Busted

Sheng Siong used to be the toast if the middle to lower income households in Singapore. The prices of its products at its supermarkets were really the cheapest in town, cheaper even than the prices of NTUC Fairprice supermarket's 200 controlled items. Housewives make a beeline for the supermarket. Even my mother gushed about its really cheap products. I dropped by and verified it myself. But of late, it appears to have abandoned its low price approach to business, or at least when it come to property management. It bought up 6 heartland wet markets and increased the rental by a reported 30%. It also shortened the lease to a maximum of 1 year, triggering off suspicion that it might want to convert these wet markets into something more lucrative - say, supermarkets? A cost leader must increase and/or expand its outlets and floor space so as to sell more of the same at low prices. This is one of the primary strategy to increase revenue. That's what NTUC Fairprice has done. That's the business logic behind hypermarkets such as Carrefour and Giant in Singapore.

Doing more of the same for the wet market stallholders - i.e. not increasing rental and cutting lease periods, will be nothing but performing charity, from a business perspective. So of course Sheng Siong is not going to maintain the status quo. But to its credit, HDB has warned that it will not allow Sheng Siong to change the business use of these 6 places. HDB says that the wet markets must stay, but Sheng Siong can charge as much as it thinks makes business sense, which, if you think about it, may yet work in Sheng Siong's favour. They may not rake in as much as they had planned to do so, but an increased 30% margin is not bad, actually.

But of course, the consumers will ultimately bear the increased cost of grocery at a rate that will ultimately drive them to the supermarkets - probably what Sheng Siong would want happen. The wet markets will ultimately be abandoned and deserted, so something 'new' can rise up in their place. Well, if this is what Sheng Siong had planned to do all along, then it is now starring at a bad investment. Yes Sheng Siong may own the markets and the land, but the government owns the right of use of the territory. And the Housing & Development Board (HDB) has done the right thing this time. Although it goes against the government's oft-stated position that businesses should be left to make their own commercial decisions, this is potentially a hot political potatoe to leave alone in the simmering charcoal. If not handled properly, many of the powers that be could get their fingers burnt. And that's bad for people who need to go to the electorate to renew their license to rule in the near future.