Sheng Siong’s strategy change in the recent 6 years

Sheng Siong’s strategy change in the recent 6 years

Given the fierce competition in Singapore’s retail supermarket industry, Sheng Siong is facing the threat from powerful competitors and the fear of declining market share. During the time period of 2008-2010, Sheng Siong put their emphasis on consolidation, upgrades and renovation of their existing outlets. This explained why Sheng Siong merely opened one new store in each year of 2008 and 2009, and did not add any outlet into the brand in 2010. The financial year of 2011 is important for Sheng Siong, the firm launched the e-commerce project and adopted strategy of expansion in both local and overseas market.

2011: Expansion without debt burden
In 2011, Sheng Siong’s revenue decreased by 8% due to intense competition. Government announced to reduce the ratio of foreign workers, which leads to rising cost of labor for Sheng Siong since then. However, Sheng Siong cleared off all their debt and held abundant cash in balance. The company realised the strategic meaning of increase presence of outlets to reach more customers, thus opened 4 at Elias Mall, Teck Whye, Woodlands Industrial Park and Thomson Imperial Court.

2012: Aggressive expansion
In 2012, Sheng Siong brought 8 new stores to places which they didn’t reach previously. Under the circumstance of weakened market and unfavourable policy, Sheng Siong’s revenue increased by 10.17% and net profit almost doubled from $27.256m in 2011 to $41.677m, which benefits from soared online sales and increasing revenue from new stores. For overseas market, Sheng Siong had a wholly owned subsidiary in Malaysia called Sheng Siong (M) Sdn. Bhd. The 8 new stores are spread out across the island which includes Toa Payoh, Yishun Central, Jalan Besar, Geylang, Bukit Batok, Bedok North, Ghim Moh and Clementi.

2013: Services upgrade
In 2013, Sheng Siong stuck to their strategy of spread wings and located at places without previous presence. However, they didn’t manage to secure appropriate place for new operation, instead, Sheng Siong extended open hours of their 29 stores. After that, 29 out of 33 outlets of Sheng Siong provided 24 hours services to consumers. Sheng Siong observed 7.86% revenue increase but 5.6% drop of net profit compared to performance of 2012 because Sheng Siong didn’t win a bid for retail place and constructions near their stores at Bedok Central and The Verge impacted their sales.

2014: Cost management & preparation for further expansion
In 2014, Sheng Siong kept their strategy to mainly hire elderly singaporean in order to avoid rising cost of hiring foreign workers. Actually their started to do this since 2013, and in 2014, Sheng Siong’s efforts got paid off as they observed the lowest ratio of administrative cost to gross profit over 3 years. Additionally, profit margin improved from 5.66% in 2013 to 6.56%. Sheng Siong preferred to acquire capital from equity compared to using debt and borrowing, and the firm issued 120 million new shares at $0.67 each, which reflected persist expansion plan of the management group. At the end of year 2014, Sheng Siong held additional $30m cash when compared to balance in last year.

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