How Singapore supermarket chain Sheng Siong's local focus during coronavirus pandemic lifted its fortunes

When fresh meat and vegetables run low at home, part-time receptionist Linda Lim usually only has one supermarket in mind for grocery shopping: a Sheng Siong outlet just five minutes away by car.

For her, the no frills, home-grown supermarket chain checks all the boxes: it offers discounts to older shoppers, has a wide variety of low-priced products and even features a unique wet market-style butcher's station where she can get a fresh piece of pork or whole chicken cut up to her liking.

But most important, the 61-year-old said, is the convenience. "Since it's so close to home, I can drop by any time and I don't have to carry so many heavy groceries at one go."

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Having a supermarket nearby that is open 24 hours is a huge allure, said Teresa Wong, a 62-year-old retiree who visits the same branch as Lim. "Grocery shopping has become very convenient. If I have a busy day, I can pop by at 10 or 11pm. You can't do that at a wet market."

Lim and Wong are among the thousands of Singapore residents taken in by Sheng Siong's hyperlocal approach to grocery shopping, which it has honed since it first opened as a stall selling chilled pork in 1985. Now the country's third-largest supermarket chain, it has been listed on the Singapore stock exchange since 2011 and its founders - chief executive officer Lim Hock Chee and his two brothers - have become billionaires, with an estimated combined fortune of S$1.57 billion (US$1.18 billion).

Bolstered by heightened demand for its goods because of the Covid-19 pandemic, the supermarket chain registered more than S$1 billion (US$750 million) in revenue for the first nine months of last year - a 44.6 per cent increase from the same period in 2019, while its net profit leapt 83.3 per cent to S$107 million. It has yet to report its 2020 full-year results.

In light of its performance, Sheng Siong recently announced it was giving bonuses of up to 16 months' pay to its over 3,000 staff members. This is in addition to an extra month's salary awarded to them last April.

The company declined an interview, but an internal staff memo stated the bonus was to acknowledge that it had "performed extremely well as compared to previous years".

News of the bumper bonus made headlines in Singapore and sparked numerous discussions online, with many commenters lauding the supermarket chain's generosity to its staff. Labour analysts however pointed out this was an exception and should not be expected.

"Paying bonuses is discretionary and for Sheng Siong to go beyond the norm takes a great dose of generosity that can be unmatched," PeopleWorldwide Consulting managing director David Leong told The Straits Times.

Shoppers are seen in a mall in Singapore. Coronavirus restrictions meant that many shopped close to their homes. Photo: Reuters alt=Shoppers are seen in a mall in Singapore. Coronavirus restrictions meant that many shopped close to their homes. Photo: Reuters

LOCAL FOCUS

But the company had already been doing well before the global pandemic hit, with revenue rising from S$764.4 million in 2015 to S$991.3 million in 2019. This can be attributed to its unique business formula - a laserlike focus on a small cluster of homes in an already minuscule consumer market. It does not have a presence in Singapore's downtown region and fewer than 10 of its 64 outlets are found in neighbourhood shopping malls or town centres.

Instead, its stores are mostly found in public housing blocks with a high concentration of flats deep in local neighbourhoods.

"The locations are in the heartlands and they're so accessible. Shoppers can visit more on a regular basis," said Lynda Wee, an adjunct associate professor at Nanyang Technological University's Nanyang Business School.

Sheng Siong largely avoids competing on the same turf as its closest competitors, such as Cold Storage - operated by Hong Kong-based retail conglomerate Dairy Farm International Holdings - and NTUC Fairprice, Singapore's largest supermarket chain backed by its massive labour movement union. These heavyweights occupy the city centre, suburban malls and transport hubs, where footfall is heaviest.

In a city state as small as Singapore, such a hyperlocal approach may seem questionable on paper. But it has shown to be extremely effective in reality, said Carmen Lee, head of OCBC Investment Research.

This is also part of the Sheng Siong DNA, added CGS-CIMB analyst Cezzane See. "They have a mass-market approach. And the heartlands is where the masses stay, so they focus on these areas."

When these masses were forced to stay at home after the government imposed a partial two-month lockdown last year, Sheng Siong reaped the dividends by being the closest supermarket to the homes of many Singaporeans.

"The closure of most dining places and retail malls also meant that more people restarted cooking at home, and this led to higher sales in 2020," said Lee.

Lim Hock Chee, chief executive of supermarket chain Sheng Siong. Photo: Singapore Institute of Technology (SIT) YouTube alt=Lim Hock Chee, chief executive of supermarket chain Sheng Siong. Photo: Singapore Institute of Technology (SIT) YouTube

FUNERAL DONATIONS, TV SHOW

During the partial lockdown, Sheng Siong also made headlines when reports emerged that an employee had slipped S$200 into the collection box at a funeral wake of a resident near one of its outlets. This was subsequently revealed to be a standard practice by the management.

To generate even more local outreach, the company launched a national television programme - The Sheng Siong Show - that sees customers become game participants with a chance to win cash prizes. The programme is a successful strategy to attract customers, noted Lee.

Sheng Siong has managed to maintain these customers in a competitive consumer market by finding its niche: budget-conscious older Singaporeans who are not keen on buying pre-packaged fresh produce. It offers discounts to those over 60 and pioneered a wet market-style fresh produce section, even becoming the first supermarket in the country to feature live seafood stations.

Its rebates also became a big draw for customers. "It is actually the most important reason why I go there. No other supermarket gives such good rebates," said Cecilia Chew, who visits twice a week. The insurance agent, who is in her 50s, has a credit card that gives her up to 12 per cent worth of rebates when she shops there.

But this mass-market strategy is also a double-edged sword. Sheng Siong is seen as a supermarket for those who are conscious about their budget, said Nanyang Business School's Wee. "Their price point focuses on value. It is a heartland supermarket with value merchandise."

As such, the low prices have led to a certain stigma about shopping there among some shoppers, and concerns that the products may be of a lower quality.

For example, accounts executive Ho Lay Teen hardly ever shops at Sheng Siong, instead opting for NTUC, its larger rival.

"NTUC has a larger variety of products and has many international brands. It also feels more organised and has a cleaner look too," said the 55-year-old.

"You can't compare Sheng Siong to Cold Storage and Fairprice for quality of certain products. But the daily essentials are there," said personal assistant Carol Tiong, 61.

For Wong though, the prices and service she receives at her local store are the reasons she keeps returning. "It has become my No 1 supermarket," she said.

This focus on convenience and affordability is expected to help Sheng Siong maintain its growth trajectory. An analysis by DBS Bank predicts earnings are set to 'remain robust, driven by higher store count and better gross margins".

This article originally appeared on the South China Morning Post (SCMP).

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