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16 Sep 2022  (1420 Views) 
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Supermarkets


Fairprice changed its business model
I became a shareholder of Fairprice 40 years ago and invested a modest sum (maybe $1,000) in its shares. 

Fairprice offered low prices and have a convenient network of stores all over Singapore. Fairprice distributes a large part of their profits to their shareholders each year as a rebate on their purchases.

In most years, the rebate was 6%.

Many shareholders of Fairprice, who were mostly members of NTUC affiliated unions, liked the business strategy of the cooperative, i.e. low prices and good rebates.

The business strategy of Fairprice changed over the years. The prices at their supermarket increased and became more expensive than other supermarkets. New supermarket chains started to offer more competitive prices. 

Fairprice invested heavily in technology, but they did not appear to bring down prices through higher productivity. It seemed that their heavy investments added to their operating expenses.

Fairprice launched the Link loyalty program, which brings in Fairprice and other partners. Fairprice reduced its rebate t0 4% (from 6%) to offset the benefit provided to members under the Link points (which was estimated to be worth 2%). The Links loyalty program was expensive to manage and adds to the high operating expenses.

The Link loyalty program appeared to be largely driven by Fairprice, as contribution from other partners was small. As Fairprice already had a rebate program, the Link program was a duplication. 

Fairprice joined with OCBC Bank to issue a credit card in 2007. That was 15 years ago. They have now ended this partnership. 

Fairprice now partners with Standard Chartered Bank to set up a digital bank, called Trust Bank.

I prefer the original model of Fairprice, i.e. low prices and good rebates.
The new business model of Fairprice is quite different. I will stop shopping in Fairprice. I will not open an account with Trust Bank (as I have too many bank accounts only).

Tan Kin Lian


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But sad to say most customers will still buy fm NTUC FP because of its many branches throughout SG for convenience sake n most brands of items available fm them. Hard to push down or dent a GAINT that had gone rogue. ????????

Jeff Lee  17 Sep 2022  

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