Giant’s Possible Exit From Hypermarket Business

Rumor has it that Hypermarket chain Giant will wind down its seven hypermarket stores in Singapore, save the HQ in Tampines. This is after closing of two Giant Hypermarket stores in Bukit Panjang and Whampoa. When approached by Today, the company confirmed its plan to shut its VivoCity outlet early next year and review lease renewals and store performance of the remaining hypermarket stores. Giant supermarket stores, previously converted from Shop n Save, its sister company under parent company Dairy Farm will be business as usual. Currently, Giant has about 60 supermarket stores across Singapore.

Weakness in Giant Hypermarket and Supermarket Businesses

Dairy Farm first reported weakness in its hypermarket and supermarket businesses in 2017, with operating profit dropped significantly by 30 per cent. Lower foot traffic coupled with higher rental has contributed to its poor performance in Singapore, Malaysia and Indonesia. Meanwhile, operational and manpower costs have been increasing. However, the biggest challenge faced by Giant is said to be the increasing competition from online grocery shopping. In addition to online shopping options provided by FairPrice and Cold Storage, the aggressive marketing by RedMart and Honestbee has presented more challenges to Giant in maintaining its market share. Amazon’s entry in 2017 further changed the game with its Amazon Fresh delivery service. With guidance from your economics tutor in economics tuition, discuss the economic implications of online grocery and delivery on Giant. By applying knowledge you have learned in the economics tuition class conducted by your economics tutor, explain the primary and secondary factors contributing to Giant’s poor performance.

The fall of Giant Hypermarket stores came as a surprise. Giant was the first to have a hypermarket in Singapore. Only five years ago, Dairy Farm converted 56 of its Shop n Save stores to Giant stores in a re-branding exercise, to build on Giant’s existing strength / economy of scale in hypermarket and supermarket businesses.

Singapore Hypermarket/Supermarket Sector

Singapore hypermarket/supermarket sector is dominated by three key players, FairPrice, Dairy Farm and Sheng Siong. Among the three, FairPrice has the most extensive consumer reach with some 140 hypermarkets and supermarkets accounting for 34 per cent market share. Besides its loyalty programme, the group also launched Warehouse Club, a first membership only retail warehouse in 2015 to offer bargain buys in bulk. FairPrice’s success could be attributed to its successful business strategy in offering tiered pricing/products to cater to customers of different income groups. The topic of tiered pricing is explained in the lecture notes by Mr Edmund Quek, Principal Economics Tutor of Economics Cafe Learning Centre, a leading economics tuition centre in Bishan. Mr Quek is a well sought-after economics tutor with more than 20 years of experience in teaching economics tuition. Sign up for his economics tuition today to benefit from his teaching. You may also explore other economics tuition centres in Bishan to check on the economics tutor’s qualification, knowledge and experience.

Sheng Siong Supermarket, a home-grown brand has 45 stores in residential heartlands. It has announced plans to grow its total store count to more than 50 by end of 2018, with at least 10 bids in 2018 in its tender pipeline. This is on the backdrop of positive profit growth of 10 per cent to S$69.5 million in 2017.

Dairy Farm has under its brand, established household names Cold Storage, Giant, Market Place and formerly Shop n Save among others. It used to have the largest supermarket chain including 52 Cold Storage supermarket stores, 52 Giant supermarket stores and 8 Giant hypermarkets. The possible closure of Giant hypermarket presents opportunity for its competitors to gain a bigger market share. It remains to be seen which player will benefit the most from Giant’s retreat/exit from hypermarket business.

Linda Geng

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