SINGAPORE: Despite taking up two shophouses along Simon Road in Kovan, only half of the space at Lola’s Cafe is open for business on weekdays.
According to its co-founder June Tan, it was a decision that had to be made after business started slowing down considerably eight months ago.
“We were still doing fine for the first six months of 2016 but over the last two quarters, sales have fallen and the drop is very pronounced on weekdays.”
Since opening in 2013, the cafe has enjoyed brisk business but amid the lingering economic slowdown, the constant flow of walk-in customers it used to see throughout the week has thinned, said Ms Tan.
“Weekdays are quite quiet now, even during dinner time. We expanded our space last year but with no demand, I have to close half of my space on weekdays to save costs.”
Takings have also decreased at Ms Tan’s second cafe On The Table in Pasir Panjang, as the nearby working crowd cut down on food expenses. With slower business, Ms Tan said profits from both bistros dropped 20 per cent last year and will likely decrease further in 2017.
Weekday crowds have thinned at Lola’s Cafe. (Photo: Tang See Kit)
The food and beverage (F&B) sector is not the only one going through a rough patch. Amid the uncertain economy, it has become a challenge to find a business owner who feels upbeat about the near future.
Even as the pick-up in manufacturing helped Singapore’s economy to grow at a faster-than-expected pace of 2 per cent in 2016, sentiment has remained cautious. “Economic recovery feels better when everyone’s doing the tango together but there are some sectors that are still feeling the heat,” said Mizuho Bank’s senior economist Vishnu Varathan, referring to the services sector and some manufacturing clusters such as marine and offshore engineering.
“Due to uncertainties, 2017 will be characterised by caution and tentative optimism,” he added.
Mr Tan Wee Keng, chief executive of Tollyjoy Baby Products, also has a “cautiously optimistic” view of how 2017 might pan out. The company has seen its input costs spike amid a rejuvenated US dollar over the course of last year. However, for fear of turning away price-sensitive customers, it has held back on raising product prices.
“We import some goods in US dollars so that has affected input costs but given the climate over the past two years, it is very difficult to increase prices,” said Mr Tan. “When times are good, people will understand if you need to raise prices but when times are bad, it’s tough.”
The homegrown firm managed a slight profit increase last year, but is not letting its guard down. It plans to continue investing in new product development and technology to further increase efficiency.
As such, Mr Tan hopes that the Productivity and Innovation Credit (PIC), which the company has tapped to upgrade its computers and purchase machinery for better transportation of goods, can be extended in the upcoming Budget. Introduced in 2010, the PIC scheme is set to expire at the end of the year.
“We are watching our bottomline very carefully. Thankfully there’s help from the Government, such as the PIC, but that’s ending soon. Hopefully, it can be extended or have another similar policy take its place to help businesses to tide over this difficult period,” Mr Tan said.
Tollyjoy Baby Products’ CEO Tan Wee Keng said consumer and business sentiment has been lacklustre for the past two years. (Photo: Tang See Kit)
Other small- and medium-sized enterprises (SMEs) are hoping for additional help when it comes to venturing beyond Singapore.
Ademco Security Group told Channel NewsAsia that strong performances in foreign markets, especially Indonesia and the Philippines, have helped to offset the challenges it faced in Singapore last year. The company is looking to strengthen its footing in these high-potential markets and managing director Toby Koh said local SMEs like Ademco would benefit from partnerships with government-linked companies when going overseas.
This is a view echoed by Mr Ang Yuit, vice president of membership and training at the Association of Small and Medium Enterprises (ASME). “Many SMEs here ask: ‘Why don’t Singapore GLCs and large enterprises operate like the Japanese and Koreans, who hunt in a synergistic pack when they penetrate foreign markets (and) bring along smaller enterprises so that these smaller enterprises can blossom abroad as well?”
To bring about a mindset change, Mr Ang suggests rolling out tax incentives to entice “large enterprises to buy from local SMEs or bring local SMEs abroad”.
But apart from leaning on the Government, local firms have been taking matters into their own hands.
Ademco Security Group, for one, is keeping an eye on emerging security technologies, as well as leveraging on cloud computing, mobile applications and new means of communications to come up with better security solutions.
Mr Koh said: “We have a customer who has 500 sites in Singapore. Before that, whenever the alarm is activated, a security guard would have to go down manually to verify the situation. Now, we cover all the sites with a central monitoring system that allows the customer to check what happened when an alarm is activated and assess the risk level within one to two minutes.”
“We are also keeping a close tab on the latest security trends, collecting and comparing data. This allows us to take the appropriate track to innovate to meet market needs,” he added.
Ademco Security Group’s control monitoring station is manned round the clock. (Photo: Ademco Security Group)
Also investing in technology is Yang Kee Logistics. Given that manpower costs have been a long-standing issue for the highly labour-intensive industry, chief executive Jos Raaymakers said the company made a significant investment to change its information technology (IT) strategy so as to improve productivity.
And as its fortunes take a hit amid lower orders from clients in the oil and gas and manufacturing sectors, Yang Kee turned its sights to other verticals such as chemicals, and that has helped the logistics firm to clock double-digit revenue growth last year.
“Sometimes, an economic slowdown also means that customers are reviewing their supply chains and that creates opportunities for new vendors. So our view has been that a slower economy doesn’t mean no opportunities for accelerated growth,” Mr Raaymakers said.
“Even with the breakdown in the Trans-Pacific Partnership (TPP), countries such as Australia have said they still want to go ahead. The Singapore Government also said it will pursue other trade deals… I think globalisation will continue and that means opportunities still for logistics companies like us.”
For Ms Tan, the strategy to ride out the economic downturn could lie in a new F&B venture – a dessert cafe called Suzette which opened its doors last October.
“It’s a rethink of our business model and strategy thus far… The store size of Suzette is 3 to 4 times smaller than Lola’s and On The Table, and we are keeping the manpower lean to just three full-timers. With a smaller place and leaner manpower, there could be better profit margins.”
Despite a tough environment, Ms Tan and her co-founder invested a six-digit sum into this dessert cafe. (Photo: Tang See Kit)
The young entrepreneur is also sticking to a glass-half-full mentality when it comes to the challenge of thinning profits.
“We have been very lucky since we started Lola’s. It has done so well and is still our cash cow. For a small business that started on a very high note, we will take this opportunity to think about cost which is something that we didn’t learn to look at properly right from the start,” she told Channel NewsAsia. “There have been many learning points last year so moving forward, we will do better in terms of how we strategise, manage our manpower and optimise costs.”
Follow See Kit on Twitter @SeeKitCNA
