Growing the online grocery shopping culture in Malaysia

• Eying the regional market, but needs to build home base first
• Looking to raise RM1mil to build infrastructure and team

ONLINE grocery shopping has not really taken off in Malaysia, but for online grocery startup Freshcart Grocer, that only means there is potential and room for the market to grow.
 
But that also means that while the startup may have its eyes on a regional play, its immediate focus is on cultivating its domestic base, according to cofounder and chief executive officer Jonathan Oh.
 
“The key challenge is to get people to adapt to online grocery shopping,” he told Digital News Asia (DNA) in Kuala Lumpur recently.
 
“I would like to bring Freshcart Grocer out of Malaysia, but at the moment we’re still very focused on growing a solid customer base in Kuala Lumpur and Selangor,” he said, adding that he would be also looking to expand to other Malaysian states like Penang and Johor.

READ ALSO: Grocers facing ‘Uberisation,’ says HappyFresh
 
Freshcart Grocer has been self-funded so far, with Oh and his cofounder Soh Shangrong putting in their own money. Oh declined to be specific, but said it was in the RM100,000 to RM200,000 (US$24,000 to US$48,000) range.
 
But Freshcart Grocer was also the second runner-up in the Alliance Bank BizSmart SME Innovation Challenge 2015, earning it a cash prize of RM150,000 (about US$36,000 at current rates).
 
That money would be used to expand the team, develop a mobile app, and revamp its website, according to Oh.
  
He said that Freshcart Grocer is also looking to raise RM1 million (US$241,000) in a pre-seed round to further improve its facilities and infrastructure, and to expand its product offerings.
 
The startup has been up and running since June 2014, but was originally an online fruit store.
 
“After a while, our customers wanted more from us, so we expanded our product offerings,” said Oh.
 
“We started with 15 products and now we have over 100 products. We’re looking to expand to 1,000 products by the end of this year.
 
“5,000 people have gone through Freshcart Grocer’s services and we register a monthly growth rate of 15% in terms of revenue,” he claimed.
 
Not your typical grocery store
 

 
Oh said what sets Freshcart Grocer apart from other online grocery stores is its “carefully curated products.”
 
“We don’t want shoppers to be overwhelmed with choices, so what we do is we handpick and curate – for example, minimising our inventory down to at least three brands for a certain product,” he said.
 
Freshcart Grocer operates on a hybrid B2C-B2B model, working with third-party service providers for the former segment.
 
“This is because we don’t have our own fleet, at least not for the business-to-consumer side (B2C). For B2C, we work with local service providers to help deliver goods to customers, while for the B2B side, we have our own team deliver the goods,” said Oh.
 
The B2B (business-to-business) side is essentially special packages for corporate customers.
 
“Say if a company is organising ‘breakfast day,’ not only can we deliver fruits and breakfast for you, we can also help organise the entire event – and on top of that, teach your employees how to eat healthy,” Oh declared.
 
Having said that, he stressed that the primary focus is still on B2C, a segment that makes up about 70% of Freshcart Grocer’s customer base.
 
“There is potential on the B2B side, but it has to grow in tandem with the B2C business,” he added.
 
Freshcart Grocer also offers ‘artisan goods’ – handmade food using high-quality ingredients – such as roasted nuts, homemade jam, and others, from local foodmakers.
 
Oh said Freshcart Grocer has about 30 partners listing their products on its website, including food suppliers and artisan foodmakers.
 
“We don’t charge our partners a listing fee, but we do take a margin out of their sales.
 
“We ensure they (partners) understand that this cut we take goes back into funding our business, where we continue to supply good quality products to our customers,” he said.
 
Partners, and hiring ‘slow’
 
When asked, Oh said that the biggest challenge in starting Freshcart Grocer was logistics.
 
“When we started … we went on the ground to deliver the groceries ourselves.
 
“But later on, we realised we didn’t want to be an asset-heavy company where we have to own our own fleet, so we started working with third-party service providers, and this eventually solved our logistics problem,” he said.
 
The other big challenge was people.
 
“We were too desperate for people to come on board to help lessen our workload, so we hired really quickly,” said Oh.
 
“But it didn’t go as well as we expected. We spent too little time getting to know the people we were going to hire, and it is costly to hire the wrong person.
 
“Plus, it’s not easy to fire someone. So now, we’ve learned to hire slow,” he added.
 
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