COVID-19 FORCED A CHANGE IN CONSUMER BEHAVIOUR, BUT THIS SUPERMARKET CHAIN IS MAKING THAT POSSIBLE
The coronavirus outbreak has changed the grocery and food retail industry globally. Lockdowns everywhere created unprecedented demands on modern trade. Consumers shifting to digital buying were straining entire ecosystems of grocery and food retail. The digital shift is permanent, the new normal, and present retailers with opportunities to innovate to reach more people. Workers in grocery and retail have also emerged as a new category of frontline service, according to the ILO. In many countries, they are now in the league of security and healthcare personnel, putting themselves at risk in the service of others.
Keells is at the forefront of setting these trends and driving retail’s new normal in Sri Lanka. With 109 modern trade outlets across the country, it is the supermarket business of listed John Keells Holdings. It has more than 345 distinct private labels apart from over 7,000 third party labels on its shelves. The business reported Rs55 billion in revenue for the year ending March 2020. With modern retail penetration below 20% in Sri Lanka, the lowest in the region, Keells has tremendous growth opportunities. COVID-19 is likely to have hastened some of those.
Households across Sri Lanka fretted most over food and other essentials during the two-month lockdown. The lockdowns and curfew disrupted many corner shops and grocery stores. They remained shut for most of the lockdown period. This was a big problem because corner shops account for 80% of Sri Lanka’s grocery sales. Anxious homemakers in search of food and essentials quickly pivoted to supermarket chains such as Keells.
The dynamic and driven Keells could respond to challenges quickly. It had a large workforce. It had access to a large supply chain and stocks, and the technology to accommodate an increase in online trade. “Dealing with the unprecedented online demand was a challenge,” says Aravinda Wanniarachchi, John Keells’ Chief Financial Officer – Retail. “Stocks weren’t an issue, but the overnight pivot to online with massive demands certainly was.
The first thing we did was rationalise our offering by strategically looking at key groceries and household items required by customers. We also looked at stock availability to deliver without interruptions from suppliers.” To overcome this, Keells shrunk its portfolio down to a more manageable number. It also ensured stock availability with suppliers. “While it wasn’t ideal, we took that decision to sustain that momentum,” Aravinda said. Keells typically has around one month of stocks at any given point, sans the perishable items. It did not foresee supply chain restrictions either.
Initially, Keells had to overcome three challenges to respond to the new demand. First, the lockdown cut off and stranded staff. Keells outlets in the Western Province were the hardest hit. It could not bring in staff from outstations and barely had half the usual workforce to fulfil the rocketing orders. Typically, catering to over 100,000 shoppers a day, there was no chance to replicate that with the restricted number of staff. And now online orders soon overwhelmed them.
The second challenge was tech related. Keells’ online platform was not designed for such large volumes. Before COVID, its online platform processed a few hundred orders daily as Sri Lankans had really not embraced online and ecommerce as expected. The third challenge was around transitioning. It had to quickly become an online business. Volunteers from across the John Keells group and from every pay grade stepped in to fill the void to meet the unprecedented demand for goods.. Air Force personnel chipped in to assist in the company’s operations as well.
Keells hired courier services and private lastmile delivery firms to fulfil orders on time. “The biggest bottleneck was the online platform because it was not developed to handle such high online demands. We quickly moved to a cloud-based server. This allowed a significantly higher number of consumers to place orders,” Aravinda said. This was an important breakthrough because now many people could get their essentials. At the end of trading each day, the tech division of Keells Supermarkets together with John Keells IT worked throughout the night tweaking the online platform.
The tech team worked to get the system live by 6 am the next day; this went on every day for almost a month. “We were moving into a total delivery model,” says Nilush Cooray, Head of Operations, recalling the early days of the coronavirus outbreak. Initially, most orders came via phone calls, WhatsApp, SMS, and emails. “Because of the huge volumes, we had to evolve overnight into essentially a courier company,” Nilush says.
Operational staff faced mounting pressure. Existing processes were inadequate to deal with spiking volumes. Catering to such huge volumes required new processes. It required new KPIs and strategies to make sure the orders flowed as efficiently as possible. Ensuring timely fulfilment was a priority. It required tracking orders at every stage from order placement to fulfilment.
Keells took health and safety of its staff and customers seriously. This was even before national social distancing guidelines solidified. It ordered a large volume of PPE for its staff. Processes were in place to ensure hygiene and social distancing at every outlet. Designated safe zones and mandatory breaks allowed staff members to ease stress. “During the lockdown period, we understood that our staff had families who needed attention. Without their knowledge, we sent essential supplies to their families as a small token of appreciation,” Nilush said.
Grocery and food retail cemented its place as an essential service. No one had to take a pay cut at Keells. Most businesses in the country had to take drastic measures to cut costs to survive the post-lockdown economic slump. No one felt the new responsibility more than the frontline staff at Keells.
“They felt that they were providing a valuable service to the country. This is why they persisted uncomplaining for many months,” Nilush says. “There were opportunities for people to go back home when the curfew lifted, but a sense of duty, a feeling of responsibility, made them stay on working”.
Customer engagement was as important as ever during the testing lockdown period. Managing consumer sentiment was essential for smooth operations and Keells had three aspects to this. First, keeping communication lines open was critical. “For us, the holy grail became continuous communication,” says Nilusha Fernando, Head of Marketing. “We shifted to a digital medium and updated our customers with details on stores, safety precautions, and how many orders we’re taking. Initially we updated customers daily and thereafter weekly till mid May 2020.
Second, was managing customer sentiment. At the onset, Keells was upfront about the initial challenges around fulfilling orders on time. “We made mistakes and errors and we quickly acknowledged them and gave solutions,” Nilusha says. Consumers were already anxious and on edge, but this openness helped maintain relationships. Third, Keells kept tabs on consumer sentiment with regular market research. It recorded every customer complaint and feedback. This was essential to fine-tune its platform, processes, and delivery mechanisms.
The lockdown ending and the economy opening for normal business will see the footfall at Keells’ outlets recover. The brickand-mortar business model will unlikely decline, but a new normal is taking shape. Keells is developing an upgraded online sales platform to meet growing demand. “A brand-new website is being developed that will be able to handle significantly higher loads. It will have the entire range of products available too. We will have the processes in place to ensure same-day delivery; or next-day delivery at the very least,” Aravinda, Head of Retail, says. The World Bank’s private sector arm IFC recently announced a huge investment of $175 million in John Keells Holdings’ retail and hotels businesses. “Over the next six months, Keells will expand in major cities, and will continue to invest in expansion, but only if there is a prospect of assured returns. If you give it one year where things would be much more normal, we will make an assessment and potentially increase the tempo of expansion,” he says.
Keells Private Labels
The supermarket is expanding its portfolio of private labels to win price sensitive consumers, increase sales and improve profitability margins. Its products are estimated to be 10% lower priced than comparable brands according to the 2019/20 annual report of Ceylon Cold Stores Plc, Keells’ parent company. Ceylon Cold Stores is in turn controlled by John Keells Holdings. Keells has over 340 private labels sure to attract demand as households come to terms with falling incomes and low purchasing power due to the COVID-19 economic downturn. The products range from biscuits, detergents, sauces, spreads, tea leaves, coffee, spices, stationery and drinking water. While price sensitivity is key, high quality is essential for Keells’ products to take off the shelves. Apart from stringent in-house quality testing, third party testers and certifiers inspect Keells’ product range annually.Innovation is another advantage Keells is hoping will give it an edge. The supermarket chain recently introduced a range of products called ‘Free From’ which includes lactose-free ice-cream, fresh milk, powdered milk, and frozen yoghurt. Its innovation unit is hoping to expand this range.
Caring for the community
500 KN95 face masks donated to the Gampaha District Hospital
100 PPE kits and face shields donated to public health inspectors
300 essential packs distributed to farmers in remote Sooriyaweva
10,000 packs of essentials distributed designated charities in areas around Colombo together with John Keells Foundation and CCS
20,000 kg fresh fruit and vegetables donated to charities, armed forces, and quarantine camps
Keells E-commerce Journey
Fraught with challenges, Keells learned quickly and was upfront with customers
Before COVID-19, Keells’ ecommerce platform fulfilled not more than 2,000 orders a month. That was the extent of the demand. However, after the lockdown pushed a largely tech-averse population of consumers onto digital platforms, Keells quickly transitioned into a fledgling ecommerce store. Learning quickly through trial and error, fulfilling 1000 daily online orders at the start, Keells now fulfils over 10,000 online orders daily as it became the primary source of groceries and essentials during the lockdown. The range of essential goods available online has increased to over 350 from the initial 90. Keells also expanded its delivery grid by hiring last-mile delivery service providers enabling it to serve a larger consumer base. The online platform was constantly upgraded. The payment gateway and order tracking were improved. A state-of-the-art queuing system was brought in to improve the user experience. Keells also set up two fulfilment centres dedicated to online orders with adequate stocks and staff to ensure timely delivery. Of course, customers are hard to satisfy all the time, but Keells is upfront about its challenges. “Keells has received mixed reviews on the (ecommerce) work done so far but will strive to make improvements to ensure the customer benefits at the end,” the company said in a statement during the lockdown. “We were not afraid to acknowledge our mistakes,” says Nilusha Fernando, Head of Marketing. “Constant engagement with customers allowed us to quickly improve, and that was very important to have,” Nilusha says.