Courts Asia Ltd, a Singapore listed retailer of consumer electronics and household furnishings, is looking to expand its regional reach after establishing a strong foothold in Singapore and Malaysia.
Courts, which only recently opened its first branch in Jakarta, says a move into Indonesia is long overdue. It plans more such stores in the near future as demand for consumer electronics and furnishings rises with the growth of the middle class.
"We continue to have a plan to have a presence all across Asean and Asia but how and when we achieve that target is something we have look at," Terry O'Connor, the chief executive officer told Asia Focus during a recent talk in Bangkok.
The 12,000-square-metre Courts Megastore in Jakarta is the company's biggest space to date, reflecting the huge size of the Indonesian market, with a population of 250 million. Singapore-listed Courts wants to have at least 12 stores in Indonesia in the years ahead, with Jakarta the main focus given its population of 10 million and the dense population of West Java in general.
The low degree of organised or "modern trade" retail in Indonesia is another reason spurring Courts to move into the country. Only about 15% of the retail trade in Indonesia is organised, compared with more than 50% in Thailand and Singapore, aid Mr O'Connor.
TOUGH MARKET
The decision to open a Megastore in Jakarta stems from hard lessons learned earlier in Thailand, according to Mr O'Connor.
Courts entered southern Thailand several years ago and at one point had 10 stores, but the figure shrank to six and eventually the company withdrew as purchasing power in the region was lower than that of Bangkok.
The operation at the time was still under a UK-based parent company but a subsequent restructuring left the Asian operation under Courts Asia which was held by private equity funds.
"Thailand was a young business with six stores and we had to make a decision on allocation of capital. Therefore we withdrew from Thailand and Indonesia to focus on synergies between Singapore and Malaysia," Mr O'Connor said, adding that the company also wanted to return to Thailand now that it was back in Indonesia.
"We still have a Southeast Asia agenda and eventually that will lead to Thailand being back on the agenda at some point."
The original lesson from Thailand, he said, was that one has to be prepared to fight harder even in the toughest markets. Courts chose to open branches outside Bangkok because it felt there was "too much" competition in the capital.
"In hindsight we probably should have opened in Bangkok, but the reason we didn't was because there were 184 competitors just in the organised trade alone, and that's why we opened in the South where we didn't get the consumer density," he admitted.
Thailand stands out in organised retail in Southeast Asia because it experienced the hypermarket boom far ahead of others, with Tesco and Carrefour first entering the country in the mid-1990s.
"We should have had the density and that is probably what shaped our thinking of going into markets such as Jakarta and light-format stores in Kuala Lumpur and others," said Mr O'Connor.
Courts Asia sees Malaysia as a key market although many customers there are far less affluent than those in Singapore. Consequently, it has launched its own consumer finance business which is a big part of the operations in Malaysia.
Due to the lack of population density in Kuala Lumpur, the company has expanded into satellite towns and cities apart from the capital. Only 19 of its 65 stores in Malaysia are in Kuala Lumpur. Mr O'Connor believes 100 locations would represent full potential for Courts in Malaysia.
ONLINE ASPIRATIONS
Malaysia and Singapore together account for US$830 million in sales and Mr O'Connor is aiming for $1 billion within five years, and he fully expects to double that figure in the future.
"We have said that in the past. If you are stargazing and you are at $830 million, then $1 billion is too small. But we have said that $2 billion [is possible] and there is no timeframe specified," he says while laughing when asked if he would want to achieve that target before he turns 50 in a few years from now.
Courts has various options available, including organic growth, acquisitions and new retail channels. The company has had success with its expanded online platform in Singapore and it hopes to use that platform to expand to other markets in Asean.
"We're not in a business where we're in love with bricks and mortar and if the consumer accelerates their purchases online, we are there," said Mr O'Connor.
Today Courts is the ninth largest online seller in Singapore and there is no traditional retailer above it.
In the traditional market, the weekend is the busiest time for shopping but online it's Monday and online shoppers are mostly female, he said.
Courts' Singapore business is worth S$550 million and online now generates $15-20 million or 3-4% of the total, but annual growth is 70-100%, "and we are very excited about this", he said.
"We have 13,000 SKUs (stock-keeping units) online and our Megastore has only 10,000 SKU. We are adding about 500 SKUs per month online. We will launch an Amazon type of multi-market and multi-currency marketplace as we move toward this platform, and there isn't a bricks-and-mortar retailer in Southeast Asia that is doing this at the moment."
The move goes against the new conventional wisdom of the online age but Mr O'Connor is not a believer in conventional wisdom.
"Absolutely we are going into head-on competition with pure [online] players and the notion that a bricks-and-mortar retailer cannot go in competition with pure players is a fiction," he said.