Electronics Chain Pivots To Online Growth Strategy

Malaysia’s largest electronics chain, Senheng New Retail, plans to stop opening new brick-and-mortar stores from 2026, according to its founder, instead turning to tech to drive its expansion in the face of growing online competition.

The Kuala Lumpur-listed company, which was one of the first in the country to adopt the chain store model, will sharpen its focus on a cross-channel business approach, 24-hour delivery and loyalty programs to draw in shoppers to its stores and app, Executive Chairman Lim Kim Heng told Nikkei Asia.

“We cannot keep on expanding, opening 10 to 20 shops [every year] to drive our growth,” Lim said in a recent interview, adding that the company is instead seeking to more than double its online revenue contribution to 15% this year. The rate is currently at around 6% to 7%.

“We want to grow [our customer base] through our ecosystem platform,” Lim said.

The growth of e-commerce players in Malaysia, which began over the past decade or so, is more pronounced today, prompting established companies like Senheng to rethink operations. The country’s consumer sentiment has also been impacted in recent years on the back of inflation and a weaker ringgit.

For the nine months to September last year, Senheng’s net profit tumbled 54.7% to 17.9 million ringgit ($3.8 million) from the same period the year before on weaker revenue, as it recorded its lowest quarterly profit in the third quarter since its listing in January 2022. Its stock price is down 69% from its public debut.

Operating 125 outlets across the country, Senheng had planned to open or upgrade 61 outlets by 2024, as part of its expansion plan following the initial public offering. But Lim said it is extending this timeline by two years to 2026 because of market conditions and declining consumer spending.

From 2026 onwards, Lim added, the company will no longer open new outlets, given that its mobile app gains more traction. The minimum bar would be to achieve over 6 million downloads, he said, or monthly active users exceeding 1 million. It currently has close to 4 million members.

“Growing without new physical stores is a new challenge we are taking on,” Lim said.

Founded in 1989, Senheng was a pioneer in the chain model and brought standardized prices to all outlets in the early 2000s. Offering around 280 brands today, the company became the largest electronic retailer in Malaysia by revenue, competing with foreign players like Harvey Norman of Australia and Courts Asia, owned by Japan’s Nojima.

But the first e-commerce wave in Malaysia forced the company to start focusing on online business. Its revenue began a downward trajectory in 2013, when the country saw entries of e-commerce players like Singapore’s Lazada, now owned by Alibaba Group Holdings, followed by Sea’s Shopee two years later.

“At one point, the online wave and marketplaces … drew away many of our customers with their subsidized model,” Lim said.

Senheng’s revenue, however, started to recover when the company began the “omnichannel” model in 2017, where customers can get home delivery within 24 hours through its logistics and warehouses, or by pickup at its nearest outlet. Users can enjoy basic free installations and support for online orders.

Lim said Senheng’s strength lies in its loyalty program. With an annual fee of up to 24 ringgit, users can enjoy an extra one-year warranty on top of those from manufacturers, and rewards that can be redeemed for future purchases.

Gary Lim, a 36-year-old restaurant owner in Petaling Jaya, west of Kuala Lumpur, said he prefers to go to retailers for high-priced goods for his home or for business appliances because “there is a sense of security, assurance of quality and [it is] easier to ensure warranty claims.”

Malaysia’s consumer electronics market revenue is estimated at $4.5 billion in 2024, where online sales contributed 21.6% of the total, according to Statista. This means close to 80% of revenue still depends on brick-and-mortar retail electronics.

Yet, the business environment is quickly changing, with players like ByteDance-owned TikTok entering the online shopping space in 2022. Lim of Senheng said expensive orders haven’t been affected but online traffic has moved to these platforms as well as cheaper orders “below 200 ringgit.”

Padma Zechariah, a retired event organizer, said she only visits the physical stores to check the prices of products. Since the COVID-19 pandemic, she said, her family has bought all electronic goods online because prices at retail shops are “far more expensive.”

Lim said: “We cannot compete on low prices with online marketplaces. They have lots of funds to subsidize. We will maintain our offline [stores], but we need to pay more attention online.”

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