When retailers are in tears, Mustafa is doing roaring business. What is the magic? - by Corinne Kerk
They call him the Rajah of Serangoon Road and with good reason.
While many retailers are suffering losses, downsizing, or have completely given up and moved out, Mustaq Ahmad's department stores in the Serangoon Road area are doing a thriving business.
On a mid-week afternoon, the store is packed with customers and you have to squeeze through the crowd to get to Mr Ahmad's office on the second level of Mustafa Centre, at Syed Alwi Road.
The managing director of Mohamed Mustafa & Samsuddin Company (MMSC) has another store round the corner at Serangoon Plaza.
Already known to the public as an unaffected and humble man with assets worth well over S$100 million, Mr Ahmad greets you behind his plain desk with a patient look on his face and the opening line: "People always ask me 'how do you do it?' But there's nothing new to this business, it's basically buying and selling."
Still, he fields your questions with the fortitude of a man accustomed to the media probing him for the secrets to his success.
Born in India, the 45-year-old has come a long way since he started a shop in Campbell Lane selling ready-made garments with his father and uncle back in 1971.
For the current financial year ending June 1997, he estimates sales of between S$230 million and S$250 million from the stores' combined shopping space of 150,000 sq ft.
But profitability is "still on the low side" because of the S$45 million Mustafa Centre which was opened last April. "But we're satisfied with it," says Mr Ahmad. And why not? Last financial year, net profit stood at S$3 million and for the current year, he's projecting some S$5 million.
Naturally, this figure wasn't plucked from the sky in some misguided sense of optimism. The sales will come from the daily weekday traffic of 10,000 and weekend traffic of 15,000 to 20,000. And the crowds are still growing.
Yet, it can't be the ambience that is pulling in the crowds. At first sight, Mustafa's looks like a window designer's nightmare. Merchandise from chilli crackers to sequinned handbags and portable radios are stacked unglamorously against windows and along the aisles on the floor.
The reason is simple enough: the store is quite literally bursting at the seams.
"There just isn't anymore space," came Mr Ahmad's simple answer. "With nice displays, you lose 4 to 5 times more space. Basically, people come here to buy things and not to look at displays. We're not promoting any products, we are selling promoted products. So let someone else promote them and we'll do the selling."
A more obvious reason for the stores' attraction is its pricing. While some department stores are trying to go up market and targeting customers with big spending power, Mr Ahmad aims for the mass market.
"At our shop here, we believe everybody is a customer," explains Mr Ahmad, pointing out that maids and employers shop there together. Mustafa's is also a favorite of Indian and Bangladeshi foreign workers.
"We have a lot of things which most people can afford and anybody can come in and find something for themselves. Customers can buy small things and all these small things can add up to a big volume. At the same time, we also have bigger ticket items, so there'll be a product for everyone."
Mr Ahmad says he also offers lower mark-ups compared to other stores. "Of course we make money," says Mr Ahmad. "But we work it out such that we have a smaller mark-up and customers get the lowest market price, but we have enough margin from a big turnover."
Gross profit margin on products is at an average of about 15 per cent at his stores, with some ranging from 10 to 30 per cent. The reason why his stores can keep prices low is because they buy in much bigger quantities and can therefore negotiate for lower prices.
"And if there's a big price difference in the market, we parallel import the goods," says Mr Ahmad. Parallel imports, which range from electrical products to perfume, make up about 20 per cent of the goods. "Although we only have two shops here, we do a lot of homework and my staff will travel to buy these goods," he reveals.
But just when you think his secret is all down to a pricing strategy, Mr Ahmad tells you it isn't all that simple.
"It's not just the price, it's the real thinking behind it," he emphasises. "We ask ourselves if we are going hand-in-hand with customers or if we are just trying to sell them things."
Taking the tourist business as an example, Mr Ahmad says the visitors are quite prepared to spend, but some retailers think they should therefore make as much money from them as possible.
"But if he finds out the price difference, he will not come back," he points out. "The normal price is the price that will build trust, even though it's not necessarily the cheapest."
At the same time, the method of pricing is also important.
According to Mr Ahmad, MMSC's products are presented without a lot of hidden cost. For instance, if the price tag of an electrical product at his stores says S$300, it already includes the 3 per cent goods and services tax (GST).
"Someone else could have a S$299 price tag, but have yet to include the GST, plus S$10 for delivery and so on. So in the end, the customer pays S$320," he explains. "It's a very simple method we use without being afraid that someone will beat us with a S$299 price tag. That's where the confidence comes in."
Although customers may take some time to realise this, they keep going back to his stores when they do. "This is because they know there is something different, there's honesty," says Mr Ahmad.
"Then we're a little bit better than the next store." Of course, the fact that MMSC stores have a wide range of products also helps. Because of its location in Little India, MMSC's complete range of Indian supermarket products makes it very popular. So even though there are Indian spice shops in the area, they can't beat MMSC stores for their range, and hence, the convenience.
And instead of fancy carrier bags, MMSC stores use plastic bags which are tied with a security tag once the items have been paid for. This may not exactly look elegant, but it certainly is an effective method against pilfering, which stands at about 0.5 per cent, compared to some stores with a rate of between 3 and 4 per cent.
While the MMSC stores don't look expensive, Mr Ahmad emphasises that its goods aren't cheap either. "Customers don't care about the seller's problems, as long as the price is fair," he states. So instead of frequent sales, he keeps his prices steady. "This is business we are building everyday, because we can't promote everyday."
Although many retailers expect the poor trading conditions to continue for some time, Mr Ahmad believes the outlook is good for his business.
"There's a lot of opportunities, not only here, but all around the world," he says matter-of-factly. "We're short of space, but not short of customers. We can open a shop anywhere, as long as we have our own niche market and can use our way of doing business."
The fact is, Mr Ahmad is confident that if he were to set up this type of stores in Kuala Lumpur, Jakarta or Hongkong, it will be a hit. But don't mistake this for arrogance.
"Why am I confident? Because we find that there are certain weaknesses in the market, so we take the opportunity to remove those weaknesses and provide for the customer," came the simple reply."A lot of big businesses don't have confidence in doing things."
And this confidence means that if he pays $1 for item, no one can pay 50 cents for it, and he can sell it to the customer for $1.20. "It's a fair price, but not the cheapest," emphasises Mr Ahmad.
"Those who think cheapest is the fairest come into the market and then disappear because expenses are more than their income. Some others think they want to make as much profit as possible, but this doesn't match because the market cannot accept it."
"So the question is at what levels can the market accept the prices," he says. "That's the trick of the game." The difficulty is of course, how to read market correctly. And that, according to Mr Ahmad, comes down to how much a person is involved in the business.
"If a person shows enough interest, he can create a niche market," he believes. "Just study the needs of a particular group of people and fit their needs. Everybody needs their daily necessities right? So the business is there already."
The other thing he believes retailers should do is to retain whatever they started out selling.
"So if you were selling artificial jewellery, and want to sell gold as well, then keep both," he says. "And when you add diamonds, you should sell all three. You have to build on existing business because you've done it successfully and if you maintain your bread and butter, you're safe."
With his business cruising along, what are his expansion plans?
"We're very satisfied with how we're doing and as and when things come up, we will expand," says Mr Ahmad. "But for us to set up anywhere, we need a big capital, and there's no magic show where we can set up without it."
Although renting is easy, that is not an option for him because "rentals will go up and you'll be at the mercy of your landlord". Another way to gain capital quickly is to invest in high leverage business "and get headaches everyday". But this is not a prefered choice as Mr Ahmad would rather take it at a more unhurried pace. "We can take whatever challenges as long as we don't put too much worry on ourselves or stress on our health," he says in his laid-back manner.
Raising funds through a public listing is yet another possible -- and much faster -- means of financing a business, but MMSC is only just "thinking about it a little bit".
"If we want to move fast in the market, we might do that, but if we decide to move slowly, we can remain like this," he says. "We're not aggressive in the sense of wanting to reach this or that target in a certain year. We are very comfortable with this speed."
One thing's for sure though. With 60 per cent of his customers being locals and 40 per cent tourists, Mr Ahmad would like to see more Singaporeans of all races visiting his store.
"Right now, Indians form about 65 per cent of customers, so we need more Chinese shoppers."
So far, the only expansion plan that's certain is his proposal to convert the 130 hotel rooms above Mustafa Centre into an additional 45,000 sq ft of retail space.
Having said all that, Mr Ahmad's business philosophy boils down to taking care of the people he's dealing with.
His staff, customers and suppliers attest to his friendly and easygoing nature, largely because he isn't stuck in some plush boardroom holding endless meetings, but meeting them regularly on the shopfloor.
Of course, there's also the 'X' factor -- Mr Ahmad's ability to understand the consumer psyche, and his swift reaction to changes in consumer demands and expectations.
But just when you think you've got Mr Ahmad's business strategy in a nutshell, he surprises you.
"Whatever I say, tomorrow, the ideas might change," he says with a shrug. "Because tomorrow is another day."