Singapore-based tech retailer Challenger Technologies has launched a venture arm — Challenge Ventures — with an initial paid-up capital of SG$1 million (US$714,000).
The funds will go towards investing in digital platforms that can support and complement the company’s business operations, according to an official statement.
Challenger’s smartphone market focussed e-commerce portal AndiOS Pte Ltd and end-to-end integrated marketing solutions subsidiary inCall System, which it acquired in 2011, will be absorbed into Challenge Ventures.
The company said that if suitable investments are found, it would consider injecting another SG$20 million (US$14.3 million).
“We intend to look for suitable investments beyond brick-and-mortar retail businesses in order to expand our physical retail footprint as the largest IT retail chain store operator in Singapore,” said Challenger Chief Executive Loo Leong Thye in a statement. “Investing in digital platforms will help us achieve our vision of being a large online and offline player,” Thye added.
The challenge for Challenger
Challenger’s fresh venture could be seen as another move to diversify its model to buck the trend of sluggish retail growth in Singapore. The nation is seeing more consumers flocking to e-commerce, compounding the problem of rising rentals and a tightened labour market. Last year, Challenger’s rental cost increased 36 per cent to SG$8.9 million (US$6.35 million)
Early this year, it invested SG$500,000 (US$357,000) to overhaul its 4,000 square feet space at Funan DigitalLife Mall, incorporating new retail concepts including three 110-inch video walls, providing an immersive games experience to shoppers. It is also setting up more pop-up stores and temporary retail spaces in shopping malls.
“Being conscious of the challenging times ahead, we are rationalising, right-sizing and getting more innovative. The idea is to seize every opportunity even during a slump phase.” Challenger’s Head of Marketing, Loo Pei Fen, explained in an interview with Channel NewsAsia.
In 2014, Challenger’s revenue and net profit decreased eight per cent and 13 per cent to SG$355.1 million (US$253.4 million) and SG$15.0 million (US$10.7 million) respectively.
Its standalone in-house brand, the Valore concept stores failed to take off and were converted into small-format Challenger stores. Valore made the news last year when it recalled 12,000 units of its portable power bank because of overheating issues.
In addition, Challenger closed all its retail outlets in Malaysia.
It’s not all doom and gloom for the retail chain, though.
On the subsidiary side, Challenger electronic signage service business, CBD eVision Pte Ltd, registered an increase in turnover of about 29 per cent to SG$900,000 (US$642,500). InCall Systems increased its revenue and profit by 21 per cent to SG$5.7 million (US$4.07 million) and by five per cent to SG$800,000 (US$571,000) respectively.
Whether diversifying its business model will be sustainable enough to not only tide Challenger through tough times but also drastically increase profitability remains to be seen.