While businesses are optimistic in 2022, consumers are more cautious, revealing headwinds may be on the way for the second half of the year.
This is according to the third Shop Small Research for Singapore conducted by American Express with 304 local business leaders in May 2022, which for the first time also included 510 consumers to understand their spending habits and sentiments.
Almost three in four businesses (73%) expect annual revenue to recover to or exceed pre-pandemic levels, compared with only 57% of consumers who expect to resume or exceed pre-pandemic spending levels.
This difference is also seen in their sentiments for the second half of 2022, where only 60% of consumers expect to be optimistic, confident or excited, compared to 79% of businesses.
In fact, 65% of consumers are taking a more conservative spending approach due to rising costs and economic uncertainty – with Gen X being the most conservative. Should costs continue to rise, almost one in two consumers (45%) are saying they will be looking to cut spending across all categories.
Mr Elroy Lim, General Manager and Vice President of Merchant Services for American Express Singapore said, “As pandemic restrictions ease and travel resumes the first half of this year, most businesses are optimistic and expect annual revenue to rise.
“However, our consumer survey shows that while consumers have resumed pre-pandemic social activity, they are approaching spending conservatively.
Survivability concerns remain
When asked for their sentiment in the second half of 2022, almost eight in 10 (79%) of business leaders are optimistic, confident or excited, while 21% are nervous, stressed or worried.
Sharing an optimistic outlook is homegrown dry cleaning and laundry service, Presto Drycleaners. Its second-generation owner, Mr Weitian Chan said, “I am optimistic about this year’s performance. Our business suffered the last two years as our customers no longer needed to dry clean their winterwear or office clothes. With travel reopening and more people back in the office, our customers are returning and I’m looking forward to grow the business further.”
However, the Shop Small Research also shows that about one in two businesses (49%) cannot survive beyond six months, if costs continue to rise or if sales do not recover by the end of 2022.
Rising costs has overtaken the volatile COVID-19 situation as the top business challenge in 2022. The top factors for increasing costs are higher logistics (42%), raw material (42%) and labour (37%) costs.
Recovery is also expected to be uneven. While consumers intend to spend more in areas like dining out and travel, the vast majority are unlikely to spend at pre-pandemic levels.
Only 29% of consumers expect to resume or exceed pre-pandemic spending levels for travel and staycations, and 39% for dining out.
Mr Joseph Soh, veteran entrepreneur and Managing Director of Knots Cafe and Living said, “I don’t think the main challenges are behind us; they are actually ahead of us. While revenue is increasing, costs are rising much faster. Businesses are caught in between, and we have to be prepared.”
Businesses motivated by local support
Mr Elroy Lim from American Express added, “The silver lining is that nine in 10 consumers do indeed shop local – a heartening number we found when we expanded our Shop Small Research to study consumer shopping habits for the first time.
“This year, 77% of businesses said they are motivated by local community support – the highest ever seen in our research in three years. It truly shows how much everyone’s support means to local business owners. And this is why we continue to bring Shop Small back again.”
Ms Hellen Jiang, Founder of Cat Socrates, an indie multi-label concept retailer said, “Our customers are our biggest supporters. We were very grateful that even during an unimaginable time like Circuit Breaker when we had to close our stores and go online, our customers supported us there. Now that our stores are open again, our customers continue to support us in person.”
Consumers tend to shop local where they live (77%), work (30%) or when they want to find something unique (30%). They also generally see local businesses favourably. The most common opinions are that they are convenient (53%), affordable (42%) and essential to the community (40%).