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Retail challenges and rising costs: Why Crate and Barrel is suddenly leaving the SG market

Retail challenges and rising costs: Why Crate and Barrel is suddenly leaving the SG market

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Yesterday, home good retailer Crate and Barrel and its sister brand CB2 revealed that it will be exiting the Singapore market as of 31 May, as confirmed to MARKTEING-INTERACTIVE by the brand.

The American brand, which has been in Singapore for the last 10 years, initially made the announcement out of the blue on its social media channels saying, "It is with a heavy heart that we announce the closure of Crate and Barrel Singapore. We have enjoyed serving the community over the past 10 years and would like to take this opportunity to express our gratitude for your loyalty and unwavering support." 

When MARKETING-INTERACTIVE reached out, a spokesperson at Crate and Barrel said that they were shutting down as its franchise agreement was not renewed by its US headquarters. 

Don't miss: Crate and Barrel exits Singapore market in shock announcement 

It added that there are currently no plans for Crate and Barrel and CB2 to return to Singapore as of now but that its online retail and ION Orchard store will be open as per normal till the 31 May. Till then, shoppers can enjoy offers up to 40% off storewide in addition to other deals in its Crate & Barrel Thank You Singapore Sale.

Saying that, Crate and Barrel's sudden exit is certainly a surprising one especially considering that more people have been returning to in-store shopping since the pandemic. 

According to a Milieu Insight study MARKETING-INTERACTIVE published over Chinese New Year with over 5,000 respondents from Singapore, Thailand, Vietnam, Malaysia and the Philippines, it was found that physical stores are still going to be a big part of those spending on fashion this festive season.  Around 53% of those who intend to spend on fashion are most likely to be shopping in physical stores, despite the ease and convenience of online. Meanwhile, 18% intend to do so via brands’ or fashion retailers’ websites/ apps and 28% on marketplace ecommerce platforms.

Interestingly, across the region, Singapore shoppers are most likely to shop in-person (66%) versus other Southeast Asian countries.

According to Uma Ranganathan, the head of solutions development at dentsu Singapore, the main problem Crate and Barrel could have faced was its reliance on a flagship-stores-only strategy that promised exclusive and experiential high-end shopping in lieu of adopting an omni-channel discovery and shopping model that would caters to customers who are now in an “always” shopping mode. This could have put pressure on sales volumes, she said. 

"Changing customer behaviours now demand a shift in the distribution of online versus offline touch points that brands need to maintain to fully engage with their customers," she added. "While customers are returning to physical stores, they also have several shoppable moments with the brand’s online presence via their direct to consumer (DTC) presence, official stores on marketplace and even their shoppable social interactions."

As a result, according to Ranganathan, what brands now require is a strategic total commerce approach that enables a balanced omni-channel presence, measures real media effectiveness and attribution of marketing spends and implements a meaningful and personalised customer relationship management.

Tackling rising costs of living

At the end of the day though, having shoppers return and a solid strategy are not all a brand needs to thrive in the retail space. Rather, one must also take note of inflation and the rising costs of living that are making shopper smore cautious. 

It looks like it was a perfect storm for Crate and Barrel in terms of operating in the premium end of a discretionary category at a time when there is a high cost of living and recessionary economic pressures impacting consumer spending, Ranganathan noted. 

"At the same time, its pool of core, loyal consumers may also have dwindled further with the exit of many expats from the Singapore workforce in recent times." she said. 

Agreeing with her, Kevin Kan, the chief experience officer at Breakout Consulting Asia noted that Crate and Barrel was "just too expensive" for Singapore as a mass market retailer. "As the economic climate has deteriorated since the global pandemic, it is not surprising that they are leaving Singapore," he said. 

Kan continued by saying: "As consumers tighten their belts and go for more 'value for money' options, Singapore shoppers are still going to value and trust brands such as IKEA who are still doing well. Especially when they are offering things like a 10-year guarantee and 365-day return policies. Now that is something that will engender loyal shoppers. How will Crate & Barrel compete with that?" he asked rhetorically. 

The increasing costs of advertisements 

Alongside rising costs of living, one has to also remember that the costs of advertising and marketing have also been increasing in tandem, according to Desh Balakrishnan, the CEO of Media360 Communications.

"The cost of advertising is high in Singapore especially to consistently sustain a top-of-mind presence amongst high-net-worth individuals since Crate and Barrel typically targets them," he said. 

To combat that, Balakrishnan suggests a clear marketing strategy with defined outcomes to help sustain the business as well as a loyalty programme integrated within its strategy.

"It's marketing strategy and loyalty programmes could have been derailed due to the challenges of COVID-19 which also saw many businesses struggling with massive losses' he said. 

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