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Tag: asia

  • Hong Kong Luxury Goods Stores Want Cheaper Rents

    Hong Kong Luxury Goods Stores Want Cheaper Rents

    Rents for retail space on the island of O‘ahu rose to a record earlier this year.  Colliers International says commercial rents here have been rising for the past several years, a trend that’s expected to continue. Commercial rents have also risen in Hong Kong, but some luxury retailers are fighting back.  HPR’s Bill Dorman has more in today’s Asia Minute.

    Selling luxury goods in Hong Kong is not the business it used to be.  Part of that reflects a slowing Chinese economy.  But those who follow the sales say an even bigger impact has been the crackdown on extravagant spending by Chinese government officials.

    This week, the chief financial officer of Gucci’s parent company threatened to close some stores in Hong Kong unless rents are reduced.  He told a conference call of analysts that “many landlords have not necessarily understood that the markets have changed.”

    Bloomberg reports Burberry may also try to lower its rent after its sales in the city fell to a two-year low.  Commercial rents have come down in some parts of Hong Kong, but they remain among the most expensive in the world.  Reuters reports a 500-square foot store space in the neighborhood of Causeway Bay can cost the equivalent of 64-thousand US dollars a month.

    Commercial real estate firm Cushman and Wakefield says annual rent for retailers tops two-thousand dollars a square foot in three different Hong Kong neighborhoods.  Many Chinese shoppers are now traveling beyond Hong Kong to buy luxury goods.  In a report last month, Bain and Company said the world’s luxury goods market is continuing to grow, and its major driver is tourism.

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  • Vista Land bags multiple awards at the 2015 Philippines Property Awards

    Vista Land bags multiple awards at the 2015 Philippines Property Awards

    Vista Land received several awards at the recently concluded 2015 Philippines Property Awards for its prestige brands Brittany, Vista Malls, Vista Residences and Camella.

    Amore, an Italian-themed residential property under the luxury brand of Vista Land, Brittany, was awarded Best Housing Development in Metro Manila and Best Housing Development in the Philippines for 2015.

    Amore is a massive development that infuses Italian elements such as cupolas, cobblestone pathways, gabled roofs and pocket gardens that draw the beauty of landscape and light within an expansive central business district emerging at the south of Manila.

    The affordable housing brand, Camella, won as the Best Mid-Range Development (Resort) for the Camella Palawan development.

    Meanwhile, Vista Land’s Vista City was recognized as Highly Commended for Best Retail Development and Best Retail Architecture for its Evia Lifestyle Center. To date, the center’s first two buildings are already up and running with an elite selection of stores and restaurants.

    Concluding the list of awards Vista Land earned is the Highly Commended for the Best Architectural Design recognition for the Vista Hub at the Bonifacio Global City.

    Vista Land has been in the business of building quality homes and communities for four decades now. Its developments are present in 38 provinces and 90 cities all over the Philippines.

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  • Cellphone makers switch to budget handsets after law change

    Cellphone makers switch to budget handsets after law change

    South Korea’s mobile phone makers are breaking away from their premium-oriented smartphone lineups to churn out cheaper phones as consumers are more price-conscious due to tougher subsidy rules, industry watchers said Wednesday.

    Samsung Electronics Co. recently rolled out its latest mid-end phone, the Galaxy A8, at an about 20 percent discounted price compared with the flagship Galaxy S6, and the budget phone Galaxy J5 for less than 300,000 won (US$259).

    It also started selling the Galaxy Folder, with a price tag similar to the J5 model, which is designed to woo older generations, who need fewer features.

    Samsung’s move came after the Galaxy Grand Max, a low-end model that was released in January, became a smash hit in Korea, with 700,000 units sold so far, watchers said.

    LG Electronics Inc., Samsung’s smaller rival, has also been bolstering its budget phone lineup, unveiling five new models this year, including the LG Volt, the G style and the LG Bello II.

    Industry watchers said such a shift in their lineup strategy is attributable to the enactment of a new law in October last year, which caps the phone subsidies that mobile carriers can provide to retail stores at 330,000 won.

    Although the law was revised to restrict excessive incentives that had led to cutthroat competition, it has prompted consumers to look for cheaper phones because of the reduced subsidies.

    As part of a bid to diversify portfolios, SK Telecom Co., the top mobile carrier in the country, is apparently mulling launching a cellphone rental service in a joint project with its information technology service unit.

    If the rental business kicks off in Korea in fall as widely forecast, it will bring a significant change in the market landscape as it will be an unprecedented move and affect other rivals, market watchers said.

    Skeptics, however, played down its growth potential because the device has more personal elements like banking details and photos compared with other common rental products.

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  • Thai products flood Vietnam market

    Thai products flood Vietnam market

    Thai products can be seen everywhere, gradually replacing cheap Chinese low-quality goods on supermarkets’ shelves and at pavement shops.

    “In the past, Chinese motorbike accessories flooded the domestic market, but 70-80 percent of the products available in the market are from Thailand,” said Hai, a distributor of Michelin tires, a Thai brand well known in Vietnam.

    Thai tycoons in recent years have been flocking to Vietnam, taking over a series of Vietnamese distribution chains. The move were described as a step to clear the way for Thai products to penetrate the home market.

    Thai BJC Group, for example, spent $876 million to take over Metro Cash & Carry Vietnam. Meanwhile, Thai Corporation International, a subsidiary of BJC, bought 51 percent of Phu Thai Group, which ran 42 Family Marts.

    Thai products, however, usually cost more than Chinese and Vietnamese products.

    “Thai goods fit Vietnamese tastes and they are not too expensive,” said Le Thi Thanh Lam, deputy general director of Saigon Food.

    The greatest success of Thai businessmen is that they are very professional in penetrating the Vietnamese market.

    Robert Tran from Robenny, a Canadian consultancy firm, noted that the cementing of firm positions in the market with the retail growth rate of 15 percent and Vietnam’s high population of 90 million can help Thai retail groups increase the number of shops in Vietnam.

    “This allows the companies to have an advantage in negotiating with manufacturers about commissions and prices,” he explained.

    Meanwhile, Pham Ngoc Hung, deputy chair of the HCM City Business Association, noted that Thai businesses followed sound business strategies.

    “The distributors develop their chains in a 5-10-year term plan, and do not do ‘hit-and-run’ business,” he said. “The larger the distribution networks expand, the more easily they can bring Thai products to Vietnam.”

    While Thai businessmen have conducted rapid-fire attacks at the Vietnamese market, domestic businesses remain ‘bewildered’.

    Tran said he was surprised about the way Vietnamese do business.

    “Vietnamese businesses say they can completely satisfy requirements set by foreign partners. However, they cannot show sample products,” he noted.

    “A large business even said it would only make an investment if the partner agreed to sign the contracts first,” he said.

     

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  • Lotte Group Founder Loses Japan CEO Title Amid Succession Battle

    Lotte Group Founder Loses Japan CEO Title Amid Succession Battle

    Turmoil has erupted atop South Korea’s largest retail giant Lotte Group, shining a spotlight on one of the biggest family feuds the country has seen.

    The week began with 92-year-old Lotte founder Shin Kyuk Ho and his eldest son flying to Japan to fire a group of senior managers at a key unit, a maneuver that backfired and left the patriarch sidelined the next day. By Wednesday, Shin Dong Bin had successfully fended off his elder brother’s attempt to derail him from taking over control of the group.

    At stake is leadership over a conglomerate with 80 units across Korea, operating everything from department stores, amusements parks to hotels with 112 trillion won ($97 billion) of assets. Though the country saw sibling rivalries tear up Hyundai Group more than a decade ago, power struggles at businesses of Lotte’s size are rarely displayed in public in a corporate landscape dominated by family-run businesses, known locally as the chaebol.

    “It was an unexpected move as everyone had assumed that the founder had already selected Shin Dong Bin as his heir,” said Chae Yi Bai, an analyst at corporate watchdog Center for Good Corporate Governance. “This puts Lotte’s succession plans back in debate.”

    The drama at Lotte Group comes at a time when concerns over dynastic succession is fresh in people’s memories. Less than two weeks ago, Samsung Group narrowly defeated billionaire activist investor Paul Elliott Singer in a hotly-contested proxy fight, paving the way for the founding Lee family to tighten its grip over the nation’s largest conglomerate.

    Back at Lotte, co-chairman Shin Dong Bin apologized to employees on Wednesday for the turmoil brought by the dispute and urged them to put faith in him.

    “I am very sorry for causing uncertainties and turmoil to you all — the corporate value that Lotte has held up for a long time should not be rattled simply by an individual’s family issues,” 60-year-old Shin said in a note to employees, a copy of which was distributed to the media.

    The founder’s act to support elder son Shin Dong Joo, 61, had been unexpected as the younger Shin had been heir-apparent after executive titles including the vice chairman role at the parent group were stripped from Dong Joo in January.

    Lotte declined to make Shin Kyuk Ho or Shin Dong Joo available for comment.

    Shares Spike

    Shares of Lotte’s listed South Korea affiliates spiked on speculation the contesting Shin brothers would snap up the shares to solidify their control, Kim Tae Hong, an analyst at Yuanta Securities Korea Co. said by phone.

    Lotte Shopping Co. rose for a second straight session to end 6.6 percent higher by the close of trading in Seoul, the largest gain since 2010. Lotte Confectionery Co. closed up 4.7 percent, after jumping as much as 16 percent. The benchmark Kospi index ended little changed.

    In an earlier statement sent to media Wednesday, Lotte Group said the older son and his father’s July 27 act to fire executives at the closely held Japan unit Lotte Holdings Co. didn’t follow legal procedures.

    Tokyo-based Lotte Holdings’ board of directors held a meeting a day after to nullify the dismissals, and decided to move the founder into an honorary chairman role, according to the statement. Such a role typically carries no specific duties or voting rights.

    The older Shin brother’s attempt to gain influence over the Japan unit is aimed ultimately at capturing control over the entire group, due to the conglomerate’s shareholding structure, according to Chae.

    Attack Blocked

    “Whoever holds Lotte’s holding companies in Japan pretty much holds the entire group because of how the group’s corporate governance structure is designed,” Chae said. “It’s too early to say who won the crown, but Shin Dong Bin seems to have successfully blocked the attack this time around.”

    The founder holds a 28 percent stake in Lotte Holdings Co., Dong Joo holds 20 percent and Dong Bin has 19.1 percent, while a company called Kwang Yoon Sa holds 27.65 percent, according to data compiled by Bloomberg. Kwang Yoon Sa, a packaging company also based in Tokyo, is said to be owned by the founder, according to the Korea Economic Daily.

    Lotte Holdings spokeswoman Ruka Mizuno declined to comment on the governance structure of Lotte Holdings and Kwang Yoon Sa. when reached by phone, saying the companies aren’t listed.

    Shin Kyuk Ho, born in Ulsan, South Korea in 1922, started Lotte in Japan in 1948 after completing his university studies there. The company started off selling chewing gum in postwar Japan and quickly grew into a major confectionery company.

    When diplomatic relations normalized between Korea and Japan in 1965, Shin began investing in his home country and established Lotte Confectionery Co. in 1967, according to the Seoul-based Center for Good Corporate Governance.

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  • Tmall.com promotes same-day grocery delivery in China

    Tmall.com promotes same-day grocery delivery in China

    Tmall.com, China’s largest business-to-consume platform and a unit of Alibaba Group, said on Friday that it has launched a CNY1 billion (USD161 million) online grocery promotional campaign targeted at Beijing users, and teamed up with Cainiao, the logistics affiliate of Alibaba Group, to offer same-day delivery services to Beijing city residents.

    Online grocery shopping is a rapidly growing e-commerce segment and a strategic area of interest for Alibaba Group. The convenience of online grocery shopping has already drawn in millions of users. According to Kantar Worldpanel, China’s FMCG (fast moving consumer goods) e-commerce penetration rate was 36 percent in 2014, while McKinsey states that 40 percent of Chinese consumers have bought food online.

    Tmall Supermarket will run its promotion three times a day, allowing Beijing-based internet users a chance to win “red packets” that subsidize their grocery purchases. The promotion will end by the end of this month.

    Beijing residents who order from Tmall’s supermarket before 11 am will be eligible for same-day delivery service. In the future, Tmall Supermarket and Cainiao plan to roll-out same-day delivery services to Shanghai and other Chinese cities.

    Jeff Zhang, President of Alibaba Group’s China Retail Marketplaces said Tmall Supermarket will draw on Alibaba Group’s complete e-commerce ecosystem – including Alibaba’s advantage in logistics, strength in online payments, big data and cloud computing, to bring consumers the most convenient and secure online shopping experience for quality products.

    Tmall Supermarket was established in 2012 and provides a one-stop shopping solution for Chinese users looking to purchase authentic food products, cosmetics, beverages, snacks, imported items, etc. In the past year, Tmall Supermarket’s Beijing area GMV soared more than 700 percent with 90 percent of consumers shopping on their mobile phones.

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  • Flipkart launches 20 pick-up centres to mitigate delivery issues

    Flipkart launches 20 pick-up centres to mitigate delivery issues

    A pilot project, Flipkart claimed, has received an overwhelming response from customers with more than 80% of shipments picked up through the stores over a period of 6 months. Banking on the success of the first phase launch, the company aims to open 100 such centres by March 2016.

    Logistics and good customer experience are the most common sticking points for e-commerce companies in India. As a result, most online retailers are increasingly partnering with logistics firms to address the problem.

    “Our efforts are focused on expanding our delivery network without compromising on the customer service levels and expectation,” said Neeraj Aggarwal, Senior Director (Delivery Operations) at Flipkart. “We also plan to offer several value added services like instant returns, spot trials, open box deliveries and exclusive product demos at these experience zones to enhance customer engagement.”

    Online retailer Flipkart on Tuesday introduced 20 pick-up centres for its customers in 10 cities across the country. These so-called ‘experience zones’ will allow customers to walk into a centre at their own convenience and collect products ordered online.

    The centres have been set up by Flipkart’s logistics and delivery unit Ekart.

    Unavailability of customers during delivery and restricted entry of delivery boys into informationtechnology parks, gated communities and educational institutions are among the primary reasons that leads to customer dissatisfaction with the delivery process, Flipkart said in a statement.

    Flipkart expects this alternative delivery model to catapult customer convenience, while enhancing scale and reach in supply chain expansion.

    The company said these collection points will form a key element of Flipkart’s rural expansion strategy. “Flipkart plans to expand their reach into Tier 4 towns and rural areas by making the entire town serviceable from a pick-up centre, a reliable alternative to door delivery in small towns,” it said.

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  • China’s shoppers may take 10 years to step up

    China’s shoppers may take 10 years to step up

    Chinese policymakers are gung-ho to transition their economy away from investment and toward consumption, but that may not happen for another decade, new data shows.

    “Without a substantial intervention, we believe consumption’s share of China’s economy is unlikely to rise substantially before 2025,” The Demand Institute, a non-profit organization operated by The Conference Board and Nielsen, said in a new report.

    Private consumption as a share of gross domestic product (GDP) will average 28 percent from now until 2025, the think-tank said.

    To be sure, the mainland has long underperformed the global average in this regard as Beijing previously focused on export-led growth.

    Consumption as a share of GDP was 37 percent last year, according to the Brookings Institution, compared with around 70 percent in the U.S. and 60 percent in fellow emerging market, India.

    The indicator has only recently started to stabilize in recent years. Consumption relative to GDP declined 48 percentage points from 1952 to 2011, one of the longest and largest drops of any nation on record.

    Based on an examination of 167 countries between 1950 and 2011, the report found that nations with similar economic characteristics to China saw consumption remain flat relative to GDP for a considerable period following previous declines.

    China’s desire to rebalance its economy stems from the need to avoid the dreaded “middle-income trap,” in which developing countries are unable to graduate into high-income countries after achieving a certain level of per capita GDP.

    While many economists believe the economic transition is already underway, albeit at a gradual pace, they also expect it will take a while before consumption’s share of GDP spikes higher.

    “Only towards the end of decade, when the economy slows further to 5-6 percent, consumption’s share of GDP will become more important,” said Jian Chang, China economist at Barclays. “But we have seen investment slow significantly and I think total consumption as a share of GDP could near 50 percent this year.”

    Beijing’s strategic vision of boosting consumption was first outlined in 2011’s 12th Five-year Plan and since then, the government has unleashed a slew of measures, including raising wages and slashing import tariffs on high-demand goods.

    But The Demand Institute warns that the burden can’t rest on the government alone: “It is up to business to nurture the demand that policy unleashes, aligning goods and services with consumers’ shifting preferences.”

    Ensuring access to products and services via reliable distribution channels, satisfying demand across different income, regional and age groups as well as offering more financial services to support consumption are some of the factors that businesses can embrace, the report said.

  • Lawson to open 450 stores in Japan this year

    Lawson to open 450 stores in Japan this year

    Even though Japan’s convenience store sector faces numerous challenges, the country’s second-largest operator, Lawson, plans to open another 450 stores this year, the company’s CEO has revealed.

    Genichi Tamatsuka said there are 55,000 convenience stores in Japan but the market has not yet reached saturation point.

    He sees massive potential for growth because of demographic and other social changes that are altering consumers’ buying behaviour.

    “Whereas people used to go to a big supermarket and prepare meals for a family of four or five, now they’re busier, they’re older, and they prefer to buy in a small neighbourhood store,” he explained.

    Lawson currently runs a network of 12,000 stores – soon to be expanded – and, combined with its logistical muscle, Tamatsuka expressed confidence that it would be able to meet the needs of these “combini” neighbourhood stores.

    “With our scale of 12,000 stores, our supply chain and platform, we can supply food and necessities to these neighbourhoods,” he said.

    Expansion overseas is another source of potential growth, he indicated, considering the value placed on the high level of customer service provided by Japanese retailers.

    Lawson has 500 stores in China and has also started up operations in Thailand, Indonesia and the Philippines.

    Despite Tamatsuka’s confidence, research group Euromonitor earlier this year published a more downbeat assessment of Japan’s retail landscape.

    “Japanese grocery retailers are expected to face numerous challenges imposed by such factors as changing demographics and operational difficulties,” it warned.

    However, in what could be seen as endorsement of Tamatsuka’s expansion strategy, the report went on to say, “in order to fight against such negative circumstances, grocery retailers may attempt to expand in size and diversify business portfolios”.

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  • Flipkart launches financial assistance programme for vendors

    Flipkart launches financial assistance programme for vendors

    Online retail major Flipkart on Friday launched its financial assistance programme Growth Capital Initiative for sellers across the country. The company has tied up with leading banks and financial institutions such as Bajaj Finserv, Axis Bank, NeoGrowth, Lendingkart and Capital First, for the same.

    The platform will compare lending services between different financial players and enable access to capital. While Flipkart will play the role of a curator, the platform will create an arena and ecosystem of financial services for sellers that will be governed by the market forces.

    “Lack of funding has often emerged as one of the key hurdles for small businesses. In fact, most of the lending organisations consider them as ‘un-bankable’ which results in a lot of SMEs/units closing down or borrowing from other sources at higher rates. We see a huge unmet demand in this sector. Our initiative will provide simple, hassle-free and competitive options to sellers to avail financial services,” said Ankit Nagori, Chief Business Officer at Flipkart.

    With this initiative, sellers across India will be able to gain quick access to loans with basic documentation and within minimum turn-around-time. Our focus is to simplify the whole capital fund gathering process so that they can make timely investment and focus on developing their businesses, added Nagori.

    Rivals Snapdeal already has a financial assistance arm for vendors in place since last year while Amazon has tie-ups with various financial institutions in the country for the same. In addition, there are start-ups like Lendingkart.com and Capital Float that assist vendors in online e-commerce to seek easy loans.

  • Singapore’s Orchard Rd hasn’t lost its gloss

    Singapore’s Orchard Rd hasn’t lost its gloss

    Orchard Road remains the top destination for shoppers during the recent Great Singapore Sale, according to a new report, debunking calls that Singapore’s prime shopping belt may be losing its shine.

    The premier retail strip attracted the highest footfall during the city-state’s annual shopping promotion, held from May 29 to June 28 this year, a new report by location intelligence company AdNear said. The study analyzed the foot traffic data from 192,000 respondents in six retail locations, including Bugis Junction, Marina Square, Novena Square, Orchard Road, Raffles City and Suntec City, for the month of June.

    “The busy shopping district [of Orchard Road] had almost 2.5 times more foot traffic, definitely in line with the fact that it has an array of malls [compared to] Suntec City, Raffles City and Bugis Junction,” the report said.

    Long regarded as one of Asia’s best shopping streets, Orchard Road has been struggling to keep up with a competitive retail environment brought about by a confluence of factors including fewer tourist arrivals from China andincreased competition from suburban malls and online retailers.

    Reflecting slowing sales at major department stores, average monthly gross rents of prime retail space on Orchard Road slipped 1 percent in the second quarter to a four-year low of $37.79 Singapore dollars per square foot, according to data provided by property consultancy Cushman and Wakefield.

    With its position as a top shopping destination at stake, events such as the Pedestrian Night where a section of Orchard Road goes car-free once a month, have been unveiled; while a $40 million worth of facelift is on the cards to rejuvenate Singapore’s premier shopping street.

    Who likes Orchard Road more?

    To be sure, shoppers are not ditching Orchard Road just yet.

    Among consumers surveyed, the tree-lined shopping belt is ranked among the top three retail locations for the affluent group, homemakers, professionals and travelers. Only the student category gave the shopping precinct a thumbs-down, ranking Orchard Road as the second least-preferred place for retail therapy.

    Orchard Road is also the go-to destination for females, but shunned by male shoppers who ranked it as the least desirable shopping destination. Interestingly, the top choice for male shoppers – Marina Square – was ranked last by female consumers.

    The report showed Sunday as the favorite day for a shopping spree among females, whilst the men favored a mid-week splurge, with footfall at its highest on Tuesdays. Despite the preference for different days, both genders like to shop between 5pm and 9pm.

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  • H&M may open 30 stores in India by early 2016

    H&M may open 30 stores in India by early 2016

    Following IKEA announcing the purchase of 13 acres in Hyderabad for its first store in India on Friday, it’s the turn of another Swedish chain, Hennes & Mauritz (H&M), to go for a big rollout in the country. H&M, rival to another European fast fashion brand, Zara, is likely to open as many as 30 stores in India by early next year, sources say.

    The Swedish fashion chain, in the middle of major global expansion, is learnt to have already closed about 15 real estate lease deals in India, and is in the process of raising this count. The group, with $22 billion in global sales and 3,600 outlets across 59 markets, recently announced it would launch its first India store in the national capital. The store, of about 25,000 sq ft, would be located at a popular mall.

    At the time of making its application for investing about Rs 750 crore into the country, H&M had said it planned to open 50 outlets across India through the next few years. Zara, in a joint venture with Tata group’s Trent, has 16 stores across the country; it posted $114 million in sales for the year ended March this year.

    H&M did not reply to a Business Standard questionnaire on store openings and lease deals.

    According to H&M’s latest quarterly report, the company plans to open as many as 400 stores across the world this year. Besides India, the group’s expansion thrust is on the US and China. In fact, in North America, both H&M and Inditex’s Zara are giving stiff competition to the US-based Gap. Recently, Gap announced its plan to shut 175 stores in the US.

    Besides international expansion, H&M is also focused on going online. Of late, the group has gone online in Poland, Portugal, Romania, the Czech Republic, Bulgaria, Slovakia, Hungary and Belgium, among others.

    Though the company secured the government’s approval to invest in India early last year, it has delayed its launch partly due to a slow retail environment in its home market, pressure on margins and focus on some other key markets. Analysts said general elections in India, as well as political uncertainties, might also have added to the delay.

    H&M’s big India play at this point is significant because there has been no action in the international brick-and-mortar retail scene for about a year, except Gap launching its store recently.

    The National Democratic Alliance government at the Centre is opposed to foreign direct investment (FDI) in multi-brand retail. The UK’s Tesco, in partnership with the Tata group, is the only entity in multi-brand retail to have invested in India (Maharashtra and Karnataka). In 2013, American major Walmart parted ways with its partner, Bharti group.

    While limiting its business to wholesale, Walmart has not shown any interest in entering India’s multi-brand sector. French chain Carrefour, which also had wholesale stores in the country, made an exit last year, in the absence of a favourable multi-brand policy.

    In multi-brand retail, FDI is capped at 51 per cent, while 100 per cent foreign investment is allowed in single-brand retail. However, despite the fact that there’s no cap on FDI in single brand retail, companies such as IKEA and H&M are believed to have been worried over a clause pertaining to mandatory 30 per cent sourcing from India.

  • Hero to open more stores to boost revenues

    Hero to open more stores to boost revenues

    Retail company PT Hero Supermarket (Hero) will spend up to Rp 640 billion (US$48 million) this year for business expansion with retail plans to open stores in several cities across the country.

    The move will be made to restore the company’s disappointing financial performance earlier this year.

    Hero, which operates hypermarkets, supermarkets, convenience stores, drug stores and furniture stores, plans to open four Giant Ekstra hypermarkets and six mid-sized Giant Ekspres supermarkets in several regions, including Bangka and Lombok. Arief Istanto, a director with Hero, said each Giant Ekstra would cost between Rp 100 billion and Rp 150 billion while the Giant Ekspres would cost about Rp 20 billion. It means the company will allocate between Rp 440 billion and Rp 640 billion in capital expenditure to build the stores this year.

    Arif said the company aimed to improve its financial performance and hoped to book profits like it did in previous years. The company will use its internal funds for the expansion.

    “We would like to expand our network so that it can attract more customers. Thus, our top line will also increase,” he said after an extraordinary shareholders’ meeting on Tuesday. At the meeting, they agreed not to disburse the Rp 43.75 billion in dividends to shareholders and instead spend it on the company’s business expansion plan.

    Hero Supermarket previously suffered Rp 33.19 billion in net losses during the first quarter of this year amid a 14 percent increase in net revenues of Rp 3.57 trillion, making it the worst performer in the country’s retail industry.

    Last year, the company saw its net profit dive to Rp 43.75 billion from Rp 671.13 billion in 2013. A 13.94 percent increase in revenues, which stood at Rp 13.56 trillion at that time, could not ease the ballooning operating expenses, which hit Rp 3.31 trillion.

    “Our 2014 financial results were disappointing with weak sales growth and a significant increase in operating costs across all businesses as well as higher overhead and store pre-opening costs,” Stephane Deutsch, Hero’s president director, said in a statement.

    In 2014, the company launched a flagship furniture store under Swedish brand IKEA in Alam Sutera, Tangerang, Banten, some 25 kilometers west of Jakarta’s city center.

    Arief confirmed Hero has planned to build five more IKEA stores in the future as the company was upbeat about the prospects of the franchise furniture store.

    “At the moment, we are looking for land for the second store. It is supposed to be done this year,” Arief said, adding that the second store would be located in Greater Jakarta.

    According to him, IKEA has contributed around Rp 200 billion to Hero’s revenues in the first quarter of this year,

    Hero says it hopes to book 30 to 40 percent growth in revenues during the fasting month of Ramadhan this year. The company currently operates 33 Hero supermarket stores, 341 Guardian healthcare stores, 98 Starmart convenience stores, 53 Giant Ekstra stores, 121 Giant Ekspres stores, two Jason supermarket stores and one IKEA store.

  • Gap narrows for Chinese brands

    Gap narrows for Chinese brands

    Chinese brands are closing the gap with international brands as consumers become more concerned about product quality rather than the origin of the brands, according to a latest study.

    As high as 67 percent of consumers said they favor domestic brands, consumer research firm Mintel said in a research report yesterday.

    The study covered 3,000 consumers aged between 20 and 49 in 10 cities.

    The domestic food and beverage brands have a strong following, with 42 percent of the respondents favoring them over foreign products compared with 25 percent that prefer imported snacks.

    For domestic ready-to-drink beverage brands, 44 percent of consumers prefer them against 27 percent that favor foreign products.

    Baby food is an exception with 45 percent of respondents saying they would choose international brands against only 31 percent who favor domestic products.

    “We’ve seen Chinese consumers becoming more value-driven, as they’re more likely to judge a product by its content and quality instead of checking whether it’s an international or domestic brand,” said Laural Gu, Mintel China’s senior lifestyle analyst.

    The study also found that 47 percent of the consumers were more willing to indulge themselves by paying for services instead of products.

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  • Now, you can shop on Twitter

    Now, you can shop on Twitter

    Twitter has announced that the company is launching a product and place pages that allows users to discover and purchase items within the service.

    According to the Verge, the new pages will organise related tweets about products and brands on dedicated pages.

    A product page will let people see others’ tweets about that product, prices, and, sometimes, a buy button.

    The company is also rolling out what it’s calling Collections, a way for brands and celebrities to curate products and recommend them to followers.

    This is the second new feature Twitter has unveiled this week after announcing Project Lightning, a news platform that would allow users to follow events instead of people.