Never waste a crisis: How BHG is transforming its retail business

BHG Bugis's Beauty Hall offers several digital touchpoints, including Lift and Learn digital wall where customers can find information about products.. Image courtesy of BHG.

The COVID-19 pandemic has made transformation a necessity, as companies find new ways of delivering value to customers in a new normal. One sector where this has become extremely relevant is retail, with consumer habits undergoing tremendous change as a result of the pandemic. At the Frontiers of Work 2021 conference, we spoke to Jheeva Subramanian, Chief Financial Officer at BHG Singapore, to find out more about their transformation journey and the future of the retail sector. Subramanian also heads the company’s digital transformation function, as well as its IT and marketing.

The retail sector was severely hit by COVID-19. As more places open up, what are your projections for the sector?

Compared to last year, retail demand is picking up, and I think it will get better, but it is still slightly sluggish. There are a few reasons for this.

Firstly, 2020 was a very tough year for companies, and this impacted people as well in areas like job security and redundancies. I think people will still be slightly cautious this year. While vaccines are being rolled out, people are still working from home, and in Singapore, we are still seeing foot-fall 50% to 60% below 2019 levels. This means that you will not likely see a huge jump in sales for a lot of companies — especially in retail.

However, this also depends on which country and sector you are in. If you go to China, things are almost back to normal. Some parts of retail there are seeing huge numbers and growth even compared to 2019. They have been at the forefront of technology that makes consumer and business life easier, and constant innovation has led to them taking a leading position coming out of the pandemic, as they have been much better prepared for it. In Singapore, it is going to take another year before retail picks up. But nobody wants to stay at home 24/7 and do everything online. We are social creatures, and we want to go out and experience something.

With this current outlook for the retail sector, is now a good time to transform for companies in the industry?

If companies are waiting for a pandemic or a problem to transform, then you are already late to the game. Transformation is an ongoing thing, and you do not stop transformation because you have reached a certain goal. Technology evolves at a massive speed now, and you have to be agile enough to evolve as you go. COVID-19 has forced the hands of many companies to transform or be left behind to become irrelevant. An example would be Blockbuster, which used to sell video tapes. Using technology, they could have transformed their business model and become Netflix — but they did not.

Can you tell us more about the transformation being done at your company?

At BHG Singapore, we have a five-year plan for transformation, which includes a Digital Transformation plan. We started at the end of 2019, not knowing that COVID was going to hit, but we continued in 2020 because we believed we were already late to the game and playing catch-up.

We did the basic fundamental strategies, then focused on digital transformation and how we can use technology to pivot to a new business model. For us, the concept of digital transformation in retail is not merely going online. It is not the blurring of offline and online — that is a given. It goes beyond that. How can we use technology to transform the business model? If you don’t do that, you might be in trouble, as the departmental store model is very challenging, and is becoming irrelevant for many consumers.

We spent the last six months of 2019 putting our thoughts on paper for what we want to do for the next five years. ‘This is where we want to get to, but we know that things will change along the way.’

The first step was getting the correct people in place. The right skill-set is important, but also balancing finance, investment, and change. It will be very risky if you invest in everything without taking into account your current business model. Your business needs to be running whilst you transform, and that is extremely difficult. So, we needed to set up the right team, and make sure everyone understands why we are doing it and what we want to achieve.

Then, we started taking small wins. The industry is not very technologically-driven, and if we had introduced all the technology that we wanted to at once, it would have scared people off. We started by introducing small technological changes that made people’s lives and work easier, and this encouraged them to understand the benefits. We sent 80% of our staff to digital training courses, getting them ready for what was going to come, especially since many of our staff were aged over 50. For example, when we introduced mobile Point-of-Sales into our stores, the first two people who volunteered for training were two 60-year old ladies! We were surprised, but because of the small wins and making them understand the purpose, they were encouraged to try it out.

We were very late to the game for our online channel, which only started in July 2020, but we have taken steps to ensure that we can catch up. We have introduced concepts like a unified commerce solution, endless aisles in our department stores, and smart mirrors. This is to get the business ready for where we want to go and the new business model. Phase 3 and 4 will see us leverage the platforms as a new business strategy, including how we monetize data, and making sure our revenue stream is not just selling products in stores.

Can you share more about your process and experience going online?

When you start an online business as a retailer, you are likely to make a big loss in the first year, because you are putting the team and infrastructure in place. Acquiring consumers online is also a lot more difficult and expensive than it was ten years ago. We didn’t want that as 2020 was already a year where businesses were going to suffer.

So, we incubated the e-commerce department as a start-up within the company. We started slow, built things, measured them, and learnt from them. We tested the market on what it wanted, without spending time building 100% of the product, because most of the time customers may not want half of it. We built it in-house with a very simple Shopify platform, with just one person from the marketing team who was transformed into a digital marketing person.

Thankfully, the e-commerce channel was a profitable business in the first six months. This year, we go to Phase 2, where we will transform into a unified commerce solution and integrate all out platforms, including e-commerce. We expect to grow a lot more going into this year, but because it was a profit-making channel, we are able to reinvest the money into growing the business.

The old buzzword of omni-channel has been replaced by unified commerce. What does it mean for you and how do you see it playing out?

Omni-channel was the start-point of a multi-channel business, where data was shared within different systems, but you still might have 4-5 separate systems for e-commerce, CRM, ERP, and front-end POS systems. But the data is shared, and senior management can see it through tools such as BI. The problem is that this data is not centered on the consumers, but on the business. Having 4-5 systems also creates many issues when integrating them and making them talk to one another.

For unified commerce, we are moving to one system, with front-end POS, back-end ERP, e-commerce, and CRM, so that we get a single customer and single inventory view. With this, we are able to do an ‘endless aisle’ concept, where consumers can see our entire business inventory across five stores and even in the warehouse from an interactive screen in a single shop. This connected system helps give customers a more seamless and frictionless journey. The next step for unified commerce will then be how we can use the data properly, because we are gathering a vast amount of data.

With developments like 5G and IOT coming over the horizon, what technologies do you think could impact your business and how might you use it?

IOT is not new, but it is new for many industries and people, and 5G coming into play makes it even easier.

For a consumer-facing company like ours, we sell an A-to-Z of products, and there are many human touchpoints during the journey in our stores. Today, we are not using data like we should, and can leverage things like AI, machine learning, and robotic process automation to churn out data and get valuable information on customer shopping preferences, so that brands and ourselves can personalize their experience and monetize this data. We will respect data regulations and privacy policies, but consumers who are willing to share this data will get much better treatment and services from what we plan to do, and how we connect this data for the benefit of consumers and brands with us as an intermediary may be a business model we can look at.

Looking back at your experiences, what advice would you give to your older selves, or other companies that are trying to transform, especially during a crisis?

Firstly, if you make a decision to transform, go all out for it.

You cannot do transformation as an experiment by itself. This does not mean you throw all your resources at it, but wanting to transform has to be in everyone’s mind, from your employees up to the shareholders and stakeholders. Everyone needs to understand the need to transform and why we are doing it. If you are doing it as a small group in the company or just one department, you are setting yourself up for failure.

Second, think of a way to put your business out of the current business model, because if you don’t, someone else will. This was what happened to Blockbuster. So, you are constantly innovating and transforming, because there is no time to wait anymore. It will be challenging for many companies with cash flow being tight, but innovation does not need to be expensive.

One example is how we started in e-commerce without using a lot of money. You can try things such as working with start-ups and co-creating, because having an ecosystem where you co-create with others is a lot cheaper than doing everything in-house.

You mentioned that innovation does not need to be expensive. As CFO and Head of Transformation, how do you balance the internal fight within yourself in your two job functions?

It is difficult, but my rule is that if I do not transform, I might not have a business anymore. It is a priority, so we find ways to do it. For example, we did not get any investment last year for our transformation, so it was all done with operational cash flow. Doing it step-by-step and finding creative ways on how you partner with external sources is extremely important. For example, Airbnb does not use a lot of internal assets, but relies on you and I to put our homes for rent.

It is definitely challenging, but transformation is extremely key to staying relevant. Holding back on transformation is a disaster, so it will always take priority if I am considering whether to transform or not.