Interview: Gary Brown
How can retailers take advantage of new technologies to both increase business efficiency and enhance customer experience?
GARY BROWN: Retailers are looking closely at implementing beacon technology in their stores. The way beacon works is that once a customer has downloaded an app and signed up, when they walk past a store they’ll receive an SMS notification for a special time-sensitive offer. It’s powerful in terms of instant action – customers don’t receive notifications at home because they’re unlikely to be near a store. This technology will create a situation where customers walk past and we try to pull them in with special offers. The alert is only sent out to a customer when they’re within a certain radius to ensure convenience. As a localised call to action it’s far less invasive. Beacon technology will probably take six to 12 months to introduce and it’s an exciting opportunity. It ties in with suppliers, who would be very happy to support it.
What are the main factors preventing greater e-commerce penetration in Malaysia?
BROWN: There is a high propensity to shop but a low propensity to pay online because of distrust with the system due to bad experience or general mindset. Now customers have the opportunity to buy online and come and pay in some stores. We have a small suite of merchants, but we want to add an airline and an online shopping merchant among others, as we see potential. As an example, Malaysia Airlines has 50 ticketing offices in the country, but if they were to come on board with us, they would have another 1850. Another area with potential is the foreign worker segment, who typically have internet access but lack access to credit. We are also pushing in-store bill payments such as utilities and services as well as pre-paid gift cards. The latter has proven popular in the US, Japan and Australia, but it is a new concept in Malaysia. We are optimistic that the idea will catch on.
What are the key supply chain challenges faced by retailers when looking to expand across Malaysia?
BROWN: The supply chain situation varies by retailer, and each tends to adopt their own process and policy. Because we deliver to so many stores on a daily basis, our supply chain is complex. And it is moving suppliers away from their traditional model of using a distributor and a wholesaler to a direct service situation – not to each store but to a central warehouse for each retailer. Wholesalers and distributors are going to end up servicing more outstation areas and smaller shops. Retailers cannot afford to hold too much stock, whether in a warehouse or an outlet, which is shrinking supply chain requirements all the time. This shortens lead times and puts pressure on each step in the chain to be more efficient. It’s a fundamental shift in supply chains for Malaysia which, in this respect, is only now catching up to the developed world.
To what extent is slowing consumption in 2015 a concern for the sector over the next 18 months?
BROWN: The retail market has been negatively impacted, with discretionary retail suffering the most. The problem we had in 2015 was negative consumer sentiment heading into implementation of the goods and services tax (GST), and this compounded the issue. But according to Nielsen numbers from the fourth quarter of 2014, the consumer confidence index was at its lowest level since the 2009 financial crisis. It improved in Q1 but got worse in Q2 due to GST. That was not just a result of the impending GST; it was the result of a fall in real consumer confidence driven by three airline disasters, cuts in petrol subsidies and flooding on the east coast. Other issues surrounding 1Malaysia Development Berhad also create downward pressure. Despite this, Malaysia’s economic fundamentals are sound and its infrastructure is great. The outlook for the next 18 months is positive, and the government will sort out any overhanging issues.