came mostly from convenience stores and e-commerce, whereas growth during the COVID-19 pandemic has been driven by hyper and super markets and e-commerce instead.
Given their proximity to housing, hyper and super markets offer geographic convenience, and many are open 24/7, facilitating shopping for any schedule. They also offer a wide variety of products. We expect convenience stores to gradually bounce back as Singapore moves into Phase 3. As stores begin shifting to online channels, consumers will bring a steady demand for health and hygiene products, which means that businesses will need to adapt their portfolios for changing shopper behaviours.
Given the lockdown period and concerns about the virus, e-commerce continues to thrive. As e-tailers improve their logistics to meet new levels of demand, we expect this dynamic to continue on the same trajectory for the rest of this year. Importantly, the longer a changed behaviour remains, the more likely it is that the behaviour will become the new normal behaviour.
Consumer dynamics will also shift
In addition to changing consumer dynamics brought on by the pandemic, falling consumer sentiment and recessionary conditions will continue shaping the way consumers shop, as well as what they shop for and where.
We recently surveyed Singaporeans to ask what actions they would like FMCG companies to take in this new normal. More than half of them (53%) said that they want manufacturers to launch smaller packs at lower price points.
This indicates that many Singaporeans are willing to compromise on consumption if it means that they can save more money. On the other hand, 51% said they prefer bigger economy packs so they get larger servings per dollar. Irrespective of this polarisation, it’s clear that Singaporeans are looking for products that help them save more and achieve more value for their money.
Brands and retailers need to reboot their promotion strategies
Singapore is a market that relies heavily on promotions for FMCG products. Nearly two-fifths (38%) of volume sales are sold on promotion.
With consumers still stocking their pantries after the Circuit Breaker, and businesses wanting to rejuvenate themselves and their categories in the upcoming second half of the year, manufacturers and retailers will need to re-assess their promotion strategies.
Given the fact that only 37% of promotions drive incremental sales, 63% don’t contribute to category growth. Therefore, it’s necessary to understand the right depth and frequency of promotions in order to drive incremental growth in the new normal.
Retailers and manufacturers will have to understand how consumer habits are changing and recalibrate to meet the changed circumstances brought on by COVID-19.