price war with prime now? don’t bet on it about two...
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| THURSDAY, AUGUST 10, 2017 | THE STRAITS TIMES | C1
$6.27bCOMBINED GROUP PROFITS OF
149 SGX-LISTED FIRMS IN Q2 C4
Annabeth Leow
Customers should not count on a protracted price war being sparked by Amazon’s introduction of its Prime Now service in Singapore last month, say experts.
Prime Now is the American retail giant’s much vaunted fast delivery service, with a stated turnaround time of two hours. But recent diffi-culties in placing and receiving Prime Now orders within two hours have underscored logistical challenges here.
Still, Prime Now’s debut could push other retailers to focus on de-livery time and other ways to stand out from the crowd, they add.
E-commerce companies must also decide whether they want to adopt a retail model, where they hawk their own wares, or a market-place model, where they serve as a platform for third-party vendors.
Last year, a report from Google and state investment firm Tema-sek Holdings put the value of Singa-pore’s e-commerce market at $1 bil-lion that year, or 2.1 per cent of all retail spend. The Government has set an ambitious target of 10 per cent of all retail receipts by 2020 – well ahead of the Google- Temasek report’s projections, which antici-pated Singapore’s e-commerce re-tail share growing to just 6.7 per cent by 2025.
Right now, large global retailers active here include Chinese giant Alibaba, which owns Taobao and lately drove up its stake in Singa-pore-based Lazada from 51 per cent to 83 per cent. Other online players operate in specialised seg-ments – such as groceries, where RedMart was bought by Lazada just last year; fashion, with Zalora one big name; or food delivery, where operators include Deliveroo and UberEats.
Visa country manager for Singa-pore and Brunei Ooi Huey Tyng notes: “There is significant trans-formation in the service model, es-
pecially for transportation, meal de-livery and groceries delivery.”
Associate Professor Lewis Lim, of Nanyang Technological Univer-sity’s Nanyang Business School, thinks that Amazon’s decision to swoop in on the household goods front was a savvy specialisation.
“If you think about the market of this particular category, it’s very es-tablished in Singapore,” he says, pointing to how supermarket chains such as FairPrice have al-ready ventured online. But he cau-tions “they have perhaps over- promised with the Prime Now ser-vice”, given the backlog of orders that almost immediately ensued.
“Having made the promise of a two-hour delivery, the first priority for them would be and should be to try to meet their standard now,” says Prof Lim, who studies competi-tive marketing behaviour.
He adds that, whether or not Ama-zon succeeds in living up to its two-hour delivery schtick, it has al-ready created “new market expecta-tions on the part of the consumers”.
And if Amazon gets it right, the
convenience of fast deliveries can also make up for prices that are not the lowest, Prof Lim notes.
Economist Jochen Krauss, a man-aging partner at international pric-ing consultancy Simon-Kucher & Partners, agrees that prices may not be eroded, even with Amazon Prime Now in town.
“A lot of companies don’t want to do that, but they somehow actively or by chance come into a price war mode where they think they can drive purchase or volume by lower-ing prices, and many times it actu-ally doesn’t play out,” he says.
“It is because of the concentrated retail space… the density, the con-centration of that space, some-times drives players to do crazy things with regard to promotions.”
Prof Lim and Dr Krauss both note the appeal of being a “time player”. Similarly, Lazada Singa-pore chief executive Alexis Lanternier tells The Straits Times: “There is growing interest in our ‘Express’ channel, where products are delivered within the same day of ordering.” The turnaround is
“thanks to our partnerships with es-tablished, home-grown logistics partners SingPost and Ninja Van”.
Logistics, in fact, may be the big-gest challenge in Singapore, says Mr Luc Andreani, managing director of Foodpanda Singapore, who joined in June after previously serving as Lazada’s chief marketplace officer.
He says “our customers don’t care so much if they get the food in 30 minutes, versus 25”, but, with only so many delivery riders, it is much harder for his business to shave off those five minutes.
“We have more than 2,500 rid-ers,” says Mr Andreani. “Rider sup-ply is indeed the greatest challenge in Singapore as all riders are free-lancers, and therefore very liquid.”
He adds: “Here, it’s more of an op-timisation game, rather than an ex-pansion game.”
As the e-commerce landscape ma-tures, companies could turn to inno-vative models to meet customers’ needs. For example, Dr Krauss sug-gests, grocery retailers could have air-conditioned pick-up points at transport hubs like MRT stations – a service already tested in overseas markets such as the American capi-tal Washington, DC – or tap local convenience stores’ facilities to stash products awaiting collection.
Foodpanda’s Mr Andreani adds that at his company, “we are work-ing on opening what we call satel-lite kitchens… that we will rent and sub-rent to specific vendors which will focus only on delivery”.
As the Government pushes to ex-pose local retailers to a bustling e-commerce market, one possible future could see local small and medium-sized enterprises roped into the big boys’ supply chains.
Mr Lanternier puts his modus operandi this way: “Lazada’s suc-cess is fuelled by our expanding net-work of e-commerce partners: lo-cal sellers, third-party logistic ven-dors, suppliers, SMEs and like- minded partners.”
Dennis ChanDeputy Business Editor
Global investment firm Blackstone, Singapore sovereign fund GIC and Massachusetts Mutual Life Insur-ance Company (MassMutual) have agreed to acquire Goldman Sachs’ entire shareholding in British- based pensions provider Rothesay Life for an undisclosed sum.
Upon successful completion of the transaction, GIC and Black-stone will hold equal largest stakes in Rothesay Life, while Mass-Mutual will increase its stake sub-stantially in the pension provider.
GIC and Blackstone previously owned 26.5 per cent each. Mass-Mutual had a 6.5 per cent stake.
While Goldman Sachs will no longer hold any interest in Rothe-say following the sale of its 32.7 per cent stake, it will continue to have a close relationship with the com-pany it founded.
Since the initial investment by shareholders in December 2013, Rothesay Life has grown its asset under management from £7.5 bil-lion (S$13.2 billion) to £23.7 bil-lion last year through a combina-tion of corporate defined benefit pension transfers, reinsurance and acquisitions.
The transaction is expected to close in the fourth quarter and is subject to regulatory and anti- trust approvals. “We are delighted to increase our investment in Rothesay Life. It is an outstanding business and we look forward to supporting its further growth,” Blackstone Tactical Opportuni-ties senior managing director Qasim Abbas said.
“Rothesay Life is a good example of GIC’s investment objectives as a long-term investor,” said GIC chief investment officer for private
equity Choo Yong Cheen.“Rothesay Life has a differenti-
ated strategy and strong growth prospects with the increasing de-mand for annuity risk transfer solu-tions. We are delighted to have the opportunity to increase our share-holding and continue to support the management team alongside Blackstone and MassMutual.”
Established in 2007, Rothesay has become a leading provider of annuity risk transfer solutions in Britain. It helps companies to shed the risks associated with their pension scheme liabilities.
Its growth has been achieved through the steady accumulation of pension scheme clients, signifi-cant strategic acquisitions and the reinsurance of annuity portfolios.
Clients include the pension schemes and members associated with firms like RSA, British Air-ways, General Motors and Philips.
Wong Siew Ying
Developer GuocoLand has trimmed the number of units put up for sale at its latest condo-minium, Martin Modern, in what is seen as a bet on private residential prices reversing course after years of decline.
Other developers also appear to share the same sentiments.
Earlier this week, Chinese devel-oper Qingjian Realty said it is hold-ing back the second phase of sales launch at its Le Quest project in an-ticipation of possible upturn in the property market.
Lendlease had also put off placing new units at Park Place Residences at PLQ on the market after launch-ing 217 apartments for sale in March – in the hope of pricing the remaining units at a higher price subsequently.
GuocoLand told The Straits Times that it sold 110 of the 450 units at lux-ury condo Martin Modern in Martin Place within about two weeks of its launch last month. The developer said there is potential to raise the selling price next year.
“We have already started to mod-
erate the releases... You want to achieve a good start so there is confi-dence in the project. I think we have already achieved that. We should not be selling too much too fast,” said Mr Cheng Hsing Yao, group managing director of Guo-coLand (Singapore).
Average selling prices at Martin Modern, the first major launch in the Robertson Quay neighbour-hood in eight years, range from $2,009 psf to over $2,500 psf.
Mr Cheng declined to speculate by how much the prices might rise next year but he acknowledged there will be “pressure for prices to go up” in view of recent aggressive land bids and fewer condo completions.
“The margin is already quite thin among developers, and land consti-tutes 60 per cent to 70 per cent of total cost, so when the land cost goes up so much, it is not a choice for the developers not to sell higher.”
GuocoLand is seeking opportuni-ties to acquire plots, with a focus on mixed development as well as good-quality sites for homes. How-ever, Mr Cheng said the firm will “keep a level head” on land bids.
The developer has three other projects with unsold units: the ultra luxe Wallich Residence at Tanjong Pagar Centre, Leedon Residence off Farrer Road and Sims Urban Oasis in Aljunied.
The 99-year leasehold Wallich
Residence, which will be ready in the fourth quarter, is spread across levels 39 to 64 in Singapore’s tallest building. The project caught the pub-lic eye recently after news broke of its $108 million super penthouse.
Mr Cheng said 19 apartments at the 181-unit luxury condo project have been sold at an average price of $3,100 psf. The 21,108 sq ft super penthouse is not ready for sale.
The Straits Times understands that the super penthouse, spanning three floors, will have a dedicated lift and is highly customisable.
Below the Wallich Residence sits 890,000 sq ft of Grade A office space, Guoco Tower, of which 93 per cent has been leased. The firm
is in talks to lease the remaining of-fice space, including 27,000 sq ft on level 37, at higher rents.
Property consultants have been forecasting a bottoming out of rents in the commercial property market this year as sentiment improves.
“A lot of the tenants at Guoco Tower are MNCs with regional headquarters here, and they are growing. Less than a year into mov-ing here, five tenants are already ex-panding,” said Mr Cheng.
About 40 per cent of tenants at Guoco Tower are in the technology, media and telecoms sectors, and they include Uber and Agoda.
It cuts number of units put up for sale at latest condo; other developers also holding back
GuocoLand (Singapore) group managing director Cheng Hsing Yao acknowledged that there will be “pressure for prices to go up” in view of recent aggressive land bids and fewer condo completions. It is seeking opportunities to acquire plots but will “keep a level head” on land bids. ST PHOTO: NG SOR LUAN
Price war with Prime Now? Don’t bet on it GIC, partners buying out Goldman Sachs’ stake in Rothesay Life
ASEAN AT 50 A PROMISING FUTURE AWAITS C2-3CHINA FACTORY INFLATION FIGURE HOLDS STEADY IN JULY C5
STRONG GROWTH PROSPECTS
Rothesay Life has a differentiated strategy and strong growth prospects with the increasing demand for annuity risk transfer solutions. We are delighted to have the opportunity to increase our shareholding and continue to support the management team alongside Blackstone and MassMutual.
’’MR CHOO YONG CHEEN, GIC chief investment officer for private equity, on Rothesay Life being a good example of GIC’s investment objectives as a long-term investor.
Amazon Prime Now’s debut here could push other retailers to focus on delivery time and other ways to stand out, experts add. ST PHOTO: KUA CHEE SIONG
GuocoLand looks to rise in private home prices
110GuocoLand sold that many units out of 450 at its luxury condo Martin Modern within about two weeks of its launch.