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Lunar year buying frenzy hit by crisis

SHOPPING is a national obsession in Singapore, yet this lunar New Year retailers are struggling to get the city's usually insatiable shoppers to part with their cash as a cloud of economic gloom hangs over Asia.

"Even though there's a 50 percent sale on here, look at the sales counter, there's no one queuing. That's not normal," said Mrs Them, a 47-year-old housewife, browsing through a department store at the city's renowned Orchard Road shopping district.

The lunar New Year, which starts tomorrow, comes hard on the heels of Christmas, signaling a traditional two-month shopping frenzy in most of East Asia as consumers splash out on seasonal foods as well as gifts and new clothes for the holidays.

This year, though, shoppers are showing signs of restraint as a global economic crisis knocks consumer confidence across Asia and prompts governments and retailers to conjure up new ways to bolster spending.

Slower growth

"It's going to be tough for Asian retailers, perhaps not quite as tough as in Europe and the United States, but we will see slower growth," said Paul McKenzie, head of consumer research at CLSA in Hong Kong.

He expects retail sales growth in Hong Kong and Singapore to be negative this year, or flat at best, compared with a rise of about 11.5 percent and 5 percent respectively in 2008.

Slower growth in tourism, which accounts for 20-30 percent of retail sales in Hong Kong, is expected to hurt retailers there.

In Chinese mainland, HSBC forecasts annual retail sales growth to slow to a nominal rate of 15 percent this year from about 18 percent in 2008 as consumers tighten their belts amid a slowdown.

To stimulate its economy, Chinese mainland will give its neediest citizens hand-outs of up to 180 yuan (US$26), while Taiwan will dole out the equivalent of US$109 in shopping vouchers to brighten the mood before the Chinese New Year holiday.

Retailers globally have been hurt by a deteriorating economic outlook. In the United States, stores experienced their most dismal Christmas holiday sales in 40 years, while a growing list of household names have disappeared off Britain's high street.

Yet analysts say Asian retailers have an advantage as the impact of the economic crisis is far less than in the United States and Europe.

Also, consumer spending will likely benefit from sizeable government fiscal packages of about US$640 billion in Asia, excluding Japan, hefty interest rate cuts and lower fuel prices.

Still, with Hong Kong, Japan and Singapore all in recession, and South Korea's economy tipped to contract in 2009 for the first time in 11 years, this year's shopping season could prove critical.

"Everyone is worried about what will happen after Chinese New Year, when the impetus of the Christmas and New Year shopping period is over," said Terry O'Connor, regional CEO for Courts, an electronic and furniture retailer that has 80 stores in Southeast Asia. "Consumers are cautious but it's not a disaster in Asia."

Asia has enjoyed surging growth in recent years which has expanded the ranks of a middle-class keen to acquire the trappings of their newfound affluence.

But in a region heavily dependent on exports, which fell sharply in December, cuts in work orders are leading to lay-offs in factories across the region.

The International Monetary Fund predicts that Asia's economy will grow 4.9 percent this year compared to a forecast of 6 percent in 2008.

The mood in Japan is particularly glum as it enters what some economists say might be its longest recession on record.

Japan's No. 3 department store chain Takashimaya Co Ltd said sales at its flagship store in Tokyo fell 5 percent year-on-year in the first two trading days of 2009, a period that traditionally marks an annual ritual of bargain hunting.

Discretionary items such as designer clothes and electronics are being hit hard, while stores report relatively solid sales of food items as people choose to spend more time at home.

"Our immediate goal is just to survive," said Ichiro Fukuyama, associate director at J.Front Retailing, the country's second largest department store chain.

Consumer expenditure across Asia is expected to slow in 2009 and consumer confidence has been hurt. In Chinese mainland, 46 percent of consumers thought the country's economic situation was good in November compared to 90 percent in April 2007. Service sector sentiment in Japan, watched closely for consumer and retail trends, hit a record low in December.

Bleak outlook

With unemployment queues expanding as Asian exports plunge, job security is seen as the key to how consumer spending will hold up. Faced with a bleak outlook, retailers and governments are ramping up efforts to spur shopping.

Shinsegae Co Ltd, a top department store chain in South Korea, is promoting low to medium-priced gift sets for the lunar New Year, in light of the economic slump.

"We have sharply increased gift sets in the price range between 50,000 won (US$36.40) and 70,000 won this year, down from last year's range of 70,000 won to 120,000 won," spokesman Jeong Jae-uk said. "We expect sales growth at about 10 percent for this lunar New Year season, down from 18 percent for the same period last year."

Terry O'Connor at Courts said the chain was chasing business with road shows and promotions. "Everything we do is more aggressive by a measure of 2-3 fold," he said.

In Taiwan, where retail sales and wholesale spending account for about a fifth of GDP, shopping vouchers were to be distributed about a week before the lunar New Year.

On Dihua Street, one of Taipei's biggest traditional markets for lunar New Year goods, owner Chen Kuo-chu, 60, said his Chinese delicacies store is unlikely to benefit from government shopping vouchers as the sum given is not that high.

The Year of the Ox is a sign of "prosperity through fortitude" - a motto Asia's retailers may adopt at the start of what is likely to be a difficult year.

"Now, it seems all my hope lies on the week-long Spring Festival (lunar New Year) holiday. I just wish more people would go out shopping, rather than staying at home," said one shop owner.


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