Retail giant Senheng to enter e-commerce fray with O2O model

By Karamjit Singh May 19, 2016

Believes its 24-hour in-store pickup is unmatched
Over US$12mil invested in logistics delivery

Retail giant Senheng to enter e-commerce fray with O2O model

WITH all the media mileage that e-commerce startups get, it is quite easy to fall into the trap of believing that the days of traditional brick-and-mortar retailers are numbered, especially those dealing in gadgets and white goods.

At a recent interview in a local hotel where he had been attending a big data executive course by the Harvard Business School, Lim Kim Heng (pic above), the cofounder and managing director of Senheng Electric (KL) Sdn Bhd, listens patiently and with a wry smile as I too lay out a dire future for his company.

Senheng operates a chain of over 100 stores across the country, selling everything from washing machines and power banks to insurance and projectors.

With a preference for shoes that would not look out of place on a warehouse floor (he does own 12 warehouses across the country), one would not guess to presume that Lim was about to challenge the dire prognosis of brick-and-mortar merchants – backed by a RM50-million (US$12.45-million) investment in logistics, the key to delivering a great service to customers, he believes.

From half-a-store to a chain

Through his career, the soft-smiling Lim has already displayed an ability to recognise and respond to key business trends.

Early into his foray as an entrepreneur, when he opened a ‘half-shop’ selling white goods in a suburb of Kuala Lumpur in 1989, he was already thinking of how to prevent his top staff from leaving and setting up their own shops, which would end up with them competing against him.

“After all, I had done it to my boss. But I did not want my top managers leaving me and starting their own household electric and electronic stores,” he says.

An avid reader, he had learnt about the chain store method from Taiwan and decided to go learn the system.

“Up till then, in my first five years, I had operated my electrical store along traditional lines, but after my exposure in Taiwan, I learned to standardise a lot of processes and procedures to make it easier to operate.

“And from this, my business took off very fast,” he recalls.

Efficiency aside, the chain store method also allowed him to start offering franchising to his outstanding managers, and he is proud today to have created 10 millionaires, he says.

“My target is 100 though, and so I am a long way from retirement,” he laughs.

Along with the rapid growth from 1993 onwards came the need to learn English for the Mandarin-educated Lim.

“From being the smallest retailer in Malaysia in 1989 when I started, I had become the largest in 1999 with 60 Senheng stores. But I was still giving my annual dealer and distributor appreciation night speeches in Mandarin,” he says.

With Japanese brands being among his key suppliers, his friends urged him to be more corporate and to speak in English. But self-conscious of his broken English, he shied away initially.

“But I knew I had to take this step and so, from kindergarten, I enrolled my children in English schools and learnt English by speaking to them over the years,” he says.

Logistics as the differentiator

Displaying the same decisive decision-making in facing the onslaught of e-commerce startups that seem to revel in selling goods at steep discounts, the choice for Lim was easy. “Hide or join the fray.”

Clearly, hiding was not an option.

“In 2013 we created a new department, identified our strengths and decided to base our e-commerce strategy on the O2O (offline-to-online) model,” says Lim.

“We want to push consumers to order online and pick up in-store if they want 24-hour delivery. If they wish to order online and have it delivered, then we will guarantee 48-hour delivery.”

Lim believes this plays to Senheng’s strengths of offering consumers speed and peace of mind when ordering online.

“No-one can challenge us with 24-hour delivery as we have 12 warehouses across the country able to send any product the customer has ordered online, to the store they choose for pick-up,” boasts Lim.

That confidence comes from careful planning. And Senheng’s brick-and-mortar heritage comes through here as the company has bided its time while putting all the pieces in place – starting with investing RM50 million to build those warehouses across 12 states in Malaysia, and a fleet of over 100 trucks.

The e-commerce business is expected to launch in July.

Lim is also unfazed by the prospects of competing against price with the largest e-commerce startups, some of which indulge in predatory price gauging just to win customers.

He believes Senheng can be cheaper.

“Our unit volume from each brand gives us cost advantages, and don’t forget that we have the credit, the trust, and a long, long relationship with the brands.

“They will not give the e-commerce merchants any cheaper price than what we get,” Lim says, declaring that Senheng is the largest buyer of goods from these brands.

Senheng crossed RM1 billion (US$248 million) in revenue in 2013.

“If you are transferring the burden of inventory to the supplier, then that cost of transfer from them to you is expensive. This also explains why we buy upfront from suppliers to get the best prices,” he says, adding that it also does not do consignment as it is expensive.

“And even if e-commerce merchants subsidise their products, they can’t subsidise them all and I believe 90% of our products will still be cheaper,” he adds.

To hear Lim speak about how Senheng intends to compete against e-commerce startups, click on the video below: