Author: Mei Ling Tan

  • Mobile banking consumers in Singapore warned of malware threat.

    Mobile banking consumers in Singapore warned of malware threat.

    Bank customers in Singapore have been warned of a rise in malware infections on Android phones that seek to hijack online passwords and one-time security codes.

    The warning, from the Association of Banks in Singapore (ABS), says the infections appear as a software update for Android smartphones, or as a service for updating WhatsApp.In the latter, a pop-up advertisement encourages consumers to tap it and download a “new” version of the program or risk losing access to the service. After downloading the update, the application will prompt the customer to input confidential information, such as credit card details, which could then be used to commit fraud.

    Smartphones that have been jailbroken or rooted are particularly susceptible to infection, says the ABS.

    Ong-Ang Ai Boon, director of ABS, says that major retail banks in Singapore have seen an increase of mobile banking customers from 1.5 million in 2013 to 2.4 million in 2015.

    “ABS would like to remind mobile banking customers that smartphones are as susceptible to malware as desktop computers or laptops,” she says. “Consumers are reminded to download applications only from trusted sources.”

  • China’s Slowdown Is Killing Its Luxury Market

    China’s Slowdown Is Killing Its Luxury Market

    Many investors are unfamiliar with the Chow Tai Fook Jewellery Group, but it is in fact the world’s largest publicly traded jewelry chain.

    The company reported its first half profit for 2015 plunged 42 percent due to weak demand in Hong Kong and Macau and an economic slowdown, Macau Daily Times noted.

    Chow Tai Fook’s net income fell to HK$1.56 billion ($201 million) for the six-month period ending in September. In the same period a year ago, the company’s net income was HK$2.69 billion. Sales for the six-month period fell 4.1 percent from a year ago to HK$28.1 billion, while same-store sales fell 18 percent in Hong Kong and Macau, but rose 0.1 percent in mainland China.

    The company warned investors back in early November that its profits are expected to decline due to the weakness in Hong Kong and Macau, along with an unfavorable sales mix of lower-margin gold products and unrealized hedging losses.

    Is Tiffany Winning Where Chow Tai Fook Is Failing?

    Tiffany & Co. reported its third quarter results on Tuesday. Commenting on the Asia-Pacific region, the company said that total sales rose 6 percent in the third quarter and comparable store sales rose 2 percent. Total sales and comparable store sales in the year-to-date period rose 6 percent and 4 percent, respectively.

    On a constant-exchange-rate basis, Tiffany said that it saw “healthy sales growth” in China, but sales declined again in Hong Kong and Macau.

    Tiffany also announced a total sales and comparable store sales growth in Japan of (FX-neutral) of 34 percent and 24 percent, respectively. According to a report by Bloomberg, Tiffany is “eating Chow Tai Fook’s breakfast” as Chinese tourists accounted for a “significant” portion of the growth Tiffany experienced in Japan.

    Bloomberg also noted that Chinese goods don’t have a “particularly good” reputation among Chinese shoppers, which might also explain why Tiffany is seeing success in a region where Chow Tai Fook “should be cleaning up.”

  • Metro surges ahead

    Metro surges ahead

    Last week amid cheers and the beat of drums, Cebuano retailer Frank S. Gaisano – with his siblings Margaret, Jack and Edward by his side – rang the opening bell at the Philippine Stock Exchange (PSE) in Makati.

    The traditional ceremony marked the market debut of Metro Retail Stores Group, Inc., the first for a Gaisano —  an iconic name in Cebu’s retail industry —  and for a Cebu-based company in almost a decade.

    Gaisano said going public, which raised about P3.6 billion for Metro’s expansion, will also enable Metro to “improve margins and operating efficiency, protect our market share, and consequently create value for our investors.”

    Frank Gaisano (4th from left), chairman and CEO, leadS the bell-ringing ceremony to mark the listing of Metro Retail Stores Group Inc. on the Philippine Stock Exchange. Joining him on stage are his siblings Jack Gaisano director, Edward Gaisano, chairman and CEO of Vicsal, and Margaret Gaisano-Ang, director. PSE executives witness the milestone led by chairman Jose Pardo, president and CEO Hans Sicat, and directors Vivian Yuchingco, Emmanuel Bautista and Alejandro Yu. (CDN PHOTO/TONEE DESPOJO)

    “We are ready to compete with other industry players in serving our value-conscious market and be a leading and well-admired retailer,” Gaisano said in a statement issued after the ceremony.

    Metro, retail arm of Vicsal Development Corp., is the fourth largest retailer in the country, after SM, Puregold and Robinsons. It is the largest department store and hypermarket operator in the Visayas.

    The company is embarking on an aggressive expansion program that will see 50 to 70 new stores in the next five years, bringing the company’s network to more than 100 stores.

    This will double Metro’s footprint from the current 400,000-square meters for 46 stores, said Metro President and Chief Operating Officer Arthur Emmanuel.

    “About 100,000-square meters have been secured, including stores that will open in partnership with Megaworld and Ayala. These should open in the next two years,” said Joseph Conrad M. Balatbat, investor relations head of Metro, in a press conference after the bell-ringing ceremony.

    Margaret Gsaisano-Ang holds up the image of Sto. Nino, Cebu's patron, at the Philippine Stock Exchange in Makati as Sinulog dancers perform a dance offering on stage for a touch of Cebuano culture. (CDN PHOTO/TONEE DESPOJO)

    At least seven stores are slated to open next year, including one in northern Cebu and another in the south. Four other stores will serve as anchor stores of Ayala developments while one will rise at the Megaworld mixed-use complex in Iloilo.

    About half of the 50 to 70 new stores that will open in the next five years will be in the Visayas while the rest will be in Luzon and Mindanao, where Metro has yet to establish its presence.

    “The Visayas is our priority. We see the Visayas growing much faster than Luzon. Based on Euromonitor, retail penetration in the Philippines is only 28 percent. It’s much lower in the Visayas,” Balatbat said.

    The bulk or 67 percent of the IPO proceeds will fund this aggressive expansion. The rest will be used for mergers and acquisitions.

    Balatbat said they were in talks for the acquisition of more neighborhood stores that will be rebranded as Metro Fresh N Easy.

    FIRST TRADING DAY

    The Metro stock, with trading symbol MRSGI, opened strong at P4.30 and closed at P4.13, about 3.5 percent higher than the IPO price of P3.99.

    The listing followed an initial public offering (IPO) that issued 905.4 million common shares and raised about P3.6 billion.

    This milestone occurred 33 years after the first store — then called Metro Gaisano — was opened in Colon Street in  Cebu City in 1982.

    Before the bell-ringing ceremony, Sinulog dancers in colorful costumes performed on the trading floor and on  stage as company representatives waved Metro flaglets.

    Metro Retail is run by siblings Margaret, Jack, Edward and Frank. Their parents Victor and Sally, from whose names Vicsal was coined, started Metro with a store in Colon Street that had to compete with seven others in 1982.

    There are currently 46 Metro stores across three retail formats — department store, supermarket and hypermarket (Super Metro) — in the Visayas and Luzon. Twenty-six of these stores are in Cebu and the Visayas.

    With its listing on the PSE, Metro joined three other Cebu-based companies that have tapped the capital market: Cebu Property Ventures and Development Corp. in 1992; and Cebu Holdings, Inc. and Vivant Corp., both in 1994. Aboitiz Equity Ventures and Aboitiz Power Corp. were still based in Cebu when they went public in 1994 and 2007, respectively. Both are now based in Manila.

    “This reflects our confidence in the capital markets. We believe the Philippine economy is one of the least vulnerable among the emerging economies. We continue to leverage on this positive sentiment on our economy,” Gaisano said during the press conference.

     

  • Question mark hangs over South Korea’s discount spree

    Question mark hangs over South Korea’s discount spree

    People love bargain deals. Clearance sales with 80 percent or more off can even lure customers in to buy things they don’t need.

    That’s why retailers offer “door buster” deals when they need to handle rising stockpiles or attract customers during holiday shopping seasons, such as “Black Friday”, the biggest shopping day of the year in the United States.

    On top of seasonal sales and occasional promotions, major South Korean retailers have been holding a series of big discount events since summer to create an intense, promotion-heavy atmosphere through the Christmas season and beyond.

    The discount binge has indeed given a fillip to consumer spending here, but market watchers question its long-term effect as a slowdown in Asia’s fourth-largest economy has led to lower incomes for many people, prompting them to tighten their purse strings.

    Most recently, “K-Sale Day” kicked off last week to run for 26 days nationwide, led by major department stores and outlets that hope to grab shoppers’ attention ahead of the original Black Friday.

    It came just a month after “Korea’s Black Friday”, a nationwide shopping campaign initiated by the government during the first two weeks of October to jack up the stagnant domestic consumption.

    The government-led event even overlapped with “Korea Grand Sale”, during which retailers knocked down prices from early September to mid-October to woo back both domestic consumers and Chinese travelers during the long-haul national holiday.

    One of the main reasons for the deluge of sales is the summer slump following the outbreak of Middle East Respiratory Syndrome (MERS) in late May, which poured cold water on domestic spending and dented tourist numbers.

    More fundamentally, however, the seemingly never-ending sale is seen as an early sign that South Korea is heading into a recession.

    “Although the domestic economy has long grappled with sluggish consumption, the government is ever more concerned about weak spending after exports showed signs of slowing,” Ko Ga-young, a researcher at LG Economic Research Institute, said.

    “Exporters in the manufacturing sector had propelled the growth until the 2008 global financial crisis, but their prospects remain bleak due to slowdown in the Chinese economy and tougher global competition in the low-end manufacturing sector.”

    Although policy makers had expected that low oil prices and record-low interest rates would boost the economy this year, the fallout from the MERS outbreak prompted the government to lower its 2015 growth forecast from 3.8 percent to 3.1 percent in June.

    The discount events, held both online and offline, did not create much buzz like Chinese e-commerce giant Alibaba’s “Singles Day”, which recorded a blockbuster $14.3 billion in sales on Nov. 11, but the steep discounts did serve as the spending trigger for pent-up demand in a short period of time.

    According to the data compiled by the industry ministry, the 22 retailers that joined the Black Friday Korea campaign saw their sales rise 20.7 percent on-year to 719.4 billion won (US$634.9 million) during the two-week period.

    While the government touted its “successful effort” in reviving the consumer sentiment, the market remained skeptical over the growth from last year’s low base during the extended holiday season.

    “Large department stores and discount chains face an unfavorable business environment because massive sales events and permanent discount policy produced a limited effect despite last year’s low base,” said Nam Sung-hyun, a researcher at Kiwoom Securities.

    Unlike a one-off factor like the viral disease, market watchers worry that the tight labor market and rising household debt could continue to discourage people from spending on concerns over their unstable future.

    The youth jobless rate reached the highest level in 15 years at 10.1 percent in June with more college graduates landing at temporary positions, while the average consumption propensity dipped to a record low 71.5 percent in the third quarter, according to Statistics Korea.

    “The consumption propensity is expected to further decline because households are managing their spending schedule in line with the bleak long-term growth prospect and extended life span,” Ko said.

    Brick-and-mortar shops face an even dimmer outlook as more consumers are hunting for bargains from online marketplaces abroad.

    Traditional retailers not only have to compete with each other but also counter challenges from international online marketplaces stealing their customers with easier delivery and transaction procedures.

    “As more consumers learn they can easily buy products at a much cheaper price via online vendors, offline shops are more frequently conducting discount events to retain their customers,” said Jun Mi-young, a professor at Seoul National University and co-author of Trend Korea 2016.

    “The experience of buying foreign brands at discounted prices has created a healthy dose of cynicism about department stores’ pricing policy.”

    According to U.S. No. 1 retailer Walmart’s Black Friday advertisement, South Korean tech giant Samsung Electronics’ 55-inch HDTV was discounted to $498, less than half prices for similar models sold at Korean department stores.

    Some deals even raise questions over whether retailers set a higher price from the beginning to look like they are giving discounts.

    Lotte Department Store’s K-Sale Day promotional leaflet shows that the price of German kitchenware maker Henkel’s five-star knife block set was reduced from 550,000 won to 229,000 won.

    Sounds like a good deal. But you can buy the same product below 200,000 won at several online shopping malls on any given day. The desperate efforts to grab customers with lower prices, however, come at a price.

    As sales start earlier and last longer, they become less important and easier for consumers to ignore. When every day is special, none is.

    “I used to wait for the discount season to buy off-season clothes or other things at cheaper prices,” Lee Su-jin, a 35-year-old office worker in Seoul, said. “These days, I use mobile applications to buy refurbished products or find good deals at overseas websites.” While the discount pricing strategy is useful in driving traffic and sales for a short term, marketing professionals worry repeated sales could negatively affect the retail industry in the long run.

    To survive in the borderless digital commerce world, they advise brick-and-mortar shops to come up with differentiated services to increase customer loyalty.

    “As the rise of digital shopping has become an inevitable trend in the retail industry, offline sales channels should seek ways to provide better in-store experiences and quality service,” Jun said. “Squeezing margins is not a sustainable business model.”

    Experts emphasize the government’s role in setting a long-term policy to manage the record-high household debt and steer the economy clear of such economic uncertainties as China’s slowdown and market jitters over a U.S. rate hike.

    “The government should control the pace of the household debt growth so it does not rise faster than the income growth, which could further contract spending,” Ko said. “Structural reforms are also needed to foster new value-added service sector for healthier growth.”

     

  • Tourists help Singapore Q3 GDP beat estimates

    Tourists help Singapore Q3 GDP beat estimates

    Singapore’s economy grew at a much faster clip in the third quarter than initially estimated, as an influx of visitors boosted the hospitality and retail sectors. The economy grew by 1.9 percent on-quarter between in the September quarter, compared with a 2.5 percent contraction in the preceding three months, the Department of Statistics said Wednesday.

    The advance estimate released last month showed the economy had eked out a 0.1 percent gain. The latest reading proves that the export-oriented island-state avoided a technical recession, which is typically defined as two successive quarters in which the economy contracted from the previous three months.

    The Ministry of Trade and Industry expects growth to be 2 percent for all of 2015 and it forecasts an economic expansion of between 1 and 3 percent in 2016. “While sectors such as finance and insurance and wholesale trade are expected to support growth, the manufacturing sector is likely to remain weak,” the Ministry of Trade and Industry said. “In China, there is a risk that ongoing reforms to rebalance the economy may falter, leading to a significant drop in demand.” The wholesale and retail trade sector grew by 5.3 percent on quarter between July and September , up from 1.1 percent in the second quarter.

    A pick-up in tourist arrivals underpinned faster growth in the transportation and storage and accommodation and food sectors, where output expanded by 5.9 percent and 12 percent respectively. On a year-on-year basis, Singapore’s economy also expanded by 1.9 percent, a shade lower than the 2 percent increase in the second quarter but higher than the 1.4 percent increase initially forecast.

    Still, the effects of a slowdown in China cast a pall on the manufacturing sector, where output slumped for the second quarter running, although the pace of the contraction slowed. Construction activity also cooled, falling 1.6 percent from the previous quarter after a feverish 13 percent increase in the second quarter.

  • Daiso, Robinsons Retail to strengthen PH partnership

    Daiso, Robinsons Retail to strengthen PH partnership

    Daiso Industries Ltd. is impressed with the growth of the Daiso Japan store chain in the country.

    Japan founder and President Hirotake Yano was recently in the country as one of the speakers of the 17th Asia-Pacific Retailers Convention and Exhibition (APRCE) Manila 2015.

    He also met with officials of Robinsons Retail Holdings Inc. (RRHI), appointed franchisee in the Philippines of Daiso Industries. RRHI is led by Robina Gokongwei-Pe, Wilfred Co and Katherine Michelle Yu.

    Yano added that he is very happy with the growth of Daiso Japan in the Philippines. “I first came here four years ago and observed that it was experiencing a very competitive growth, one that was comparable to Daiso in Japan.  I am actually quite proud of this development.”Yano reaffirmed the strong and exclusive partnership between the two companies as he expressed his satisfaction over the Supreme Court’s final ruling in June this year, preventing Japan Home Center (JHC) from using the trademark Daiso.  He reiterated that RRHI is Daiso’s only authorized and licensed partner in the Philippines. It will be recalled that Daiso Industries Co., Ltd filed a complaint with the Intellectual Property Office against Japan Home Center (JHC) in 2009.

    There are now 44 Daiso Japan stores in the Philippines and over 2,400 stores in 30 countries around the world.

    Both Yano and Gokongwei-Pe reiterated the strength of their business collaboration that was sealed in 2008. “I am very confident with the leadership of the Robinsons Group as our Daiso Industries’ exclusive retailer in the Philippines,” he said. “That is why I look forward for continued growth as customer demand increases.”

    Gokongwei-Pe is likewise very optimistic about the expansion of the Daiso Japan brand. “We brought it here knowing that it is a big brand from Japan that offers good quality and affordable products. That, for me, is the best combination that is very much suited to the Philippine market. The items in our stores are the real Daiso merchandise from Japan.  There is a guarantee behind the name and the partnership that we have with Daiso Industries,” Gokongwei-Pe said.

  • South Korean Convenience Stores Thrive

    South Korean Convenience Stores Thrive

    The growing interest in ready-made meals and other necessities—driven by an increase in single-adult households—has fueled the growth of convenience stores in South Korea, Yonhap reports. These retailers stock daily essentials and food in smaller quantities and are open 24 hours a day, which provides more opportunities for working adults to shop.

    The three biggest chains—7-Eleven, BGF Retail and GS Retail—opened a combined 2,000 new locations this year. Overall, the number of convenience stores in the country jumped to close to 26,000.

    GS Retail, which operates GS 25, generated the largest increase with $3.11 billion in sales from January to September 2015, a 36% bump from the same time period in 2014. Meanwhile, BGF Retail posted a 28.8% rise in sales, while 7-Eleven increased its sales by 26.4%, over the same time period.

    Local convenience stores are capitalizing on the boost in customers by launching their own private-label brands to provide a low-cost alternative to name brands. The stores also have changed up their merchandise mix to include more non-food items in addition to the beverages, cigarettes and instant food items.

    However, the increasing number of convenience stores has begun to saturate the market. Retailers now experience stronger competition from each other, often with stores on opposite sides of the street vying for the same customers.

  • Moody’s lowers Parkson Retail Group debt outlook to negative

    Moody’s lowers Parkson Retail Group debt outlook to negative

    Moody’s Investors Service has lowered the outlook for Parkson Retail Group Ltd’s Ba3 corporate family and senior unsecured debt ratings to negative from stable.

    In a statement issued on Wednesday, Moody’s has also affirmed Parkson’s Ba3 corporate family and senior unsecured debt ratings.

    A Moody’s vice president and senior credit officer Lina Choi said: “The outlook change reflects Parkson’s weaker-than-expected financial results for 3Q 2015.

    “Our expectation that its profitability and financial leverage will likely remain weak for its Ba3 ratings over the next 12-18 months, given the ongoing challenges apparent in China’s retail market.”

    Parkson, which is listed on the Hong Kong Stock Exchange and one of the largest operators of department store chains in China, reported a normalised operating profit of 86.7mil renminbi — after excluding a one-off litigation penalty of 140mil renminbi — in the first nine months of 2015 compared with 346.4mil renminb in 2014.

    “This decline was due to the consideration that the company faced strong competition during this time and also experienced a 9.4% decline in gross sales proceeds (GSP) in 3Q 2015, a further deterioration from the 3% fall in 1H 2015.

    “Moody’s notes that subdued retail sentiment and strong competition have prompted Parkson to offer more promotions and discounts on its products,” it said.

    Moody’s also estimated Parkson’s profitability — as measured by EBITDA/GSP — would decline to 11% for all of 2015 from 12.7% in 2014.

    At end-2014, it owned and managed 60 stores spread across 34 Chinese cities. It targets the middle-end of the Chinese retail market. It is 53.1%-owned by Parkson Holdings Bhd (unrated), an affiliate of Malaysia’s Lion Group.

    Moody’s said despite the company’s plan to improve profitability through more direct sales, Moody’s expects EBITDA/GSP to fall to around 10%-11% in the next 12-18 months. Such a range would be close to its rating downgrade trigger level.

    The ratings agency also said Moody’s expected Parkson’s retained cash flow (RCF)/net debt to decline to 8% at end-2015 from 11.3% at end-2014 due to the fall in cash holdings.

    It pointed out Parkson’s cash and cash equivalent fell to 3.6bil renminbi in 3Q 2015 from 4.8bil renminbi at end-December 2014 due to increased working capital outflow and capital expenditure on new stores.

    Moody’s expects RCF/net debt to stay around 8% over the next 12-18 months, a level which provides little space from our downgrade trigger of 8-10%.

    At the same time, Parkson’s liquidity remains adequate, although its cash buffer has narrowed. Cash and cash equivalent of 3.6bil renminbi at end-September 2015 could cover its short-term debt of 700mil renminbi.

    Moody’s said Parkson’s Ba3 corporate family rating reflects its competitive position in China’s highly fragmented department store industry, underpinned by its well-recognised brand name and national presence.

    “The rating also considers its low level of collections risk and adequate liquidity profile. However, the rating is constrained by structural challenges, such as intense competition from other retailers, rising rental rates, online retailing and the execution risks associated with its aggressive expansion into lower-tier cities in China.

    “In particular, Parkson’s dependence on leased stores is high, exposing the company to the risk of reallocations and escalating rents. These challenges, together with its ambitious investments in new stores, will continue to pressure its profitability and financial metrics.

    “The outlook could return to stable if Parkson curbs the deterioration in gross sales proceeds, and demonstrates an ability to restore profit margins,” it said.

    Moody’s said the metrics which it would consider for a return to a stable outlook include:

    (1) adjusted EBITDA/gross sales proceeds recovering to above 10%-11%; and (2) adjusted retained cash flow/net debt rising above 10% on a sustained basis.

    The ratings could experience downward pressure if Parkson fails to stabilise its profitability and financial metrics due to: (1) rising competition; (2) reduced bargaining power over its concessionaires/suppliers; or (3) the need to make large investments for store expansions.

    Credit metrics indicative of downgrade pressure include the likelihood of adjusted EBITDA/gross sales proceeds trending below 10%-12% or of adjusted retained cash flow/net debt trending below 8%-10% on a sustained basis.

    Any sign that the company is extending financial support to its parent, the Lion Group, will also pressure Parkson’s corporate family rating.

  • Candidates Start Lining for Indonesia Property Awards 2016

    Candidates Start Lining for Indonesia Property Awards 2016

    Ensign Media is the publisher of Property Report and the organizer of the event.

    “At the first-ever Property Report Congress held in October, the majority of panelists from Indonesia predicted that the coming year would offer a better outlook for the country as the domestic real estate market continues to evolve and adapt to changes.”

    Great names in Indonesia property industry, including Sinar Mas Land and Ciputra Group, won several trophies in 2015’s first Indonesia Property Award.

    The award has prepared 27 trophies for the next year’s event, with categories covering a range of segments including condominium, housing, villa, hotel, office and retail.

    Commercial real estate services company Colliers International revealed a gloomy report on Jakarta’s office, apartment, retail, hotel and industrial estate market in the third quarter.

    The report said the occupancy in Jakarta’s central business districts in the third quarter 2015 has fallen to 92.7 percent, down “moderately” by 3 percent on a yearly basis.

    Apartment prices witnessed a “minor” increase of 3.4 percent quarterly and 11.2 percent annually to Rp 29.87 million per square meter.

    Occupancy rates in the retail sector dropped 1 percent to 85.3 percent in a year-on-year basis in the third quarter of this year.

    Occupancy in Jakarta’s hotels also dropped by 1.2 percent quarterly to 57.2 percent.

  • Innovation is not an issue in Indonesia: Ideosource’s Andrias Ekoyuono

    Innovation is not an issue in Indonesia: Ideosource’s Andrias Ekoyuono

    Prior to his current work, he spent years at Indonesia’s major online media Detik.com, followed by a stint at Hewlett-Packard and XL Axiata.

    “Back in Detik.com, my work involved setting up new businesses, business models, and monetisation models. I also did some marketing,” he explains. “There is actually a continuation between what I am doing then and now.”

    As an Indonesian VC, Ideosource’s portfolio ranges from gaming with Touchten, media with Female Daily Network, e-commerce with Bhinneka, and innovative companies for niche markets such as Stockbit and e-Fishery.

    Its latest investment is a sports wearables company called Turing Sense, a Silicon Valley-based startup founded by Indonesians.

    Dividing time between mentoring and looking for new business, as well as writing and speaking about entrepreneurship, Ekoyuono discusses startup and innovation in Indonesia – and why, despite challenges here and there, there is progress to celebrate.

    Can you tell us how the tech startup landscape in the country is?

    There is a significant difference with when we began in 2011. At that time, [the tech industry] was still in its early stage, we even had to make our own incubation programme, since incubators were basically non-existent. But lately, there have been more and more incubators, both from telco [companies] and campuses. There is definitely progress.

    We are starting to get used to hearing news about funding, and founders are getting more diverse. When we began, most founders were university graduates … But now, we have begun to see Internet industry veterans and diaspora – Indonesians who have been living and working abroad.

    There are also founders who have already run a conventional business, migrating to the digital side.

    Up until two years ago, people thought the Internet industry was cool, but [it was] still something for the distant future. No sense of urgency. But Tokopedia’s funding last year really got people to wonder … What is this company and why is US$100 million given to them?(laughs)

    Especially since they also advertise heavily on conventional media such as TV and newspaper. People began to see the Internet as ‘something’.

    But the most phenomenal is Go-Jek. Once it got to the level of the ojek drivers, it strengthened the message that technology is indeed for everybody.

    Speaking of business types, does e-commerce remain a primadonna in Indonesia?

    If we are looking with a top-down approach, there are some industries with strong visibility. First is media, then e-commerce, then fintech … The others are transportation. These are the ones with the biggest market. Consumers are starting to evolve.

    What founders need to consider is how to bridge between a digitised consumer and the industry itself, which might be run by conventional business and transaction model.

    Will this sector grow? I believe it will, followed by other sectors. Fashion and electronic goods still play a crucial role. But groceries are also starting to grow.

    What are the greatest challenges for investors in Indonesia, especially in terms of scouting for new talents and business?

    If you read my writing, you might notice that the main idea is about sharing knowledge to Indonesian startups to prepare for their pitch. Informing them what sets them apart from traditional entrepreneurs.

    The issue that we often see in Indonesian startups is that many founders do not have a deep understanding of the problem they are trying to solve. They often shoot something that may not be that big of a problem; that consumers do not even care about … It is advisable to start from the problems you encounter yourself.

    Second, often, founders do not have enough knowledge about building a sustainable business. For example, selling durian online is certainly not sustainable as you can only do it during durian season! (laughs)

    There is also a problem of scalability. How to balance between cost and business model.

    Does this mean that investors only sit around and wait? No. Especially for Ideosource, since we are local, we have been spending our time to build the ecosystem. Doing campus visits, building communities, writing in the media …

    Is innovation dead in Indonesia? Do founders tend to play it safe with businesses with great revenue?

    Oh, I’d say it’s not even an issue! Many people believe so because they are looking at Facebook and Twitter, which, at the beginning, might seem to not have a clear mechanism for monetisation. There is a misconception. I believe they did [consider monetisation], but it is just not [as] exposed.

    Our main problem is not innovation itself, our main problem is not fully understanding which problem to tackle. “We want to gather users first!” Yes, but what do you want these users to do?

    When it comes to innovation… Every year, we meet with 300-500 startups and guess what — I cannot mention names yet — but many of them are doing something very advanced. We are starting to get there.

    But, in terms of ecosystem, we are still like China and India at their early stage. IoT is still sitting at the back seat. Which is why founders in that subsector tend to be more quiet compared to those in e-commerce. They are still hiding in their labs.

    Generally, we need to dream bigger.If you want to create a startup, you should visualise ‘how big will the animal be?’

  • 759 Store Hong Kong closes four shops

    Just three months ago Hong Kong supermarket retail concept 759 Stores was boasting a 48 per cent increase in sales and the opening of 57 new shops last financial year.

    This month the chain says it will close four Hong Kong stores citing the lacklustre retail climate in Hong Kong.

    The four stores are all located in shopping centres owned by The Link REIT which according to 759 Stores has refused to grant rent reductions during negotiations over lease renewals.

    759 Store Hong Kong, the trading brand of listed business CEC International Holdings, positions itself as in between convenience stores and supermarkets, its primary point of difference its ‘self-import model’ of stock and uniform margins.

    Its 759 Store and 759 Supermarket concepts have evolved since the brand’s launch in 2010 from just selling sweets and snacks into a broader range of low margin, high turnover lines across many categories, including rice and grain, non-staple food, frozen food, alcohol, pet snacks, household goods, kitchenware, household electrical appliances, personal care supplies, cosmetics, supplies for babies, toys, novelties and accessories.

    Now CEC is planning to further diversify from its core snack and beauty products businesses, seeking a Chinese medicine license allowing it to sell packaged traditional soup in 100 of its stores.

    There are 260 759 branded shops across Hong Kong. Some of these will be expanded from the smaller store model into larger supermarkets, according to a report in today’s Hong Kong Economic Journal, which quotes 759 Stores chairman Lam Wai-chun.

    Lam said the company’s online business has already broken even and on Singles Day the company sold a record $20 million of products.

  • Lawson Japan mulls banking foray

    Lawson Japan mulls banking foray

    Convenience store operator Lawson Japan is considering a foray into banking.

    The company says that with more than 12,000 convenience stores operating across Japan it has the physical branch network in place to accept deposits from customers.

    It also has the IT infrastructure in place which could be easily modified to allow customers to pay bills, make bank transfers and other basic banking services – all of which would draw additional customers in store, or increase the frequency of visits of existing customers.

    underlying the seriousness of the planning, Japanese bank Mitsubishi UFJ Financial Group has indicated it would take a small stake in the new bank, and contribute ATMs, IT and other services to a Lawson Bank.

    If Lawson does move into banking, it would not be Japan’s first retailer to do so. Rivel Seven & I Holdings, parent of 7-Eleven, established a bank in 2001. Aeon received a banking licence in 2007 and has since expanded its banking and financial services into other markets such as Malaysia and Thailand.

    Another c-store operator, FamilyMart last year began exploring a banking partnership with Japan Net Bank, although those discussions have not yet born a finite plan.

  • Lotte Duty Free in shock Seoul licence loss

    South Korea’s Lotte Duty Free has lost the licence to operate one of its large stores in downtown Seoul.

    Beleaguered Lotte – in the midst of a family feud over its management and on the eve of a planned IPO of its Hotels unit – has been displaced by heavy industries company Doosan Co in the 10,990 sqm store in South Korea’s tallest building – the Lotte World Tower and Mall.

    Lotte has had the licence to run the store for five years and sunk US$255 million into the site.

    “The customs agency decision has shattered its ambitions to grow it into the world’s largest duty-free outlet over the next decade,” reported Japan Today newspaper in Tokyo.

    “The setback was particularly badly timed given the preparations for an initial public offering of shares in Lotte’s hotel unit, which runs the group’s duty-free business.”

    Lotte’s duty free business is a subsidiary of Lotte Hotels, contributing 80 per cent of the operation’s revenues.

    Park Jong-Dae, analyst at Hana Financial Securities, said investors are concerned the loss of the licence will hurt Hotel Lotte’s overall profits.

    “As a result, the company’s valuation may fall when it goes public,” he said.

    Lotte Duty Free’s flagship Myeong-dong store is unaffected.

  • Causeway Bay retail rents remain expensive

    Causeway Bay retail rents remain expensive

    New York’s Upper Fifth Avenue is the most expensive retail street in the world with rents rising to US$3500/sqft. in 2015.

    That’s nearly 50 per cent expensive than Causeway Bay in Hong Kong, which has held its second place on Cushman & Wakefield’s latest global rankings, despite the decline this calendar year of 14 per cent.

    Cushman & Wakefield’s Main Streets Across the World report tracks over 500 of the top retail streets around the globe, ranking them by their prime rental value using Cushman & Wakefield’s proprietary data. The 27th edition of the report shows that rents have risen in 35 per cent of streets around the world – despite the increased global uncertainty experienced over the past 12 months. The report also includes a ranking of the 65 most expensive streets – the top one per country.

    New York’s Fifth Avenue retained its position as the most expensive global retail location with rents up an average 3.6 per cent year on year and 46 per cent above the second-placed Causeway Bay in Hong Kong ($2399/sqft).

    The top 10 Global high street retail destinations by rent (in US$/sqft/year):

    1 Fifth Avenue (New York) – $3500.

    2 Causeway Bay (Hong Kong) – $2399.

    3 Avenue des Champs Élysées (Paris) – $1372.

    4 New Bond Street (London) – $1321.

    5 Via Montenapoleone (Milan) – $1035.

    6 Bahnhofstrasse (Zurich) – $895.

    7 The Ginza (Tokyo) – $882.

    8 Myeongdong (Seoul) – $882

    9 Kohlmarket (Vienna) – $478.

    10 Kaufinger / Neuhauser (Munich) – $459.

    In Asia Pacific, there has been a downward pressure on rents on the back of weaker retail sales and slowing tourism in China, particularly. This has resulted in lower rents, which is creating incentives for more international luxury brands and high street retailers to move in. However, interest rate hikes by the Chinese government could impact consumer spending power. Elsewhere, high-profile international retailers are targeting both Australia and New Zealand and Metro Manila.

    Theodore Knipfing, head of retail, Asia Pacific at Cushman & Wakefield, said the outlook for Asia’s overall retail market is largely positive, with retail sales growth averaging 8.5 per cent over the next five years (in US dollar terms).

    “Rising tourist numbers are spurring robust and sustained retailer demand – albeit firmly focused on prime, well-located space. Although the growth of eCommerce is notable across the region, physical stores will remain important, although landlords will need to focus on improving the shopping environment and customer experience in order to compete for retailer demand.”

    Europe

    Avenue Champs Élysées in Paris retained its crown as the most expensive retail location in EMEA, followed closely by London’s New Bond Street. Strongest rental growth this year was recorded in Dublin’s Grafton Street and Covent Garden in London, as well as in top high streets in Milan and Rome. However, high streets in Russia and Ukraine experienced sharp declines linked to the conflict between the two countries that yielded slowdowns in economic growth and retail sales.

    Justin Taylor, head of EMEA retail at Cushman & Wakefield, said: “Improving employment prospects, rising real wages and healthier consumer confidence in advanced economies are set to offer more positive momentum for the retail sector. From an EMEA perspective, despite any economic and political uncertainties in certain countries, the retail market is expected to see further improvements. Indeed, a strong retail sales growth forecast, robust occupier demand and a lack of supply in many locations mean rents will keep rising in the most popular high streets.

    “Indeed, tight availability is shaping the retail landscape, pushing the geographic boundaries of well-established high street markets outwards,” Taylor concluded.

    The Americas

    The US represents seven of the Top 10 most expensive cities in the Americas, with Toronto, Rio de Janeiro and Vancouver at sixth, seventh and eighth, respectively. Seattle posted the highest rent growth in the US, up 27.3 per cent to $70 per sqft, while Los Angeles’ Rodeo Drive corridor posted the highest retail rents outside New York at $800 per sqft, a 23 per cent increase. Strong tourism and a vibrant local economy make San Francisco’s Union Square a market to watch with its 1.1 per cent vacancy, $650 per sqft rents and 13 per cent rent growth, which follows 21 per cent rent growth for the same period through mid-2014. Similarly, Chicago’s Michigan Avenue posted 8.2 per cent rent growth with average retail rents of $525 per sqft.

    At $320 per sq. ft., Toronto’s Bloor Street retail corridor was the most expensive high street in Canada, while Edmonton’s Whyte Avenue was the most affordable in the Americas at $45 per sq. ft.

    Gene Spiegelman, vice chairman, head of retail services, North America at Cushman & Wakefield, said: “The Americas region is expected to sustain a positive trajectory going forward into 2016, bolstered by a steady consumer sector benefiting from a material reduction in energy costs and stable employment expectations, especially in the US.

    “Retailers will continue to add physical stores to support their expansion plans while at the same time optimising their footprint to respond to the ongoing evolution of ‘clicks and bricks.’

    “International luxury brands will continue to dominate the high street, providing a boost to the key destination cities with high exposure from tourism and strong foot traffic.”

  • HSBC results hit by Asia market falls

    HSBC results hit by Asia market falls

    HSBC has reported a 14% drop in profits for the third quarter of 2015 after adjusting for foreign currency movements, as the sharp falls in stock markets across Asia hit revenues in its retail banking and wealth management division. The overall adjusted profit was $5,5bn (£3.56bn, €5.0bn) compared with $6.4bn in the third quarter of 2014.

    The global bank said adjusted revenues were down 4% in the three months to the end of September to $14bn, mainly because of the drop in the Principal Retail Banking & Wealth Management division. Revenue was also lower in Global Banking & Markets operation.

    Operating expenses were also up 2% in the third quarter at $8.58bn, mainly due to increased spending on regulatory programmes and compliance.

    “Despite slowing growth in the mainland Chinese economy and market volatility in Asia, there has been no visible impact on our Asian credit quality in 3Q15,” group chief executive Stuart Gulliver told an investor briefing.

    Hong Kong hit

    Iain Mackay, HSBC’s group finance director, said the reduction in revenue in the wealth management operation mainly reflected lower earnings in Hong Kong.

    “This was caused by the stock market correction in Asia, which reduced asset valuations in our life insurance manufacturing business,” Mackay said.

    Profit from retail banking and wealth management operations also fell 32.8% in the third quarter when compared to the previous quarter. While for the Asia region as a whole profits were down 30% in Q3 compared to Q2.

    The bank also reported a 19.1% drop in profits from the Middle East and Africa region during the latest quarter compared with the previous one.

    Overall HSBC ‘s results were better than expected after costs related to fines and compensation for customers fell by $1.4bn. However, its shares weakened by 1.2% in London morning trade.