Brick-and-mortar with its back against the wall

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Brick-and-mortar with its back against the wall
Stores struggle with rising rentals and scarce manpower

By Joyce Hooi
joyceh@sph.com.sg   @JoyceHooiBT
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[SINGAPORE] If life were theatre, retailers would be the Greek chorus. Of late, theirs has been a tale of woe, with rentals high and manpower scarce. Online players are nipping at their heels, local shoppers are increasingly price-conscious and foreign ones are kept at bay by the strong Singapore dollar.

Even so, life (and the show) must go on, and some retailers are regrouping or making do in the face of untenable conditions.

Clothing retailer FJ Benjamin, for example, now has a 15 per cent vacancy rate for employees across its network of stores in Singapore. To combat this, the firm moves staff from underperforming stores to those that are doing well, says Ian Lim, CEO of FJ Benjamin (Singapore). The underperforming stores are then downsized or earmarked for closure.

At the same time, the company has already begun to reduce the size of two or three of its stores where it believes the rental rates are fair but the stores are too large. Elsewhere, some leases up for renewal have had their rental rates negotiated down to "acceptable" levels, Mr Lim says.

Sometimes, however, push comes to shove, when store sizes or rentals cannot be made smaller or lower.

"We are looking at closing two or three stores in Singapore . . . to arrive at an optimal network size for the current sluggish market conditions," says Mr Lim.

FJ Benjamin is not alone. Across the island, retailers are shuttering stores.

Challenger Technologies, for example, will close its 112 Katong retail outlet when the lease expires this December.

"From time to time, we review our retail operations and will cease retail operations or not renew leases at locations that are not performing up to our expectations," its spokeswoman tells BT.

Over 2012 and 2013, jewellery retailer Aspial opened 12 new stores, but closed 19. The consolidation seems to have worked. Even with a smaller network of stores, its jewellery business revenue rose 4.1 per cent in 2013 to $169.6 million. Profit grew 29.6 per cent on better same- store sales, lower rental expense and depreciation.

With the labour crunch expected to worsen, some retailers have also pumped money into raising productivity.

Supermarket chain Sheng Siong, for example, invested in a warehouse management system that sped up the process of product picking. It also linked up its seafood purchasing at the Jurong Fishery Port to its back office, distribution centre and supermarkets, feeding all parties in the network real-time information.

These moves saw Sheng Siong making productivity gains of about 30 per cent, it says. A JPMorgan report in April noted that the supermarket chain had managed to lower its number of employees per store from 67 in 2011 to 58 in 2013.

Where you can't beat 'em, of course, you join 'em. Both Challenger and Sheng Siong are among the latest brick-and-mortar players to go online, setting up shopping portals on the Internet late last year.

"Despite a lack of publicity, Challenger's online sales have been growing month-on-month. In fact, it doubled from May to June 2014," its spokeswoman tells BT.

Sheng Siong's e-commerce foray also means that all the brick-and-mortar supermarket chains in Singapore are now online. They will go up against pure-play online grocers RedMart and a new upmarket contender, GoFresh, for a groceries market that is estimated to be worth $6 billion here.

Sheng Siong says it is too early to reveal volumes for its online shopping pilot project which started last November, but it knows that this form of shopping is here to stay.

"E-commerce will be a way of life in the future, and we are making full use of this as a mutual learning experience; to win over customers who prefer physical shopping and to adapt our model to accommodate their needs," it says.
Winston Churchill:-
“The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.”
"The farther backward you can look, the farther forward you are likely to see."
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#2
I saw two names, Challenger and Sheng Siong, and both are in my portfolio. Both should survive well amid the labour crunch in Singapore Big Grin
“夏则资皮,冬则资纱,旱则资船,水则资车” - 范蠡
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