Last month, there were media reports on US eCommerce giant Amazon entering the Southeast Asia market via Singapore.
The reports also mentioned that the company is likely to introduce a grocery service here and that it has been buying assets such as refrigerated trucks and hiring new people. This could be major news for bricks-and-mortar grocery retailers in Singapore.
Some of you can perhaps remember the closure of the big Borders bookstore in Wheelock Place in 2011 as part of the Borders company’s bankruptcy in the same year.
In a Wall Street Journal profile of Borders’ bankruptcy, journalist Shira Ovide wrote that “[s]ome of Border’s problems weren’t the company’s fault. There are now hundreds of places to buy books online or in physical bookstores.” Amazon is one company dominant in the online retail of books.
While it is possible to sell books or non-perishable devices easily over the web, the barriers to entry for online retailers when it comes to fresh and perishable goods are higher. It’s not easy to keep fresh goods, well, fresh.
But that has not stopped Amazon from trying to – and succeeding in – winning business from bricks-and-mortar grocers in the US. Take for example, the following excerpt from an April 2016 Business Insider article:
“In the past two years, Amazon grocery shoppers have increased on average by about 26% year-over-year every quarter, according to Cowen data. For comparison, Walmart purchasers have declined 3% year-over-year on average, while grocery shoppers at Target have declined by about 1%.”
Walmart and Target are US-based traditional bricks-and-mortar grocery retailers.
There are some online grocers in Singapore at the moment and a leading player in the scene is Redmart. So, it’s fair to say that bricks-and-mortar grocers here have been dealing with online competition for awhile.
But, there’s a big difference between Redmart and Amazon – the former does not have anything close to the deep pockets the latter has. As of 30 September 2016, Amazon has US$13.7 billion in cash and equivalents.
Nothing’s set in stone for the grocery retail environment in Singapore at the moment. But it would be interesting to see how the bricks-and-mortar grocers here, such as Sheng Siong Group Ltd (SGX: OV8), Dairy Farm International Holdings Ltd (SGX: D01), and NTUC Fairprice, respond to this potential new threat from Amazon. As Amazon’s chief executive Jeff Bezo once famously said, “Your margin is my opportunity.”
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of Dairy Farm International Holdings. Motley Fool Singapore contributor Ong Kai Kiat doesn’t own shares in any companies mentioned.