THE economy may be slowing and the retail industry is going through a rough patch, but Al-Ikhsan Sports Sdn Bhd believes this is as good a time as any for it to shine.
“The economy is soft, even globally. I think Malaysia is fairly stable in that sense. When the economy faces rough weather, that’s when the true strength of retailers can be seen.
“When the economy does well, everyone does well. You can hide your inefficiencies and all that. But if you can grow your business when the economy is down, it shows the strength of the company. As the economy gets tougher, Al-Ikhsan will become more relevant, ” says chief executive officer Vach Pillutla.
At a time when most businesses are looking to downsize their physical presence, Al-Ikhsan is looking at ways to expand its number of outlets. The company currently has 131 stores under five different retail models, namely, the Al-Ikhsan Sports chain (116 outlets), Sports Warehouse (4), Football Republic (6), Sneaker Street (2) and Factory Outlets (3).
The homegrown sports retailer has carved a name for itself in the market by selling products from international sporting brands such as Nike, Adidas, Puma and Umbro at an affordable price.
Pillutla says it is planning to open 12 to 14 new doors every year, with 80% of its expansion plans focused on the entry- to mid-level concept.
Although the retail industry has become increasingly competitive, he notes that the company’s advantage in staying ahead of the pack is its core mission to stay affordable.
“Our core purpose will keep us going for the next few years. As long as we are able to communicate our core purpose properly to consumers, I think they will keep coming back, ” he says.
Tapping the bottom
As consumers become a little more tight-fisted, retailers have been trying to diversify into either the more premium or niche markets to maintain margins and profitability.
Pillutla notes that unlike most emerging markets, the local retail space has two very distinct segments: the high-end and entry-level segments.
“Most emerging markets have a very big middle-class segment. It works like a typical pyramid, where the well-heeled consumers make up the smaller segment at the top and the entry level is much bigger. As the economy grows, the middle-class will expand and other consumers will aspire to move up the pyramid.
“Malaysia is different in the sense that people are either at the top end or at the entry level. There’s very little middle-class. So brands and retailers who try to stay in the middle of the spectrum don’t do well because consumers who see a middle-class brand are either willing to trade up or trade down. So you either have to be at the upper-end or lower-end of the market, ” he explains.
Hence, he believes that there is also money to be made at the bottom of the pyramid.
“People at the bottom of the pyramid are also aspirational. They, too, want things and if you can make it affordable for them, you can tap that market. Consumers are the king. So we have to keep our brand focus and give them what they want, ” he adds.
Although margins may be thinner at the entry-level, Al-Ikhsan has a variety of retail concepts which can be pushed out to meet the needs of the market it is in and grow its volume.
Pillutla says its Sports Warehouse brand, for example, which focuses on entry-level consumers, is a concept that still has legs to go, particularly in smaller towns.
“Wherever that has a catchment of 50,000 people, we can do any one of our concepts. We started the Warehouse this year and it has shown very strong results so far. We can see another 35 to 40 Sports Warehouse outlets over the next three to five years. Our next position is to move down, deeper, ” he says. That said, he maintains that Al-Ikhsan also has enough variety of products to cater to a wider range of consumers.
“Our stores have products from different brands. We can have prices for certain products that go up to RM600. So while we make products affordable to consumers, we are also able to sell them at a certain level of prices if the brand can command that price. In that way, we can cater to a wider range.
“But we always try to stay to our core purpose, to stay affordable. We are about making Malaysia fit and active since 1993 by making brands affordable to consumers. That is our strength and our core purpose. It cannot go away.”
Al-Ikhsan was founded by Ali Hassan Mohd Hassan in 1993 in a small shop in Holiday Plaza, Johor.
His entrepreneurial pursuit had started earlier on as a student in Universiti Teknologi Malaysia to fund his studies. He sold trinkets and such and managed to graduate with a diploma.
When he started the business, he was diligent to ensure that he maximised every opportunity to keep sales going. He built a good rapport with his customers and kept his sports products affordable.
Ali Hassan’s success in growing Al-Ikhsan was obvious when the retailer caught the eye of government-linked private equity firm Ekuinas, which bought a 35% stake in the company in 2016.
Ali Hassan and his wife still holds the remaining 65% of the company and he has stayed on as its chairman.
Pillutla thinks the company is only halfway through “what we are really capable of doing”. As long as the sports industry continues to grow, Al-Ikhsan will be able to grow in tandem.
He adds that its retail concepts are also applicable to any emerging market, making it easier for it to expand overseas when the time is right.
On the horizon
Over the next three years, the company will continue to expand into tier-2 and -3 cities. It will also continue its focus on the entry-level concept stores like the Sports Warehouse.
Another thing that the company will be paying close attention to in the coming years is its private label. Pillutla hopes to make its private label and licences more relevant to the masses as he views this as a good channel for Al-Ikhsan to have a deeper engagement with its consumers.“We want to create products that consumers want. I think our house brand can grow to be a significant brand pillar for us, maybe making up to 30% of the brands we have, ” he says.
With these strategies in place, the retailer is aiming to keep its double-digit growth every year – a target that Pillutla says is “absolutely achievable”.
“That’s the job of professional CEOs like us. There’s a limit to what founders and entrepreneurs can do for a company because the thing about professional CEOs is that we don’t think from our hearts.
“We see opportunities, we look at our current capabilities and we think in terms of how we can build that capability for future growth. We are a bit disconnected, so we don’t make decisions based on emotions. But that is not to say that one is right and one is wrong. It is just a way of working.
“In business, you need data and experience to take a very informed action, so that you’ll have stronger chances of success. And we believe we have a formula here, ” he says.
“The challenge for us is more internal. We are no longer small. And we need to continue to drive and align our people towards our mission. We are a homegrown brand and this is an opportunity to showcase an example of a bumiputera company that is growing. As long as we understand our core, we can have market share, ” he says.If all goes well, the company is eyeing listing plans in two to three years’ time.