Hypermarkets a global growth avenue for Malaysian SMEs

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Industry Speaks: HypermarketsIndustry Speaks: Hypermarkets(From left) Herman Sanches, Datuk Ameer Ali, Umapagan Ampikaipakan, Georg Fischer and Meor Kamal

The sheer size and reach of hypermarkets offer a unique opportunity for local small and medium enterprises (SMEs) to extend their footprint both nationally and abroad, said the top executives of two leading hypermarkets.

Georg Fischer, the CEO of Tesco Stores Malaysia said that, as a global retailer, Tesco can help capable SMEs expand abroad through their international network of stores.

“If Malaysian SMEs are able to grow, we can help them supply to foreign markets as we are a global business,” he said at the recent Industry Speaks event organised by PEMANDU on the topic of doing business with hypermarkets.

Fischer also pointed out that about 20% of the products in Tesco Malaysia stores are from local SMEs, which while below the government’s target of 30%, remains the highest in the industry and the company is working towards hitting the mandated target.

He also said that 80% of the products sold under Tesco’s in-house brand were manufactured by Malaysian SMEs, which is a testament to their quality.

“We chose local suppliers despite having access to foreign suppliers,” he said. “This shows how global retailers can be beneficial for locals.”

Local SMEs needed to diversify their offerings

Datuk Ameer Ali Mydin, the Managing Director of Mydin Holdings, said that one way the local hypermarket chain supports SMEs is by not charging listing fees for SME products in Mydin stores.

He also said that Mydin does not impose a minimum capacity requirement on SME suppliers – those with a smaller production capacity could just supply to the stores within a particular region instead of the entire country.

“We know some SMEs have capacity problems,” he said. “We let you in small and hopefully we grow with you.”

He also said that Mydin does not discriminate against local SME products just because they are not from a big brand name.

“In Mydin, the first aisle you see are for local SME products,” he said.

Ameer cautioned however that local SMEs needed to diversify their offerings, noting that too many were trying to make the same types of products such as ketchup and “keropok lekor”.

“If they brand themselves correctly and make something different, SMEs can be successful,” he advised.

Meor Kamal Azhar, the Senior Director of Business Development at SME Corp Malaysia said that the government agency is reaching out to the SME community with programmes to help upgrade their products to higher standards.

SMEs that successfully adopt higher standards could have a better chance at having their products carried by hypermarkets.

Meor said that the three key things for SMEs to consider are to expand their delivery capacity, enhance their packaging and certify their products.

Fischer said that a growing trend SMEs should pay attention to was the rise of internet shopping. “This is an amazing opportunity and we want our suppliers to think about it,” he said.

Tesco started offering online shopping a year ago and Fischer noted that 25% of online orders now originate from smartphones. “We are getting ready for the future… A certain percentage of shopping will occur online.”

Malaysia is undergoing a drive to increase the number of large format stores such as hypermarkets to help modernise the retail sector as part of the Economic Transformation Programme (ETP).

Under the Wholesale and Retail National Key Economic Area (NKEA), the ETP aims to foster the establishment of 61 additional hypermarkets by 2020, boosting the current total large format store floor space of 1.4 million sq metres by 50%.

Six new hypermarkets were opened in 2013.

SMEs, meanwhile, make up about 98% of the approximately 78,000 companies in Malaysia as of 2012.

The SME sector contributed 31% of the country’s GDP while employing 59% of the nation’s workforce.

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