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HAO Mart branches out with niche offerings, halal concepts
BARELY four years after its parent company HAO Corp delisted its electronics manufacturing business and went into the grocery industry, HAO Mart is delivering strong results for the group, following aggressive expansion.
Opening as many as eight outlets in a single month at one point, HAO Mart today has 44 outlets in four distinct retail formats, including minimarts, supermarkets and Halal Hub outlets catering to the Muslim community.
It has achieved 50 per cent growth year on year since it was founded in 2016, and is on track to achieve S$100 million in revenue this year. This will surpass revenue from HAO Corp's Advanced Integrated Manufacturing business, a goal the group has pursued since starting the grocery business, Hao Mart executive and group managing director Patrick Tan told The Business Times.
"We are in the aerospace industry, which is a niche market and a competitive industry. Our key customer is under a lot of cost pressure," Mr Tan said. "We were worried for our employees, because the margins kept coming down, and we couldn't go and tell our customer that the margin is too low."
HAO Corp picked the grocery industry for its potential to scale up quickly, and will soon be in a stronger position to negotiate prices with its aerospace customers.
As no one in the group had prior experience in the grocery business, Mr Tan spent four months learning how to man the cash register, stack goods, track inventory and order stock. The stint opened his eyes to the expertise needed to manage a retail store.
"We thought, manufacturing is already so complicated, how difficult is it to run a supermart? It's not easy," he said, noting that a supermart outlet has 10,000 to 30,000 products or stock keeping units (SKUs), while a manufacturing business like HAO Corp might handle about 20,000 components.
"For manufacturing, with an MRP (material requirements planning) system in place, the system will trigger you to do the purchase orders. But in retail, if you don't have such a system in place, you have to base it on your knowledge and how fast certain items are selling."
Hiring enough staff for its many stores is a major headache for HAO Mart, whether it is looking for outlet managers or cashiers and stackers. As a result, it is investing heavily in technology and automation.
In February, it purchased a two-storey warehouse in Changi South for S$20.3 million, where it plans to store stock in bulk and automate deliveries to outlets based on scanned sales data. Instead of having staff monitor stock levels, delivery orders will be triggered once stocks fall below a predetermined level, calculated by how much of each item has been sold.
In the warehouse, sensors for the various SKUs will light up to indicate items in an order awaiting fulfilment, so that staff can find them more easily. Robots will be used to pick up smaller lightweight products.
Mr Tan expects the warehouse to help HAO Mart scale even faster and compete more effectively with the big boys in the supermarket space. It currently has two Eccellente outlets, which are the company's mall-located supermarkets, and will be opening three more.
One way it aims to differentiate its supermarkets from competitors is with international product lanes, each dedicated to items from a specific place such as Japan, Korea and Taiwan. Said Mr Tan: "Consumers want to try new products, and it will be easy for them to find products from a particular place. In fact, Japanese and Koreans who know that HAO Mart has this international lane come specifically to our stores to shop."
Although HAO Mart opens new outlets quickly, it also stands ready to close them if they do not perform well. Mr Tan said the company reviews each store's profit and loss on a monthly basis, and closes unprofitable outlets within a year if possible. If the outlets are leased under three-year contracts, HAO Mart tries to achieve profitability by the third year.
Its 14 Halal Hub outlets have been well-received by the Muslim community, and since last March have been able to accept the vouchers provided by the Islamic Religious Council of Singapore (Muis) to needy families for purchasing necessities.
HAO Mart is further developing its offerings for the local Muslim market with its Paradiso by HAO Mart concept at The Grandstand in Turf Club Road. Located above its HAO Megamart, Paradiso will feature a halal supermart, a halal food court and an event hall, which has been leased out to a wedding planner to host Malay weddings. The food court is the last piece awaiting completion, and the whole concept will be officially launched latest by mid-year.
"This will be the biggest halal area in Singapore, where the Muslim community can go down and relax, shop and hold their weddings," said Mr Tan. "We are trying it out and we think it will be very successful."
HAO Halal Hub is garnering international interest, with invitations from Malaysia, Brunei and some Middle East countries to set up shop. However, the company is not yet ready to expand overseas, preferring to focus on pursuing its goal of 100 outlets under its various chains in Singapore, although Mr Tan declined to give a firm date for this. (see amendment note)
This is as competition for outlet spaces is high, and the company is expecting a consolidation in the industry within the next two years, given how high and unsustainable some of the bids for space have been.
Until then, it is happy to bide its time and focus on stabilising its business and implementing its technology upgrades. "We won't be surprised if one or two chain supermarkets close down. That will be a time when we can expand faster," Mr Tan said.
Amendment note: A previous version of this article stated that HAO Mart's plan is to open 100 Halal Hub outlets. HAO Mart has clarified that its plan is to open 100 outlets overall, including Halal Hub outlets. The article above has been revised to reflect this.