Me & My Money Series (Sunday Times)

seems like rental expense for operating business is a killer in sg..

(15-04-2012, 09:30 AM)pianist Wrote: seems like rental expense for operating business is a killer in sg..

Yes, in fact it is rental and staff costs which frequently "kill off" a business. Now that so many malls are being managed by REITs, REIT managers will want to tout AEIs (Asset Enhancement Initiatives) to increase rental so as to payout more to unitholders. This would imply positive rental reversion and rentals can only go up as a result, squeezing more and more smaller businesses. These are precisely the group of people who cannot stomach higher fixed costs, and so after a period of struggling they have to close shop and either move to somewhere smaller (within the same premises), or somewhere further (where rental psf is cheaper). Either way, you lose out on potential sales and customer traffic.

Rental/staff cost being a killer is an understatement.
It is a murderer.

Let's start with something everyone can understand, retail space.
Generally there are 3 places you can set up shop

1. Malls
2. HDB shops
3. Ground floor shops at Industrial area.

1. Malls. Expensive no matter how you look at it. Easily $20-30psf. A shop of 500sf ft will cost a 5 figure sum.
2. HDB shops. Varies. The town centres/new housing estates are expensive , close to a 5 figure or above 5 figure.
3. Ground floor Industrial Estate shops, cheaper as they are located in far flung places. Rents for places like One Commonwelth is ard 8k per
unit and is of decent size.

Add another 3 staff to tend to the retail shop and you are looking at minimum overheads of ard 20K at least.
It's getting more difficult to start up a retail business. In certain segments, retail businesses are losing out to online businesses.
There are more people ordering stuff online.

So....forget about retail biz, just be a retail space landlord.

For retail businesses, it's an uphill task to break even cos even before you start, you're already slapped with a layer of high fixed costs (i.e. rental). Add to that the inventory you have to purchase and commit to, and we're probably looking at around $200K to $300K of commitment.

No wonder it's not easy to encourage people in Singapore to become entrepreneurs....

Musicwhiz Wrote:No wonder it's not easy to encourage people in Singapore to become entrepreneurs....

Nobody said you have to go into retail. There are plenty of businesses that do not require a retail shopfront.

If people insist on opening retail shops even when they know the rent will be hell, then they fully deserve to suffer.

If you know that the expressway traffic is heavy but still insist on running across, then you have nobody to blame if you get knocked down.

(16-04-2012, 03:19 PM)d.o.g. Wrote: Nobody said you have to go into retail. There are plenty of businesses that do not require a retail shopfront.

Yeah, and I am glad you highlighted this point, if only to demonstrate how crippling it can be to maintain a retail operation in Singapore. Thanks for that.

But it's still amazing how many people prefer to go and set up a retail outlet to maintain "presence", and only find out the hard truth after 6 months and a ton of cash burn.

Yes Sirs, how much easier to start a "passive investment" business. You can pick and choose more than one business to be a passive partner. If you fail in one, you still have so many others to cushion your losses. And you don't have to work like a bull in starting a Char Kway Tieu store.

If the retail potential is not yet proven, can consider to start with kiosk/shopping cart type of retail space to reduce rental cost before setting up the actual shop.
I do not know the rental rates, but presumely should be much lesser than the 3 options mentioned by big toe.

wsreader Wrote:If the retail potential is not yet proven, can consider to start with kiosk/shopping cart type of retail space to reduce rental cost before setting up the actual shop.

I do not know the rental rates, but presumely should be much lesser than the 3 options mentioned by big toe.

Shopping carts can rent for $5k or more per month in the popular malls, and they are good for testing products but not concepts. For products, consignment might be a more cost-effective option.

If it's a retail concept, though, then you have no choice but to put up an actual storefront. Better find a partner with deep pockets or rich parents... or try a different business!

Missed out one more option, that is private shop-houses. Again, depends very much on location, area opposite bugis will cost you an arm and leg. And you have to pay rent monthly(unless you are the landlord) and you do not have many arms and legs.

HDB no longer allow you to buy shops from them, they probably realized that it is good business to rent the shops out to the highest bidder. Those who are unable to pay the revised rent when tenancy is set for renewal will be deemed "not commercially viable". So, next better player with the highest bid please. In punggol, the sky's the limit for rent. Recent bidding reveal rents of 80K for a supermarket, 30K for a small clinic.
In popular malls such as vivo city, there is a waiting list of tenants willing to fork out high rents.

And do not think for a second that when you rent a shop in a mall, it is your shop.
It is their shop. You will pay penalties if you fail to comply.
Open late, pay. Don't Open, pay. Shop not up to their high standards, pay.
Concept not right, cannot open. ... ... ...

But having said that, retail is the easiest business to get started.
Just buy something to market/sell. Overheads is another story altogether.