New grocer banks on new model

  • SMEBiz
  • Saturday, 15 Feb 2020

Chief executive officer and co-founder Stephen Francis

CONVENIENCE is playing a bigger role in the grocery shopping experience. And for MyGroser, this is an opportune time to make its mark in the local market.

In a time when most things can be bought online or through an app, chief executive officer and co-founder Stephen Francis notes that the market is also warming up to the idea of purchasing their groceries online, including fresh produce like meats and vegetables. Increasingly, high-end grocers and hypermarkets are offering their customers the option to make their purchases online and have the goods delivered to their doorstep.

This trend has, no doubt, helped MyGroser see steady growth since its launch last year.

MyGroser is a grocery service that allows customers to order their groceries online or via its mobile app. The purchases are then delivered to them between 9am to 9pm daily.

But what makes MyGroser slightly different from your average grocer that offers a similar delivery service is that MyGroser does not have a regular outlet that you can visit. It is purely a digital grocer. It operates its own warehouse, or cloud stores, where the goods are stored and picked out to fulfill the orders that were made online. These cloud stores are very much like a supermarket where the only shoppers are its employees.

It is a unique business model which Francis believes has the potential to succeed.

Given that the company does not need to operate physical outlets, its operating cost could be lower compared to other chain grocers. Scaling up could also be done much faster and easier.

Nonetheless, initial start-up cost was significant and getting investor buy-in was a challenge.

“Raising funds was definitely challenging as many people believed that non-grocery backgrounded people like us would never get the support of the industry. There was also the high cost of starting up as MyGroser is one of those rare companies in the space – we are a technology-enabled-heavy-asset startup. That makes it harder for people to believe in it.

“So what the founders did was we demonstrated our faith in what we were doing by raising the funds ourselves. We have used loans, personal loans, company secured assets, borrowings and even credit cards at some point to get to where we are. We have been working on this for about two years now, and several million have already been invested.

“Today, however, we have demonstrated that there is definitely a way to offer consumers and businesses a premium online grocery and delivery service without compromising on profitability or quality, ” he says.

Francis, who started the business with two other partners, saw the opportunity for MyGroser to take off when he found himself wishing for such a service to be available.

“I lead a pretty busy life and I wanted an affordable, quality service that could restock my kitchen needs when I wanted them to. Especially when it comes to coffee!”

His partners agreed with him and they set about studying the idea. They looked at how other grocery players operated in the region and studied business models that have worked and failed.

Once they settled on a model to pursue, they had to assemble a team and convince the industry that they were serious about the business.

“Since then, we have been able to innovate faster than other players in Malaysia. The focus, however, has never changed. We provide convenience when it comes to grocery and food delivery to our consumers. We ensure freshness at all points to provide quality and we provide value-driven pricing while offering a premium service, ” he says.

The local grocery scene has seen some changes in recent times as operators restructure their network to cope with rising costs and changing consumer behaviour. Most recently, GCH Retail (M) Sdn Bhd, which operates high-end supermarket chains Mercato and Cold Storage, is in the midst of consolidating its businesses which has led to the closing of some Cold Storage and Giant stores.

Francis says the grocery industry in Malaysia is going through a seismic shift in how it operates. For a long time, traditional grocery stores were able to segment the market into low, mid and high price points. This has worked partly because there were a variety of models to cater to these segments like value chains, hypermarkets, food halls and premium brands.

But today’s consumers have changed and they are looking at other factors such as product value and convenience, he notes.

“I believe there is a place for both old grocery store-type businesses and us as we have already seen in more mature markets like Europe that have had online groceries for more than a decade. The combination of a customer-first offline store and online efficiencies cannot be denied.

“But online is the main way to go for general fresh, affordable and reliable grocery shopping and with MyGroser, we are on that path to helping Malaysia get to this stage as quickly as possible.

“There will, of course, always be a role for value-responsive, flexible brick-and-mortar grocery store players. I just think that the convenience of online direct-to-consumer services like MyGroser will make it much more evolved, ” he says.

He opines that one of the company’s advantages that ensures the long-term prospect of the business is its control over the entire supply chain; from sourcing over 10,000 fresh grocery, to managing the warehousing and inventory of these products in it’s own cloud stores, to their delivery.

With an operational model in hand, MyGroser has begun its first external fund raise and Francis is hoping to get the support of angel investors, family funds and venture capitalists.

The company currently has the capacity to support demand from a large part of the Klang Valley.

It aims to continue building on its technology and customer experience to grow its reach.

Getting the word out may be a challenge, but given time, he is positive the grocer will indeed be a sizeable player in the market.

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