Johor Bahru-Singapore RTS link sparks concerns over retail value leakage

The RTS Link threatens Singapore's retail market.

The Johor Bahru-Singapore Rapid Transit System (RTS) Link, set to enhance connectivity between the two cities, poses a potential 5.4% retail value leakage, impacting Singapore's retail sales by an estimated 3% to 4%. 

This development prompts concerns among Singaporean retailers about increased consumer spending in Johor Bahru, driven by favourable currency exchange rates and the rising cost of living in Singapore.

DBS has highlighted that the affordability of goods and services has increased in Johor Bahru due to the weakened Malaysian Ringgit (MYR) and Goods and Services Tax (GST) hikes in Singapore. The ease of travel enabled by the RTS Link may prompt Singaporeans to “stretch the dollar” by shopping across the border. 

Januel Koh, a Digital Marketing and Branding Lecturer at Singapore Polytechnic's School of Business, identifies key sectors likely to be affected. “Singaporeans love to go to Johor to buy groceries for apparel, fashion, and technological products," he noted. Additionally, services such as haircuts, spa treatments, and massages are popular due to the cost savings of 30% to 60% in Johor Bahru. 

Mário Braz de Matos, Co-founder and Managing Partner of Flying Fish Lab, stated, “I think the catchment area is going to be a key consideration.” Businesses located further from the RTS Link may experience less impact, while sectors with comparable offerings on both sides of the border may see significant shifts in consumer behaviour due to price differences.

Competitive strategies for singaporean retailers

As Singaporean retailers face these challenges, they must innovate and adapt to remain competitive. de Matos emphasised the importance of focusing on value rather than price. “Singapore is not a cost country; it’s a value country,” he said. Retailers need to rethink their value propositions and consider offering unique experiences or products that justify the higher prices. 

Januel Koh concurred that retailers should focus on meeting consumer expectations and providing added value to differentiate themselves from Johor Bahru's offerings.

The RTS Link is expected to alter Singaporean consumer shopping habits, with more individuals seeking opportunities to maximise value through cross-border purchases. Koh observed a shift back to offline shopping post-COVID, with consumers exploring various platforms for the best value deals. 

He highlighted the importance of omnichannel strategies, emphasising the role of memberships and personalised experiences in attracting and retaining customers. “When this membership is in place, that’s when the magic happens,” Koh stated.

“We’re not going to prevent people from going over to Johor. We have to live with it,” Braz de Matos advised. He suggested focusing on attracting Johor Bahru residents to Singapore, balancing the flow of shoppers between the two cities.

Government support and policy

Addressing the impact of the RTS Link on the retail sector requires targeted government support. Braz de Matos called for policies that enhance business value propositions and provide training and resources for retailers to reposition and transform. He also praises Singapore’s effective monitoring of business performance, suggesting the use of GST data to gauge retail health and inform policy decisions.

As the RTS Link nears completion, Singaporean retailers face the dual challenge of retaining local customers and attracting cross-border shoppers. By focusing on value, experience, and strategic adaptation, they can mitigate the potential impact and thrive in this evolving landscape.