Global brands accept high costs as gateway strategy squeezes local shops

International operators arrive with established digital marketing capabilities and supply chains.

Local retailers in Singapore face tougher competition from foreign franchises that are rapidly expanding across food and beverage (F&B), lifestyle and beauty, putting pressure on margins and forcing smaller players to sharpen differentiation.

“Singapore’s open and globally connected market makes it an attractive gateway for international brands seeking a regional foothold,” Tricia Tan, executive director at the Franchising and Licensing Association (FLA) Singapore, told Retail Asia.

Many see the city-state as a gateway into Southeast Asia rather than a primary profit centre, she said in an emailed reply to questions.

That strategy allows foreign franchises to tolerate higher costs in exchange for visibility and scale. It also gives them an edge over local retailers struggling with labour shortages, rising rents and higher operating expenses.

Recent entrants include Chinese beverage chains such as Heytea, Luckin Coffee and Mixue Ice Cream & Tea, as well as Canadian coffee brand Tim Hortons and Chinese retailer Miniso. Tan said these operators typically arrive with established franchise models, digital marketing capabilities and efficient supply chains.

Local retailers, by contrast, often lack the pricing power and economies of scale needed to match aggressive promotions.

The challenge becomes sharper during periods of economic uncertainty, when consumers turn more price-sensitive and loyalty weakens, Tan said.

James Wilson, a partner and head of consumer and retail at KPMG Services Pte. Ltd., said the influx of foreign franchises “raises the competitive baseline,” particularly in beauty, food and beverage, lifestyle and affordable luxury segments.

Global brands tend to offer polished store formats and integrated online to offline experiences that reset consumer expectations, he pointed out.

Still, Wilson said local retailers are not without advantages. Brands who “connect with their identity, values, and craftsmanship are positioned to win in the long-term,” he said in an emailed reply to questions, citing a KPMG report.

Consumer preferences in Singapore also remain segmented, according to Hugo Texier, a partner at Roland Berger.

“Singaporean consumers typically prefer local brands for groceries, food and nonalcoholic beverages, household goods, health and medical goods, and dining-out outlets,” he said in an emailed reply to questions. 

International brands dominate more discretionary categories, including alcoholic beverages, personal care, fashion, leisure, and electronics, he added.

To stay competitive, Tan said local retailers must emphasise trust, authenticity and expansion beyond Singapore.

The domestic market is small, and relying on local demand alone limits growth. Brands that combine heritage with disciplined execution have shown resilience.

She pointed to Ya Kun Kaya Toast and Pet Lovers Centre as examples of trust built over decades, whilst restaurant groups such as Tung Lok Restaurants (2000) Ltd. and Jumbo Group Ltd. have differentiated themselves through consistency and product innovation.

Wilson said retailers should be “rooted in identity” whilst adopting select practices from global and luxury brands.

Texier added that proximity to local culture remains a key advantage. Tailored offerings and understanding of local consumption habits can offset the scale of multinational chains.

Technology is becoming a central tool in that effort. Tan cited brands like Benjamin Barker, which uses e-commerce to build lifestyle communities, and Ryan’s Grocery, which has emphasised sustainability and community engagement.

Commune Lifestyle Pte. Ltd has expanded beyond furniture through partnerships with Singapore Airlines Ltd., Pedro Group Pte. Ltd, and other brands.

Wilson said artificial intelligence is increasingly seen as a positive force. Almost three quarters of industry professionals view it as enhancing customer engagement.

Applications include demand forecasting, personalised marketing, customer relationship management, and operational efficiency.

Cost pressures, however, remain the dominant constraint. Rising rents and manpower expenses leave local retailers with less room to reinvest in innovation or customer experience.

Global franchises, Wilson said, are often better positioned to absorb shocks, whilst local players must find ways to adapt without losing what distinguishes them.

Texier warned that slow digital adoption, margin compression and shifts toward circular consumption could widen that gap further if retailers fail to respond.