Inside Pickaboo’s Ambitious Retail Strategy
Pickaboo, the Dhaka-based eCommerce company, is moving forward with a new retail strategy at the intersection of online-offline. Equipped with its reputation in the online world and advantage in data and technology, the company aims to build a physical retail chain brand for mobile and gadgets in Bangladesh that will complement its online operation and vice-versa.
The company sees a big opportunity in physical retail. There are not many established multi-brand retail outlets in the mobile handset and gadget space. Similarly, a presence in physical retail can help Pickaboo to advance its position in digital commerce and vice versa.
An online-offline operation working in synergy could become an unbeatable combination for Pickaboo. Pickaboo has already opened its first two stores – in Bashundhara City and Jamuna Future Park. The company says the response has been beyond expectation so far and it aims to open 30 more outlets in 2020.
While there is a big opportunity to build a modern commerce operation at the intersection of online and offline, there are new challenges as well. The offline retail world, particularly mobile and gadget, is competitive and largely unorganized, the investment, management and logistical needs of a physical retail operation are very different from an online operation.
A lot will depend on how successfully Pickaboo can tackle these challenges of physical retail and take advantage of an offline-online connected operation.
Pickaboo was originally founded in 2016. Guaranteed original product. Excellent customer service. On-time delivery. And relentless service innovation helped the company to take a commanding position in a fast-growing ecommerce industry in Bangladesh within a short period of time. However, the rise was cut short for various reasons.
Today, the company is eyeing to make investments in strategic areas to consolidate its position in the ecommerce industry in Bangladesh that will have far-reaching on its growth as well on the digital retail in Bangladesh in the coming years.
On the one hand, Pickaboo is working to build an operation at the intersection of online and offline retail with a view to marry both the operations to gain strategic advantage.
Similarly, the company has narrowed down its product line. The company says it aims to become the largest online and offline platform for mobile handsets and gadgets in Bangladesh and does not plan to expand beyond the vertical in the next two years if the market does not change dramatically.
“We will not pay much attention to other categories at least in the next two years,” Morin Talukder, CEO of Pickaboo, says. “By the time, if the market changes and demands, then we will eventually add more categories but so far our priority remains mobile and gadgets both online and offline.”
Strategic focus offers strategic advantages
There is merit to this strategy. While successful ecommerce is essentially an aggregation play where the platform with the longest and deepest collection of products wins, almost all the major ecommerce players today including Amazon started off with a single vertical and eventually moved on to add more verticals once they decisively conquered one vertical they started off with.
There are several advantages to focusing on a single vertical. One, focus – you can go deeper into the vertical and compete better. Second, startups are often resource constraint entities which means if you are doing a limited number of activities your chance of doing it well goes up. Third, the 80/20 rule works everywhere. Often about 20% of your products bring you 80% revenue which means the concentration is better than spreading yourself too thin across verticals, at least in the early days.
In the case of Pickaboo, going all-in on mobile and gadgets makes sense for several reasons. One, mobile and gadgets remains one of the top verticals in ecommerce. Two, Pickaboo has a strong positioning in the market being the best online store for mobile and gadgets. Third, the market for mobile and gadgets is huge. According to industry insiders, the current size of the mobile and gadget market is north of BDT 16,000 crore in Bangladesh and is growing every year. Despite the size, there is almost no prominent online or offline retail brand for mobile and gadgets.
As Pickaboo zeros into the mobile and gadgets, the company has advantages and almost a sure shot at becoming the next-most-important digital commerce aggregator in Bangladesh in the coming decade.
Pickaboo moves into physical retail, eyes sustainability, and strategic gains
At the same time, in a surprising yet comprehensive move, Pickaboo has started making investments in physical retail. The company says it aims to build an operation that connects, albeit seamlessly, both offline and online. This is a strategically important move for several reasons.
Offline retail continues to offer a big opportunity in Bangladesh. In fact, almost 99% of commerce remains offline. The transition to online will eventually happen but it is likely to take a long time as we can see it in many markets including the advanced market like the US and our neighboring market India.
If Pickaboo can pull off a synergetic online-offline play in the retail, it can become a formidable player in the entire digital commerce space in Bangladesh.
A presence in offline retail will allow Pickaboo to attract more customers and bring them online. Build greater credibility among new customers who remain skeptical about online retail. Similarly, while offline retail is investment heavy, to begin with, it is much easier to make money in offline retail than online, at least for now. Moreover, Pickaboo has been investing in a closed franchise model to expand its offline retail network, which means the necessary investment to run the offline retail operation significantly comes down for Pickaboo. Achieving a sustainable operation and reaching a stage of relative profitability should be much easier through offline and online play.
Pickaboo says it aims to build fast-growing but sustainable operations on solid foundations. The expectation is that a synergy between online and offline operation coupled with focus on single but a fast-growing large vertical and customer service will give the company an edge over the competition, allow build a loyal base of customers and grow a sustainable business.
There is substance to these expectations. Done right, Pickaboo can easily become the most important new age retail player in Bangladesh in the next decade.
Why offline retail makes sense for online-first Pickaboo
The mobile handset market, combined with gadgets and accessories, is a BDT 16,000 market in Bangladesh and growing. While mobile handsets and gadgets are one of the most popular categories in ecommerce, 99% of the mobile handset market remains offline and a larger number of consumers remain comfortable trusting offline retails shops over online sellers. Given the reality of commerce across markets, it is safe to predict that the offline market is not going anywhere soon.
Being a digital-first retail company, Pickaboo sees an opportunity in the offline retail world. The company says as an online retailer, it has certain advantages that can help it build a scalable business offline and marry both offline and online operations to its advantage.
A big opportunity: In Bangladesh, there is almost no multi-branded retail chain for smartphones. There are a few, but they remain limited in scale with less than 16 outlets across the country. Multi-brand outlets offer exclusive benefits to customers. It allows customers to experience products of different companies under one roof which is not the case with single-brand shops where you can experience products of only one company. Working with multiple brands means your operating cost comes down compared to those who are running a single brand shop and your resources are better utilized.
The offline market is not as discount-driven as online. It means you can play with customer service and product quality.
There have been some positive changes in the offline world such as the local manufacturing of smartphones which has brought down the cost of smartphones making it accessible to a greater number of people. At the same time, BTRC is putting more restrictions on illegally imported handsets improving the competitiveness in the market for people who want to do business legally.
Overall, offline offers a big opportunity.
Marrying online and offline operation: If Pickaboo can effectively marry its online and offline operation, it will get a number of benefits. One, Pickaboo can use offline outlets as delivery hubs for online deliveries and thus build a hyper-local ecommerce model that can ensure faster and cost-efficient delivery to customers.
Pickaboo already allows customers to collect their online orders from their nearby Pickaboo outlet for free of charge if that is more convenient for a customer. When a Pickaboo user places an order online, he/she sees two options: click and collect from a Pickaboo out and another is regular delivery collections. And customers can choose what is best for them.
Two, when Pickaboo deals with partners such as Samsung and Huawei, it deals for both online and offline allowing it greater leverage. Pickaboo uses the same planning process and resources for its both offline and online operation which makes the entire operation more efficient.
Third, if Pickaboo offline was a separate brand, it would have been an uphill battle for Pickaboo to build the brand and manage everything. Now Pickaboo is doing it together. It is an integrated management. “When we have a deal with Samsung, it goes live both to my online and offline stores,” Mr. Morin says. “We are almost managing the operation as one.”
Pickaboo’s new customer: For Picakboo, getting into offline retail is strategically and operationally easier. For Pickaboo, Pickaboo offline is just another customer of its online operation. Pickabook online just delivers products to the outlets every day. In fact, this improves its standing with the brand partners. Since Pickaboo online deals with brand partners, it now has greater leverage since it has increased orders.
Structural advantages: Due to its offline retail operation, Pickaboo enjoys several structural advantages because of its online-offline play. One, Pickaboo drives big volume for its brand partners through its online and offline operations. Which means it gets priority when it comes to getting the latest products from brands. This means Pickaboo always has the latest collection in its shop ahead of everyone else giving it a competitive advantage that is not accessible to other retail outlets.
Second, for Samsung and other mobile handset brands, expanding retail brand shops is expensive. At one point, brands usually reduce their investment. Many brands including Samsung have done it multiple times before. Moreover, a single brand retail outlet is not competitive if you put it along with a multi-brand shop because customers would like to compare products before buying it and would prefer to go to a shop that offers them to check products from more than one brand. Since Pickaboo is a multi-brand retail outlet, it enjoys a competitive advantage over the single-brand shops and brand partners are likely to prefer to work with Pickaboo.
Pickaboo’s offline-online strategy – how the online-first retailer plans to win offline
Pickaboo says it aims to accomplish a few things with its offline strategy. One, offline offers a big opportunity. Other than Gadget and Gear, there is no other prominent offline multi-brand mobile and gadget retail chain brand in Bangladesh. “The space is completely empty and there is a big opportunity if one can play it right,” Mr. Morin says. Pickaboo aims to break into it. Two, as we discussed before, a seamless and strategic integration between offline and online commerce can result in a superior strategic advantage for Pickaboo. Three, the offline retail world remains largely unorganized, Pickaboo aims to bring order to that, thus positioning itself as the leader in the organized retail for mobile and gadgets.
While a successful offline retail play will bring immense benefits for Pickaboo, it is not going to be easy to pull off a successful offline play.
That being said, Pickaboo does enjoy certain benefits when it comes to offline retail. Since its launch in 2016, the company has been able to build a brand that people trust. The company plans to take advantage of its brand image in its offline operations.
Similarly, Pickaboo has successful examples of similar startups in other markets such as Carphone Warehouse in the UK that has built a large business in the vertical based on an ingenious online-offline playbook. In fact, a growing number of ecommerce players starting from Alibaba to Amazon to local Khaas Food and Styline have been moving into offline retail in search for expansion and stronger competitive moats.
In an interview with FS, Mr. Morin says: the company has a plan to win offline retail and that a synergetic online-offline operation would benefit both parts of its business.
Data as a centerpiece of the strategy. Being an online retailer, Pickaboo has one of the most important advantages when it comes to retail – data. The company understands the importance of data and how to use data to gain advantage in the market. Since Pickaboo launches each product both online and offline, it can see trends ahead of other players from its online and offline operations and accordingly dictate strategic decisions in the both world. As a result, Pickaboo can move ahead of any of its competitions and offer products that customers are originally looking for. That is not possible for any other retail shop.
“We can see the trend ahead of any offline retailer,” Mr. Morin says. Since we collect both offline and online data we can see the performance of different products and take necessary actions when a product underperforms and vice-versa.”
Over the past few years, Pickaboo has invested in technology to build excellent sync between its online and offline operation. When a customer orders something offline that also creates order in Pickaboo online system allowing the company to access a greater set of data.
Customer-centric approach: Pickaboo has an excellent positive brand image among young people. Over the years, the company has been able to build a reputation for great quality products and excellent customer service. The company aims to take advantage of that reputation and replicate that customer-centric approach to the world of offline retail.
The company says it has designed its outlets to ensure excellent customer service. In every Pickaboo shop, the company has a QA manager who looks after the quality. The company calls every customer who shops from a Pickaboo outlet and takes feedback regarding the experience. There are monitoring systems in place to review dealing with customers and give feedback. When a new customer buys a phone, the sales representatives in the shop help with usage and other issues. “We are helping each customer in their full journey when they buy a phone from us,” Mr. Morin says. “ Our customer representatives show data transfer from the old phone to the new phone to every function in detail. We are planning to launch a self-checkout process in the shop so that you don’t need to wait for the cash counter to pay.”
A gradual expansion strategy based on market feedback. Pickaboo plans to move in phase by phase manner when it comes to executing its retail strategy. Initially, the company aims to open some 30 outlets in 2020. “We are doing around 5 outlets first to see the response from the market, which you can call our pilot project,” Mr. Morin says. “After this pilot project, we will then keep expanding across the country.”
The purpose of the pilot is to learn from the market, take customer feedback, make mistakes and learn from them and execute the next phase of execution better.
Working together with small retail entrepreneurs. Retail is often quite expensive and challenging management. Pickaboo says it has come up with a strategy that can address both challenges. The company is using a semi-franchisee model to execute its retail strategy. Instead of investing all the capital by itself, Pickaboo is working with retail entrepreneurs who already have retail operations or are interested in a retail business to create the outlets. In the first two shops, Pickaboo has collaborated with two independent entrepreneurs.
The company says it not only wants to open retail outlets but also to create entrepreneurship. “Our model is not that we are only creating a shop. We are also creating local entrepreneurs,” Mr. Morin says. “These outlets are not only Pickaboo, but we are also taking one partner who manages the shop. We have a profit-sharing model in place.”
Many small entrepreneurs suffer in retail due to competitive pressure. In any market you go, there are all the major mobile phone brands and it is hard to compete for a shop that has no brand value. A lack of brand image is a challenge for a lot of small retail shops. Pickaboo aims to play in this space. The company says, for Pickaboo, it is easier to enter the market because the company already has a brand awareness due to its online presence. Mr. Morin offers an example of the power of Pickaboo brand: “in less than a month of our launch in Bashundhara City and we are one of the highest sellers in Bashundhara City. It is a short time and a lot of people are not aware of our offline activities. But when someone is passing by the shop, they can recall the name and they recognize the brand and give us a try.”
The company keeps the process of franchisee a closed process for now. It works with individual entrepreneurs and then moves forward if everything from vision to values match. The company says it will eventually open up the process to the public in a limited manner. However, the stringent criteria will remain to work with Pickaboo, which the company considers necessary for maintaining the quality of the business.
Using data to give suggestions to customers. Pickaboo has a big advantage when it comes to data. It can offer suggestions based on what are the best selling products and so on. The company has also brought the feature offline. “We have organized our shop based on functionalities such as a good quality camera”, Mr. Morin says. “Our customer representatives also are trained accordingly: they ask customers their priority and then they show products accordingly.”
Bringing product review from online to offline and vice-versa. Online reviews are well-known but offline reviews are not. Because there is no way to do reviews offline. But Pickaboo is changing that. The company emails every customer who shops in any of the Pickaboo outlets and requests for reviews. When a customer provides a review, the company updates it both online as shop specific review as well as on offline along with the product in print.
Focusing on customer retention. The offline world is mostly about sales. Most shops are into selling things and are seldom worried about service and customer retention because you essentially don’t see these data offline. Pickaboo says it is the opposite of what happens in a regular offline world. The company says it pays a lot of attention to retaining its offline customers. The company takes advantage of tech and customer service and works hard to build a lasting relationship with every customer that buys from its outlets. “We are more agile and open to learning,” Mr. Morin says. “We have a system no other offline retail has. We can offer far greater customer service than anyone in the market.”
Challenges of offline retail – a new territory for Pickaboo
While offline offers excellent opportunities in conjunction with online retail, it is not devoid of challenges. There are many challenges when it comes to running an offline retail operation.
One, offline operation has management issues that are different from online such as you need demos for every product which is not the case with online and you need to deal with brands separately for these demos.
Second, as you grow as a retail chain ensuring uniform customer experience can become a challenge. While you can easily ensure customer service online because it is managed centrally, it can be a challenge if you aim to do the same offline. This is more so for Pickaboo since the company claims customer service as one of the key differentiators.
Third, organized retail chains often can’t offer price benefits to customers outside of MRP price whereas small informal retail shops could potentially offer small price concessions. Now if a customer gets a 1000 tk off, he would rather buy from a shop than from Pickaboo.
Pickaboo says it has plans in place to address these challenges. “We understand there will be challenges,” Mr. Morin says. “We aim to beat these challenges with the help of technology, a combination of better customer service, after-sales service, and other benefits.”
The path forward for Pickaboo
It has been less than one month since Pickaboo launched its first two offline retail outlets and the company says the performance has exceeded their expectations. “We are doing 30% more than the market average from a specific shop,” Mr. Morin says. “We are receiving excellent responses from the market although we have just launched and not many people know our offline activities. We are hoping that response would be even better as more people know about our shop.”
Mr. Morin says as its offline operation grows, Pickaboo plans to expand its offline retail strategy and work with small shops where Pickaboo will be providing them with product support and use them as Pickaboo distribution points across the country.
Pickaboo has a great start with its physical retail. Offline retail offers far better margin and sustainability from a profit perspective, at least for now when ecommerce remains discount-driven in Bangladesh. Physical retail also allows an online retailer to attract new offline customers online, build trust with skeptical customers and helps improve operational efficiency when it comes to delivery and logistics.
A seamless marriage between offline and online operations could potentially prove to be the secret sauce of ecommerce success in Bangladesh.
Learn more about how Pickaboo aims to change retail with a combination of offline and online strategy here.