The state of Malaysia’s retail sector is not looking good, as falling retails sales and now, the impact of the recent Coronavirus outbreak has impacted tourism to the country. There was some hope for an uplift in the industry from a growth in tourist, but that looks unlikely.
In 2019, the outlook was not good according to Retail Group Malaysia, which prepares quarterly reports for the Malaysia Retailers Association.
“The coming New Year will remain a challenge for the Malaysian retail industry. Externally, trade disputes among countries are not expected to end soon. Internally, economic policies that can stimulate consumer spending are limited in the near term.”Retail Group Malaysia MD Tan Hai Hsin
As the region’s digital economy develops, the situation for physical retailers may grow more dire. Already, 80% of Malaysian users between 16 and 64 are shopping online.
To find out if there is a chance for retailers in Malaysia to change their fortunes, we spoke to Vernon Chua, CEO and Co-Founder of Innergia Labs. This company has built an innovative cloud data analytics platform called SYCARDA to help retailers effectively scale their businesses through automation and data analysis. This cloud-based system is different from the traditional clunky and capital intensive POS systems of old.
We spoke to Vernon to find out more about the company and also his thoughts on the evolving retail scene. Find out what he had to share below.
What were the reasons you decided to start Innergia Labs and build a product like SYCARDA?
Before I started Innergia Labs I was involved in network managed services and had deployed my network infrastructure to 16 shopping malls in the Klang Valley. This gave me the opportunity to have many conversations with retailers and mall operators, and I realised a common challenge they faced was the inability to easily collect and analyse the sales data from their outlets. The issue they had was that the Point-of-Sale (POS) space was too fragmented and it was impossible to integrate with all of the different providers in order to extract data.
Sensing an opportunity, I decided to talk to retail players in Hong Kong and Singapore to see how they’ve solved the problem and whether there was a solution I could bring back home. To my surprise, they also had the same problem and were looking for a solution.
My team and I decided to take on the challenge of solving this problem, and we were able to come up with a software agent that could be installed across any POS that will automatically collect and push transaction data to our cloud platform for processing, analysis and visualisation. We call this solution SYCARDA (pronounced like the insect – cicada), which is an acronym for the Systematic Collection and Analysis of Retail Data.
SYCARDA is provided as a Software-as-a-Service (SaaS) cloud platform that helps retailers see their store performances and understand their customer consumption behaviour in real time.
With the slowing retail market in Malaysia, do you believe that there is still hope for traditional retailers?
Absolutely, but they will have to adapt to their customers’ changing expectations and deliver a better experience.
Basically, what has happened is that with the rise of e-commerce traditional retailers started losing market share to new online players, especially large marketplace platforms, who were able to provide products at competitive prices and deliver them at convenience. The retail verticals that were most vulnerable were those in fashion, gadgets, accessories and books. The health, lifestyle, convenience and F&B verticals on the other hand have weathered the storm far better.
However, the rise of e-commerce does not mean that traditional retailers will inevitably die out. In China, despite online spending accounting for more than 20% of all retail spend, malls and traditional retailers are starting to see a resurgence as they adopt technologies that help them understand their customers and deliver a better experience and value to them. They have also invested into converging the online and offline experience for their shoppers so that they have a seamless experience between their online and offline stores. To survive, Malaysian retailers must do the same: understand the changing landscape of retail and customer expectations, and adapt to them appropriately,
How does your product help retailers?
Our goal is to help retailers sell smarter. We are able to do this by helping them automatically collect accurate transaction data from their store and bringing insights of their customers collective behaviour in terms of what they buy, where they buy, when they buy and how they buy.
Using the insights SYCARDA provided, an F&B chain understood their hero products and what other products their customers were mixing them with. They also understood their customers average spend and designed a set meal that fit within their customers wallet size. This promotion helped increase group revenue by 8% within 3 months of introducing that set meal.
A supermarket chain is using SYCARDA to track the consumption rate of their fresh goods. They estimate that the wastage of fresh goods costs them 2% of their revenue annually, but with the help of real time consumption data they are expecting to reduce their wastage by half.
Another retail chain started realising that a good segment of their payment was coming through two different bank issued credit cards. They used this data to negotiate a channel partnership with one of the banks and managed to drive that bank’s credit card usage to 40% of all their transactions while delivering an additional 5% revenue growth to the retailer.
What are some of the challenges you currently see in the market? How do you overcome them?
Awareness of the benefits of data seems to be a big challenge in the retail sector. We spend a lot of time educating retailers on the importance of understanding their customers to drive revenue and how their own readily available data helps them do that.
They also seem to hesitate adopting new technologies and systems because they’re afraid they don’t have the manpower and expertise to use the tools effectively, which is why we’ve designed SYCARDA to be automated from end to end with no need for human intervention to collect, process and visualise the data. This means they do not need additional manpower or resources to start utilising SYCARDA.
Finally, retailers (especially SME retailers) think that technology adoption is an expensive affair with an unclear return on their investment. We understand this, which is why we opted to provide SYCARDA as a cost-efficient SaaS model with no capital expenditure and with no change to their existing infrastructure. This allows them to adopt technology at a very affordable (even for SMEs) rate, with easy to calculate returns on investments from cost-savings and revenue increases.
Do you see the same challenges when you expand outside of Malaysia? What are the new issues that may be obstacles to overcome?
We are now in Singapore and Indonesia and from what we’ve experienced so far, it’s the same set of challenges over there. It’s been vital for us to find the right partners who understand the pain points retailers face and who can communicate effectively how SYCARDA addresses them.
We foresee language challenges when we expand to Thailand and the other neighbouring countries as their languages have their own written scripts and we will have to adapt our system to not just read but understand them properly.
What is next for your brand?
Regional expansion is very much on the cards for us. Our Malaysian customer base is growing well and we are aiming to emulate that success in Indonesia and Singapore. We intend to expand our presence to the Philippines and are actively researching the market and looking for potential partners there now.
In 2019 we also evolved SYCARDA into the mall space, with two malls adopting SYCARDA as a way to track customer spend in their malls and providing a value-added service to their tenants. We intend to grow this space further especially with the small to medium sized malls.
We also successfully launched a campaign monitoring module for brand owners to track their marketing campaigns with merchants carrying their products. This module was used by one of the largest beverage manufacturers in the world to track the launch of one of their products across their participating merchants. The next 12 months will see us acquiring more brand owners onto the SYCARDA platform.