Wednesday 21 May 2014

Keeping old-school shops open for business

Traditional businesses offer a rich source of national identity and economic value. How can they stay relevant and survive?
By Chia Yan Min, The Straits Times, 20 May 2014

FOR 40 years, Mr Chen Foon Kee has run Chen Mee Lee Rattan Furniture in a corner of Bukit Merah. He inherited the shop from his father. It still draws a steady stream of customers and turns enough profit to survive.

But that might not be the case much longer. Rising rents and raw material costs are becoming a burden, and his children are not keen to take over the shop, the 66- year-old told The Straits Times.

As Singapore makes a push towards greater productivity and high value-added sectors, one key group of casualties is firms like Mr Chen's: small traditional enterprises located in the heartland.

These are decades-old shops started by small-time entrepreneurs, staffed by and mainly catering to residents in their immediate neighbourhood.

Some involve a craft, such as cobblers, hawkers or furniture makers. Others, like provision shops or Chinese medicine halls, simply buy and sell goods.

These businesses face the same problems as many other Singaporean firms today, namely high labour and rental costs. But they are also grappling with other obstacles: a declining generation of core customers, few interested successors, and insufficient scale or capital to invest in productivity-boosting measures.

There is little public data on the closures of such businesses. But anecdotal evidence suggests a recent rising rate of attrition, amid pressures from the ongoing economic restructuring.

While the Government has rolled out incentives and cushioning measures to help companies raise their productivity, traditional business owners tend to be less aware of what aid is available, or the companies could be too small to qualify.

For the popular Productivity and Innovation Credit scheme, for instance, companies must have at least three local employees to be eligible for a cash payout.

Some may argue that these less productive, older industries should make way for new ones, as is natural in a growing economy.

But such businesses have a unique value of their own, as Nominated MP Teo Siong Seng noted in this year's Budget debate.

"A slab of bean curd, a bowl of bak kut teh... can never be equated to an electronic chip in terms of value," said Mr Teo, who is the former Singapore Chinese Chamber of Commerce and Industry president. However, many of these "old and established businesses... can be said to symbolise the original flavours of Singapore, and have become an integral part of Singapore culture", he added.

These businesses also serve an economic niche. "A convenience store in the heartland, for instance, provides locational convenience for its shoppers," said Dr Nitin Pangarkar, associate professor of strategy and policy at NUS Business School's department of business policy.

"A Chinese medicine hall provides value to those customers who choose to use Chinese medicines versus other alternatives."

Similarly, hawker stalls provide an important low-cost dining option for Singaporeans.

Neighbourhood businesses also provide jobs for residents living nearby, who may not be able to afford the transport costs needed to commute to work far from home, or leave their homes for long periods - for instance, if they are caring for children or aged parents.

Also, these uniquely Singaporean enterprises lend richness and diversity to the domestic business landscape. They stand out from cookie-cutter global industries and help incubate a pipeline of promising local entrepreneurs.

Modern methods

HOW, then, can these enterprises be preserved?

One way is to make their products more relevant to younger generations. The success of local companies such as Ya Kun Kaya Toast, which serves old-school Singapore breakfasts, and Eu Yan Sang, which makes traditional Chinese remedies, shows an enduring demand for traditional goods packaged with a more modern spin.

Once-humble local products such as Tiger Balm or Axe Brand Oil have also attained success overseas by marketing themselves as "heritage brands", attracting Singaporeans and foreigners alike.

Companies with a strong heritage link "are seen as iconic, and can identify their products as a symbol of Singapore", said Barclays economist Leong Wai Ho.

This allows them to command higher prices for their products, which often have decades of history and a strong following.

Such products can also be an attractive takeover prospect for a larger company looking to diversify its holdings or buy into a well-established brand.

BreadTalk Group, for instance, bought over traditional Teochew bakery Thye Moh Chan after it closed its doors in 2011. After almost 70 years in Geylang, the bakery, known for its Teochew-style mooncakes and tau sar piah (mung bean pastries), was relaunched with slicker packaging and now has outlets in Chinatown Point and VivoCity.

Having new management may help these businesses restructure and run more efficiently, said UOB economist Francis Tan. They can also tap more capital.

Another source of funding for marketing comes from the Government. The Housing Board's (HDB) Revitalisation of Shops Scheme co-pays shops when they upgrade their premises. About 7,500 shops have benefited from $35.5 million in funding so far, with retailers reporting a 10 per cent to 30 per cent hike in sales, HDB said.

For other traditional trades, such as cooking hawker food or crafting handmade products, a more pressing issue is succession.

The Government has stepped in with the Hawker Master Trainer programme, which enlists the help of established hawkers to train a new generation of successors. The first batch of 13 trainees graduated last month.

To expand on and consolidate such efforts, the Government could create a platform to "matchmake" traditional companies with modern but heritage-minded ones, and elderly business owners with younger successors outside the family.

As consumers, Singaporeans can also do their part and vote with their wallets. Last year, residents in Tiong Bahru set up a Facebook group called We Love Hua Bee, in a bid to save a 70-year-old coffee shop.

Once the set for local film Mee Pok Man, the coffee shop was on the verge of closing down last year after its owners decided that leasing out the venue was more profitable than running the coffee shop. But the show of support led the venue's new lessee, restaurateur and hotelier Loh Lik Peng, to allow Hua Bee to continue operating in the day before making way for Bincho, a yakitori bar, at night and on the weekends.

"Nostalgia is nice but it's not a business model," said public relations agency owner and five-year Tiong Bahru resident Carolyn Oei, who helped set up the Facebook group.

"Why do people walk past the kopitiam to pay $5 for a latte at a hipster cafe? Change is inevitable but it has to stop somewhere... If not, every other cafe is going to look the same, and have the same type of food on offer."

No comments:

Post a Comment