Challenger beefs up its online retail presence

Singapore

THE impending closure of Singapore's Funan DigitaLife Mall next month coincides with the opening of a new chapter for its anchor tenant, Challenger Technologies - it will move online in a big way.

The homegrown mega supermarket known for all things tech since 1982 is aiming to earn as much as half its revenue from its revamped e-commerce portal, hachi.tech, in five years, up from a very small percentage now.

So after Funan downs its shutters, the IT retailer will not replicate its mega store in any other mall in Singapore, though it will maintain its brick-and-mortar presence through its 50-odd existing stores. It will also look into adding two to three new leases this year to that number, though none of these will be like that one-stop store that took up the sixth floor of the Funan mall.

Challenger's chief executive Loo Leong Thye said online shopping is an additional and important growth engine for the company. "Hachi.tech will house many times more products than our physical retail stores, giving our customers more choice and convenience," he said.

The company's chief technology officer Joshua Woon told The Business Times that Challenger would continue to expand its retail footprint when suitable locations and rental rates crop up.

"Over time, retail stores will evolve into experiential spaces, providing convenience for customers who choose to buy online but then pick up in-store."

Giving the context to the company's move to grow its online presence, he said Challenger's sales revenue is in the region of S$380 million.

"We are looking to cross the 50 per cent mark from online sales revenue within five years. The company aims to generate a cumulative S$500 million from online over the next five years. It's an aggressive target that the CEO has set for us. The initial target we are aiming for is S$100 million in revenue from online sales in 2016 alone," he said.

The company's digital transformation comes at a time when offline retail companies everywhere are being forced to compete online or risk becoming irrelevant.

A 2014 PayPal survey found that online shopping in Singapore has grown 38 per cent annually since 2011. Total spending last year was estimated at S$4.8 billion; it is expected to rise to S$6.9 billion by 2018.

Mr Woon said: "Having a strong and credible online presence will be crucial for every retailer's competitiveness and growth."

He added that as the company progresses along its digital journey, the speed at which it can scale will result in higher productivity and greater sales volumes, and sweep it towards its target.

To help it get there, it will unveil incentives such as 5x loyalty points for shoppers who make their purchases online instead of in a physical outlet. It is looking to use hachi.tech to take aim at the "huge domestic e-commerce opportunity".

The company is banking on this change to sharpen its edge in the booming domestic e-commerce market, which is expected to be worth US$6.4 billion by 2020.

There is a reason for the name hachi.tech. "Hachi" in Japanese means "eight", a number representing good luck to many in Asia. The Japanese name is also a nod to the company's commitment to an elevated level of product display and delivery of an excellent customer experience, added Mr Woon.

Challenger is looking at hachi.tech as more than just an online extension of its physical outlets, he added. Hachi.tech is being pitched as a marketplace that sells all the products Challenger stores have - and more.

"The biggest difference that hachi.tech brings to the table is that it sells products not traditionally stocked at Challenger. A lot of our distributors and brand partners carry products that are not in the IT category. However, they would like to reach out to our large database of members," Mr Woon said.

"With hachi.tech, we can provide these products on the platform since it has limitless inventory space, which enables us to engage with new customers who are searching for these products."

Asked about logistics, an indispensable part of online sales, Mr Woon replied that the company's investment arm, Challenge Ventures Pte Ltd, has invested in Zyllem, an on-demand service. "With it, we can tailor our logistics requirements to meet specific e-commerce needs. We will continue to collaborate with suitable partners where possible, whether it is related to logistics or other areas relevant to Challenger's digital expansion."

He noted that Challenger's physical retail stores and hachi.tech each have their own strengths, and "we will continue to position them with their own value propositions".

The speed at which Challenger can scale up at home and overseas is critical. Mr Woon said the e-commerce platform built on AWS (Amazon Web Services), with consultancy services provided by cloud-enabled services provider Datapipe, allow for this.

"If e-commerce is key to our business strategy, Datapipe has helped manage this move to the online environment, particularly around our cloud technology deployment.

"We wanted to move into the cloud because this was the only way to provide a scalable IT environment, allowing us to provide sufficient agility and flexibility. This would allow us to manage our business and grow our customer base in such a demanding and changing market," he added.