The disruption caused by the pandemic has prompted many businesses to discard strategies previously laid out for 2020. But, with the right mindset, this could lead to new opportunities.
Every business started life as a true start-up, or at the least employed a start-up approach to get off the ground. That includes Alibaba and Freshippo. Freshippo is an example of the New Retail model that Alibaba has successfully incubated since 2015 in Shanghai but now scaled up to the major tier-1 and tier-2 cities across China. Freshippo has grown into a technology-driven brand that includes everything from convenience stores and breakfast pick-up stations to even a shopping mall by offering a seamless blend of the online and offline shopping experience to cater to different customer needs. Over time, though, as a business becomes larger that “hunger” and nimbleness we all have when first starting out tend to fall away in favour of growing at-scale and ensuring that day-to-day operations run smoothly.
In this COVID-19 environment, it is perhaps time to rediscover the mindset and drive we had through the “youth” of our business journeys. This mentality calls for thinking creatively to overcome the challenges posed by the pandemic, and outside the nicely drawn up business plans we initially had for 2020. At the same time, our past experiences can help guide our efforts and ensure we’re moving in the right direction, without having to endure the same trial-and-error process we navigated in our earliest days. Importantly, the lessons we have learnt are transferable to businesses in Malaysia as well.
I believe this mindset is key to helping our Freshippo team find ways to meet the needs of many stuck at home in China during the depths of rolling lockdowns. We all understood the role we play in keeping households supplied with food and other daily necessities. The commitment to keep all our stores – more than 200 around China – operational and well-stocked throughout required creative thinking and sacrifices by the team, including volunteer delivery runs into the epicentre at Wuhan and being quarantined after.
Because we were able to quickly introduce safety measures from centralised delivery in a community, scheduled self-pickup and contactless delivery, along with ensuring all our employees were properly protected and socially responsible, not a single Freshippo employee was infected. This really enabled us to continue supplying the many households trapped at home without disruption.
Like most businesses, we had to go back to the drawing board for many of our carefully laid-out plans. For example, the Chinese New Year is probably the most important celebration in China and we had prepared many beautifully packaged gifts using fruits and other produce for people to bring home to their loved ones for their celebrations.
Following the lockdowns, we faced a dilemma when we were not able to meet the online demand for fruits with our existing supply. Without (much) hesitation, we decided to rip up these gift sets and sell the items individually instead, providing for more people stuck at home. It was a pity, but we recognised the need and opportunity then, and this unexpected approach was fitting for the unpredictable situation we were all in.
With the skyrocketing demand for food and grocery delivery during the lockdowns, we had to get creative in delivering to consumers as well. Previously, deliveries were done door-to-door on bicycles, but the social distancing requirements reduced the average number of deliveries our partners could make in a normal situation. In addition to hiring more delivery partners, we traded bicycles for buses to carry more goods and moved quickly to set up a bunch of remote pick-up points so more deliveries could be completed without inconveniencing shoppers. Our team even used an abandoned bus as a remote collection area at one point.
When your business was first starting out, you were likely only roping in help when needed. Gunning for better utilisation of time and resources not only benefits your business but also your employees, ensuring their time is not being wasted.
Especially with the sudden lockdowns in China during the outbreak of the pandemic back to earlier this year, many households were not able to stock up on foodstuff and other essential items in time. The gap in resources was increasingly evident day by day as orders began to pile up. At the same time, many of the restaurants which were forced to close were struggling to support employees who were now stuck in place and unable to return home due to the travel restrictions. These restaurants were hoping to lend some of their staff to help us.
This was the first time we have temporarily employed workers at such scale – as of early February this year, over 5,000 employees from 40 restaurants – and had to quickly simplify our in-store training procedures so the new hires could hit the ground running within just two hours. At the end of the day, this experience proved beneficial for all parties. We were glad to be able to help struggling businesses by lightening the wage load, while having more people help us to ensure households can shelter at home effectively.
We see how this employee-sharing model can help smaller businesses, in particular, to meet needs only when required, and even help protect jobs. For example, the utilisation rate for our frontline staff in Freshippo stores is only around 50% to 70%. This idle time prevents employees from maximising their growth and possibly even income. Imagine if we had a flexible system that allows employees to work in one place for three hours and in another place for two hours – their total income would increase significantly while helping businesses manage costs too.
Freshippo was in a good position during the pandemic because our business model straddles both online and offline. The online part of our business is integral to help us meet the needs of many trapped at home, who could only order food and necessities online, while offline remains crucial to actually bring what is needed to the people.
But the needle has definitely shifted even more to online as a result of the pandemic – especially by encouraging older generations to learn to shop with their smartphones. In China, the social distancing and reporting requirements and the issuing of electronic vouchers by the government prompted even more to do so.
For younger, tech-savvy consumers, we have seen an increase in demand both for raw ingredients and ready-to-cook meals. This trend seems here to stay as more are becoming health-conscious. Taken together, there is a clear and fundamental shift in consumer behaviour. We find that retailers who have digitally integrated their online-and-offline from supply to stores are the ones pulling ahead, not just during the pandemic but also in a future where consumer behaviours will be changed for good.
During the pandemic, we witnessed a threefold increase in online traffic as compared to the same period last year, and eight out of every 10 orders were made online from a 50/50 split before. While the lifting of measures mean more people are returning to shopping offline, we don’t expect the ratio to return to what it was pre-pandemic because behaviours have changed for good.
The pandemic has been a wake-up call for many businesses. While painful, the lessons might have hastened us to take steps that are necessary for the long-term viability of business in a digitalised world. For us, we re-examined our business purpose and agreed that, while a large-format physical retail approach was key to what Freshippo was built on – and what I personally prefer, the average consumer’s needs can be met better by us via many smaller convenience stores as we move into our next phase of expansion.
What worked in getting your business off the ground may not necessarily work now, and what works now may not mean it works in the long term. The key is to rediscover and hold onto the hunger of your younger business self, remaining nimble in the very fast-paced environment we now find ourselves in.
Hou Yi is the Founder and President of Freshippo & Vice President of Alibaba Group.
Malaysian National News Agency
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