Customer insights are crucial

Piyawat Titasattavorakul doesn't have any intention of competing with the Meteorological Department, but since his 7-Eleven convenience stores plan to offer baked goods soon, he believes the retail giant will need to have the capability to forecast customers' needs and also, umm, when it will rain.

The managing director of CP All, which owns the master franchise to run 7-Eleven stores in Thailand, said retailers had to be customer-centric and capable of using input from consumers to shape up their businesses.

Retailers have to be observant of their consumers' behaviour, which varies depending on many factors such as age and lifestyle. And even the same consumers, 7-Eleven has found, have different needs at different times.

"You must be very observant. For instance, in the morning customers only want sandwiches and drinks at 7-Eleven. You need to stock enough of the goods they want," Piyawat said.

Quite often, retailers run short of favourite goods but overstock on less popular items. They instead should put more than enough quantities of hot-selling items on the shelves, he said.

Piyawat said it might be necessary even for small retailers to have affordable software to enable them to gain customer insights. For a retailer like 7-Eleven which is shifting more towards selling food, business intelligence is definitely crucial, since fresh food, despite its higher margin of 30-40 per cent versus 8-11 per cent for groceries, has very limited shelf life, he said.

For example, the 7-Eleven stores in the Ramkamhaeng University area have to know which subjects the private tutor schools there are going to offer on certain days because some subjects draw more students, which means more customers.

"Especially when we're shifting more to food items, it's very important for us to have such information, including whether it will be raining. The stores have to know about their customers within a 300-metre radius," he said.

Speaking at a seminar last month held by the Internal Trade Department to educate traditional groceries on modern retailing techniques, Piyawat urged small retailers to seek partnerships and alliances, form clusters and share customer information on their supply chains in a bid to meet localised needs and niches.

"Seek alliances. Don't stay lonely. Consult with your wholesalers and manufacturers to find out about new products," he said.

Piyawat said 7-Eleven was willing to share its best practices with small grocer because their improvement would be a boon to the overall economy, which would consequently benefit the company. It has also shifted to fresh food and is selling much fewer groceries.

"We sell only expensive, small packs of groceries. You can shift to medium-priced goods," he told grocers.

"We're going for baked goods."

A CP All spokesperson said 7-Eleven, in a partnership with bakery chain The Deli House, had opened a prototype bakery and if it succeeded would expand the concept to other outlets.

Meanwhile Piyawat said traditional stores had some advantages over big retailers because of the closeness to customers that allowed them to remember their customers and know their families, their preferences and even who they're buying for. Also, small retailers have more flexibility in their purchasing and logistic management, he said.

On the other hand, small grocers normally have disadvantages in inventory and procurement costs (due to their lack of economies of scale), know-how in retailing and service management, lack of expertise in conducting marketing and promotion campaigns to attract customers and increase sales, lack of financing to develop and improve their shops and management systems, as well as ignorance of product display and assortment.

Piyawat said technology should be used to help retailers sort, store and display their goods punctually in accordance with the demands of their customers .

He warned that mismatching consumers' requirements could be very harmful.

"Having to dump 20 pieces is no big deal, but if customers are disappointed and turn elsewhere, it is a big deal," he said.

pichaya@nationgroup.com