Interviewed by Balqees Alramahi for MBSC Sales Management Project Date: November 12, 2024
Balqees: I am recording this, if you don't mind, because we need to transcribe. The team might join and ask questions, and the business might attend. None of us are sales or marketing experts; we're just learning. But we will let you lead this conversation. I understood that you're a marketing director, right?
Majed: Yes, I'm an e-commerce director.
Balqees: So you're looking to understand more about e-commerce, right?
Majed: We're trying to understand the full sales process. We're trying to assess your sales model, strategy, and find the challenges, and how you have solved them, or how we can find creative solutions to solve these challenges.
Let me talk about my expertise in e-commerce. E-commerce is a sales operation from A to Z. Currently, e-commerce in Saudi represents around 8-9% of the total grocery business. In the grocery business, we're talking about 80-90 billion Saudi Riyals per year, which is really huge. We contribute around 8-9 billion Saudi Riyals in online business, as a total Saudi market.
As Panda, we sell around 11.5 billion Saudi Riyals per year in total, from the 80 billion I mentioned. In online sales, we're still small; we haven't grown much yet because there wasn't a clear management focus. But starting around the end of 2023, the full management began to see the potential behind online. And yes, e-commerce is growing very fast.
In retail offline stores, the market growth is 3-4%. Whereas online business is growing around 15-20%. We don't have all the technical capabilities yet. Everything online is about technical details, and you need to be on trend with marketing and technical transformation. And now, everything is transforming through AI. So, we went to the experts, so we don't reinvent the wheel.
Majed: We looked at who works best in e-commerce, and we signed with them. We found in the UK, in Europe specifically, there's a company called Ocado. Ocado is one of the biggest e-commerce platforms and solutions providers in Europe and UK. They alone process about 4 million orders per month.
Most of their operation is done through robots. When you place an order, it goes to the system. Robots pick the products and do the packing and everything. We signed with them, and we'll be starting the first phase in January, and the second phase in August. The first phase in January will focus on the picking and delivery solution - the back-end operations. The second phase in August next year will implement the full stack, including a downloadable application.
Let me explain how the picking process works. When a customer places an order, it's routed based on location. Currently, we're operating through 40 stores, and we're expanding to 100 stores by end of December. For example, if you're sitting in Riyadh and place an order, geolocation shows us where you are, and automatically sends the order to the nearest store.
Balqees: That's nice, wow.
Majed: Yes, it goes to the picking application. In each store, we have 7 to 9 pickers. We have two types of picking: mono-picking and multi-picking. We also have two models of orders: scheduled orders and express orders.
Scheduled orders are for the next 3-hour slot or next-day delivery. Express orders are delivered within the next 30 minutes. When you enter the application, you choose scheduled or express.
With scheduled orders, you have access to about 17,000 categories. With express, you have around 8,000 items. Express orders also have capacity constraints. For example, you can't order 5 bottles of water; you're limited to 2 boxes. This is because express delivery uses bikes or sedan cars, whereas scheduled delivery uses trucks.
Balqees: Ah, okay. So capacity is a constraint?
Majed: Yes, capacity is a constraint. Usually, the mission of express and scheduled is different. Express is for top-up orders. You might do your monthly shopping through scheduled delivery, with a big basket size and lots of categories. Express usually happens when, for example, you have an appointment and need some juices or snacks urgently. The basket size should be small; it's not your main shopping cart.
Majed: The mode of transportation differs, and the mode of picking differs too. For express orders, we use mono-picking, where the picker carries a bag and trolley. The application shows all categories in the store, directing the picker to specific rows. It needs to be fast - the picking journey shouldn't take more than 15 minutes maximum. We calculate the picker rate as a KPI measure.
Balqees: Oh.
Majed: Yes, we track this daily, weekly, and monthly. We also have something called fulfillment rate - if you order 10 items, did we deliver all 10 or only 8? Currently, we have a challenge in this area. We're fulfilling at around 96%, up from 78% previously. We've progressed a lot. This challenge is due to out-of-stock issues in the stores.
Don't forget, we have people coming to the physical stores too, which we can't fully control. What we do in this case is work with the supply chain to increase the minimum quantities needed inside the store. We look at the history on a daily basis and increase the stocks available to enhance our fulfillment rate.
For scheduled orders, we use multi-picking. This means we use a big trolley with docking stations inside it, which we call pots.
Balqees: Is this a robotic process or a manual process?
Majed: It's manual, but the idea is similar to robotic systems. Instead of bringing a trolley for one order, we fill for the next 5 orders simultaneously. Pickers work by category. For example, one picker will go to beverages and juices, taking all items and sorting them - but they don't know which specific order each item is for. Another picker goes to produce and meat, and a third might handle grocery items.
After picking, they go to what we call a dispatching area or storage area. There, they collect the orders in bags. For example, order number one might need one item from this box, two from another, and so on. They put them in bags, place them on shelves, and wait for the delivery truck.
The most challenging aspects in Saudi Arabia are:
Balqees: You charge for delivery?
Majed: We only charge half a Riyal as a marketing campaign.
Balqees: Wow. Another question - these operations you're explaining now, the sales operations function - do you have input on how the strategy is designed for how the operation is run? What I'm thinking is, you're saying the fulfillment rate is a challenge. So maybe your strategy is to increase that?
Majed: Yes, definitely. We look at benchmarks in the best countries, for example, for fulfillment rate. We see what's available and how we need to benchmark. For example, we were doing everything with mono-picking, but to improve the picking rate, we needed to switch to mono-picking for express and multi-picking for scheduled orders.
Balqees: Do you adjust your behavior based on customer behavior? For example, did you find that a lot of people plan ahead, and that's why you changed your model from mono-picking to the other one?
Majed: Scheduled orders are more profitable for us. Why? Because usually the scheduled order basket size is high - we're talking about 250 to 300 Saudi Riyals, whereas express is around 100 Saudi Riyals. When we increase the basket size, the percentage of last-mile delivery cost decreases - 18 Saudi Riyals out of 300 is better than out of 100 Riyals.
Plus, looking at the fulfillment rate challenge, we're planning to implement what's called a dark store - a customer fulfillment center. It's like a warehouse that is 5000 square meters where customers are not allowed to enter. Inside, there are shelves with items, and picking happens from there. Since customers can't enter, we ensure 100% that the stocks are available. When you place a scheduled order, everything will be picked from there.
Balqees: So you guarantee a higher fulfillment rate when it comes to the planned...
Majed: Yes, we call it planned or scheduled orders. At the end of the day, we don't see the customer - there is no interaction except through the application and last-mile delivery. So we need to ensure our application functions very well. For example, if you want lactose-free items, we need to ensure that when you put it in the search, it comes out very accurately. We need to ensure you find the product.
Balqees: Most of your KPIs are, of course, related to customer satisfaction. When it comes to your team, first of all, how are you structured? Do you think the team that you have is sufficient? How frequently do you change your team members? How do you change your whole structure? How do you manage your talent? How do you retain them?
Majed: Let me talk about the structure first, then about retention. The most challenging part of e-commerce is that people who work in the domain are scarce. They need to have technical skills and think outside the box because we are a very fast-moving business. Being ahead of the curve isn't just nice to have - it's mandatory.
I handle the e-commerce structure. We have:
We need to think like customers think. Based on customer thinking, we build our range inside each category - by brand, by segment, by price. Each category has different segmentation. It differs between impulse category (like chocolate) and other categories.
Balqees: Do they get specific training?
Majed: Yes. The customer service is through a third-party agency, not in-house. We do training on a monthly basis and sort through issues regularly.
Balqees: When it comes to online shopping, there are many applications other than the Panda one. How do you attract your customer base and make them loyal to your e-commerce platform?
Majed: We see the customer journey in three stages:
Each phase has different costs, with the first phase being the most expensive. We're now signing up with one of the global marketing and media agencies to launch creative media campaigns early next year, including social media and billboard campaigns to bring customers to our application.
Balqees: I had a follow-up question on that. Mr. Rahmanbali, I don't know if Abdelhamid, are you there? Do you have any questions? I don't know if you went through the questions that we shared in the invite.
Majed: I tried to go through them quickly, but I'm not a subject matter expert.
Balqees: We talked about solution selling, product knowledge, objection handling. When you have problems, I wanted to ask if your area, e-commerce, is only retail. You don't deal with B2B in your area?
Majed: No, we don't. B2B has different structure and requirements. Usually, B2B businesses are more into supplier to business. Because we work with suppliers, we take margins from them. B2B business is looking for cost to cost, and it's very challenging to remove from my margins. Profitability is low.
Balqees: So, you prefer B2C? Or is it retail?
Majed: We prefer B2C because it's more profitable for us. B2B only works in certain situations when we have a profitable model. For example, if a building or bank has 5,000 employees, we might make a special discount for such a company if they order on a constant basis.
We're also looking to have something called a subscription model. We have a huge database - 14 million customer records. For example, if you have a baby and need diapers on a monthly basis, you can subscribe through the application. You know diapers last for two weeks, so before they expire in one week, you'll automatically receive more and lose money automatically from your account.
Balqees: Oh, yes. That helps with profitability as well.
Balqees: Cross-selling and up-selling. Is that something that is in your area?
Majed: Yes.
Balqees: How crucial is it for revenue and client satisfaction?
Majed: We do up-selling and cross-selling through promotions on the application. Ocado has this feature. We always tend to increase the customer's basket size. For example, at checkout, if we notice you bought Downy before but haven't bought it recently and it will expire soon, we'll suggest adding Downy to your cart.
For cross-selling, we look at category relationships. For example, if we see lots of people buy fruits and vegetables but don't buy organic products or blueberries, we might tell them, "We have a big discount on berries - try them now at 2 for 15 Saudi Riyals."
Balqees: Another question about sales forecasting. How critical is accurate sales forecasting for planning and meeting revenue targets?
Majed: It's very important - one of the key elements for customer satisfaction. It's a chain. Without good demand planning and forecasting, we lose customer satisfaction and hit our fulfillment rate. We have a team that works on this daily. We look at every store in every region - we have 100 stores.
We work on the 80-20 rule. For example, if a SKU isn't moving for more than a month and a half, we don't keep it on the list. It's a hassle to forecast for it, so we replace it with something else. We need to keep trying.
The forecasting team looks at stores with low sales. If we see a store's fulfillment rate is 85% when our benchmark is 96%, they do deep dive analysis. They look at the SKUs that are affecting us and increase their fulfillment rate. We look at physical stocks inside the stores because sometimes we have a problem where physical stock doesn't match system stock.
Balqees: Oh, okay.
Majed: Yes, sometimes items aren't properly reported as sold, or they're damaged. Plus, we have regular customers walking into our stores. Sometimes items fall and break. It shows on the existing system, but we don't remove it. Sometimes at the cashier, if you bought 10 bottles of water, the cashier might scan it as one item instead of scanning each one. There are stock differences we need to clear on a daily basis. It shows as negative stock. It's very, very challenging.
Balqees: Does this fall under... Do you try to, for example, encourage cashiers to be more accurate when they scan? Is this also another part of training that you give to them?
Majed: Yes, cashiers fall under offline stores. They do training on this daily basis, but you know there are exceptions. Sometimes items are scratched, and sometimes the customer changes their mind. It's not always your cashier's fault.
Balqees: Okay. What else can we talk about? You have a follow-up process through the app, right? You mentioned that when people buy something, you ask if they'd like to restock. How essential is the follow-up process in maintaining client satisfaction?
Majed: Yes, we have several follow-up processes. We track customer satisfaction rates. For example, 2-3% of customers cancel their orders. We also have people who put items in the cart but don't check out. We have the customer team call each one to understand their issues. Depending on the issue, we try to sort it out. Sometimes when we have a problem we can't solve, we give them cashback - like a 15% or 10% discount - as a gesture to make them happy.
We're also creating something called "The Fruitful Day" - it's a new campaign, very confidential. It's like a fruit basket we send to loyal customers or customers who stopped buying. It's part of the retention game. For example, on your birthday, we send you this Fruitful Day with a QR code as a call to action to download the application. We also track moments like when customers order diapers for the first time, indicating they have a baby at home.
Balqees: This is how marketing is interacting with sales, right?
Majed: Yes, this is part of the follow-up process.
Balqees: There's a question about closing techniques. How vital are closing techniques for successfully finalizing deals? Do you have an answer for that? Is it relevant to your area?
Majed: With closing deals, we usually only have deals with suppliers. Closing deals is very important because the margins negotiation is crucial for us. The other income that we agree on when we do marketing campaigns enhances our P&L.
Balqees: I understood from what you said that you guys are really experts when it comes to your product knowledge. At all levels of the team, you have the categories and you have in-depth care about what is the product and how can we sell it in a better way, right? Do you have any ways to keep them updated about the information or about the products?
Majed: We depend on our partners. We're not the experts, but we have the know-how. We know our customers very well. The expertise in the categories comes from the suppliers. We always reach out to our suppliers for education. We do something called a joint business plan, going through it end-to-end to understand how to increase basket size and educate our customers.
Education is very important. Customers usually spend only five to two seconds shopping, whether offline or online. You need to catch their attention to satisfy their needs. There's a lot of clutter - any store has around 40,000 to 50,000 SKU products inside.
We do category management as part of our collaboration. We look at all the sales, identify least moving SKUs, and cut non-performing items. We build categories to reflect the shopper decision tree. For example, if customers enter the aisle looking at brands first, we divide by brand. If the category is divided by flavor, we divide by flavor, then by brand. This is all based on research and insights - not just someone's opinion. We do lots of surveys, tests, and A-B testing in different stores.
Balqees: Thank you very much for your time. I really appreciate it. Would it be okay if we email you with any extra questions?
Majed: No worries. I would love to see feedback from people, even students, about their experience with the application. Everyone can download the Panda app. There's something in the banners called Spin the Wheel where you can try your luck for 100% cashback. Everyone is a winner depending on luck. We're the only application delivering for half a Riyal, and we're having massive discounts up to 70% right now for White Friday.
Balqees: Thank you so much. This has been very informative.
[End of Interview]