Monday, 14 April 2008

The richest will survive

Singapore, because of her size, the small little red dot on the map, it’s indeed a very niche market area for many businessmen. No doubt, this small little red dot had progressed and advanced superbly. Many businesses had been set up and of course folded up too.

Our government is always encouraging people to go into entrepreneurship. Many incentives had been promised to help these entrepreneurs and SMEs. However, being an entrepreneur in Singapore is definitely an uphill task. In my view, two major factors that are holding people back from entering into a business in Singapore, is none other than rental and labor cost.

As if that is not enough, they had an opponent that is hard to beat if you are competing on prices which is what most consumers are comparing. I am sure that most small to medium business owners agree with me that this competitor is none other than ‘Auntie Lucy’ if they happen to be in the same industry as them.

They seem to be in every industry, venturing into anything that is profitable. ‘Auntie Lucy’ first started off as a union, to protect and safe-guard the well being of employees. Over the years, they had expanded and now we have ‘Auntie Lucy’ doing nearly everything. Dental, Healthcare, Supermarket, Child Care, Food Court, Convenience shop, Car Rental, Insurance and even home services such as part-time maids, plumbing services, etc are businesses that ‘Auntie Lucy’ is currently engaged in.

Apart from protecting the welfare of employees, they had now threatened the interest of the self-employed which will indirectly affect the employed. Yes, ‘Auntie Lucy’ aims to provide consumers with wider choice and value for money services which is a good sign provided the pricing is not below market standard and it enables the rest to remain in the race.

By the way, are they really providing a better price? Recently they had absorbed GST and yet make big profits. Understood from a friend whose father is working in a particular brand of a bread. She said that according to her father, on the surface ‘Auntie Lucy’ is absorbing the GST but in actual fact the suppliers were the ones that were forced to absorb it.

Let’s take part-time maid as an example. This is a job done mostly by housewives. They will go to their customer’s place, do the chores and are paid hourly. Housewives that need to take care of their young children or needs to take care of elderly parents are not able to work outside; therefore this is an ideal income-generating means for them. However, this means had been made saturated by competitors like ‘Auntie Lucy’.

I would like to talk about the Financial Industry as well. It’s definitely booming, year in year out, LIA (Life Insurance Association) had announced two-digit growth in the life insurance industry. Agents tied insurers accounted for 71% of new businesses, banks contributed to 17% and the rest was distributed by the Independent Financial Advisers.

Out of these 3 channels, ‘Auntie Lucy Income’ can be found in 2 of them; agents tied insurers and Independent Financial advisers. Besides Life Insurance, ‘Auntie Lucy Income’ also participates actively in General Insurance businesses. Most of the time, quoting premiums which are unbelievably low, causing other insurers to follow suit or give up the deal so as not to incur losses. Insured are always complaining about the poor customer service they are having especially when it comes to a claim.

Recently, ‘Auntie Lucy Income’ announced that they are going to compete for the Number one position in the Insurance industry. They are going to expand their sales force by recruiting more Advisers. If they should succeed in growing their sales force, very soon they will monopolize the market. Even if other insurers were to have better policies they may still lost out because most Singaporeans will go for something that is cheaper. Take for example: How many people actually read the terms and conditions carefully when purchasing a travel policy? Most of us would just purchase the one that is cheaper.

Just when I thought that ‘Auntie Lucy’ is the only competitor when it comes to pricing I was shock to find out from friends who work in the laundry industry that, their main competitor is ….
This friend of mine had been working in a commercial laundry as a Marketing Manager for years. For the past 5-6 years he realized a massive drop in sales volume. Previously, commercial laundries take their fair share of the market. Different hotel chains will be handled by different laundries, the same for hospitals and restaurants.

This is how it works: when the contract expires, laundries would be asked to tender for the project. The one that quote the lowest will most probably get the project. He said this to me, “I mark up a 20% from my cost for the tender, and I lost it. The next year, I reduce it to 10%, I lost it again. Last year, I reduce it to 5%, I still lost it! If the company cannot even have a profit of 5%, what kind of business are we in? We are not a charitable organization, we have mouths to feed!”

I can understand his frustration. This competitor can afford to quote that low simply because their labor cost is very low, near to zero. Laundry is done in the premises of the prison, therefore what rental cost are we talking about here? Of course, they are the statutory board whereas the commercial laundries are paying their employees, rental expenses, finance loans, etc.

When one project is lost, the company had to start to under-cut to get other projects which probably initially were not done by them. Thus creating disharmony and relationship became strained.

I always hear people saying this, the government is going into any business that is making money, and I wonder when are they going to do the casket business? I often laugh when I hear things like that, but one day we could be seeing ‘Auntie Lucy’ selling casket. Guess what? Out of curiosity, while writing this post I browsed through the net for ‘fair price casket’ and it appear, top of the list! I wonder if it is associated or it’s just a somewhat similar name. Due to this find, I went around to some friends to ask. Most of them told me that, yes, this is under ‘Auntie Lucy’ while others said not sure.

In conclusion, the fittest may not be able to survive in this race, the richest and largest will.


Anonymous said...

u mean Until-You-Si izzit?

chappy said...

'Auntie Lucy' has a funeral service. It's located here at "her" official website.

Anonymous said...

Yes. You are right. "auntie Lucy" is doing all kinds of businesses-including casket. Why? Because they must create many job opportunities, not for you and me but for 'second career' of those RUNNING DOGS!

Ned Stark said...

I heard from some taxi drivers that Auntie Lucy also provides some form of funeral services and additionally they have ventured into the floral industry.

Anonymous said...

Auntie lucy Everywhere = mom and pops shop dying everywhere. Fair Where got fair.Just like Opp are decreased for PAPi. Auntie Lucy Kill Comp editor too.
All your bases are belong to Auntie Lucy and PAPi.
You are all complacent.

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