The core costs of any retailing business comprise rent, cost of goods, working capital, capital for renovating the shop and labour.
However, rent is still the prime cost in the retailing of branded goods because, to the retailer, the location of his outlet is his most vital concern.
This is evident in the number of shops that sell premium brands in Orchard Road - the most famous shopping area in Singapore.
However, I advise retailers against rushing for shop space in Orchard Road's malls, especially those that are going to open soon, because the competition will create a vicious circle of rising rentals.
Shoppers will not benefit from this trend, as retailers will tend to pass the increased rent on to consumers.
I hope that mall owners would set reasonable rents to attract retailers whose businesses have good potential for growth.
Property owners should remember that increasing rent at this difficult time will only add salt to the wound.
Retailers should sit back during this crucial period, to rethink their long-term business strategies, consolidate their strengths and work on their weaknesses, in order to achieve better results.
Consumers should also spend wisely, by comparing prices before making purchases.
