Is It Fair For Businesses In Singapore To Impose A Surcharge On Goods And Services For Chinese New Year?

Chinese New Year (CNY), one of the major festivals that is celebrated in Singapore, is just around the corner, on January 22. This year’s celebration also marks the return to the pre-COVID days, with most COVID-19 restrictions that were in place for the past two years now relaxed.

Even though we’re happy to be able to shop and dine with our families, friends, or colleagues in large groups, some of the goods and services we usually pay for may see a surge in price during the weeks leading up to CNY.

For example, aside from usual suspects like festive goodies such as bak kwa, pineapple tarts, and others, we might also notice a surge in pricing on our other regular spending like haircuts, manicures and pedicures, groceries, and even third-party handyman services—yes, it’s not a good time now to repair that broken oven if you’re thinking about baking some cookies.

Read Also: Why Bak Kwa Costs More During Chinese New Year

Surcharges Imposed During Festive Period Adds To The Cost Of Living Pressures 

Amidst the current high inflationary environment, the surcharges imposed during this major festivity will certainly add to the cost of living pressures for consumers. However, these higher costs for goods and services may not typically translate to an improved service standard or better product offering.

Hence, consumers may view it as unfair for businesses to take advantage of the holiday period to squeeze out more money (profit) at their expense.

It could also alienate regular consumers, who might be incentivised to look for other alternatives or may be forced to forgo consuming such services leading up to the festive period. Both such outcomes are negative for businesses.

If so, why then do some businesses continue to levy a surcharge on their goods and services?

Charging More Allows Businesses To Deal With The High Demand And Have A Financial Cushion For The Year

Gone are the days when neighbourhood plazas felt like ghost towns, with most shops closed for at least two days to a week, as they did (at least as far as I can remember) 20 years ago. Today, most businesses, besides a few traditional mom-and-pop shops, tend to operate as usual even on CNY.

Fast food restaurants such as McDonald’s and KFC, as well as major supermarkets such as NTUC FairPrice, Giant, Cold Storage, and Sheng Siong Supermarket, are some of the companies that will continue to operate (most of their outlets) as usual even during CNY. Yet, while these big companies are better positioned to absorb the higher operating costs of operating during CNY, other smaller businesses may not have the same financial clout or business prospects to make it viable for them to stay open throughout the CNY holidays.

For these small companies, imposing a surcharge in the weeks prior to CNY, may benefit them in the following ways:

#1 Able To Deal With The Temporary Higher Operating Costs

Small companies may not be able to absorb any surge in operating costs, unlike bigger companies. They might look to pass on any additional one-off costs incurred during this festive period, which could be a result of longer operational hours. This could be in the form of higher transportation and logistics, manpower, or even raw material costs.

As such, it could be practical for businesses to impose a temporary surcharge on consumers instead of raising the prices on their goods and services.

#2 Better Manage Increased Demand

Small businesses like hair and beauty salons may not be able to cope with the sudden increase in demand for their services at their current capacity. To better manage the crowd level and consumer expectations, these businesses may place a surcharge on their services.

#3 The Additional Income Can Be Distributed As A Bonus To Employees And Support An Extended Business Closure

Some businesses may charge a small fee to stay open for extended hours and pay out the revenue generated as a bonus to their employees.

Also, certain small businesses, like those selling home improvement items like curtains, blankets, and cushions, or those operating nurseries, could see CNY as their biggest revenue-generating opportunity for the year. By charging more during this period, it improves the financial ability of the business to give their staff a better bonus and offer a longer CNY holiday break.

Businesses May Need To Transform And Redesign Jobs To Stay Relevant In the Future Economy

In the long run, small businesses that need to cover the higher operating costs, may not be able to continue with the current practice of imposing a surcharge in the weeks leading up to CNY. Consumers who vote with their wallets will eventually switch to other (oft quoted: cheaper and better) alternatives, which could be detrimental to the fortunes of these small mom-and-pop shops.

Instead, businesses should continually drive to transform their current operational practices to meet the current demands and preferences of consumers. It is also important for businesses to stay relevant to job seekers by redesigning job roles to match the expectations of the upcoming workforce.

Here are some ways that businesses could reduce the need for a surcharge while still remaining operationally viable and maintaining their competitiveness.

#1 Plan Ahead And Optimise Inventory

Businesses that have been in existence for a few years would have sufficient knowledge and data on the consumer patterns leading up to CNY. This information can then be used to predict, plan, and manage inventory levels effectively, which would also translate into optimising costs.

#2 Go Digital, Sell Online

Other than being able to collect payments digitally, businesses selling goods could also consider setting up a digital store on popular ecommerce platforms. Unlike brick-and-mortar stores, these digital stores can stay open 24 hours a day, 7 days a week, and at a fraction of the cost.

Businesses can also engage multiple third-party delivery partners like Grab and Lalamove to fulfil orders during peak seasons. This enables businesses to scale their operations without having to physically work longer hours or require a large team.

Read Also: Guide To Start Digital Pack For Small And Medium Enterprises

#3 Incentivise Regular Patronage With Group Buys

Instead of promoting it as a one-off item or service, businesses could offer it as a package. Similar to how hair salons and beauty parlours offer packages for their services, other businesses could also offer different purchase options for consumers to use their services throughout the year. This ensures regular patronage and customer loyalty for the business.

#4 Raise Productivity And Reduce Reliance On Human Labour

Manpower could be a major concern for most small businesses, as they may not have the same allure as big-brand retail outlets. These businesses should look into redesigning the job functions offered and raising the productivity levels of their workers. There are also various grants available under the Workforce Productivity like the Productivity Solutions Grant (PSG-JR) and SkillsFuture Enterprise Credit, that businesses can use to reduce the training costs of their employees.

Where possible, businesses could also look into robotics and automation for work processes that can be streamlined to reduce the amount of human labour that is required. This would enable the business to scale up its operations on demand without experiencing significantly higher operating costs.

Read Also: Guide To Understanding The Productivity Solutions Grant (PSG)

The post Is It Fair For Businesses In Singapore To Impose A Surcharge On Goods And Services For Chinese New Year? appeared first on DollarsAndSense Business.