Smaller grocery chains find ways to stay in the game

Competitive prices, catering to niche segment are helping them go up against bigger players

A small supermarket chain saw the potential of catering to residents in their neighbourhoods and rode the heartland wave to expand to eight outlets in the 2000s.

By the 2010s, competition between major supermarket players had intensified in a business worth billions of dollars a year.

In a bid to go one up on rivals, FairPrice and the Dairy Farm group's Shop N Save vied to buy that small chain - MCP Supermarket - in 2010. It was eventually sold to Shop N Save for a seven-figure sum. Only six of the MCP outlets are still in business, first rebranded as stores under Shop N Save and later Giant.

Today, the former owner of MCP Supermarket, Mr Raymond Tan, is back with three MCP Fairmart outlets in the heartland.

Despite the dominance of the big boys - FairPrice, Giant and Sheng Siong - small grocery chains have continued to hang on by keeping their prices competitive.

Like MCP Fairmart, other small-to medium-sized supermarket chains have carved out a niche for themselves in the heartland too, including Prime Supermarket, which has 20 outlets, and Ang Mo Supermarket, which has six.

MCP's Mr Tan, 54, said: "We can still fight with the big players based on pricing and freshness of goods."

CONVENIENCE IS IMPORTANT

What matters to me is the convenience, not so much the saving of a few cents.

FINANCE MANAGER SUNDEP ARORA

He said: "Suppliers tend to sell items at a higher price point to the larger chains because they still need to pay to rent space to display their items there, but they don't have to for us."

Staff at MCP Fairmart maintain the freshness of the fruits and vegetables by opening up the plastic packs and throwing out those that have gone bad every afternoon. Jin Tai Mart, which has six outlets in the heartland, is also confident of competing with the big players when it comes to pricing.

Its Facebook page claims that it sells the "most affordable milk powder in Singapore".

A 1.6kg tin of Dumex Mamil Gold 3 milk powder at its shop goes for $63.90, for instance. Customers get $1 off if they buy two tins. If they return with the lid that has the store label, they get a $2 rebate on their next purchase. The same product sells for around $69.80 at a large chain.

Said Jin Tai Group chief executive Francis Liew, 60: "We have learnt how to build a niche for ourselves. We (have been) known for cheap milk powder and diapers for over 20 years."

NECESSARY TO FIND A NICHE

Competition is stiff and one needs to find a niche. Otherwise, the small players will become smaller and disappear while the big become bigger.

JIN TAI MART'S FRANCIS LIEW

Overall, Singapore's store-based grocery retailers have continued to thrive despite rising competition from online grocery retailers, according to a Euromonitor International report last year on grocery retailers in Singapore.

"Consumers are spending more than ever in supermarkets. This trend is being driven mainly by the rising cost of groceries, rising affluence among Singapore's middle class and the emerging interest in home cooking," said the report.

The space crunch in Singapore means that supermarkets or minimarts are often in close proximity.

Both the MCP Fairmart in Bedok North and Jin Tai Mart in Tanjong Pagar Plaza, for instance, are just a few doors down from a FairPrice branch.

Mr Liew said he does not feel any pressure or stress from competing with FairPrice.

He said he can price some of his items lower than those at the larger chains as suppliers may face higher overheads in selling their items at the popular chains.

"The suppliers have to fork out a listing fee to register their products with the chains, pay to rent the space to display their items and also pay for product advertisements," he added.

MCP Fairmart also has items that are cheaper than those sold at the mega chains. Its 5kg bag of SongHe rice costs $16.40, 50 cents cheaper than at one of the larger chains.

However, Associate Professor Lynda Wee from Nanyang Business School said focusing on pricing alone may not be sustainable.

Said Prof Wee: "Heartland retailers should rethink how they can refresh their value proposition by playing up their advantage - they are in close proximity to their residents who may be time-poor, such as young adults or parents or silver customers who cannot travel or carry much groceries and yet not IT-savvy enough to buy online."

Finance manager Sundep Arora, 41, agreed. Last Wednesday, he bought some drinks at MCP Fairmart in Bedok North instead of the FairPrice outlet a five-minute walk away, as his wife was getting her hair done at the hair salon next door.

"What matters to me is the convenience, not so much the saving of a few cents," said Mr Arora.

Though the smaller supermarket chains are still surviving, their owners are unsure of their prospects.

"There are more small and medium-players now, and if everyone is digging the same well, there is bound to be less water for each party," said Mr Tan.

He said he used to sell about 10,000 fruits a day on the 15th day of Chinese New Year. In recent years, sales have hovered around 1,000.

He has no plans to expand the business as it is hard to find workers, with tighter foreign manpower controls. The growing number of smaller and younger families also means that people do not cook much on weekdays. Instead, Mr Tan is focusing on growing his hair salon and restaurant businesses.

Rather than setting his sights elsewhere, Mr Liew has chosen to reinvent the minimart model instead.

In Japan and Taiwan, minimarts that sell a mix of cosmetics and toiletries are popular and ubiquitous.

Jin Tai Mart has also found a sweet spot by selling things from baby products to toiletries to traditional goods.

For instance, one can find stacks of dried and preserved fruits that appeal to the elderly next to face masks targeted at the young.

"Competition is stiff and one needs to find a niche," said Mr Liew. "Otherwise, the small players will become smaller and disappear while the big become bigger."