Challenger enters luxury audio market with ION concept store

FOR all the buzz that e-commerce gets, retail industry veteran Loo Leong Thye remains convinced that bricks and mortar stores still make for better business.

The founder and chief executive of electronics retailer, Challenger Technologies, told The Business Times on Friday: "Online is about convenience and price. If you don't sell cheap, people don't buy. If we do promotions, we do very well. If we don't do promotions, it's so-so.

"It's all about promotions. We know the market very well. Online business is burning money. We don't have the money to burn."

Instead, Challenger is prudently expanding its retail footprint across the island, and bringing new store experiences to the local scene.

Mr Loo was speaking at the media launch of Musica Boutique, Challenger's first luxury concept store for high-end audio products.

The 2,000 sq ft store opened for business in November last year without fanfare. It is located on the fourth floor of ION Orchard where it draws a niche crowd.

Mr Loo believes that Musica Boutique will start making meaningful contributions to the group's bottom line in about six months.

"Which is a bit slow for us," he added: "Normally we want first month. But this is a totally new concept, so we give ourselves a bit more time."

Musica Boutique is designed for upgraders looking for a better sound system, and is laid out in a fashion that will take them from brands they know - like Bang & Olufsen or Bose which are displayed up front - to advanced audiophile brands in the back, like Focal, or Astell & Kern.

Eighty per cent of models here have never been carried before in a Challenger store. The regular stores are not conducive for listening to high-end audio.

It's also unusual to see so many premium audio brands in a single setting in Singapore. This gives customers a chance to pick up the devices they're torn between and take them into a soundproof room to compare the sound.

So far, sales are "good", Mr Loo said: "We don't need so many customers. We need only high-end customers, and the products they buy, the average price is S$1,000 to S$2,000. It's not like the retail side, maybe average price is S$100. Margins are about the same, but value is higher."

Back in 2016, Challenger launched its online store, Hachi.tech, and projected that the portal would deliver 50 per cent of revenue in three to five years.

Today, less than 5 per cent of revenue flows through Hachi.tech.

Mr Loo explained the change in strategy: "If I sell online cheaper, everybody will flock online. It will cannibalise the retail, same time I will be very busy doing a lot of (after-sales) services. Because we are strong in providing customer service, so the more you sell, the more problems you will have."

He's not willing to compromise on service quality: "We've got to take care of customer problems. So it's better that we focus on the group of customers that want our service, and are prepared to pay the kind of price that they think is reasonable."

This year, the homegrown retailer will focus on improving its backend IT system, and growing its ValueClub membership, which has stabilised at half a million members.

Challenger will also open a 5,000 sq ft store at Paya Lebar Quarter in the third quarter this year. The mall had been expected to open last year but faced delays.

Asked if Challenger might make a return to Funan mall when it reopens in June, Mr Loo said that negotiations with landlord CapitaLand are still ongoing. For years, Challenger had been the anchor tenant at Funan, with a 53,000 sq ft flagship store.

Challenger shares closed flat at S$0.50 on Friday.