Recent currency fluctuations have little effect on retail prices

Retailers say rising costs like rent, transport negate any currency gains or losses


SADLY for Singapore consumers, shops here have not been flooded with much cheaper American and Japanese goods recently despite some hefty currency changes.

Over the past year, both the United States dollar and the Japanese yen have weakened considerably against the Singapore dollar.

This means American and Japanese goods theoretically are now cheaper to import. But retailers told The Straits Times that rising costs such as rent and transport have negated this currency effect.

Some goods have dropped in price, but only a little.

The good news, however, is that European goods have yet to see price increases even though the euro and the sterling have strengthened against the Singapore dollar.

This has sparked quiet concern among retailers carrying European brands, but so far, they have been willing to absorb modest currency costs.

The Singdollar has risen 8.6 per cent against the greenback and 8.7 per cent against the yen from a year ago.

Most of the dozens of firms contacted by The Straits Times said they review prices only every six to 12 months and would adjust prices only if there were drastic changes in cost price. Many firms surveyed have decided to stick with current prices.

For example, a 500g bag of Kameda Hatsuga Genmai Japanese rice from Isetan Scotts costs $12.50 - the same as in the past year.

Even when prices decrease, they are minimal compared with the currency cost savings gained by the firm.

A 2kg bag of Moronaga Uonuma rice at Isetan costs 50 cents less now than a year ago, a decrease which translates into less than a 1.4 per cent reduction.

Said Mr Sunny Sim, the executive director of Sembawang Music, which imports CDs: 'Operation cost is so high that small savings cannot compensate for the increase of rentals by the landlord.'

The sentiment was similar among other retailers, with some citing an increase in freight and logistics costs.

Also, rents of retail space have increased by 5 to 8 per cent on average, estimates Mr Danny Yeo, an executive director of property consultancy Knight Frank. 'This figure could be even higher than 10 per cent in prime locations,' he added.

A key concern is that price changes may cause consumers unnecessary confusion.

'The customers in Singapore are very price-sensitive,' said Ms Jasmine Sng, a senior manager at Muji Singapore, a Japanese no-frills clothing and household goods store. 'Market rates, market comparisons and consumer reactions are far more important.'

This is especially so for luxury brands, which pride themselves on consistency.

'We do have some exchange rate gain, but we cannot be changing prices all the time - this is a prestige brand,' Ms Ann Teo, the accounting manager at LVMH Fashion (Singapore), said of the Fendi and Alfie brands that her firm distributes here.

Another factor is that multinational companies with headquarters based overseas are affected by internal red tape, which means price adjustments are heavily restricted by the parent firm.

'All our prices are controlled by the head office in the US,' said Mr Lim Lee Huang, the finance director at jeweller Tiffany and Company.

Other firms say they face a problem of uncertainty, as they do not know which direction the Singdollar will take.

They say current gains from the rising Singdollar make up for losses incurred when the local currency weakened on earlier occasions.

For example, the Singdollar weakened 8.9 per cent against the yen in 2003 alone.

Mr Lau Cho Yau, the financial controller of Soo Kee Jewellery, said: 'The Singdollar is sometimes strong and sometimes weak. In the long run, if you maintain prices, then it will be alright.'

The good news is that prices of European products have also remained unchanged - for now.

Even with the Singdollar weakening by 4.5 per cent against the sterling and by 5.6 per cent against the euro from a year ago, firms carrying European brands are unwilling to lift retail prices.

'Cost price has gone up because the supplier bills us in euros. Though retail prices have gone up a little, we have not passed on the increase in full,' said a firm carrying European food brands.

For instance, The Diary Of Alicia Keys, a CD imported from Europe, is still priced at $17.95 at Gramaphone - unchanged from a year ago.

Said director Jayes Baskar at Tellon International, which distributes French fashion line NafNaf: 'Now, the fluctuations are within a small range, so it is fine, we won't increase the price. If the fluctuations are too much, then there's a problem.'