Interview with Rishi Melwani of Melcom Group

Melcom Group is retail oriented, but has been quite focused on diversification. What are your plans to utilize the potential of the company?

In the past, we have moved into different areas. Some time ago, we entered into plastic manufacturing. The most recent diversification project was a centralized bakery facility with the aim being to service as many of our own stores as possible with bread, confectionaries, and other items. We have had some success with this, and in the future, I would like to see the Group move more into heavy industry and food manufacturing. There are government directives currently that are promoting and subsidizing such projects in every region of the country.

Does this first step, the bakery, change the image of the Group? Suddenly, you are not just selling your own bread, but producing it as well.

It definitely has enhanced the image of the Group, especially in the stores that receive the bakery items. We have received good feedback. We are trying to produce things that are not readily available here. The traditional local bakeries produce very different items than what we produce. Also, food products are something that is consumed. This is a big step away from what we are known for which is houseware and kitchenware, traditionally. But now, our reach has expanded. People know that they can come in to find things for their homes and their kitchens as well as something to eat.

We have built a really great name for ourselves in Ghana. Travelling a lot outside the country, I often get asked, “When are you coming to us?”

What do you need to be able to become involved in producing more in the food sector? Would you need a partnership with industrial companies?

It would be unwise to go into this completely on our own because we are traditionally a retailer. We understand very well how to source things, how to purchase them, and how to resell them. However, what we do not know as well is how to produce things from scratch. A strategic partnership with a bigger company would enhance this growth. We are strong in logistics and our network here is extremely wide. Our reach extends throughout all the regions of Ghana. This is a skill we can enhance and develop ourselves. Although, for the actual production side of things, we would need someone from the outside to help us.

Is there a specific product or area where you think there is a need here which is not fulfilled by somewhere else?

A specific example would be alcohol. All of the high-end product is coming into the country from outside and there is definitely a market here for low-end alcohol that is growing very quickly. There is a niche somewhere in the middle for affordable alcoholic beverages that are not quite at the lowest end of the market. There is scope to be explored in the middle.

Where would you like to situate yourself compared to local companies that also export, such as Kasapreko?

The strength of Kasapreko is that they are a very Ghanaian company. They are Ghanaian run and Ghanaian owned. What we can do differently is bring that international flavour to a locally produced alcohol.

Do you have any special plans for outside Ghana?

That is something that is very exciting for us because we have built a really great name for ourselves in Ghana. Travelling a lot outside the country, I often get asked, “When are you coming to us?” Not so much in the west African countries, but when I go to India, for example, people ask me why I have not brought something like that over there. Especially in the English-speaking countries which are not too far away, such as Liberia, for example, which is a country that has been war torn for a long time and a place where infrastructure is just starting to pick up, now would be a great time to go over there. The challenges that we face with all of the other regional neighboring countries is the language, unfortunately, which forces us to think in a completely different way. We would have to get French speaking personnel and we would have to understand the cultural differences that come with that. It would be a real challenge. But at the end of the day, countries in the same region are very similar in their purchasing habits. I would like to see us reach outside of Ghana one day soon.

Concerning those countries, what would be the decisive factor to move forward?

In order to be able to move forward, partnerships would come into play again. We have developed so much in Ghana because we have become experts here. We know the ins and outs. We know how to get things into the country. We know how the Ghanaian customer thinks. However, we do not know how our neighbours think. We do not know how to get things done in the quickest way possible in Togo or Burkina Faso, for example. Developing relationships with players that are already operating there might be an avenue that we would have to follow.

You are the fourth generation so being online for you is quite natural. You recently started this new online service and are planning to expand. What are your plans for the future of Melcom online?

It is off to a promising start already. We are quite happy with the traffic that has flown to the website. Obviously, there is great room for expansion. The Ghanaian consumer is changing very quickly. The trust regarding the concept of payment online has not quite reached the point of where we want it to be, but we are sitting in a position now where we will be at the forefront of the online wave that will eventually come. I would like to see online activity generate just as much if not more than what is currently coming out of the retail stores. Now that smartphones are owned by almost everyone, I would definitely want Melcom Online to be one of the first local websites that is a go to page for people.

What challenges are you facing?

Right now, the biggest challenge is the online to offline concept where people are searching online and getting their information online, but then the purchases are being made offline. The biggest challenge is the factor of trust towards the internet. Another challenge is the total number of people who are currently bankable. It is not a huge proportion. We would service that through payment on delivery, but the fact remains that the net of people who are in the banking system with the ability to make end to end purchases online is not quite where we want it to be.

How do you see the company in the medium term of three years’ time? If everything goes according to your plan, what will Melcom be in 2020?

In 2020, Melcom will hopefully be known as a truly Ghanaian company. I would like more Ghanaian brothers and sisters in senior management positions, all of the stores being run fully Ghanaian, and purchasing to be done by Ghanaians. Currently, the management team are the ones going abroad and bringing products that we believe the Ghanaian consumer desires, needs and wants. But ultimately, we need to understand from customers themselves, who are the Ghanaians, what they truly want. I would like to see part of our team overseas in China for the majority of the time doing our purchasing for us.

Interview with Manoj Sadhwani of Melcom Group

What would you like to implement in the company that will make Melcom Group even more profitable?

There are small ways we can begin, such as putting an end to back ordering. For example, some of the smaller stores do not hold as much variety of stock. Customers will place their order at the shop and then we send the tracking code, pick it up, and drop it at that shop for the customer. Now, we can interact with the customer online and eliminate that extra cost. No one is thinking in that direction, so that is something that we will begin to do. We can also reduce the number of deliveries we have every week. Deliveries should be based on sales and done as efficiently as possible. We can reduce extra deliveries that do not need to happen. Extra deliveries do not mean extra sales. Other changes to implement include changes to manpower- not to cut everyone, but to keep only those people that are necessary. Sometimes people are there simply because they are allotted in the budget, but if you do not need them, you do not need them. In the end, every time you shave down a cost, you are going to become more profitable. Also, we need to do P&Ls for each store, which is an aspect that is not being addressed. In some of our stores, we think that by growing we become more profitable, but some stores on their own are not profitable. We have to do a cost benefit analysis to determine if it is worth having a footprint there or if there is a way to change the structure to make it profitable.

Do you plan to be involved in the online sector?

For me, the online sector shows the most room for growth.

For me, the online sector shows the most room for growth. Currently, it is not performing up to the same level of sales as a physical shop. Just to get to that stage will be an achievement. As my cousin said, in due course, I also want to see the online segment doing at least as much as the actual brick and mortar stores are doing, if not more. Eventually, we will get there. One thing we have done to facilitate this goal is to redesign the website to make it more appealing, upgrade the theme, and include more hyperlinks. It is more attractive now. We are working quickly to upload all our products online. If all your items are not online yet, it will stop you from picking up. We have 25,000 products in the store, but online we have approximately one tenth of that. We are still working and progressing.

What might be a new approach or a new way of doing things in terms of financing the company in the future?

Landing a private equity fund to back us would help in the future. We need to sort out a few things internally in order to get to the stage where we can grow at an exponential rate where those funds would certainly make a difference. At the moment, we are going as fast as we are able to internally because our systems cannot handle that exponential growth. Everything is not automated as it should be. We are working to categorize items and to automate reordering as well as reordering at the warehouse level. This process is already in motion in the shops and is now being fine-tuned. Sometimes, we face a stock out, so we are upping the minimum reorders for certain items. One logic does not work perfectly for every store. We are working to analyse all the data.

Where can the company grow and develop in other sectors or ways of operation?

Manufacturing is an obvious next step. We cannot accomplish this ourselves in our current state, but if we find the right person to come on as an individual partner and make him a working partner in the business, it might be successful. It would need to be something that would be supported by the Ghanaian government through their subsidies or incentives to promote industry and exporting. Right now, the balance of trade and payments is somewhat against them because of too much importing and promotion of locally produced products. Something like cocoa would be an obvious choice, but there are already a few cocoa giants and getting the actual cocoa is difficult. If you can compete on cost for shea butter, something that the locals use very frequently, and cocoa butter, it might do well. Although, people make these products at home, so their overhead is very low. We need to examine the feasibility of everything, and do analysis to determine whether it will be profitable or not. Industry will definitely be a way forward. There is not much organized retail in some of the smaller neighboring countries. In the end, you might have to get a working partner or a family member might have to move there for a bit to get things set up. When you are there, there is a whole new economy to grow in. In the next ten to fifteen years, we are going to reach a stage where Ghana is going to become completely saturated.

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