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Amidst stiffer competition, Dairy Farm, the operator of Giant hypermarket, has closed down its outlets in Junction 10 and Jalan Tenteram, while its department store at ViVoCity is poised to stop operations by early-2019, reported Singapore Business Review.
To exacerbate the situation, sales of supermarkets and hypermarkets continued to languish, sliding by 3.0 percent in July 2018. But for Dairy Farm, the operating profit from its supermarket business declined sharply by 53.4 percent in H1 2018 on an annual basis to only $98.61 million, primarily because of the lacklustre performance of supermarkets in the ASEAN region.
In addition, Dairy Farm’s market share in Singapore’s supermarket sector fell from 23.9 percent in 2012 to 19.5 percent last year.
According to RHB analyst Juliana Cai, the problem plaguing Dairy Farm is due to a more competitive playing field already being encroached by online commerce.
“I believe some of the locations have inherent problems such as low footfalls, too many supermarkets/minimarts in the vicinity and rising rentals rates.”
In spite of headwinds faced by the sector, supermarket operators have initiated moves to increase their market share or defend their turf.
“NTUC Fairprice, for instance, has FairPrice Shop which is a basic, no-frills supermarket format which sells more house brands to cater to the more senior and budget-conscious residents in the older housing estates,” noted Cai.
It also retained its top spot as Singapore’s biggest supermarket operator, with market share rising from 50.8 percent in 2012 to 56 percent in 2017.
On the other hand, Sheng Siong’s strategy is to expand into new residential estates in a bid to attract more shoppers in the form of young families and newly-weds. However, it is refraining from aggressively opening more stores in a bid to control operating costs.
Despite a 0.8 percent dip in its supermarket sales, Sheng Siong’s earnings rose 6.3 percent year-on-year to $17.15 million in first half of 2018. Its market share also increased from 16.9 percent in 2012 to 18.9 percent last year.
“The ability to discern and cater to the needs of the demographic in the vicinity, have welcoming shopfronts, competitive prices and good product displays are important to lure and maintain footfall,” Cai added.
Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories, email romesh@propertyguru.com.sg
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