KUALA LUMPUR: The market share for hypermarkets within the nation’s broader mass retail sector has yet to reach any saturation point.
DIVERSIFICATION: Jegen relates that Tesco proposes to go into different types of stores apart from hypermarkets, similar to those it had in countries outside Malaysia.
Big players such as London-based Tesco Plc (Tesco) continues respective expansion plans in the country, to which some may view negatively as ‘killing’ the smaller sundry shops and convenience stores.
“I do not think the market has ever reached a saturation point, nor will it in the near future,” said Tesco Stores Malaysia Sdn Bhd’s (Tesco Malaysia) chief executive officer Tjeerd Jegen to The Borneo Post recently.
“Contrary to the popular belief that foreign hypermarkets are growing fast, the smaller shops are growing – in terms of numbers and market share – even faster over the last five years. According to our analysis on the locations where customers are shopping, we have found out that more customers are going to these smaller shops,” he disclosed.
Reinforcing his statement, Jegen pointed out that private consumption remained the biggest part of the Malaysian economy.
“Moreover, the target set under the Economic Transformation Programme (ETP) promotes the growth of GNI (Gross National Income) and the creation of job opportunities. Combine these aspects with the country’s healthy population growth, it will certainly boost the outlook for hypermarts, without any worries on competition – except healthy ones,” underlined Jegen.
Under ETP, the country put forth a target of acquiring a high-income nation status by 2020, with a per capita income RM48,000 and the creation of more than 3.3 million new jobs.
He stated further that with retailers, big or small, they should let customers decide by offering them the choice. “That’s how we operate, and how other successful operators perform in the market.”
One of the largest foreign hypermart operators in the country, Tesco began its entry into the local mass retail scene back in 2002 with its first hypermarket in Puchong, Selangor. Currently, it operates 38 outlets across Peninsular Malaysia.
“We do have an ambition to make Tesco accessible to all customers in Malaysia, including in Sarawak and Sabah. I would love to open Tesco’s first store in either state,” revealed Jegen. “While we do not have something concrete yet to tell you of our East Malaysian expansion, but definitely it is within our intention to everywhere in Malaysia.”
Correspondingly, the country’s Tesco chief related that the company had proposed to go into different types of stores apart from hypermarkets, similar to those it had in countries outside Malaysia.
“Currently, we have eight Tesco Extra stores where we actively supply built-packaging and products to local traders. If these traders and small shop-owners do well, obviously we will do well. Definitely, there are enough opportunities for further growth,” he added.
LOCAL PRESENCE: Currently, Tesco operates 38 outlets across Peninsular Malaysia, including one in Shah Alam as depicted here.
More significantly, Tesco Malaysia had engaged itself with the Ministry of Domestic Trade, Cooperatives and Consumerism (MDTCC) to work actively together with selected local shop-owners nationwide towards modernising the traditional retail shops, or ‘kedai runcit’, to increase their level of competitiveness.
The ‘Transformasi Kedai Runcit’ (TUKAR) programme – set under ETP’s National Key Economic Area’s (NKEA) for the wholesale and retail sector – also involved two other big players namely Mydin Mohamed Holdings Bhd (Mydin) and French-based Carrefour.
With a combined investment of RM5.43 billion for the programme from all parties, the government set an objective to transform 5,000 ‘kedai runcit’ shops over a timespan of 10 years.
“We set a target of 20 per cent sales growth within three to six months post-improvement,” remarked Jegen. In demonstrating this, Tesco Malaysia’s first pilot store was Pasar Mini Lyna in Shah Alam, where it managed to transform the mini-market tremendously within 12 days.
“We would like to do it quicker; targeting to shorten it to seven days for our forthcoming stores. Additionally, we plan to convert 15 shops every month this year,” said Jegen.
Adding the Shah Alam mini-market, Tesco Malaysia’s involvement in TUKAR would total 150 shops this year, commanding an overall minimum investment of about RM1 million for the exercise.
“Over the next three years, we intend to do the same for 500 small shops in Malaysia.
“There are many interest for us to do this. But more importantly, these shop-owners have to be the deserving ones since we are putting in a lot of effort and investment. Hence, our partnership with MDTCC is very significant, where the ministry aid us in identifying stores that have such potential to grow, and can very much benefit from the programme,” explained Jegen.
On its financial standing, the chief executive hoped the company would post better growth for the current financial year ending this March, to go alongside the nation’s economy. Tesco would be annoucing its fourth quarter financial performance by the end of this year’s first half.
For the third quarter ended November 27 last year, Tesco’s group sales increased by 8.8 per cent, strengthened by total international sales growth of 15.7 per cent. Tesco’s sales performance in Asia was strong for the period, registering a 23.4-per cent growth attributable to good sales contribution from new store openings.