Sheng Siong’s e-commerce shops trail physical stores’ profitability

On back of non-fresh items sales.

Sheng Siong notes that its stores situated as a “last mile” fulfilment for customers are more profitable than operating logistics for e-commerce business, according to a report by DBS.

“Gross margins for e-commerce are typically lower due to sales of lower-margin products such as non-fresh items. We believe this is also due to the better economies of scale at its stores compared to online sales and conversion to e-commerce in grocery retail is still slow,” DBS noted.

Nonetheless, Sheng Siong remains intent on establishing a logistics/supply chain backend infrastructure that will support e-commerce.

“We see different corporate profiles between Redmart and the supermarket players. One is more of an internet company, while the other in our view is a grocery retail operator expanding its sales channels online. Both companies have logistical capabilities that are necessary to operate an online fulfilment business,” posited DBS.