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[New Retail + New Platform] Chapter 2- New Retail
Sep 24 / Charlotte Liew
Many retail pioneers may have heard of the term “New Retail”. Coined by Jack Ma and often used in describing Alibaba’s New Retail Revolution, Senheng’s founder and Managing Director Lim Kim Heng describes “New Retail” as “A holistic shopping experience where customers have the power to decide”. Otherwise put: a customer-centric business model. In the second chapter of New Retail + New Platform, we take a look at the nine pillars to this seamless, customer-centric business model that has placed Senheng at the forefront of new retail in Malaysia. The 9 Pillars of Senheng’s Seamless Business Model. Product Placement Strategy Pricing Strategy Inventory Planning Logistics Planning Payment Gateway Maintenance & Services Commission Distribution Loyalty Program Promotional Strategy Pillar 1: Product Placement Strategy. A core tenet of the new retail concept is the unification of online and offline commerce. While this may be the norm today, being able to carry it out efficiently isn’t as easy as it may seem. With Senheng, there have been three methods in aligning both offline and online product placement: Strengthening the Senheng online e-commerce platform. Displaying as many SKU (Stock Keeping Unit) as possible online. Expanding the “Shop-in-Shop” concept. Furthermore, all products displayed on the e-commerce platform are stored at the Senheng Central Logistic Center (CDC) (see pillar 3), where they can be immediately shipped out to customers upon confirmation. As tremendous a task it may seem, individual brands can manage their own e-catalog and products within the “Shop-in-Shop” concept, thereby distributing the weight off Senheng’s shoulders. Senheng also regularly holds “Seamless Day” events. Here, buyers pay a 10% deposit online and are able to inspect the product at their nearest outlet before finalizing the purchase. Pillar 2: Pricing Strategy. Surely, no retailer can claim its business model to be seamless if offline product prices differ from the prices stated online? In Chapter 1 (Transformation), we touched on the Fixed Price Policy which played a drastic role in reviving the business. With product prices now fixed across all outlets, the next stepping stone meant unifying offline and online prices to communicate transparency to all customers. An online survey solution is also leveraged to conduct daily market price surveys, allowing Senheng to always be in the loop as to where they stand in regards to price competitiveness. Pillar 3: Inventory Planning. Ramping up efforts on the e-commerce end in turn calls for a more comprehensive inventory plan to support the surge in sales. This is where the Senheng Centralised Distribution Center (CDC) comes in, to support the Central Distribution Management System (CDM) (see pillar 4 below). A tried-and-true inventory management concept is also employed - the Long Tail Inventory Concept. The concept calls for an 80-20 ratio whereby 80% of inventory consists of high-demand products, with slow-moving SKUs making up the remaining 20%. Pillar 4: Logistics Planning. Senheng’s objectives for seamless logistics planning are threefold: Maximising inventory efficiency Strengthening turnover rate Minimising unnecessary overstock The Central Distribution Management System (CDM) is a supply chain management solution which plays a key role in propelling the company towards all three of these milestones. Through the CDM, suppliers must replenish their goods every day at the dedicated CDC. From there, the CDC replenishes onwards to the ten regional logistics centers daily, and the regional logistics centers serve as the final station before the goods are delivered to their new homes. By serving as a central window for the business to oversee all suppliers’ goods at a glance, Senheng is able to realise same-day shipping within 24 hours of an order being placed. Pillar 5: Payment Gateway. As Malaysia inches its way forward to a cashless ecosystem, what was once merely a payment method has become a competitive differentiator too. Senheng customers can choose from a variety of ways to make their payment, including via credit/debit card, instalment payment plan (IPP), easy repayment plan (such as AEON Credit), and bank points redemption. Pillar 6: Maintenance & Services. If you’ve downloaded the Senheng app yourself, you may have noticed the QuickChat feature. What you may not know is the rigorous SOP that goes behind it. When a QuickChat enquiry is made, the nearest store manager is obliged to respond within 15 minutes. If no response is received, the enquiry will be transferred to the next available store manager to respond. Should there be still no response, the incident will be escalated to the management for inquiry. This feature allows the company to offer unparalleled after-sales service, which is reflected in Senheng’s Facebook review rating today of a whopping 4.8 out of 5. Pillar 7: Commission Distribution. One challenge in aligning offline and online retail is customer service. Senheng was posed with this challenge when distributing commission for orders made online, but picked up in person at a physical store. Who was to receive the commission? The online salesperson...or the in-store staff? The answer was simple: Both. To ensure customers received equally positive service both online and offline, a commission sharing strategy was put in place, whereby the final commission is split equally between both parties. Pillar 8: Loyalty Program. Most loyal customers of Senheng are no stranger to the infamous PlusOne membership program. The loyalty program was paramount in boosting customer loyalty despite the drastic change that came with the Fixed Price Policy. In fact, 93% of Senheng sales have been shown to come from PlusOne members, while the number of members stands at 2.4 million today - and counting. The PlusOne is a cardless membership program that utilises the Senheng app, with a string of rewards including additional one-year warranty. Pillar 9: Promotional Strategy. Senheng’s promotion strategies have all been carried out with one overarching fundamental element - to “make customers happy”. As underwhelming as it may seem, there simply isn’t a marketing tool that can beat the effectiveness of a happy customer. By standardising promotions and membership benefits across both offline and online channels, as well as utilising Facebook and Google to obtain valuable insights on customer shopping behaviors, Senheng managed to chart the best sales performance in its 29 years of business in 2018. What Does “New Retail” Mean to You? Senheng was successful in encapsulating what “New Retail” meant to the business specifically, and the results can be seen even today. In 2019, Senheng was awarded an astounding total of eight awards at the SOBA 2018 Awards Ceremony, setting the record of most awards won at the SOBA Awards. The awards included: Best in Marketing Award Best Brand Award Best in CSR Award Best Employer Award Best Innovation Award Best Use of Technology Award Malaysian Business of the Year Award Entrepreneur of the Year Award
[New Retail + New Platform] Chapter 1- Transformation
Sep 15 / Charlotte Liew
Every additional year beginning from a business’s conception is fraught with risk. That being said, how are some corporations able to tough out the turbulences, while others - sadly - fizzle out? Thirty years after its founding, Senheng Electric (KL) Sdn Bhd has propelled from half a shopfront to the major corporate group it is today while remaining Malaysia’s leader in consumer electrical retail. In the first chapter of New Retail + New Platform, Senheng’s visionary managing director Lim Kim Heng attributes the company’s ability to rise from the mud and bloom more extravagantly than before to their continual transformation and learning culture. But transformation of course, can be interpreted in a variety of ways. What specific transformations did Senheng undergo, and what were the outcomes? Drawing from Senheng’s 30 years of history, chapter one delves deeply into the big ideas behind the company’s transformation over the years. Below is a summary of the six transformations that have pivoted Senheng to where it is today. ♦ 1st Transformation: The road to chain store concept. “I once attended a sharing session by a Taiwanese guru, and he introduced the concept of ‘store replication’, very much like the idea of currency note printing,” Between 2000 - 2003, the concept of chain store was very much still in its nascent stages. Despite the concept piquing Lim’s interest, Senheng’s outlets at the time lacked standardisation - products displayed differed by location, even customer service and management styles varied too. This observation sparked an epiphany for Lim - for successful expansion through chain store concept, a company must first possess a cohesive brand identity. This was kicked off via internal standardisation of the company’s mission and corporate identity system (CIS). With the company mission statement serving as a guiding light, all staff could now operate on the same page. This was followed by in-store changes and reformation of standard operating procedures. With “80% standardisation, 20% localisation” as the compass - store fronts, signages, staff uniform and color schemes were standardised across the board. While brand standardisation may not have been the initial goal, it perfectly captures how stepping stones are intrinsically linked to one another. ♦ 2nd Transformation: Risking a Fixed Price Policy. Bargaining in a retail department store may seem out of the question today though it used to be the norm. For Lim however, bargaining wasn’t just about prices - it represented a lack of trust between the customer and salesperson. This brought rise to the second transformation of implementing a Fixed Price Policy. In June 2002, all Senheng’s branches were introduced to this Fixed Price Policy. Despite an initial 25% drop in sales within the first month following the launch of the Fixed Price Policy, the decision proved to be the right one. Within a few years, Senheng saw positive sales growth for a continuous 11 years. This transition was aided by Senheng’s infamous PlusOne Program, which successfully boosted customer loyalty in spite of the drastic policy change. ♦ 3rd Transformation: Exploring a dual brand strategy. Just as he saw the potential of the Malay market, Lim believed in the power of younger customer groups. Thus, the sub-brand senQ was built to cater to the later, focusing primarily in shopping malls to address younger customer groups boasting better spending power. The dual-brand strategy also brought rise to the Shop-in-Shop concept, where brands positioned their stores within senQ outlets themselves. ♦ 4th Transformation: Buying into Big Data. In 2004, Senheng invested RM1 million in a Business Intelligence (BI) acquisition, which boasted return-on-investment within just 6 months. With the BI system in place, the company meticulously transitioned from computerisation to digitalisation. Operational aspects of the company which were still being carried out manually were naturally very vulnerable to human error. Through the digital reformation program, Senheng managed to transform from a traditional company to a fast-moving company. ♦ 5th Transformation: Time for digitalisation. Within an organisation, it’s only sensible for core revenue-generating activities to be emphasised. Along the way however, administrative and human resource management along with all its associated paperwork can often be an invisible anchor weighing progress down. Between 2015 to 2016, Senheng embarked on a comprehensive digitalisation journey which improved the company’s overall operational accuracy and efficiency. The digitalisation transformation process of Senheng included six core goals: The improvement of the Senheng app The promotion of paperless processes with suppliers through a B2B platform Introduction of e-catalogues Electronic document management systems (EDMS) E-forms E-delivery orders (e-DO) What may initially seem like a huge investment eventually saved the organisation more in terms of financial resources, manpower and training in the long run. ♦ 6th Transformation: A seamless business model. How does a company remain positive when faced with challenges outside of its control? Senheng was faced with this dilemma in 2019, when five of China’s biggest e-commerce retailers were planning to enter the Malaysian market. With other threats such as declining profits and implementation of the Goods and Services Tax (GST), a new business model seemed necessary. After participating in the retail training program at the renowned Alibaba Business School in Hangzhou, China, Lim returned with the idea for a “Seamless Business Model”. This was a model which embodied Jack Ma’s concept of “New Retail”. “New Retail is a business model whereby the online and offline operations must be able to communicate with each other in a transparent and quick manner, while still providing the same prices, services, and product variety.” By synchronising Senheng’s online and offline channels, the company was able to balance out all the losses in the past three years at once! ♦ In it for the long haul. A business that’s in it for the long run will be no stranger to forces that compel change. Senheng’s practice of continual transformation has enabled the company to jump on the backs of such change and use it to its fullest advantage to achieve the status it has today.