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From luxury items to basic necessities: Consumer patterns changing amid rising affluence, technological advances

Published on: 02-Aug-2019

 Car ownership among resident households in Singapore fell to its lowest in 10 years in the period between 2017 and 2018, the latest household expenditure survey released on Wednesday (July 31) showed.

But while fewer households are spending on such big-ticket items, more are buying products such as air purifiers, massage chairs and air-conditioners — a sign of increasing affluence and higher quality of life, said analysts.

In general, luxury items that were once considered expensive are now becoming necessities, the analysts said.

CAR OWNERSHIP

The survey found that the car ownership rate fell to 35 per cent in 2017/2018.

This was lower than the 42 per cent in 2012/2013 and the 38 per cent recorded in 2007/2008 — before the supply of Certificates of Entitlement (COEs) was tightened in 2009. A COE gives you the right to own a vehicle and use the limited road space for 10 years.

The Department of Statistics (Singstat) said that the trend corresponded to a fall in the total car population in Singapore in the last five years amid the wider availability of transportation alternatives such as car-sharing services.

Figures from the Land Transport Authority (LTA) showed that the number of private cars — excluding private-hire vehicles — dropped from 605,149 in 2012 to 546,706 in 2017.

Correspondingly, there were only 14,862 private-hire cars in 2012, compared with 68,083 in 2017.

Economist Walter Theseira from the Singapore University of Social Sciences (SUSS) pointed out that due to the COE quota, the total number of cars in Singapore is “determined by quota and not household demand”.

He added that one major change in the past few years has been the rapid growth of commercial-use cars — those owned by rental car companies for use as private-hire cars.

“As such, the fixed pool of cars is now more heavily distributed in commercial hands,” he said.

What the car ownership statistics do not reveal, Dr Theseira said, is the “pent-up demand” to own a car.

“If quota numbers were increased, car ownership rates would go up, as households would buy cars… I don't think all the increase in quota would simply go to private-hire firms.”

Still, other experts reckoned that cars have also become less of a “status symbol” now, compared with a few years ago.

Associate Professor Sharon Ng, who heads Nanyang Business School’s marketing division at the Nanyang Technological University (NTU), said that for the younger generations, car ownership is increasingly seen as a “utilitarian purchase, something they buy if they need it but less for status”.

She added that young people are also more environmentally conscious and embrace the sharing economy. “All these make car ownership less crucial to their lifestyle and their self-identity.” 

MORE BUYING ‘LUXURY’ ITEMS?

The decline in car ownership is but one aspect that is reflective of wider shifts in overall consumer patterns.

In particular, the national household expenditure survey found that people are now spending on different items compared with five years ago.

For example, 79.7 per cent of households now own air-conditioning units — with more low-income households among them — compared with five years ago.

More households (8.3 per cent) also own massage chairs compared with five years ago (7.4 per cent).

On average, about 20 per cent of households now own air purifiers and dryers.

In addition, about 28 per cent of households have bicycles and personal mobility devices (PMDs).

Reflecting on these findings, Assoc Prof Ng said: “Many things that are considered luxury items in the past, such as mobile phones and laptops, are now basic (items).”

Due to technological advances, these are things seen as essential to people’s lifestyle, she said. “Nowadays, many services need to be accessed from online resources or apps.”

Dr Joicey Wei Jie, senior lecturer at SUSS’ School of Business, said that with increasing affluence, it is expected that consumers spend more on luxury goods.

“A luxury (or superior) good may even become an ‘inferior’ good as income levels increase over time,” she said, citing the example of how mobile phones were considered “luxury” items when they first entered the market decades ago.

Dr Theseira added: “This happens for most consumer goods as a result of prices falling and expectations changing.”

He said it is a good sign of progress, but “only when expenditure goes up and people are consuming more and better goods and services”, and not just paying more for the exact same things.

LESSER DEMAND FOR SOME TECH PRODUCTS 

The ubiquity of smartphones and tablets could have resulted in a fall in demand for items such as DVD players, digital cameras, DVDs and CDs, which were traditionally used to process or store information.

Rapid digitalisation and technological advancements have also allowed greater and easier access to information and entertainment on-the-go, leading to a decline in spending on hardcopy reading materials such as books and newspapers.

In addition, the types of services purchased by households are also shifting.

For instance, the subscription rate of pay-TV droped to 54 per cent in 2017/18, from a peak of 61 per cent in 2012/13.

This could be attributed to the increasing prevalence of alternatives to pay-TV, such as online video streaming platforms, said Singstat. The survey found that some 6.9 per cent of resident households had online video streaming subscriptions in 2017/18.

A comparison was not available as this was the first time data on online video streaming subscriptions was recorded, said Singstat.

MODE OF PURCHASE CHANGING

The way households are spending is also evolving, with more buying items online.

In 2017/18, about 60 per cent of households reported online purchases, up from 31 per cent in 2012/13 when online purchases were first recorded.

Although the amount spent online remained small relative to households’ overall expenditure, monthly online spending tripled to S$240 in 2017/18.

It constituted 5 per cent of average household expenditure, excluding imputed rental in 2017/18, up from 1.7 per cent in 2012/13.

WHAT DO PEOPLE BUY ONLINE?

The average household’s online spending is mostly on food, clothing, transport, recreation and accommodation services.

With the growth of e-commerce and food delivery services offering groceries and ready-to-eat meals delivered to homes, average monthly household expenditure on buying food online jumped from S$2 in 2012/13 to S$20 in 2017/18.

Despite an overall decline in the average monthly household expenditure on clothing and footwear from S$160 in 2012/13 to S$120 in 2017/18, online spending on these items, however, increased.


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