Singapore’s in-store cafés may soon reach their limit

If every retailer has its own café, it becomes just part of the crowd.

Singapore retailers that use in-store cafés to build brand awareness and boost sales may need to think beyond coffee in the face of a market that is fast-becoming oversaturated, according to analysts.

Whilst in-store cafés could be a valuable customer engagement tool, the market may soon reach its limit, said Matthew Crabbe, vice president of trends for the Asia-Pacific region at market research firm Mintel Group Ltd.

“If everybody ends up with a café in the store, then you’re just part of the crowd,” he told Singapore Business Review. “The next step could involve adding gaming elements or other unique experiences to remain ahead of the curve.”

Most Singaporeans are regular coffee drinkers. Eight of 10 drink coffee at least once a month, and 58% drink it daily, according to a YouGov report in July 2024. Fewer Gen Z (59%) drink coffee than Millennials (79%), Gen X (85%), and Baby Boomers (83%).

The integration of cafés taps into Singapore’s strong café and foodie culture, said Sulian Tan-Wijaya, executive director of Retail and Lifestyle at Savills Singapore. “Singapore has a strong café culture and Singaporeans are well-known foodies who are always adventurous when it comes to new food and beverage experiences.”

She expects more retailers in the city-state to join the cafe bandwagon since even consumers who are not big shoppers are willing to splurge on a good café experience.

“Singapore is playing catch-up with other cities for in-store cafés,” Tan-Wijaya said. “Prada just opened their café in their ION boutique, whilst Louis Vuitton is set to open their café at their MBS maison. I believe more will follow.”

She noted that luxury brands use cafés not just to engage customers but also as a powerful branding element that brings “intangible returns.”

Luxury brands also use cafés to connect with younger consumers, especially Gen Z.  “Because it costs much less to dine at the café than to buy a luxury product, luxury brands are able to engage younger Gen Z customers by having them experience the brand through dining.”

“Going to a new café is also an Instagram-worthy excursion and experience for many,” she added.

However, integrating cafés in stores can be challenging given a manpower shortage, and high rent and operating costs, Tan-Wijaya said.

Crabbe said running an in-store café needs a significant investment in retail space, licenses, and hygiene certification. He also warned of the risks of poor-quality service or coffee, which could harm the brand. “If you’re not an expert in coffee, poor execution can damage your reputation.”

Retailers considering adding a café should align it with its overall brand identity to ensure it does not become out of place, Tan-Wijaya said. “Otherwise, it will be just having a café for the sake of it, and customers are discerning enough to see through it.”

“If you walk into a store and the café doesn’t feel like it’s part of the store, then it feels like you’ve left the store,” Crabbe said.

As in-store cafés become more commonplace, retailers should innovate to stand out, Tan-Wijaya said. “When you reach that [saturation] point, the market leaders, the more innovative brands, will be thinking: ‘OK, we’ve done coffee. What are we doing next?’”