This article first appeared in Digital Edge, The Edge Malaysia Weekly on April 10, 2023 - April 16, 2023
The pursuit of cost efficiency and the importance of understanding customer behaviour and purchasing patterns are some of the growth drivers for the retail technology space, says Incite Foodtech Group founder and co-CEO Tham Lih Chung.
The group, which is creating an integrated retail tech ecosystem through its solutions in the consumer sector as well as retail tech, retail marketing and fintech services, has been servicing the retail sector, particularly the food and beverage (F&B) segment, since 2020. In that time, Tham — who has more than a decade of experience in the retail sector — has observed varying rates of digitalisation among micro, small and medium enterprises (MSMEs).
“During the pandemic and the Movement Control Order, businesses were pushed to adopt digital tools such as food delivery platforms. But once things normalised and walk-in and dine-in customers returned, we saw a return to complacency where investment in these tools was concerned. Although there are grants offered by the government, most of the retailers will use the grant for point-of-sale systems, but POS is not digitalisation; rather, it’s a given,” says Tham.
He adds that business owners should instead be looking at human resources solutions to recruit better personnel, process payroll and use customer relationship management (CRM) to capture data about their customers, for instance.
Unlike other sectors such as financial services or manufacturing, he attributes the lag in digital adoption in retail and F&B businesses to the fact that many of these are owner-operated enterprises.
“The sole proprietor is the manager of the outlet, its marketing person and is basically running the day-to-day operations. For these business owners, investing in retail tech solutions incurs additional costs, so if these costs can be saved, why not? Every ringgit and sen that they save goes back into their pocket after all,” he says.
It’s a different story if the business owner plans to scale up the business. And this is where solution providers like Incite Foodtech come in.
Its suite of retail tech solutions, which was boosted by the recent acquisition of retail tech start-up Eatcosys Sdn Bhd, encompasses POS systems, payment gateways, CRM software, customised enterprise resource planning software, warehouse management and procurement solutions. The group describes itself as a foodtech venture that’s supercharging quick-serving-beverage-and-food (QSBF) brands’ growth with its “plug-in and scale” business model that uses formats such as physical outlets, shared spaces, kiosks and cloud kitchens, as well as through mergers and acquisitions.
In July last year, Eatcosys, a homegrown retail technology solutions provider, was recognised by KPMG and HSBC as one of the “emerging Malaysian unicorns” in its “Emerging Giants in Asia-Pacific” report.
Other brands under Incite Foodtech include Union Artisan Coffee, Le Claire, Lada Merah, Hope Coffee, Eggdicted, Goodbooch and Wondermama.
“We run our own F&B outlets, so we understand the pain points that retailers face. We’re able to give feedback to the retail tech team on these pain points and, at the same time, adopt solutions innovated by the team within our own outlets. We have found that it is always easier to convince merchants and potential clients when we ourselves are benefiting from these solutions,” Tham says.
The group, he adds, boasts a diversified client base ranging from mom-and-pop stores and single operators to chain stores and large enterprises. “With all these businesses, it’s important to understand where they are coming from and what their vision is. Some have a vision of building a huge F&B empire of 10 to 20 outlets, which allows us to share with them our experience with larger enterprises and how these enterprises have adopted our solutions as well as the right time to do that.
“With single-store operators, although they may be content with owning one outlet, their priorities may be on increasing revenue from that outlet, reducing cost and making things more efficient. If we can show them that using these solutions can help them address those concerns, then they will be convinced.”
Often, he says, it’s the fear of adopting and learning something new that deters many SMEs from digitalising their businesses. “Most of these small business owners are already dealing with daily operational issues so they are hesitant about taking up the challenge of learning something new unless it’s necessary (as was the case of businesses migrating to delivery platforms during the pandemic).
“One of our F&B clients, for example, had problems securing a longer credit term from their supplier and couldn’t get better prices, but our procurement solution made it easier for them to place orders and allowed them to have longer credit terms. This helped to ease their cash flow, allowed them to place orders more efficiently and saved them time. Afterwards, we introduced other solutions and opportunities such as securing event revenue or catering deals through our platform.
“For businesses that have reached a certain scale, we then recommend the CRM software, which can capture purchasing patterns. If the CRM is integrated with the POS, they can track, for example, if customers prefer pasta over pizza and the type of pasta that’s popular. They can then look at how they can revamp the food menu to increase revenue or refocus the marketing strategy to secure the target market,” Tham says.
But more than seeking opportunities for cross-selling its technology solutions, Tham is quick to point out that a priority for the team is understanding where a business is in its lifecycle. “As we are building a retail community, we have a division whose main purpose is to engage merchants — talk to them, get their feedback and be their listener as well. These are our community managers, whose role is to understand the needs of these businesses and their pain points. From here, we recommend solutions,” he says, reiterating the importance of sharing case studies and success stories.
Tham adds that because the group offers synergistic business solutions, it is also able to address the financing needs of its clients.
“Typically, if you go to a bank for a loan, the bank will ask for the audited accounts and management accounts but for many of these micro, small and medium enterprises, these accounts may not be updated,” he says.
(Micro enterprises are businesses with an annual sales turnover of less than RM300,000 or that have fewer than five employees. SMEs, on the other hand, are enterprises with an annual turnover of not more than RM20 million or no more than 75 full-time employees.)
Another stumbling block for businesses seeking loans from banks is that some may have been operating for less than three years, so it is almost impossible to get a bank loan. “In our case, however, as we are also providing POS systems, we have a clear picture of their sales on a daily, weekly or monthly basis and, coupled with other solutions such as CRM software, we know who their customers are. The information allows us to assess the character of the business owner and determine if they are serious about the business and their journey to date in growing the business,” says Tham, adding that the group’s wholly-owned subsidiary, which has a money lending licence, is then able to determine the appropriate loan amount, typically ranging from RM20,000 to RM300,000.
To date, most of its loans have been disbursed to existing clients who have been using Incite Foodtech’s retail tech solutions. “A money lender might have a licence to lend but how are they able to assess the character of the borrower or even their repayment capability without having a clear picture of who they are? In our case, we harness that information from the solutions that we provide to our existing clients,” says Tham.
Following the recent acquisition of Eatcosys, he says the group is now rationalising its operations. “We’re streamlining the corporate structure and revisiting the financial structure of the group to optimise the capital structure so that we can reach a healthy debt-to-equity ratio,” he says, adding that a stronger balance sheet allows the group to seek funding from financial institutions as well as from the private equity and venture capital space. The proposed fundraising, he adds, will be a step towards the group’s eventual listing, targeted sometime in 2024.
Tham is optimistic about the future. As businesses see value in procurement solutions, especially in terms of deriving cost efficiencies, and as they begin to see the importance of understanding the behaviour of customers and how knowing who the customers are can affect the bottom line, demand for retail tech solutions is expected to grow. Buoyed by this anticipated growth, Incite Foodtech is looking to increase its revenue to RM100 million in 2023, up from RM60 million in 2022.
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