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Supermarket operator Sheng Siong Group announced that it will be opening its fourth store in China.

Its subsidiary, Sheng Siong (China) Supermarket, had entered a lease agreement with Yunnan Tengda Yuntong Real Estate for a 30,772 sqft (2859sqm) retail space, according to The Business Times on July 21.

The new store will be located in Kunming in Yunnan province, and is expected to be operational before the end of the year.

Sheng Siong previously announced the opening of its third store in early June, also in Kunming.

The retail space for this outlet is around 37,800 sqft (3512 sqm), and it is expected to be operational in the third quarter of 2021.

Opportunities in China

Sheng Siong opened its first store in China in 2017.

Although Maybank Kim Eng analyst John Cheong told Singapore Business Review in 2018 that the Group could lose S$6 million in sunk costs if its expansion fails, he also predicted there was potential for growth there.

The grocery industry in China was, at the time, dominated by traditional wet markets and neighbourhood convenience stores.

This gave Sheng Siong prime opportunity to enter the industry. Additionally, Cheong said that the other Western supermarkets — Carrefour, Tesco and Walmart — are located in Kunming’s financial district, far away from Sheng Siong's first outlet at a residential enclave in the suburbs.

Additionally, Cheong highlighted that Kunming will benefit from the China’s One Belt One Road initiative, and will connect to Singapore via a 3,000 km high-speed rail.

Increase in net profit

The new store is unlikely to have a significant impact on its financial performance for the current financial year, which ends on Dec. 31, BT reported.

Sheng Siong reported a 6.5 per cent year-on-year increase in net profit to S$30.9 million for the first quarter of 2021. Sheng Siong currently has 63 stores in Singapore.

The Group submitted tenders for two retail spaces at Block 115A Alkaff Crescent and Block 610 Tampines North Drive, but were unsuccessful.

However, Sheng Siong said it expects new tenders "probably at an accelerated pace" towards the end of 2021 and into 2022 as construction activities slowly resume.

In the meantime, the supermarket chain will continue looking for areas where it has yet to build a presence. The Group added that it remains focused on expanding its retail network and improving same store sale in Singapore and China.

"We will work on driving cost efficiencies, enhance gross margins by working towards a sales mix with a higher proportion of fresh produce and deriving more efficiency gains from the supply chain."

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Top photo from from Kenny Chua / Google Maps (Photo of Blk 118 HDB Aljunied Sheng Siong outlet for illustrative purposes)