Challenger Technologies

[cif5000]

There is little doubt that competition in the still growing IT retailing sector has been increasing over the last few years. This is evident from Challenger's gradually falling overall group-level GP Margin, which has fallen further to a still respectable 18.9% in FY12, from 19.1% in FY11.

Increasing retail rents have also affected Challenger's overall profitability over the years, and this is evident from Challenger's gradually increasing Rental/GP % Ratio, which has risen further to 19.4% in FY12, from 18.6% in FY11.

I think we haven't seen the full force of competition yet. The trend of online retailing is obvious and Challenger hasn't done anything about it. Maybe they thought they did with that little e-mama shop but they haven't had a clue how to do it well. And back to "core business" they had.

Earning that first $10m every year has been easy but to earn the next $10m is incredibly difficult. The market size is the limit. A student can study for 30min to score 80 points but to score 90 points he may need to put in 3hr. ROE has to taper.

Rental is a huge retail barrier in Singapore. Their neighbours may not be as strong as them and when they are forced to operate in the virtual space the barrier that once served them will kill them. If they don't do anything now, it might be too late to do anything at all.

Hopefully, Loo can see the challenges ahead and decide to call it a day.

[dydx]

Hopefully, Loo can see the challenges ahead and decide to call it a day.

We should never under-estimate how much and what a smart, knowledgeable, able, experienced, well-connected CEO can do to a business over time.

The relative economics between the proven brick-and-mortar retail model vs. internet shopping are not necessarily clear-cut and conclusive; if so, even supermarkets would have to close down! What we know is that the economics behind distributing goods to the consumers must include the "last-mile logistics challenge", and the current overall economic equation for cost minimization still points towards having the consumers travel to the nearby stores to buy or pick up their goods. Besides, shopping remains quite a pleasurable activity to most people, mainly because they can buy and pick up a few things from the same mall in one single trip, and also having a meal or a good cup of kopi-si before or after that - all in air-con comfort! This is especially the case if the parking charges are reasonable and at least partially reimbursable, or better still free.

[yeokiwi]

The trend of online retailing is obvious and Challenger hasn't done anything about it.

It will definitely hit Singapore shore one day. Amazon has already reached Japan.
For simple cables and computer accessories, Dealextreme(www.dx.com) is selling cheaper than many retailers in Singapore even though they have to send the items via mails.

Even for myself, I regularly shop via US Amazon. It's cheaper and much more convenient. Sometimes, even after the delivery charges are factored, it is still cheaper than buying in Singapore.

For those who want to buy levi's jeans, you can go to levi's shop in shopping mall, note down the jean's model and the size that fits you.
Go online to Amazon and place your orders. Levi's 501 is selling around US$45 only now. There will be further discount during Black friday.
If a family of four buys together, the total savings is substantial.

[CityFarmer]

Challenger Tech had established a online shopping site before, the 12buy.sg, but the site closed down eventually

Not sure what happen? and no public announcement on SGXNet.

[gemswizard]

As a gadget lover myself and a challenger member as well, I also find that nowadays I visit challenger only for the purpose of checking out the gadgets and their prices as well as to talk to the sales people to understand the products. As for the actual buying, I would prefer to shop via Amazon or even going to Sim Lim as Challenger prices are not competitive at all even after member's discount.

For me, i would not buy any big ticket items in Challenger anymore. Nowadays, I only buy small ticket items there as those items are not worth the shipping or legwork to Sim Lim. For me i get the thrill of getting a gadget at huge discount online ver the price I see at Challenger. As an example, a Sennheister noise-cancelling headset I saw at Challenger was selling at $350 but I got the exact headset (minus the warranty) from Amazon during its holiday sales at only $120 after shipping. That type of discount gives me more thrill than buying the item directly from Challenger immediately.

I think the growing global presence of big online retailer such as Amazon is really a huge disrupter to brick and mortar retailer, especially if there's huge price differences (and or discount factor) at play.

<not vested>

[Drizzt]

the bulk purchase of friends at Amazon is changing the landscape abit. but if what we say is a trend, we should see it in the results.

[specuvestor]

I actually agree with all the critiques with Challenger. Problem is you can say the same thing in 2004 when it IPOed and proven right when share price halved. Yet sales and profits did not. Question then is how to determine the turning point.

I have to admit that Challenger did better than what I expected from a big macro point of view ie a slow death with the onslaught of online IT sales as internet booms. I haven't bought a single thing from Challenger in the past 10 years though I frequent SLS. It should have gone the way of Borders. But unlike Borders itself and Popular has remained resilient.

Until their top and bottom line starts to crack, we have to be careful of being too critical to call the top for a more stable IT business vs say Creative or Blackberry, where immediate product launches determine its future. Even Datapulse took a long time for doomsayers to be right even as the outlook for Optical media is pretty clear.

[shn]

I visited Challenger stores regularly -- not to buy but to see if customers are buying. Yes, there are still many buying from Challenger. Though there are people who like to hunt for better prices, there are also many who want advice from knowledgeable sales people and buy on the spot.

The fact is that we all have limited time. The more affluence I am (thanks to generous dividend payouts from counters like Challenger), the less I become concern about paying a bit more.

I have bought two stocks for my children for educational purpose -- they are Guthrie and Challenger.

Vested.

[lanoitar]

Rental is a huge retail barrier in Singapore. Their neighbours may not be as strong as them and when they are forced to operate in the virtual space the barrier that once served them will kill them. If they don't do anything now, it might be too late to do anything at all.

And low (or negative) margin is a huge barrier in online retail:

Amazon's FY 2012:
Pdt sales = 51.7b
Cost of sales = 45.97b
Fulfillment = 6.42b

Amazon's FY 2011:
Pdt sales = 42b
Cost of sales = 37.29b
Fulfillment = 4.576b

Src: http://bit.ly/YU8Dfy

I understand the threat online retail has on brick & mortar. That, however, doesn't mean that the best response is to join in.

With razor thin margin, the only way to eke out a profit would be super huge volume & efficiency. SG market (or even a regional one) is too small to implement this business model, IMHO.

[sgd]

A better idea instead of trying to setup your own site and worrying endlessly about getting enough traffic or about building brand or worry about torrent pirates hijacking your merchandise why not just help people setup their own e-commerce site. I'm sure there are many people want to setup their own sites but lack knowledge how to go about doing it.