Ghana Report

InterviewsNovember 08, 2017

Ramesh Sadhwani of Melcom Group: "Melcom Is Considering a Convenience Store Concept in Ghana"

Ramesh Sadhwani, Joint Group Managing Director at Melcom Group

: Written by Dominika Bzduchova; Published: November 08, 2017

Interview with Ramesh Sadhwani, Joint Group Managing Director at Melcom Group

Tell us about the history of the Group and how it began.

The Group actually started around 1991 with one retail outlet in Accra, and it has grown from there. Our chairman’s history in Ghana prior to the Melcom Group was in retail with his family and his cousin. It came to a point where they decided to part ways. He then wanted to start over and get back into retail again, which is where the Melcom Group began. It started only in retail and over the years, we have added on other smaller businesses. Nevertheless, the retail is the focus and the main part of the business. It started in the center of town in Accra, near the main business district. It was one of the first few organized retailers at that time. Since then, the market has developed. We have larger stores, better designed stores, better refurbished stores, air conditioning, etc. In those days though, there were still regular tube lights and fans. We were only competing with a slightly better environment than the traditional open market type shops.

Where are you now in terms of numbers of shops compared to the past?

We started with one store in 1991. By 1993 or 1994, there were three stores, and we stayed at that number for a while. Then, we grew at a rate of one or two stores per year. By the 2000s, we started growing at three to four stores every couple of years. The biggest challenge has been with land and finding the right sized properties. The restriction in growth has been due to land, getting clean titles, building, and finding people who have something we are interested in and growing in that direction. We are now at 38 stores. We have three under construction. We have two or three under negotiation in the pipeline, whether they come through or not remains to be seen depending on the due diligence, pricing, and so forth. Our target is to have about 45 stores by the middle of 2018, in addition to the ecommerce website we launched last month.

We are looking at the possibility of trying out a convenience store concept. It will be early morning to late night, offering daily use items only, foodstuffs, FMCG, emergency goods.

How many employees do you have?

We now have approximately 2,600 employees in the Group. Out of that, in the retail sector, including the back end and logistics, we are close to 1,800 to 2,000 employees. The other 500 or so come from our other businesses. We have about 100 people in the head office. We also have an army of drivers for the vehicle fleet.

Apart from the retail side, is there any other sector where you are strong?

The most recent of our ventures was a bakery which we are still working on. With that, we are also looking at coffee shops and we have opened a few in our stores. When we feel we have the right balance and the right model, we will look at expanding on that to go with the branches. We have an IATA approved travel agency. We have an electronics service center which supports the retail side and the retail customers for all electronics and electrical purchases. We have a wide range and a very large portfolio, which accounts for a big chunk of our turnover representing many of the global brands. We have a plastics injection molding factory. We are also looking to get more into industry, preferably something with local raw materials, such as the food industry, consumables, or something export related. We still have to put some thought and some ideas towards feasibility. However, we must go in that direction. There are a couple of ideas, but we have not really explored them in depth. Hopefully, with the next generation coming in now, we can distribute the work load and get involved in investigating some of these other angles.

Are you looking for partnerships?

We are always looking for opportunities. If a proposal comes forth for a partnership that looks strategic and looks good and we can see that it will take us forward, we would welcome suggestions or ideas. But, we are not looking for something just for the sake of funding and financing growth. It is welcomed, but it should be hand in hand with strategic partnership with people who have knowhow and who can offer something apart from just capital. They should be able to do things better than what we can do in order to make us more efficient and make us grow for the right reasons.

Your new store model is quite different. Can you give us more details?

Our traditional model has been for a general department store. Then, we moved on to trying larger stores, what we call the Melcom Plus, which has much more specialized people getting involved with us on things which we cannot really specialize in ourselves. Now, we are looking at the possibility of trying out a convenience store concept. It will be early morning to late night, offering daily use items only, foodstuffs, FMCG, emergency goods. It would be the sort of store you would find at a petrol station or neighbourhood where suddenly at 9 pm, you need to run out and pick something up because you have run short of it at home. We would have small formats of that spread around. We want to explore how we can expand into this direction.

How are you able to operate handling everything from “A to Z”?

Over the years, we have found that we can cut costs by backward integrating. Apart from just the retail stores and selling, we actually start from the beginning with sourcing. We have our own team of buyers and merchandisers who travel overseas to trade fairs, suppliers, and factories. From there, we buy goods and have them shipped into Ghana. We are licensed to clear our own cargo and forward our own cargo from the ports, pay our duties, take the cargo to our warehouses and to our central distribution center. We do not outsource like some of the other companies do. We find that it is cheaper and more efficient to do it ourselves. We have our own tracking fleet in addition to our own maintenance for the tracking fleet, including our own fuel station. We have maintenance for our stores, aluminium fabrication, painters, plumbers, welders, and electricians. We install our own fire panels, burglary alarm systems, and CCTV systems. We have significantly backward integrated much of the infrastructure that the front end requires to be able to work.

When you have that many services around your main core business, can you also serve clients other than yourself?

In some of those categories we are gradually starting to do that. For example, our electronics service center basically supports the global brands that we represent. We offer installation of TVs, fridges, air conditioning, and after-sale service and repairs. We can now also offer those services to other customers and other brands on a charged basis. We are starting to do more in terms of CCTV systems for one or two clients. We have inquiries from people who want burglary and fire alarm systems on their premises and we are able to do the installation for that, as well.

Ecommerce is a new step for you. A month ago, you launched your platform and it has been quite revolutionary.

We are taking baby steps on that. There are at least half a dozen or more other players in the market already who started before us. Most of them are market makers. They are not actually holding stocks. They are just offering a platform and creating a marketplace for a buyer and a seller to transact, while taking a commission in the middle. We are working on a slightly different model. We are working because we hold stocks. Our ecommerce website is linked and synchronized with our back end main warehouse stocks. We are only offering what we actually have in stock. We want to be able to have a very high fulfilment rate. We do not want the situation that we have seen with some of the other sites where they receive an order, and by the time they go to the source, the source has either changed the price or no longer has the stock. Therefore, they cannot fulfil the order. We are seeing that the fulfilment rate with some of the other websites is relatively low. We are trying to focus on keeping ours extremely high by having that linkage, which is also part of the reason why our system got delayed slightly. We wanted to make sure that we had that synchronization with the back end, without interfering with the day to day operations of the business, which reflects the true position of stocks on hand to offer the customers.

Do you think you have a competitive advantage here?

Yes, I hope so. It is something we need to leverage on.

What have been your results so far?

So far, we have been able to fulfil 100 percent of all orders that have come in.

What is your strategy to develop the Group?

We have identified a few areas of growth. We were a late comer into the supermarket and FMCG category. We have only been involved in the last four to six years. We know we can strengthen ourselves there, both in terms of variety of offering and with margins and volumes. We have recently become involved with fresh fruits and vegetables. This is offered in only three or four stores currently, so that needs to expand into the other stores. We have not yet started with butchery and fresh and frozen meats and frozen foods. We do not have a delicatessen, yet. An area which we had not explored previously in the supermarket sector is pet food and pet products. It is a small category, but it is somewhere to find a niche. There are many areas within the supermarket and FMCG category where there is space to grow and do more. Within the department store and the hypermarket concepts, there are other areas which we are starting to move into, as well. We have now started pushing into lighting, which we were not doing before. We have started to do more with hardware. We are investigating the idea of doing something more in garments and footwear, which we have not been very strong in primarily because there is still a very big second-hand garment market in this country. But, if things go the way we expect and Ghana does not become a dumping ground for second-hand garments, then the market will open up for new garments and footwear. This could be an area of growth for us. We are interested in expanding our range and the categories that we have not considered in the past. We are starting to consider doing more in terms of mobile phones, IT equipment, and laptops. We have not been competitive here because we have always been concerned with certain fixed margins. Now, we can see the need. Even if it is small margins, we need to look for faster turnover and not avoid sticking to just regular items. It is still daily use items and things that the average customer is always going to be looking for. Apart from category of product range, there is also the issue of locations. There are still second and third tier towns where we have not yet expanded. This year, we opened in the Upper North, which was the last of the ten regions of Ghana for us. We now have a footprint in every region throughout Ghana. To our knowledge, we are the only organized retailer who has achieved this. Most of the regions have more than one branch or more than one town where we have a presence, so we are making progress, but there is still work to be done. Some of the second-tier towns and even some of the primary towns could handle more than one or two branches, not to mention some of the suburbs, because those towns themselves are growing.

To expand and carry out your strategy, you would need human resources?

Of course.

What is the core need that you have? What kind of person are you looking for?

We are finding that people are coming in with basic school education and the ability to speak English. However, the issue has to do primarily with a change of attitude. Some of the younger lot are ambitious, fresh, and they have energy. But you have a lot of old school thinkers who are not moving with the times. They are used to a very lethargic timeline and they do not see the urge or the hurry. They may still be receiving a high salary, but not actually doing very much. They are not taking any responsibility or moving forward in terms of the modern way of doing things. Then, we start having issues with unions and leadership within the stores. Why should a newcomer who has better qualifications but no experience be getting equal or higher pay? If he is able to take responsibility, do more, and be more productive, then he is more valuable to me and I would need to consider paying him more. Then, you have reactions from the old school thinkers who are there, but not ready to change. They have been doing the same job for the last ten years. They are not ready to take responsibility. They are not ready to move forward. They do not want to take a supervisory role let alone a managerial role, but they want their salary to go up, irrespective of that.

The company is growing quite a lot. What kind of positions are you looking to fill?

Our main needs would be assistant shop managers, shop managers, and supervisors. Then, moving from a shop manager role into operations with somebody who would oversee three to six branches because he knows how the shops work and he knows the ins and outs of the whole system. From there, there is a growth path into merchandising and purchases. We have groomed many employees from laborers to sales reps, then from sales reps up to heads of departments. When we started, all our shops were run by expatriates. Over the years, as we have grown, we have cut down on that. Today, out of 38 stores, 35 are run by Ghanaian managers with their teams. Because he takes responsibility, we allow the Ghanaian manager to employ or nominate somebody that he can trust and work well with. If he needs a break or has to step out, he feels comfortable. Still, there needs to be a general change and much more specialized training. There is very little academic training or institutes that can teach customer care and customer service, visual merchandising, space planning, and floor planning.

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