NTUC FairPrice goes on an expansion blitz

SEAH Kian Peng remembers a childhood of sleeping on thin mattresses on the living room floor

, borrowing money from relatives when “sums didn’t add up”, and not wasting even a single grain of rice during mealtimes.

Even now, the son of a printing-firm line worker and part-time seamstress keeps a record of every cent he spends and cannot stand wasted food.

“It’s been ingrained in me. Everything is precious, everything is hard-earned,” said the FairPrice chief executive and Marine Parade GRC MP.

That is why, he said, his job at the supermarket chain – set up in 1973 by the labour movement to provide essentials at low prices – means so much to him.

But the 52-year-old said that the task of keeping high food prices at bay has become more challenging now in the face of rising costs and manpower shortages.

Rentals for the brand’s 282 stores across the island get jacked up with each three-year contract renewal, sometimes by as much as 40 per cent, and the group is short by about 900 staff – 10 per cent of the 9,000 it hires.

Still, it is sticking to its pro-Singaporean hiring policy: 80 per cent of its staff are Singaporean.

To manage costs, the chain is looking elsewhere – to technology and expansion to reap economies of scale and keep per-unit costs low.

By year end, FairPrice will open a new distribution centre in Benoi Road, equipped with the latest technology like the Caddy Pick system, which moves 10,000 cartons an hour – 25 per cent faster than the current system.

Self-checkout counters are available at 14 stores. They will be rolled out to 10 more by year end.

The next frontier? On trial is a new payment system – widely used in Europe – which allows shoppers to scan items as they browse the supermarket aisles.

But FairPrice has to continue enlarging its footprint, said Mr Seah.

Since the Colombo Plan scholar joined FairPrice in 2001, the cooperative has gone on an expansion blitz. It now has 282 outlets – from sprawling hypermarkets to convenience stores at petrol stations – up from 232 five years ago. It will open five more supermarkets and about 20 convenience stores by year end.

Last year, the group’s annual turnover crossed the $3 billion mark for the first time – up from $2 billion five years ago. It took 26 years – from 1973 to 1999 – to make the $1 billion mark, then nine more years to hit $2 billion.

“I thought the market was already saturated in 2001, and I thought it was saturated five years ago. But it’s not,” he said.

“The population has grown, there are new estates and more people are turning away from wet markets and going to supermarkets. And people seem to be cooking more.”

The secret, he said, is customisation. The chain has many different formats, adaptable to almost every location, and stores open longer hours, depending on the demographics of the population in the area. Now, 50 of its stores open round the clock.

The group will also be launching warehouse retailing by year end, modelled after Costco in the United States – a membership-only warehouse club which sells a smaller range of products, usually bulk-packaged, at unusually low prices.

Expansion and innovation are critical to survival, he added, pointing to Carrefour, which threw in the towel in 2012.

“In 10 years, it opened only two stores,” he said. “Without market share, you can’t operate efficiently.”

Mr Seah also debunked the notion that FairPrice gets it easier than other chains.

“For every new site we win, we lose two,” he said, adding that the co-op also gives up to 10 per cent of net profit to causes such as discounts for seniors and used textbooks to students from low-income families.

“We do well, so we can do good. And to see the faces of those that we help light up, that’s something money can’t buy,” he said.

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