Retail Chinn-wag: Tesco’s rise in Malaysia

FacebooktwitterredditpinterestlinkedinmailFacebooktwitterredditpinterestlinkedinmail
Tesco Malaysia: one of the leading retailers in the region

Tesco Malaysia: one of the leading retailers in the region

In a regular new column, Verdict retail consultant Simon Chinn, assesses the latest grocery store formats and concepts around the globe

On a recent trip to Malaysia, I had the chance to witness first hand the rise of Tesco in South East Asia, one of the world’s fastest growing regions.

Malaysia is proving to be quite a success story for Tesco which, along with its Tesco Lotus operation in Thailand, makes it one of the leading retailers in the region; despite not yet having a presence in countries such as Indonesia, the Philippines, Vietnam or Singapore.

Since opening its first stores in Malaysia in 2002, Tesco is now the leading retailer in the country. It currently has 35 stores in the country, 34 hypermarkets and one supermarket. In addition to a growing store estate, Tesco has successfully launched its Clubcard operation in Malaysia with over 3m households using the retailer’s loyalty card. To put that into perspective, Peninsula Malaysia has around 5.6m households, meaning over half of the households in the country have a Tesco Clubcard and; according to the retailer, the card is used on 75% of its sales in the country.

Boutique feel to clothing offer

Boutique feel to clothing offer

Boutique feel to clothing offer

Boutique feel to clothing offer

The store I visited was a massive hypermarket in Penang, a small island off mainland Malaysia. Just over a third of the store is dedicated to non-food, which is the first thing customers stumble upon when entering the store.

It has an extensive clothing section, which is nicely presented and merchandised. Tesco has recently refitted all its clothing departments at its Malaysian stores. The departments are separated from other non-food and food areas by wooden flooring, high fixtures and changing rooms; while dedicated cashiers for clothing purchases give the offer a more boutique feel. To coincide with the newly refurbished clothing department, Tesco has launched its F&F Black and Blue lines in Malaysia.

The remainder of the non-food department is a typical hypermarket offer including electricals, homewares and home appliances. It is interesting to note Tesco’s own brand features prominently in small home appliances, with Tesco-branded water dispensers and microwaves merchandised alongside Malaysian electrical household brands like Elba and Pensonic.

Tesco brand for small appliances

Tesco brand for small appliances

However, in the home entertainment area there is no sign of Tesco own brand or private label product and the television and DVD offer is dominated by reputable brands including LG, Panasonic and Toshiba; as well as domestic manufacturer brands. This gives an indication Malaysians may be more inclined to buy own brand for small household appliances but, when it comes to televisions and other home entertainment products, a trusted international manufacturer brand is the first choice.

In the food section of the store there is a broad offer to cater for the different culinary tastes of a multi-cultural population. Indeed, there is a large regional Asian foods aisle with a vast array of different dishes from the region.

Being primarily a Muslim country, non-halal products are located in a separate area of the store, away from the general food stuffs. There is a lot of fresh produce and a strong ethos of customer service with staff at counters in the fruit and vegetable and meat and bakery areas helping to bag and pack customers’ purchases.

In the frozen food section there are several pick ‘n’ mix counters, allowing customers to mix and match frozen food items including fish, chips and tofu. This kind of service is perfect for customers looking to create their own stir fry and also cateres for those who just want to buy the quantity of product they need rather than a big bag of chips, for example.

Good customer service ethos in fruit and veg

Good customer service ethos in fruit and veg

Judging by the number of customers in the store during my visit, it is clear Tesco is proving with the local community. It is likely to continue to take share of the Malaysian retail market as it opens more stores in the year ahead. Furthermore, there is a high probabilityTesco will shake up the convenience market by opening smaller format stores under the Tesco Express banner, which will make it even more accessible and convenient for the growing number of Clubcard holding households in Malaysia.

Pick 'n' mix in frozen food

Pick 'n' mix in frozen food