Words by Anandhi Gopinath
There is nothing quite like SOGO Kuala Lumpur. Multiple floors of retail catering to men, women, children and the home, a supermarket, eateries of various sizes and culinary inclinations, and a gym fit into Jalan Tuanku Abdul Rahman’s most iconic structure, successfully serving the needs of the community since retail turnaround specialist Datuk Andrew Lim took over in 2002. It buzzes with energy well into the evening, with shoppers thronging the halls for good deals. And there are many to be found for pretty much anything you might be looking for – perfume, porcelain plates or pantsuits.
The Group Deputy Chairman of SOGO Department Store Sdn Bhd, Lim is based in the top floor of this very building, right from the time he acquired it from its Japanese principals in 2002. It does not feel like much has changed since then, most notably a Japanese-style meeting room with tatami mats on the floor, a sunken boardroom table and a small outdoor garden that somewhat shows its age after so many years of being exposed to the elements. While there is a more modern boardroom next door, we can see the appeal of this particular space, teeming as it is with a nostalgic charm.
Coincidentally, the Executive Chairman of the GAMA Group’s recent acquisition of the local food retail business owned by Hong Kong-based Dairy Farms International includes a brand that inspires that same sense of nostalgia – Cold Storage, which many Malaysians would remember from their childhood as the only place to acquire imported goods with which to stock their pantries. “This brand was founded in 1903 and has this fascinating colonial personality. We hope to bring that back, serving the needs of so many people who enjoy this sort of shopping experience and who can afford to do so. Nostalgia sells, you know,” Lim says, winking mischievously at the camera trained in his direction. The other brands he acquired are Giant, Giant Mini, Teng Mini Market and Mercato, all of which sit under the GCH Capital umbrella.
From reviving the mass-appeal SOGO, to bringing the ultra-luxe Japanese retailer SEIBU to Malaysia (it opens in The Exchange TRX this year) and now managing supermarket brands, Lim has many diversified interests in the retail scene, but according to him it is not really that complicated. “The principles across the board are pretty much the same,” he says in firm yet relaxed tones. “The late Galen Weston owned both Primark and Selfridges, and the two businesses couldn’t be more different. Primark’s stuff is so cheap they don’t do delivery, while at Selfridges, you can avail yourself some of the most luxurious services money can buy. At the end of the day, it’s about giving your customer what they want, wherever they are, at a price point they are comfortable with.”
A Strong Foundation
Born and raised in Penang, Lim worked as a journalist at the Straits Echo – the breeding ground for many veteran newsmen and women – before heading off to the UK to complete his tertiary education. His preference was law, but since so many of his family members were already in the profession, his father suggested taking up accounting instead. The younger Lim reluctantly agreed, but after one year, insisted on pursuing his true passion and eventually came home as a qualified barrister. At the time, the senior Lim was on the board of GAMA, a local supermarket popular for its array of imported goods from China, which went down a treat with Penang’s predominantly Chinese residents.
His father’s involvement with GAMA gave Lim a front row seat to the retail industry. “In 1967, they established the first combined supermarket and department store in Malaysia as a single concept – prior to that, it was separate,” Lim recalls. “In Chowrasta Market, they were the first to air-condition the whole place, and the first department store to have an escalator! GAMA was the first in many ways, and it was given recognition in the Malaysian Book of Records as the oldest registered supermarket/department store in the country.”
His father eventually passed on his position on the board of GAMA to Lim, who started practicing law in 1981. This was the decade in which, courtesy of then-prime minister Tun Mahathir Mohamed’s aggressive Look East policy, many Japanese companies explored the idea of investing in Malaysia. This included the SOGO Group, who wanted to shore up their South-East Asian influence – they had already established a presence in Thailand and Singapore. Their vehicle to do this? Acquiring the GAMA group, a deal that was completed in 1989.
“This move made us shareholder promoters of the SOGO Pernas Department store,” Lim explains. “At that time, we were four stores – Penang, Klang, Banting and Seremban. The SOGO boys actually wanted to learn more about the Malaysian market. You see, in Singapore and Thailand, things were easier as the market was fairly homogenous. But this country had a unique mix of communities, so the SOGO guys starting the learning process with the GAMA group. They later signed a joint venture with Pernas to develop this (SOGO) building.”
Lim has a remarkable memory and is able to recite the details without skipping a beat. “In 1990, they signed the first JV and, in 1991 they signed with DBKL to put up this building. At that time, the capital outlay to buy the land was MYR165 million and, to build, the construction company was awarded MYR400 million. The fitout for the entire building came up to MYR70 million. So, in total, Tun Mahathir brought to this location MYR650 million worth of foreign investment. It was a brilliant move, I must say.”
When SOGO Kuala Lumpur opened in January 1994, it was a five-star, upmarket retailer that enjoyed pride of place along Jalan Tuanku Abdul Rahman, likely the most enviable location for any retail centre at the time. The SOGO boys, as Lim calls them, had their goal on luxury at every touchpoint – well-appointed interiors, foreign-trained sales staff, the most high-tech of POS systems available at the time, and a retail mix that included brands like Salvatore Ferragamo and Bally. KLites, naturally, were in awe. “This was Suria KLCC before we had Suria KLCC,” Lim grins.
There was one problem, though: no one was shopping at SOGO. Sales were worryingly lethargic. The timing for this was dreadful for the Japanese, who were already suffering from the burst of the property bubble back home. They put GAMA up for sale in 2000, of which Lim initiated a management buyout – he was the group’s legal director in Malaysia at the time – and when SOGO came up for sale two years later, Lim put up his hand and bought that, too.
This is when he started to gain a reputation as a retail turnaround specialist. All eyes were on SOGO, its fate, and the ‘saviour’ who was poised to rescue it. “In the course of events, what happened was this: after you retire the expatriate costs, we managed to turn the company around in the first year. We also relooked the retail mix here, which was very high-end – Mikimoto and Ralph Lauren were the wrong mix for the average Batu Road customer,” Lim says, referring to the old name of Jalan Tuanku Abdul Rahman. “After we took over, we altered things and brought in products people around here would buy, and sales quadrupled.”
High-end luxury labels were swapped out for mass-appeal brands, while swanky restaurants were replaced by a cheap and cheerful food court. The personality change was immediate, but so was the impact – people came to SOGO in droves, and it remains a success story to this day. Now, two decades since the SOGO KL acquisition, there are outposts in Shah Alam and Johor Baru, with one more expected in Kuala Terengganu by year-end.
Sometimes, going from red to black is as easy as reducing costs and getting customers on board. And with the brands under GCH, Lim is doing that all over again.
Moving On Up
DFI, via its subsidiary GCH Retail (Malaysia) Sdn Bhd, entered Malaysia in 1999 by acquiring a 90% stake in the Giant business, then operated by the Teng family. The business at the time consisted of five supermarkets and two hypermarkets, including the iconic Teng Mini Market (TMC) in Bangsar, Kuala Lumpur, which many KLites will fondly recall was once a neighbourhood grocery store. Today, its new owners have a much larger business to care for – when the transaction was completed earlier this March for an undisclosed sum, rumoured to be in the billions, the total number of stores stood at 91 across the Cold Storage, Giant, Giant Mini, Mercato and TMC brands.
Initially, Lim wasn’t planning on expanding in this particular retail segment. As is the case with his previous acquisitions, it was a matter of the right deal coming up at the right time. DFI had wanted to focus on its Guardian outlets and were looking for interested parties to take over their food businesses for Peninsula Malaysia. Lim and the DFI team have always been friendly, and he was in talks with them to secure group buys that would provide both parties with additional discounts. DFI got Lim to spend even more money instead. “We were so pleased to think that they considered us a partner they wanted to work with; I considered this a huge compliment,” Lim says.
In some ways, GCH was SOGO all over again – it was not doing as well as it should. Despite a bumper 2021, the succeeding year didn’t fare as well. “The issue is the overlay of expatriate costs. They had Australian, British and Singaporean staff, so costs were very high. Margins are already not great for this industry, so when you take away costs, you’re already more or less in the black. The brands themselves were doing well! On average, the stores take in MYR5 to 6 million a day; weekends are MYR7 to 8million. During festive occasions, we can take in up to MYR10million a day,” he shares.
Much like how the SOGO brand needed some tweaking to better serve the community, Lim and his team’s next steps are to shore up the strength of the individual supermarket brands and let that lead the way in determining where they should be located. Leases will be allowed to run their course before any moves are made, though.
“A lot of landowners feel an emotional attachment to Cold Storage, which has a very British personality, so that will be played up,” he says, counting off on his elegant fingers. “Mercato means market in a few European languages, and it will still be upscale with a more Mediterranean feel to it. Malaysians love pizza and spaghetti anyway, right? We are planning four new outlets, a few will close as they are not profitable. For Giant Mini, we are in talks with a co-operative to expand by one new outlet a week, likely from October onwards. Nowadays, the purchasing patterns prioritise convenience, especially among the younger set – they don’t want to go any further than down the road for their necessities, which makes sense. Too many of these stores are right next to each other, and our plan is to change that, and then head out to the areas where we have not reached.”
The GCH takeover has ramifications beyond padding Lim’s own investment portfolio – it also benefits the local economy, as it keeps more of the earnings within the country. This is why Lim, alongside other business owners in this industry, are lobbying the government to amend laws and evolve policies to help grow the retail scene. Establishing Malaysia as a retail haven is the way to go, Lim adds, but this calls for efforts from multiple departments.
“The first – and most critical thing – is to increase minimum wage but do it according to zones as some areas have lower costs than others. In Indonesia, it is done this way, so it is not unprecedented. The second thing is to get more flights to come into the country, and this a G2G thing. Singapore is up to 80% of pre-pandemic arrivals and we are only at 50%. Thailand is also ahead of us, so we must emphasise tourism again. Third would be relaxing entry requirements so more travellers can come here visa-free – the easier it is to travel to Malaysia, the bigger the chance that they will. All these moves from the government will help the retail industry flourish, which is also good for them – I mean, once we make more money, we pay more tax!” he laughs.
A Worldly Take
As Lim has been in the industry for so long, he can very quickly pinpoint how drastically it has changed over the years. The most critical shift has been what a given retail centre consists of – before, the lions’ share of a mall would be dedicated to the anchor department store, with the remainder space split between a supermarket and eateries. Today, the reverse is true as customers want to have more space dedicated to restaurants, with groceries and the like comprising a smaller deal.
“It’s a major shift, and we have to follow the consumer’s directions here. In retail, you must look at psychological drive of humans to do what they do. We don’t want to sit in a room all day; we want to go out! All shopping malls will become lifestyle centres, and we cannot be divorced from this fact. There is a future for brick-and-mortar retail destinations, and this is it.”
The Exchange TRX, the lifestyle precinct of the Tun Razak Exchange, is a good example of what Lim is talking about. Designed to be the social heart of Kuala Lumpur when it fully opens, it aims to bring experiential retail and entertainment to life, in a fresh new way. It will include more than 400 experience stores spanning only four retail levels – we love this quality vs quantity game – featuring new-to-market brands, statement stores and reimagined store formats.
In The Exchange TRX, the SOGO-SEIBU team will be opening Malaysia’s first SEIBU Department Store, which will include an upscale food hall called, in Japanese, a ‘depachika’. The SEIBU and SOGO brand names are owned by parent company Seven & I Holdings Co. Ltd of Japan, which also owns the 7-11 brand around the world. Lim added that from an inherited agreement even before his acquisition of GCH Capital, the Giant-Mercato team will be opening an upscale supermarket in The Exchange TRX.
The conversation soon meanders to other things – Lim is impeccably well-read and speaks comfortably on a variety of subjects, although none stray too far from the business at hand. We talk about big data and how AI is helping the retail business better predicts ebbs and flows, and touch on something Lim is especially passionate about: environmental, social and governance. ESG is a framework used to assess an organisation’s business practices and performance on various sustainability and ethical issues. It also provides a way to measure business risks and opportunities in those areas, especially relevant to companies operating in the food retail space.
The environment is of special interest to Lim, who speaks ruefully on the amount of single-use plastic the world goes through daily. “In Malaysia, there needs to be an end-to-end programme at a city level – all carbon waste should be compostable, and all plastics, tin and glass should be recycled. But the main thing is that we must ban single-use plastics, which are given to us by the lorryloads every day! Many European companies do not even ship products wrapped in plastic, not even scotch tape!
“There needs to be a cultural change. They do it better in European countries because they are affected – in Switzerland, the temperatures are going up so high, there is not enough snow, and whatever there is melts very quickly. It is an immediate problem, so changes are systemic. In Malaysia, the effects of global warming are not so apparent, so we don’t feel ESG is that important yet. But all companies need to be more sustainable, that’s not debatable anymore. Looking at Switzerland as an example again – food waste is frowned upon and, in some other European countries, vehicles powered by internal combustion engines are banned in certain urban areas. It is not impossible for us to do, but it does require political will and governmental enforcement.”
In the meantime, Lim does what he can. He runs a tight ship where staff often stay for multiple years, testament to his compassionate and visionary leadership. But, he admits, people also stay because retail is a very interesting industry to be part of. “I find retail makes you more dynamically inclined – if some time back, I could work a year ahead at a time, now it is three months,” he observes. “And even within that period, there are aspects of our strategy that change week to week. We practice a very dynamic management strategy that looks at what happens each month, so we can make informed decisions that are as up to date as possible.”
Our interview soon draws to an end, but the conversation prolongs over dinner – Lim loves his wine and shares a stunning 2008 Les Forts de Latour with us. It is not to say that he is particularly formal during our chat, but once the notebooks are closed and the recorders are switched off, we do see a different side to him. Gourmand, fun loving and a wine connoisseur – we talk books, politics and many other things before calling it a night. It is over our final glass of wine that we ask him this: what about the retail industry does he love most of all?
“That it constantly rejuvenates itself,” he says thoughtfully, pushing up his shirtsleeves to expose a vintage Rolex he inherited from his father. “It constantly moves forward and that, to me, is simply amazing.”