This article first appeared in The Edge Malaysia Weekly on April 17, 2017 - April 23, 2017

WHILE convenience stores seem to be mushrooming everywhere, giving the impression that the market is becoming saturated, Bison Consolidated Bhd — which operates myNEWS.com outlets — thinks otherwise. CEO Dang Tai Luk sees Bison as being in a sweet spot where it stands to benefit from the underserved market and the growing popularity of e-commerce.

In its financial year ended Oct 31, 2016, Bison’s mature stores — those older than two years — recorded same-store sales growth of 1.8%. It typically takes a new myNEWS.com outlet 12 months to break even, excluding capital expenditure.

“The penetration rate of convenience stores is low in Malaysia — 135 stores per million people — so there is still room to grow. In Japan, it is about 400 stores per million people while in Germany, it is about 800 stores per million people,” Dang tells The Edge.

“It is a good opportunity and at this point in time, I truly think that Malaysia’s convenience market is underdeveloped.”

On average, Bison serves about three million customers per month. But the range of foot traffic into myNEWS.com outlets is wide, depending on the location. According to Dang, it varies from hundreds per store per month to thousands.

He says in countries like Hong Kong and Japan, where convenience stores are known for their wide array of products and services, store sales are double that in Malaysia.

But for Malaysia to reach the coveted standard of convenience stores seen in other Asian countries like Hong Kong, Japan, Taiwan and even Thailand, Dang admits that Bison and its peers have a lot of work to do.

“We can do a lot more to catch up with the other countries. Going on a revenue growth path with network expansion, improving product mix, introducing more interesting products ... of course, all these have to come with business functions and back-end support,” he explains.

“We have to make it more interesting. We have to be able to tell consumers that a convenience store is a destination where you can get everything you need or just to drop in for a cup of coffee or pay your bills or get your snacks and so on. That’s the way convenience stores should be.”

Bison acquired a distribution centre in Johor recently to help it improve efficiency. It is also in the process of building its own food processing centre, which will supply ready-to-eat food to its outlets, beginning the second half of next year.

Dang is convinced that Malaysians will embrace convenience stores, especially the younger generation whom he sees as one of the growth drivers for Bison going forward.

Consumers have started to change their buying habits, visiting bigger format stores less and smaller format stores, like myNEWS.com, more because of the latter’s proximity to them.

Dang also sees convenience stores filling the gap between traditional stores and e-commerce platforms.

“You will still want to go to the store near your home or workplace to get your ad hoc needs. And, we can also serve the e-commerce community by being the last-mile delivery for consumers — you buy your products online and pick them up from us,” he says.

“We will be the destination you come to to pick up your goods and at the same time, buy some other items. There’s always a spillover effect. We will be able to ride e-commerce. We will also serve you in areas where e-commerce is lacking.”

The company recently tied up with EasyParcel Sdn Bhd to use myNEWS.com outlets as parcel drop-off and collection points under a service called PGEON.

At present, Bison’s expansion plan is to hit 400 stores by the end of its financial year ending Oct 31, 2017, by adding another 70 stores to its network.

Dang says most of the 70 new outlets will be located in the Klang Valley because of the heavier foot traffic. He adds that Bison has submitted bids for every station on the MRT2 line. It has been awarded with six outlets along MRT1.

When asked if there is an ideal number of myNEWS.com stores in Malaysia, Dang says, “There is no ideal number of stores. But I can definitely foresee ourselves moving into the thousands bracket [in terms of number of stores].”

While he declined to let in on when Bison will reach the 1,000-store level, he says consolidation is a likelihood for the convenience store industry in the country.

“In Japan, you have 52,000 convenience stores and these stores are only held by four or five brands. But, in Malaysia, we have 7-Eleven with about 2,200 stores. Bison has 330 outlets today and we are considered second in the market. The other few thousand are held individually, by individual owners and some smaller brands,” he says.

“And if 52,000 stores are held by only a few brands in Japan, why not in Malaysia? Then, that is when we will come in with a few thousand stores.”

Dang is of the view that lifestyle changes, technology advancement and increasing demand for quality products and services by consumers will be factors that could drive the consolidation of the convenience store market, on the premise that major brands are better able to provide the level of customer satisfaction required for goods and services.

Bison is open to mergers and acquisitions, says Dang, but is not actively seeking a target currently, although it is the faster way to expand.

“We’re not actively seeking M&A opportunities, but our ears are open. In the context of the Malaysian convenience store landscape, there’s nothing much out there to acquire … unless you go out and pick individual stores, but that may be too tedious and messy,” he says.

 Where franchising is concerned, the company is adopting a cautious approach. Dang says franchising is in the works, but he is very careful about opening up the myNEWS.com brand to outsiders.

Bison has seen strong earnings growth since its listing on the back of its store expansion plans. In the first quarter ended Jan 31, 2017, its net profit rose 10.2% year on year to RM6.36 million, while revenue grew 23.5% to RM76.23 million.

It seems like investors will have more to look forward to in the coming quarters as Dang believes the company will be able to maintain its current revenue growth and profit margin going forward.

“Revenue-wise, we are confident of sustaining the increase. We were growing at 21% and we are quite confident of maintaining that growth. As for the profit margin, [it] has always been between 6% and 7%, and we are comfortable with that,” he says.

Bison is trading at a price-earnings ratio of 32 times. Last Thursday, the stock closed at RM2.23. Most analysts covering the stock have a “buy” call on it with target prices of between RM2.07 and RM2.25.

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