KUALA LUMPUR: Retailers should emphasise on stock-keeping unit (SKU) efficiency during the Covid-19 pandemic, as retail sales take a beating from the sluggish economy, said retail data analytics provider Innergia Labs Sdn Bhd.
Its CEO Vernon Chua said it is important for retailers to understand their SKUs, and by analysing their movements and inventories, they can then make better decisions to drive sales.
“In good times, maybe you don’t care so much because revenue is coming in and carrying a little bit of dead stock doesn’t matter. (But) especially now, during the difficult, lean times, you need to be careful of the amount of cash you have stuck in inventory that you cannot move,” he told SunBiz in an interview.
He said when a retailer is carrying too much of unwanted goods, it needs to either run a sale to get rid of the products or stop ordering them for this period. Cashflow is vital and having good liquidity opens up more options for businesses to navigate in this economy.
Besides cost-cutting measures, Chua also advises clients to try and raise cash upfront through gift cards and discounted vouchers.
Innergia Labs is the creator of retail business intelligence tool Sytematic Collection & Analysis of Retail Data (Sycarda), made to address the challenges small businesses face.
“We’re focused on the SME space because SMEs are the majority of businesses and they’re the most underserved.”
Sycarda was created when Chua saw the demand for data collection by retailers and the absence of such solution in the region. The development of Sycarda started in 2015 and in 2018, Innergia Labs was launched to roll out Sycarda.
Affordable and easily-installed, Sycarda allows business owners to collect a range of data at the point-of-sale -- presented in user-friendly reports -- and use this information to craft sales strategies.
Chua said Sycarda helps retailers to understand their customers better during this challenging time.
“In Malaysia, in the midst of the Covid-19 and e-commerce expansion, the customer experience, understanding what customers want and how to give it to them is important if they (retailers) want to survive.
“By understanding their customers, they can drive that, either increase the average spend or increase the number of customers who come in, by creating the right promotions.”
Chua said data from Sycarda shows a marked decline in retail sales due to the pandemic, with an average reduction of 85% of revenue during the movement control order period.
“Retailers have to expect that their customers won’t visit their stores as much as they used to before the pandemic. This decline in footfall traffic is going to weigh heavily on their sales and cashflow. They will therefore need to move online to survive, and to focus their communications and marketing through online channels and messaging applications in engaging their customer base.”
Chua pointed out that customer wallet sizes are on average going to trend downward, and businesses should expect their customers to be more price-sensitive and value-driven.
“Price sensitivity can be tracked through a thorough pricing analysis of their sales to see what prices their customers are comfortable at purchasing. One way of doing this is by running multiple promotions to test the waters and studying the data that comes in to see their customers’ response. They should also consider investing in data analytics tools that help them to collect and analyse the data to have reliable empirical data to drive their pricing decisions.”
Sycarda is now used in 800 outlets in Malaysia and having entered Singapore and Indonesia end of last year, Chua aims to reach 3,000 outlets within a year in all three markets.
About 40% of Sycarda’s clients are food & beverage outlets while the remaining 60% consists of pharmacies, supermarkets, convenience stores and general retail stores.
Meanwhile, Chua hopes to raise RM4 million in its pre-series A round by year-end to expand its sales & marketing efforts and to continue the development of Sycarda. The start-up has previously raised RM3.2 million from private investors.
Besides growing its market base, Chua wants to improve Sycarda’s analyses and build a recommendation engine by this year.