Understanding customers and global trends to catch the next wave

Building modern retail in Kazakhstan, the world’s largest landlocked country. An interview with Jacob Fishman, Commercial Director at Magnum Cash & Carry.

Interview by Symphony RetailAI’s Paul Hoffman. Jacob Fishman presented on the importance of understanding customers and global trends – to catch the next wave at Xcelerate Retail Forum 2019.

To remain competitive, what must retailers must pay attention to?

The market is changing drastically, so if you want to develop and grow you need to run really fast, and you also must understand and meet all the demands in shoppers’ heads. The analogy, which I like to share with my team is in the form of an image, a surfer who is looking for the next big wave. Timing is critical. You can’t be in front of it, say, with an innovation that is before its time. And, of course, you don’t want to have it wash over you and leave you behind, treading water. Retailers must consider what’s happening in markets outside of their own and decide how that may be relevant to you. It’s a true skill to identify the right wave and catch it.

How does Magnum ensure it’s ready to catch the next wave, and can you give an example?

The Kazakhstani market is still developing. So, we watch other markets, like the US, Europe, Russia, Turkey and Malaysia, and we try to understand what trends are happening there. We typically have some lag time until it comes to Kazakhstan and so we try to model which changes will come and when, and based on that, we prepare our strategy. The main goal is to be ready.

A good example of this is a launch we did in March of this year. It was in what we call the eco-bio category (dietary and organic mix) and no other retailer was doing this in Kazakhstan, so it was critical that we gathered good “intelligence” and worked out a plan. First, we looked at other markets, and then we closely monitored our social media channels to see what shoppers were talking about to help us think about the assortment matrix we’d consider. Next, we did some evaluation on the potential of this category and, finally, we decided that we would launch it. We started completely from scratch – every aspect of this needed to be considered. About five months later, we rolled out the concept of this category and we launched it in three stores in Almaty City, where we felt it would do best.

In the first quarter, the launch of the eco-bio category showed impressive results; we had like-for-like growth of about 55% – 60% in terms of quantity and more than 90% in terms of revenue. We received good feedback about our shelving and assortment, as well as the pricing of the category. And currently, we’re rolling out this concept for more stores. We were on the wave.

In your role of Commercial Director, what are a few of your biggest challenges?

We have three primary challenges.

First, most of the trade in Kazakhstan is traditional trade. It’s open markets or mom and pop shops. The share of modern trade from region to region varies from 30 – 40%, and it’s a highly competitive space. The biggest challenge is fighting these open markets as vendors within traditional trade are not taxed, so to compete we must be very cost efficient to compete on price. So, in addition, we need to improve our market share and grow faster to ensure we’re at the scale that allows us to compete on price.

Another current challenge is centralization of the supply chain. Currently, approx. 90% of our assortment is delivered to stores directly by either supplier or distributors. We’re adopting a model of several distribution centers all over Kazakhstan that will enable us to increase our level of centralization to around 80 – 85% over three years. It’s a big challenge, as Kazakhstan is a large country (around 9th in the world in total real estate), but we also have a relatively small population (approx. 18million). This makes cost-effective logistics a challenge. We’re working now with some key CPG manufacturers to perform direct delivery to our distribution center.

The third challenge is to develop more of a customer-centric relationship with our CPG partners. Of course, they are always pushing their product, but we’re now investing heavily (using the Symphony RetailAI category management suite) in understanding customer needs and shaping the category based on that. So, there’s a shift from supplier to shopper.

Please give us a short summary of what you spoke about at Xcelerate 2019 in Paris.

As I’ve mentioned, we have the challenge of growing our business in a developing market. This adds to the “regular” challenges that most retailers face today. We must defend our existing position in the market, expand the modern trade percentage of the market (fighting the tax advantage that traditional merchants have), and like all over the world, understand current and developing customer demands and trends. So, of course, you can’t do this without the right technology solutions – such as the ones we’ve implemented from Symphony RetailAI for category management, pricing, supply chain and store operations.

I covered our implementation of the Symphony RetailAI solutions and how they have been helping us innovate and compete. I’ll also share lessons learned throughout the project, as that’s always a key part of any type of strategic technologic implementation.

Please share something with our readers that gives a little insight into your being.

To be honest, I feel like I come from polar perspectives sometimes. On the one hand, I’m head of commerce and marketing in the company, but I didn’t come from retail. I was in investment banking. I’ve been here for almost five years now. At the same time, I am a professional yoga instructor. I have my own yoga center in Kazakhstan. I have some unique preferences for travel around the world. I’ve been to Tibet, Bhutan, Nepal, and I’m planning to go to Latin America, the South Pole, and the North Pole as well.

Learn more about Symphony RetailAI’s Xcelerate Retail Forum.

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