The Changing Landscape Of Retail And F&B

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26-10-2018

6 min read

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WHAT makes Malaysia unique? Our food – the result of our multicultural heritage – certainly tops the list, but our beautiful beaches, biodiversity, and shopping mall culture also sets us apart from many other countries.

In fact, Malaysians spend so much time in shopping malls that new ones continue to mushroom, and it is expected that the total number of malls in greater Kuala Lumpur will reach 197 by 2021.

The retail industry in Malaysia has gone through rapid transformation in recent decades due to consumers’ changing lifestyles and increased disposable income.

This industry was traditionally dominated by small ‘mom-and-pop’ grocery stores – better-known locally as kedai runcit – but the emergence of foreign retailer participation helped it develop into a modern and sophisticated one.

The Malaysian food and beverage (F&B) industry has also experienced significant growth over the past decades: international fast food chains such as McDonald’s, Subway, Nando’s and Yum! Brands (who own KFC and Pizza Hut, among others) have established their presence here, and there has been substantial improvement in its quality of service.

However, technological advancement in the retail and F&B industries is surprisingly low, with research findings from the Department of Statistics showing that only around 10% of businesses having adopted the use of technology.

Datuk Bruce Lim Aun Choong, the Retail and F&B Productivity Nexus Champion for the Malaysia Productivity Corporation, attributes this to the fact that these industries are mainly made up of small and medium-sized enterprises (SMEs), and the owners of these businesses lack the productivity mindset.

Datuk Bruce Lim (pic)

The productivity mindset

Lim defines productivity as the value added over the number of people in the enterprise, and notes that this mindset is very rare among SMEs.
“SMEs are always about maximising profit and cutting cost as much as possible to increase margins. This is not productivity thinking, because you’re not thinking over the long term; you’re just thinking of making profit,” he says.

Productivity thinking means being open to investing a little and waiting to see the returns over the long term – and the returns will be manifold, Lim assures.

While it is understandable that it is very difficult for SME owners to extricate themselves from the day-to-day operations of the business long enough to consider investing in areas that do not yield immediate returns, they cannot afford to continue having this mindset if they want their businesses to flourish.

With the disruptions caused by technology, changing consumer habits, and the entry of the younger generations into the workforce, business owners who run traditional SMEs cannot continue with processes that are quickly becoming outdated, otherwise they will risk being left behind.

“A lot of retail chain owners – although successful – have found themselves being squeezed over the last five years or so. We used to respect the hypermarket guys, but now they feel the pressure because the economy is changing,” says Lim.

He notes that there are two distinct types of entrepreneurs currently in the industry:

  • those who have years of experience but have to change with the times, and;
  • a new batch of entrepreneurs who lack experience but already have the right mindset.

What better way to tackle the industry’s issues than to have both these groups learn from each other?

This is what the Retail and F&B Nexus has been working towards over the past year through their various initiatives – creating an ecosystem comprising experienced SME owners, new entrepreneurs, and even experts from outside the industry who are eager to rally together to drive change.

More of MPC: Removing Blocks In Professional Service

Nexus initiatives

1. Provide support for digitalisation of business operation and build e-commerce capabilities

An all-encompassing initiative was introduced in collaboration with the ICT Nexus – a three-month programme in which digital-savvy marketers coached SMEs on how to digitalise their business, from setting up their own web stores and navigating e-marketplaces, to using social media to drive traffic to their sites.

However, adopting technology is much more than just setting up a website or a web store. It also means leveraging the data gained from running the business.

“You find that a lot of these traditional retailers have a lot of data; they’ve got files on their customers over the last 10 to 20 years, but they don’t know what to do with it,” says Lim.

In the nexus’ business intelligence project, SMEs learn about big data from a fellow SME owner who has successfully digitised his business.

“They (the company) were very open, showing participants their sales figures and customers. This sharing mindset that they have is amazing for a traditional, purely retail company,” states Lim.

2. Promote opportunities for sharing economy

Another initiative is the e-procurement system, set up to get SMEs to plug into the sharing economy, rather than conduct business on their own.

Lim gives an example: If a single F&B outlet approaches a supplier to buy a certain quantity of drinks, it is not going to get an attractive rate.

“We work with a consortium of F&B brands (100 of them) and collectively, they operate a few thousand outlets, so when you approach these suppliers [as one] you find that you’re able to get better rates,” Lim elaborates.

Suppliers who are registered with the system also benefit from this as they get bulk orders instead of requests for small quantities. “Again, this is productivity that we are nurturing – you pay less, but you get a lot more,” shares Lim.

3. Strengthen retail and F&B competencies

Most of the people who work in retail and F&B may not have paper qualifications, but those who have been in the industry for a while are a lot more valuable to employers compared to a fresh graduate who has a diploma.

The focus is on recognising these workers’ previous work experience and having their skills certified with a Diploma Kemahiran Malaysia (DKM). The Department of Skills Development, or Jabatan Pembangunan Kemahiran (JPK) has played a large role in making this a reality. The nexus aims to have 200 existing workforce members awarded with DKM Level 4.
However, focusing only on the workforce is not enough – employers’ mindsets need to be changed too.
“This is the most important but also most difficult,” says Lim.

He identifies organisational culture as one of the main reasons Malaysians do not want to work in the retail and F&B industries. “Look at Starbucks; you see that young people don’t mind serving coffee – but why is it different when it comes to working at a mamak stall?”

Lim emphasises that organisational culture is not just built by the employees – it has to be led by the enterprise leader. This is why mindset change is crucial, because if employers ill treat their workers in a bid to reduce costs, the negative effects will eventually trickle down to their customers as well.

“But if you create an excellent culture with a proper career pathway, they will see their jobs in a different light. It’s just a question of ownership, culture-building, and career pathways that you need to inculcate – and it all starts with the enterprise owner,” states Lim.

4. Provide assistance to retail and F&B players to grow internationally

A major challenge that enterprises face in penetrating new markets is the lack of know-how, for example: not having the right connections, not being able to handle the logistics that come with scaling the business, and not knowing the business regulations in other countries.

“The F&B industry is burgeoning because we’re able to create great food that is distinctively Malaysian. We have up-and-coming F&B owners who have a growing number of outlets, but many of them are young and they don’t know how to export.”

This nexus aims to facilitate the process by connecting local SME owners with agents who have an international network. It is also working closely with the Malaysia External Trade Development Corporation (MATRADE) to provide loans for these SMEs so that they can expand their business.
This particular project has not been launched yet as it is more complex, but the nexus hopes to introduce real interventions and create an ecosystem that can add value to the enterprises that take part in it.

The Malaysia Productivity Corporation (MPC) has started a nationwide productivity movement across all segments of society to create higher levels of awareness and understanding of the importance and benefits of productivity at enterprise level, along with guidance on how to measure and track productivity. For more information on their Productivity Nexus, go to wayup.my. To learn more about MPC, visit mpc.gov.my.

Prefer an e-mag reading experience? This article is also available in our 27th October, 2018 digital issue. Access our digital issues here.

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