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What Investors Should Know About Sheng Siong Group Ltd’s Thoughts On E-commerce

Sheng Siong Group Ltd (SGX: OV8) is one of the largest supermarket chains in Singapore. The company’s network of 48 stores are primarily located in the heartlands of our island nation. The company was established in 1985 and listed in 2011.

The company recently published its 2017 annual report. Given that reading an annual report is one of the best ways to keep up with a company’s developments, I decided to go through Sheng Siong’s latest annual report to understand the company’s prospects, and how it had performed in 2017.

Generally, when reading an annual report, I will pay close attention to the letter to shareholders that the company’s chairman and/or CEO writes.

 In this article, I want to discuss an area that I found interesting: Management’s thoughts on online grocery retailing.

To begin with, Sheng Siong’s management acknowledged the potential disruption to the bricks-and-mortar grocery retail business that is being caused by e-commerce players such as Lazada and Amazon. In the words of Sheng Siong’s management:

“Singapore is seen as a testing ground for developing online grocery retailing. The US retail giant, Amazon has made its foray into Singapore’s retail market by launching Prime Now services in July 2017, offering a wide range of products online. Alibaba has increased their stake in Lazada. The presence of these large online platforms has raised questions on the disruption of the traditional brick and mortar grocery business by online retail.”

But, Sheng Siong’s leaders also think that bricks-and-mortar grocery retailing will still remain relevant in the future, although tweaks will have to be made:

“We believe that shopping is still a leisure activity among Singaporeans and grocery retailing in brick and mortar stores would complement online offerings. Consumers would still prefer to exercise judgment in making their own selection, particularly for fresh produce. In this aspect, we are still learning from our offering of online grocery retailing via our “allforyou.sg” platform and will adapt our physical stores to complement.”

From all the quotes above, it can be seen that Sheng Siong acknowledges the disruptive forces of e-commerce. Nevertheless, the management team thinks that a bricks-and-mortar grocery retail format will still remain relevant in the future, if changes are made to the concept to cater to fresh produce.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned. The Motley Fool Singapore has recommendations on Sheng Siong Group and Amazon.