Thailand convenience-store chain CP All and three private equity funds are competing to buy Polish retail chain Zabka from Mid Europa Partners in a deal valued at up to €1.5 billion (US$1.59 billion).
Zabka’s sale comes at a time when some policies of the ruling conservative Law and Justice party in Poland are considered an investment risk, says Deal Street Asia. CP All, which runs 7-Eleven stores, is up against CVC Capital Partners, TPG and Hellman & Friedman. The deadline for binding offers is mid-February.
London-based private equity firm Mid Europa Partners, which focusses on central and eastern European investments, bought Zabka in 2011 for €400 million. Zabka, with 3400 stores, had sales of 5.75 billion zlotys (US$1.39 billion) in 2015.
In November, Mid Europa Partners bought Romanian supermarket chain Pro from Polish Enterprise Investors fund for €533 million.
Fast Retailing’s Uniqlo China casual-clothing chain has launched its click-and-collect service so online customers can pick up their orders at a store.
Already working in the UK and the US, the service lets shoppers nominate a store where they want to pick up their orders. It also helps the Japanese chain boost traffic in its stores, and will probably be rolled out in other countries.
Initially, online items can be picked up at any one of about 400 of Uniqlo’s 500 stores in China. Customers can also choose to have their orders home delivered.
With delayed deliveries a problem in China, Uniqlo says it sees a lot of promise in the new service.
Its sales in China, including Hong Kong and Taiwan, reached ¥332.8 billion (US$48 billion) for the fiscal year ended August last year, up 9.3 per cent from the previous 12 months.
Uniqlo opens about 100 new stores a year in China, and at home in Japan last year began allowing online customers to pick up orders at 7-Eleven convenience stores.
Drone delivery service, Flirtey, and 7-Eleven have completed 77 autonomous drone deliveries to customer homes in the US after the two kicked off their commercial collaboration in July.
Flirtey conducted regular weekend deliveries in November from a 7-Eleven store to a dozen select customers who used a custom app to place their unique order. Along with listing all items available for delivery, the interactive app also notified customers when their drone was loaded, when it departed from the store and when it was arriving at their doorstep.
Once an order was placed, 7-Eleven merchandise – including items such as hot and cold food and over-the-counter medicines – were loaded into a custom Flirtey drone delivery container and flown autonomously using precision GPS to a local customer’s house.
Popular items delivered included hot food items, cold beverages and over-the-counter medicines such as 7-Select Night Time Cold & Flu Relief, 7-Select Headache Relief and aspirin.
In a sign of how far confidence in the yuan has fallen, 7-Eleven stores are valuing the Chinese currency on a par with the Hong Kong dollar, which was last seen in 2007.
One yuan fetched HK$1.12 on the foreign currency market yesterday.
While China’s currency would need to fall 10.7 percent to reach actual parity with the Hong Kong dollar, the exchange rate offered by the city’s largest operator of convenience stores shows how depreciation pressures are making the yuan less attractive to hold.
“The recent sharp yuan depreciation has hurt local merchants’ willingness to accept yuan,” said Kevin Lai, chief economist for Asia excluding Japan at Daiwa Capital Markets in Hong Kong.
“The fact that they demand a bigger premium in the exchange rate to accept yuan payments shows the outlook is pretty negative for the Chinese currency.”
Trading the yuan at parity with the Hong Kong dollar by local retail chain may be a new norm to avoid foreign exchange risk amid a weakening Chinese currency, said Hang Seng Bank (0011) acting chief economist Thomas Shik Chun-sing, who expects the yuan to further soften 3-5 percent this year.
7-Eleven adjusted its yuan rate in light of recent drastic fluctuations in the currency and will change it whenever necessary, a company spokesman said in an e-mailed reply to questions.
The convenience store chain has more than 900 stores in Hong Kong and is part of Jardine Matheson Holdings’ Dairy Farm.
Signs in Circle K, another major convenience store chain, offer an exchange rate of 100 yuan per HK$105. Rates at cosmetic retail chain Sa Sa and Mannings, a personal health retailer under Dairy Farm, are both 100 yuan per HK$110.
The yuan plunged about 12 percent against the greenback last year.
After securing dominance in its home market, China’s Alibaba Group Holding is racing to conquer the still nascent e-commerce market in Southeast Asia. Although the size of the market in Southeast Asia pales in comparison with China’s, it is expected to grow 32 percent on average each year through 2025, according to one industry executive.
US-based Amazon.com Inc also has its sights set on the region, making a face-off with Alibaba all but certain. Alibaba got to the Southeast Asian market first, but its victory is far from assured. Experts said there is no silver bullet for success, especially in an evolving e-commerce market facing difficulties of its own.
A 7-Eleven convenience store in Phuket, Thailand, that accepts Alipay.
Among the glossy, green trees in Phuket, the largest island in Thailand, the landscape is dotted by many 7-Eleven convenience stores that accept Alibaba Group Holding’s mobile payment application Alipay.
“Alipay is available in almost all 7-Eleven convenience stores here, and people are encouraged to use it with random discounts,” an employee at a 7-Eleven store on Thanon Patak Road in Phuket, who declined to be identified, told the Global Times on Saturday.
7-Eleven has added Alipay to its payment options at more than 9,000 outlets across Thailand since April.
Alibaba’s move to get Alipay into Thailand is widely perceived as a way to attract Thai smartphone users and technology-savvy consumers as it expands into Southeast Asia in 2016.
In April, the Chinese e-commerce giant acquired a controlling stake in Lazada, considered the Amazon of Southeast Asia, for $1 billion.
In November, Alibaba furthered its expansion by taking over the Singaporean online grocer RedMart via Lazada.
Alibaba’s CEO Zhang Yong said several times at press conferences in 2016 that the company’s next major goal is to help merchants on its platform enter the Southeast Asian e-commerce market.
However, expanding into Southeast Asia might be easier said than done. In the region, many people are familiar with the concept of e-commerce by name only and don’t have much of an inclination to try it.
A new frontier
A 20-something resident in Phuket surnamed Kung was surprised when she heard that Chinese shoppers spent 120.7 billion yuan ($17.4 billion) on online purchases via Alibaba’s bazaars on November 11 alone.
“My friends and I seldom shop online and do not really intend to do so because we can get whatever we need in the market or at nearby convenience stores,” Kung told the Global Times on Friday.
The woman’s biggest concern is quality. She dislikes that she can’t feel the texture of clothing sold online and worries about unwittingly buying knockoffs.
The poor reception for online shopping is reflected on the streets of Phuket, where few express deliverymen can been seen – unlike in China, where they are commonplace.
Lazada Thailand CEO Alessandro Piscini acknowledged on Thursday that Southeast Asia has a small e-commerce industry.
At a press conference with about 200 Chinese reporters in Phuket on Thursday, Piscini cited the region’s 3 percent online retail penetration rate (as of November 2015), which represented about $6 billion in sales. By comparison, China had an online retail penetration rate of 14 percent and online sales totaling $293 billion during the same period.
Still, Piscini was optimistic, saying that the small penetration rate shows that Southeast Asia has a large untapped market for e-commerce. He predicted that the region’s e-commerce market will grow by 32 percent annually to more than $200 billion by 2025, thanks to local government encouragement for the digital economy and urbanization, as well as the region’s rapidly growing middle class.
By 2020, Southeast Asia’s GDP is expected to grow by an average rate of 5.5 percent a year, Piscini said. Middle-class consumers around 35 years old will account for 60 percent of the region’s overall population, which will grow to 668 million from the current 644 million, according to latest estimates by the global statistical information provider Worldometers.
Looming rivalry
Amazon.com reportedly plans to launch in Southeast Asia in the first quarter of 2017, meaning that Alibaba and its US-based competitor will soon clash in the region.
Amazon’s entry into Southeast Asia will be done via Singapore, where “the level of customer spending and consumer culture is more closely aligned with Western markets,” TechCrunch reported in November, citing unnamed sources.
The grocery store business is shaping up to be the first battleground in the region between Amazon and Alibaba, according to the report. The rivalry between the two tech mammoths in the Southeast Asian market seems unavoidable as both have stepped up their international expansion.
“The two account for a huge amount of their home e-commerce markets, with Alibaba holding about 80 percent of online sales in China and Amazon controlling about 60 percent of the US market, so competing for new territory is a logical move,” Lu Zhenwang, founder of Shanghai Wanqing Commerce Consulting, told the Global Times on Sunday.
Alibaba should not be fazed by the potential threat of Amazon, experts said.
The Chinese company has an edge on the shopping side, but also got an early start with logistics and payments via acquisitions, experts noted.
In November, Alibaba’s financial arm Ant Financial signed an investment deal with Ascend Money, a leading online payment firm in Thailand, which also operates in Indonesia, the Philippines, Vietnam, Myanmar and Cambodia. It also snapped up a stake in Singapore’s Singpost, which is experienced at delivering parcels across Asia.
Dearth of development
Alibaba may have got to Southeast Asia ahead of Amazon, but being first doesn’t guarantee victory.
“Southeast Asia is a varied e-commerce market and full of challenges that need to be overcome,” said Liu Dingding, a Beijing-based independent analyst.
In addition to weak market reception, delivery is also perceived to be a tough issue.
Lazada Thailand CEO highlighted the complexity of delivery in Southeast Asia during Thursday press conference, citing the region’s underdeveloped infrastructure.
Liu agreed, noting that the underdeveloped infrastructure hindered the inter-city cargo or parcels delivery, which harmed users’ experiences.
According to Kung, residents in Phuket usually need to wait for one to two weeks to get their online purchases. In China, this usually takes about three days.
Against this backdrop, the e-commerce ecosystem in the region is still evolving, giving anyone a possibility to lead the market as long as it can find the right local partners, Liu said.
“Amazon, though a latecomer to Southeast Asia, still has the chance to win because it has more experience than Alibaba in expanding its business in the international marketplace,” Liu told the Global Times on Sunday.
South Korean convenience stores have long been a part of the country’s quick, fast-changing lifestyle, and are going a step further by producing their own private brands, as reported.
“The private brand business here will continue to grow across all industries, centered on firms with strong distribution channels. South Korea has a relatively low private brand penetration rate compared to other OECD (Organization for Economic Cooperation and Development) countries,” Suh Yong-gu, a professor of marketing at Sookmyung Women’s University, told the new source.
Private-label brands also benefit from a lower price tag, Suh added. 7-Eleven Korea’s introduction of private coffee brand Seven Café is an example of an affordable product that competes with existing brands. The news source notes that Seven Cafe ranked No. 1 in terms of the number of products sold at the chain’s locations this year between July 1 and November 16, which marks the first time a private brand product outperformed established brands sold at 7-Eleven stores. Seven Café began with just 20 vendors in January 2015 and has expanded to more than 4,000 vendors as of November.
Convenience stores are also collaborating with consumer goods manufacturers for added value, notes the news source. For example, South Korean c-store chain CU this year worked with dairy company Seoul Milk to release CU Big Yogurt. Since launching in April, more than 1 million bottles have been sold every month, and the product topped the list of yogurt beverages sold at CU locations, according to the company. CU has about 1,000 different private brand goods on display, which account for about 25% of all products sold at CU stores.
C-store chain GS 25, operated by GS Retail, and instant noodle maker Paldo recently rolled out Omori Kimchi stew ramen, reports the news source, noting that about 9 million units of the Omori Kimchi stew ramen were sold within a year of its release, surpassing sales of Nongshim’s Shin Ramyun.
In South Korea, c-store chains aren’t shy about experimenting with private brand products, even when they’re not food or beverage related. For example, in October 2015, CU teamed with local toy maker Oxford Block to introduce three limited edition toys. At 26,000 won ($22), the toys were sold out within five days of release.
“The rise of private brand products suggests a rosy outlook for convenience retail brands. On the downside, it has cast a cloud over manufacturers of products such as beverages which have to allocate more budget for advertisements and promotions next year,” Kim Tae-hyun, an analyst at IBK Securities, told the news source.
Industry experts look no further than Japan to gauge the future private brands in convenience stores.
“Over the past 10 years, Japan has seen a power shift from manufacturing companies to convenience retail businesses on the back of the latter’s distribution channels. For example, Seven & I Holdings, the operator of 7-Eleven Japan, gains 50% of its net sales from private brand products,” said Han Kook-hee, an analyst at NH Investment and Securities, in a report. “Most leading Japanese manufacturing firms are keen to produce private brand products for convenience store brands.”
Thai bank CIMB says it will open between 20 and 30 sub-branches inside 7-Eleven convenience stores within the next 12 months.
The CIMB 7-Eleven branches are aimed at providing extra accessibility to bank services by co-locating in areas where a full-scale bank branch is not warranted.
All of the new branches will open in the broader Metropolitan Bangkok area.
The first sub-branch opened this week, on Rama I.
Adisorn Sermchaiwong, senior executive vice-president of CIMBT’s Consumer Banking Group, says it marks the first time a Thai commercial bank has opened a sub-branch in a convenience store of any brand.
Customers can use the branch to open and close accounts, deposit cash and exchange foreign currency as well as apply for loans or leasing. Cash withdrawals will not be permitted, however, with customers invited to use co-located ATMs.
The branches will be open from 10.30am to 5.30pm daily.
“Right now our lives are greatly linked with convenience stores from the start until the end of the day, and that’s why we chose to open our sub-branch in a convenience store,” said Sermchaiwong.
Convenience-store giant 7-Eleven plans to enter Vietnam by taking over VinGroup’s VinMart+ chain, marketplace sources say.
In a statement from the US last year, 7-Eleven said it would build stores as well as convert “existing locations”. Now industry insiders are saying the group will swallow VinMart+, but there has been silence from both brands.
The 7-Eleven Vietnam franchise is a partnership between IFB Vietnam, which owns Pizza Hut Vietnam, and Seven System Vietnam. The chain has announced plans to establish 100 stores in its first three years, with 1000 outlets within a decade. Its initial store will be in Ho Chi Minh City, scheduled for early next year.
VinMart+ is Vietnam’s largest c-store chain with more than 700 outlets. It has plans to expand to 10,000 stores in next 10 years.
Vietnam is 7-Eleven’s second Pacific Rim market after Indonesia, where it launched in 2009. It also has stores in Australia, China, Japan, Malaysia, Singapore, South Korea, Taiwan, Thailand and the Philippines.
Convenience store chain FamilyMart Malaysia is aiming to open up to 1000 stores by 2020.
Out of Japan, the group is using a franchise business model in its newest market in partnership with agro-food company QL Resources, with which it has signed a 20-year agreement. As master franchisee, QL plans to have four stores open by year-end.
“The offer of fresh food is our main differentiation,” says QL executive director Chia Li Khai. Its first FamilyMart launched in Wisma Lim Foo Yong in Kuala Lumpur through its wholly owned subsidiary Maxincome Resources, with a second just opened in the Mid Valley Megamall south of Kuala Lumpur.
These will be followed this month by stores at the Taman Tun Dr Ismail (TTDI) station of the Sungai Buloh-Kajang MRT line and KLIA2.
It is setting itself apart from competitors with its “konbini” convenience-store concept from Japan. Of the nearly 2000 items on sale in each store, about 5 per cent are developed by the company using ingredients sourced by QL.
Health, beauty and personal-care products are part of konbini offerings.
Malaysia’s stores will have a counter offering oden steamed fishcakes served on a stick in broth. Other hot snacks available include fried karaage chicken, frankfurters and bento lunchboxes, as well as onigiri rice balls in seaweed plus puddings, mousses and ice cream.
Its ready-to-eat food range also includes Malay favourites such as nasi biryani and mee siam, plus salads and sandwiches and fresh coffee.
“Partnering with QL in developing halal products will be our biggest advantage,” says FamilyMart president Takashi Sawada.
He says the group is constantly studying emerging markets in the region, including Cambodia and Myanmar. The chain also has a presence in China, Indonesia, the Philippines, Taiwan, Thailand and Vietnam.
“We want to learn from Japan by offering amenities such as recycle bins and toilets equipped with bidet,” says Chia, who is the son of QL founder and group MD Chia Song Kun.
Malaysia’s outlets will also offer courier services and bill-payment services, says Chia, noting the group has earmarked up to 20 million ringgit (US$4.5 million) annually for store expansion.
Competitor 7-Eleven has about 2000 outlets in Malaysia, adding 113 this year.
The Group’s revenue for the current quarter of RM547.8 million grew by RM28.5 million or 5.5% against the corresponding quarter’s revenue in the previous year of RM519.2 million. The growth in revenue continued to be driven by the growth in new stores, improved merchandise mix and consumer promotion activity. This growth was achieved despite prolonged on-going retail market softness caused by weak consumer confidence/spending.
Gross profit of RM169.0 million improved by RM9.2 million or 5.8% compared to the corresponding quarter in the previous year and this was mainly attributed to the revenue growth of 5.5%.
Selling and distribution expenses for the quarter increased by RM14.8 million or 10.4%, mainly caused by new store expansion resulting in higher staff cost, rental cost, store depreciation expense and utility cost. In addition, the increase in the minimum wage effective 1st July 2016 has caused the store staff costs to rise by approximately 10% in the current quarter.
Administrative and other operating expenses for the quarter increased by RM0.7 million or 3.3% due to higher staff cost, head office IT depreciation expense and amortization of intangible assets.
The profit before tax of RM15.5 million decreased by RM7.0 million or 31.2% compared to the corresponding quarter in 2015 despite positive sales growth due to higher selling and distribution expenses caused by new store expansion and the impact of minimum wage increase effective 1st July 2016.
For the 9 months ended 30 September 2016
For the 9 months ended 30 September 2016, the Group’s revenue of RM1.58 billion grew RM73.2 million or 4.9% against the corresponding 9 months’ revenue in the previous year of RM1.51 billion. The growth in revenue was driven by the growth in new stores (total stores as at 30 September 2016: 2,057 stores), improved merchandise mix and consumer promotion activity.
Gross profit improved by RM28.1 mil or 6.1% compared to the corresponding 9 months in the previous year and this was mainly attributed to the revenue growth of 4.9% and gross profit margin expansion of 0.4% points.
Selling and distribution expenses for the 9 months period in 2016 increased by RM23.7 million or 5.7%, mainly caused by higher staff cost, rental cost, store depreciation expense and utility cost which is in tandem with new store expansion coupled with impact of minimum wage increase on the staff cost.
Administrative and other operating expenses decreased by RM5.5 million or 8.5% vis-à-vis the corresponding 9 months in the previous year due to higher staff cost, head office IT depreciation expense and amortization of intangible assets.
The profit before tax of RM58.8 million increased by 1.3% or RM0.8 million despite revenue growth of 4.9% and gross margin expansion by 0.4% points due to higher selling and distribution expenses from new store expansion and also the impact of minimum wage increase effective 1 July 2016 on the salary cost.
Future Prospects
The Board of Directors is of the view that the trading conditions for the remaining period of the current financial year is expected to remain challenging due to continued weak consumer confidence/spending and current macro-economic conditions. Despite this latest development, we remain positive of holding onto our market leading position.
7-Eleven Malaysia is committed to further store network expansion despite the economic headwinds in the nation.
Releasing the company’s third quarter results, CEO Gary Brown said the network now numbering 2057 stores achieved sales growth of 5.5 per cent in the three months to September 30, despite a sluggish retail market.
However there was a “significant negative impact” from the increase in the minimum wage from July 1 on third-quarter profit.
“The third quarter of 2016 highlights the tough retail market in which we have operated since the introduction of GST coupled with low consumer sentiment and spending.
“[However] we remain confident that continuous store expansion, refurbishment, promotional activity, improved merchandise mix and expanded in-store services will continue to deliver positive results despite the challenging headwinds.”
Brown noted that average spend per customer increased by about 4 per cent during the third quarter, compared with the same period last year.
Group revenue for the quarter totalled RM547.8 million (US$23.31 million) driven by new stores, improved merchandise mix and consumer promotion activity.
Gross profit of RM169 million improved by 5.8 per cent, mainly attributed to the 5.5 per cent revenue growth.
Selling and distribution expenses for the quarter increased by RM14.8 million or 10.4 per cent, mainly caused by new store expansion resulting in higher staff cost, rental cost, store depreciation expense and utility costs. The increase in the minimum wage caused store staff costs to rise by approximately 10 per cent in the current quarter.
The pre-tax profit of RM15.5 million decreased by RM7.0 million or 31.2 per cent, despite positive sales growth – and due to higher selling and distribution expenses caused by new store expansion and the impact of minimum wage increase.
For the nine months to September 30, the group’s revenue grew by 4.9 per cent against the corresponding nine months’ revenue.
The Korean convenience store sector is experiencing rapid growth as heavyweights battle for market share.
The number of convenience stores in South Korea surpassed 33,000 as of the end of October this year, marking a rapid growth since the opening of the first store 27 years ago, according to industry data.
That’s a significant increase from the 28,994 counted at the end of last year.
CU had the most with 10,634, followed by GS25 with 10,486 and 7-Eleven with 8486. Japan-affiliated brand Mini Stop had 2326, and With Me, a chain operated by Shinsegae Group, had 1615. There are some 100 others that are not part of franchises, according to the Korea Association of Convenience Store Industry.
South Korea’s first convenience store opened in southern Seoul in May 1989.
The rising number of single-person households and aging society are funneling consumers to convenience stores that are near their homes and sell small portions, industry watchers say. Convenience stores have been quick to adapt to such a customer base, expanding from conventional shelf goods, such as snacks and beverages, to lunch boxes and other kinds of meals for singles who don’t want to cook, as well as services, including delivery and financial transactions.
The sector grew 11.4 per cent last year, visibly comparable with 1.2 per cent growth in 2013 and 4.7 per cent in 2014. Sales increased from 12.8 trillion won (US$10.96 billion) in 2013 to 13.8 trillion won in 2014 and to 17.2 trillion won last year.
Industry watchers expect sales this year to exceed 20 trillion won, with room for more growth until 2030, considering that South Korea’s per-store sales is only about one-fourth of that in Japan. Japan currently has about 55,600 convenience stores.
FedEx Express, a subsidiary of FedEx Corp and convenience store chain 7-Eleven, announced today that customers and online shoppers can collect their packages at selected 7-Eleven stores. The service is only applicable to shipments of up to 10 kilograms in weight and 105 cm in dimension and with a total value for customs of no more than US$500 per shipment.
FedEx Express, a subsidiary of FedEx Corp and convenience store chain 7-Eleven, announced today that customers and online shoppers can collect their packages at selected 7-Eleven stores. The service is only applicable to shipments of up to 10 kilograms in weight and 105 cm in dimension and with a total value for customs of no more than US$500 per shipment.
Customers simply need to reply to their FedEx pre-delivery notification message and indicate their preferred 7-Eleven location. They will then receive an SMS message with the pick-up details. Customers are required to present both the air waybill number and SMS message at their chosen 7-Eleven store upon pick-up.
Packages must be collected within five days. Anthony Leung, managing director, FedEx Express, Hong Kong and Macau said the company’s retail service network expansion was a response to market needs. Rose Yeung, sales and marketing director, 7-Eleven Hong Kong and Macau, said this represented “another step forward in expanding our service portfolio, which includes bill payment, ticketing, self pick-up and donations.”
Convenience store chain operator 7-Eleven Malaysia is jumping on the bandwagon in e-commerce by offering parcel locker services in some of its outlets to facilitate delivery for online shopping.
The service is expected to start this month, says 7-Eleven Malaysia chief executive officer Gary Brown at the Asia Pacific Retail Congress in Kuala Lumpur recently.
The move by 7-Eleven will be seen as a nascent but integral part of an expanding online retail eco-system that is beginning to grow in popularity in Malaysia.
“An online shopper can choose to get his purchases delivered to a 7-Eleven store most convenient to him. Once it arrives, he will receive a text with a PIN code. Because we are a 24-hour convenience chain, we will be able to offer online shoppers the convenience to pick up their purchases 365 days, 24×7,” he says.
Brown says the move is to make shopping as convenient as possible and is part of the chain’s evolution in the larger retail space that is not confined to bricks and mortar. It has been around since the 1980s but it was only of late that the convenience chain began went beyond retail to offer payment services.
7-Eleven Malaysia Holdings Bhd was listed on Bursa Malaysia in 2014. The convenience store chain is controlled by Tan Sri Vincent Tan Chee Yioun, with an indirect stake of 53.59% via HQZ Credit Sdn Bhd. HQZ Credit is the ultimate holding company of Berjaya Retail Bhd – the major shareholder of 7-Eleven.
Brown says he is seeing a lot of changes in Malaysia’s retail landscape and 7-Eleven, as part of that landscape needs to improve customer’s experience by making it convenient.
Brown says the company plans to open 200 new stores annually for the next 10 years.
It opened 500 new stores in the past 2½ years and at the same time, refurbished another 500. The cost of 200 new stores and refurbishing another 200 involves an investment of between RM80mil and RM90mil a year, he says.
Brown says out of 2,050 7-Eleven outlets, close to 100 stores are located in malls and other managed facilities.
In Publika, Solaris Dutamas, there are four 7-Eleven outlets, six in Times Square, Jalan Imbi and three in Sg Wang mall. Two out of the six in Times Square operate 24×7.
“In a high traffic area, for example, in a mall, we need to have more density. In a mall, they operate 12 hours. But when they are outside a mall, but in a managed area, they operate 24×7,” he says.
Brown says the company is interested to enter more malls. Having a store in a mall makes sense because consumers do not want to walk too far.
“7-Eleven leverages on what we call impulse satisfaction, or instant gratification,” he says.
It also offers mobile top-up services and payment of utility bills 24×7 and recently introduced sitting arrangement for that cup of coffee.
“It is not convenient carrying a cup of hot coffee around,” he says.
The convenience store operator reported a group revenue for the financial year ended Dec 31, 2015 of RM2.01bil, an increase of 6%, or RM113.2mil, over 2014’s revenue of RM1.89bil.
The company reported a gross profit of RM59.9mil for 2015 financial year, which translates into a 3% gross profit margin over revenue, which is normal as margins tend to be rather thin for the retail sector. It reported operating income of RM109.7mil, an increase of 2.2% compared to 2014.
Better merchandise mix
Its growth in revenue was driven by new stores, an improved merchandise mix and consumer promotion activities, and was achieved despite an ongoing retail market negativity, which explains the need for the company to go into a store expansion mode as well as to offer new services at its 24-hour outlets.
The company’s store expansion drive of about 200 new stores a year will help grow revenue. Its store count increased by 199 stores or 11.4 % from 1,745 stores to 1,944 stores in 2015.
On the often quoted view that there is an oversupply of retail space in the Klang Valley and cities like Penang and Johor Baru, Brown disagrees.
“There is a lot of mall space in the Klang Valley but I would not say there is an oversupply. Malaysians like malls, so they have a role to play, despite the growth in online retail,” he says.
He says the more pertinent question is what will happen to malls which are not well located and which are not well managed.
Those that are will continue to grow, thrive and attract tenants. A mall will survive on tenant mix, which drives customer traffic.
“There may be some fallout if a mall does not have a good tenant mix,” he says.
7-Eleven Singapore convenience stores are about to have a makeover, with some of them being enlarged by 30 per cent to offer freshly prepared meals and seating.
COO Steven Lye says the chain will stock premium products, introduce seating areas and create a range of fresh-chilled, ready-to-eat meals delivered to the store daily.
“We want to convey the message that we are no longer just a place for small needs. We want to be at the top of our customers’ minds,” says Lye.
As well as the ready-to-eat meals, the expanded and elevated product range includes lifestyle items and even IT gadgets. The stores are also adding 7-Connect lockers, self-collection stations where parcels from online shopping can be picked up, and cash-withdrawal machines.
In July, 7-Eleven invested S$350,000 (US$247,384) in a branding campaign with the tagline “There’s Always 7-Eleven”, seeking to shift customer perception of its outlets from that of a stop for basic needs to a one-stop shop for groceries, toiletries, bill payments, cash withdrawals and more.
“To accommodate the extensive additions, future 7-Eleven stores will have an area of about 800 sqft [74 sqm] where possible.”
Vary by location
He says the items sold at each store will depend on its location. Those in tourist areas such as Marina Bay and Orchard Road will stock backpacks, suitcases and souvenirs while its Marine Parade outlet near East Coast Park will sell kites.
Tech developments are also in the pipeline, says Lye. One is a loyalty app, 7-Rewards, set to roll out next year. Another new service is the 7-Connect Kiosk, a self-help machine for quicker bill payments. Also, 7-Eleven counters will accept wave-payment methods such as Android Pay, Apple Pay and Visa Paywave.
“As a brand, we understand the importance of keeping up with the times and constantly evaluating the needs of customers, hence we have made a conscious effort to innovate,” says Lye.
He says the new range of meals, prepped and delivered upon order to ensure freshness, will replace the store’s frozen-thaw meals by the first quarter of next year.
“The tech behind the fresh-chilled meals is a strong value proposition we are introducing to the market,” says Lye. “Over the past 18 months we have embarked on a strategy to take these ready-to-eat meals to a whole new level.”
Flavours will include Hainanese chicken rice, braised duck rice, butter chicken biryani as well as three flavours of Japanese pastas. By next year there will be more than 40 choices.
Run by Dairy Farm Group, 7-Eleven Singapore has a network of more than 430 outlets.
