Sleek has released the results of its 2021 Index Study, examining the impact of COVID-19 on Singaporean SMEs through the lens of expenditure.
The full report, which will be published at the end of August, is based on the study and analysis of over 1,000 Singaporean SMEs. It found that businesses generally remained resilient in the face of adversity in 2020, where salary expenditure increased by 24% from 2019 – demonstrating strong employee retention rate and growth, despite the pandemic.
However, as the pandemic rages on, recovery progress made by SMEs could still be derailed by ongoing restrictions.
The report highlights industry-specific spending habits, suggesting that pandemic effects vary across industries:
F&B, Arts, & Entertainment
The industry has experienced constant highs and lows throughout the pandemic. While negative impact was visible in the first quarter of 2020 due to heightened worries amongst Singaporeans, the F&B sector proved to be resilient, and experienced a boom in Q3 2020, thanks to reopenings and subsidies.
This initially led to a year-on-year revenue increase of 40% – and this growth was also reflected similarly in their spending, with an 80% jump in year-on-year salary expenses. However, following the roll-back to Phase 2 in 2021, a 30% decrease in revenue was reported in Q1, highlighting the impact the tightened restrictions have had on the industry.
The e-commerce industry has continued to thrive as consumers embrace online shopping. Salaries in this sector saw a 30% increase in 2020, largely driven by increased consumer demand in Q3 and Q4. Aside from advertising spend and wages, freight, courier, and handling expenses were amongst the top expenditures in this sector, given the heightened volume.
Construction, Real Estate
This industry was significantly impacted by the pandemic, as salaries dropped by 30% year-on-year in 2020, likely due to retrenchment of employees given construction restrictions during lockdowns.
Since 2020’s Circuit Breaker, expenses have exceeded revenue in this sector by 8%, as revenue dropped by 44% from the year before. This will likely continue to be the trend for the construction industry in particular, as border restrictions tighten in light of the rise in COVID-19 cases.
In fact, salaries have slightly declined (-2%) in the first quarter of 2021, indicating the sector’s struggle to regain its footing.
The study also found increased expenditure on organisational growth tools and crisis management, with spending on consulting increasing by 16%in 2020. This is largely due to SMEs preferring to hire consultants instead of full-time employees to reduce financial commitments.
Spending on Information Technology (IT) and computer software (SW) increased exponentially by 342% in 2020, with purchases mainly consisting of video conferencing subscriptions, technology upgrades, and new digital equipment to accommodate the changing consumer demands and ensure continuity of business functions.
“We have seen a lot of data on how the pandemic has changed consumer spending habits, and how this has affected business strategies across various industries as a result,” said Julien Labruyere, Chief Executive Officer at Sleek.
But on the flip side, we also find value in understanding companies’ spending habits in response to these changes.”
“Once we analyse spending patterns, we can understand a business’ state of mind. Did it overspend on certain business aspects due to panic? Did it reduce spending to save money for a rainy day? Did it waste money on short-term solutions, or did the pandemic finally convince the decision makers to invest in digital transformation?
“This information is valuable in understanding where the gaps are when it comes to crisis management. During the recovery phase of this pandemic, every cent counts, so it’s important for SMEs to review their expenditure and invest in solutions that can give them the insight to make informed financial decisions moving forward.”