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How this M’sian online grocer grew 50 stores in 8 months & still sees a healthy bottom line

[Written in partnership with Supernewsroom, but the editorial team had full control over the content.]

After graduating with degrees in IT and accountancy, Eddie Chew began his career as a consultant in PricewaterhouseCoopers (PwC). All the while though, he harboured a desire to get involved in e-commerce.

But the time wasn’t right yet. He would go on to work in private equities for a good 10 years in China after consultancy. There, he saw in person how e-commerce transformed China’s economy.

Even more inspired, he started Potboy Groceries (Potboy) upon his return to Malaysia, choosing the fast-moving consumer goods (FMCG) industry because he wanted an e-commerce business that was recession-proof.

Doing errands people don’t want to do

“Potboy”—it’s not a common term to hear in Malaysia, and Eddie’s choice of a business name was wholly intentional.

A potboy is someone, usually a young man, employed in a tavern. He serves alcohol to patrons and clears the glasses when they’re done.

“So, why I find that name very interesting is because potboys actually have the same trait as us, doing what we do at this moment,” Eddie said.

Essentially, that trait lies in how Potboy does things that others don’t like to do. Eddie made the parallels clearer, saying, “When it comes to groceries, everyone needs them. But having said that, not everyone likes to shop for groceries.”

Thus, Potboy takes up this menial task. Another similarity that Potboy and potboys share is in the exposure they get to all sorts of information in their line of work.

While a potboy in a tavern may learn of trade secrets released by alcohol-loosened lips, Potboy’s e-commerce business is able to collect shopper data.

Potboy’s app

The types of data include which area these shoppers typically make purchases in, how much they buy, what they buy, and more.

This helps in several ways. For one, Potboy’s operations can be more efficient as certain products have a seasonal effect when it comes to demand. Think of Chinese New Year and the demand for mandarin oranges.

With access to this kind of data, Potboy knows when to order less or more of a product. The data also comes in handy for Potboy’s partnerships and campaign proposals with FMCG brands like Nestlé, Coca Cola, F&N, etc.

In the future, Eddie hopes Potboy’s collected data can also benefit these brands in planning their production pipelines or R&D in accordance with observed customer trends.

A “bungee-jump” business model

Taking a look at Potboy’s offerings, there doesn’t seem to be anything out of the ordinary. But what’s different is that it imposes no minimum order value yet offers free shipping (though on-demand delivery isn’t available yet).

It has its own delivery fleet / Image Credit: Potboy

Wasn’t that a risky business model that would eat away at a business’s resources?

Potentially, yes, but one that Eddie was willing to take. He believes that when a customer isn’t bound to a minimum order value and can enjoy free shipping too, they’re more likely to be satisfied with the business’s offerings and may become a return customer.

“Essentially, eventually, it will reach the point where you purchase your entire household’s needs from us. And it makes sense for the free shipping to continue, because by then the free shipping is not only recouping the costs from our profits, but actually bringing in more profits,” he told Vulcan Post.

He calls this an entrenched model. What are the challenges behind adopting it though?

“This is almost like a bungee jump. You need to have that courage to believe that that string will hold on and rebound. But before that rebound happens, you need to take that jump.”

Eddie training his staff on the ground / Image Credit: Potboy

Corporates that have standard practices typically avoid this model and its risks, but being a startup, Eddie said Potboy has nothing to lose.

“We’ve been doing this for the past 5 years and are still surviving, still making good profit off it.”

With this trust-building model, Eddie believes there’s no need for a loyalty programme. Businesses tend to rely on such programmes to attract return customers, but for him, there’s nothing more efficient in keeping your customers than good service.

Rapid expansion from online to offline

More than an e-commerce platform though, Potboy also has its offline stores, called Potboy Mart, as an extension of its business. Not every store carries the same products either, as each one has a curated variety based on the aforementioned data collected about shoppers.

Simple but stocked / Image Credit: Potboy

There are usually also multiple Potboy Marts in a single area, which Eddie believes helps increase brand visibility.

Thus, in the span of 8-9 months, they now have 50 operating outlets, with the 51st on the way. By the end of this year, he said there will be even more opened.

Editor’s Update: Information in the above paragraph has been edited to reflect greater accuracy of statement at this point in time.

But as everyone else is digitalising, why go from being purely online to physical retail now?

Contrary to that assumption, Eddie said that having an omnichannel business was Potboy’s plan from the get-go. The pandemic simply fast-tracked their plans.

Products come from its fulfilment centre, but if users don’t want to wait the standard 3-5 days for delivery, they can purchase online then collect their goods from their nearest Potboy Mart.

The team at the fulfilment centre / Image Credit: Potboy

An online-to-offline (O2O) model also means that working families can purchase online and collect groceries from a Potboy Mart on the way home instead of missing deliveries.

Or vice versa, whereby if someone comes across a Potboy Mart while driving around, they can enter and make purchases but get them shipped for free at a later time/date.

At the moment, Eddie shared that they have around 500K users and growing based on Potboy’s app data.

He also said, “In 2019, we had a top line of RM32 million with a small profit of half a million Ringgit. In 2020, we had a top line of RM55 million and an RM1.5 million bottom line.”

“Out next target is to have a net profit of no less than RM2 million.”

As the business grows, Eddie plans to keep reinvesting the earnings to grow Potboy Mart further. His goal is to open at least 200 stores in Klang Valley by the end of 2022, and 1,000 stores nationwide in the next 5 years.

-//-

Editor’s Update [22/12/21, 2PM]

Despite Eddie’s positive outlook, we did notice that the team has received some negative comments over the years regarding their service, with some recent ones too. Namely, customers have complained about their delivery speed, refunds, and customer service.

We brought these comments over to Eddie and his team for a response, but the Potboy team is opting to not respond.

This is surprising considering some commenters are even using words like “scam” which would be enough to make an SME worry, but Potboy does not seem fazed by this at all.

The Potboy team’s stance on not responding to the negative comments could imply one of two possible reasons. One, they’re aware of their shortcomings but are so confident in their product and service that they will deal with improving themselves in due time.

Or two, they have accepted that these complaints are part and parcel of the industry and do not see the need to address them.

These two hypotheses are not mutually exclusive, and regardless of whichever their reason, consumers will still take their non-response as poor customer service.

  • Learn more about Potboy here.
  • You can read more e-commerce content here.

Featured Image Credit: Potboy

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(UEN 201431998C.)

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