Overview

Bataras Sdn Bhd is a major retail chain in Sabah and Labuan, offering a wide selection of groceries and fresh produce at affordable prices. Established in 1998 by Managing Director and CEO Mr. Goh Thian Teck, the company has since grown to operate 35 outlets across the region; including 16 hypermarkets, 15 superstores, 1 Fresh Mart, and 2 Marketplace stores.

Following the acquisition of 13 GIANT outlets in 2018, Bataras significantly expanded its market share. However, the COVID-19 pandemic delayed new store openings, prompting the company to accelerate its digital transformation. In 2020, Bataras launched its E-store app and delivery service, providing customers with a reliable online shopping experience during lockdowns.

Today, Bataras operates 35 outlets, including 16 hypermarkets, 15 superstores, 1 Fresh Mart, and 2 Bataras Marketplace stores, focusing on imported goods. The company’s annual revenue has grown to approximately RM 800 million, and it employs around 2,000 people.

In 2022, Bataras achieved a 15.27% increase in net sales revenue. Total assets grew by 8.66%, while operating profit (EBIT) rose by 9.55%. Despite these gains, the company experienced a 4.49% decline in net profit, attributed to margin pressures, with the operating profit margin decreasing by 0.11%.

Key Financial Metrics:

• Net sales revenue: +15.27%
• Operating profit (EBIT): +9.55%
• EBITDA: +5.9%
• Net profit: -4.49%
• Operating profit margin (ROS): -0.11%

Bataras continues to focus on expanding both its physical presence and digital capabilities. The company aims to enhance customer convenience through its online platform while maintaining consistent pricing across in-store and digital channels. Future growth will target underserved urban and rural markets.

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Strategic Priorities/ Investments:

While information regarding Bataras Sdn Bhd explicit strategies are not available through company reporting, the following strategies are gleaned from analyst research on various Bataras Sdn Bhd publishing and news reports, combined with market analysis of the retail sector, specifically trends impacting grocers and supermarkets.

Logistics and Supply Chain improvement

• Due to the location of Bataras Sdn Bhd on the island of east Malaysia, the company faces various logistics and supply chain challenges involving importing and exporting goods for its customers and inventory. The Sabah region faces other challenges such as a low population, poor logistics connectivity, and an overall lack of technology and infrastructure. Additionally, the location places a dependence on sea and airports as well as a need for a robust, efficient, and reliable supply chain to deliver goods across the region to its numerous stores, warehouses, and other endpoints.
• Bataras likely operates with a strategy to improve the resilience and reach of its overall supply chain and logistics infrastructure and methodology. This includes investments into supply chain technology, inventory management systems, IoT, AI, and data analytics, along with automation and tracking, as well as improvements in their workforce.
• Furthermore, with the launch of Bataras’ E-commerce platform for the online selling of supermarket goods, the need for a robust supply chain and delivery infrastructure is especially critical to fulfil Sabah’s growing reliance on e-commerce and to capture a nascent market for groceries in Sabah.

Improving E-Commerce Platform:

• In 2020, Bataras launched its e-store to provide its customers with a reliable service for ordering essential goods during the lockdown caused by the Covid-19 pandemic. Since then, the e-store has remained an important part of Bataras’ value chain, providing an entirely different shopping experience for its customers.
• E-stores for grocery items and other supermarket goods face several challenges such as inventory management, inefficient delivery systems, changing customer behaviours, customer loyalty, high operational costs, price volatility, and technologically challenged customers.
• To improve customer experience and deliver a reliable e-commerce service, Bataras will need to invest in technology such as data analytics to understand customer behaviour, supply chain and logistics improvements to provide efficient sourcing of goods and delivery to customers, tech infrastructure to support a large customer base, as well as into customer service to improve the overall customer experience and to maintain and increase customer loyalty to the brand.
• Lotus’s, one of Malaysia’s largest and leading supermarket brand, has used Salesforce to deliver their customers a more personalized and intelligent experience. Lotus’s used Salesforce data analytics to enhance and streamline the customer experience as well as used data-driven marketing to create personalized marketing journeys on the Platform – highlighting a model that Bataras could follow.

Improving Profitability and Operational Efficiency

• In 2022, Bataras net profit dropped by 4.49% despite the 15.27% increase in net sales revenue. While detailed information regarding the company’s financials are unavailable, low profitability generally indicates high operating costs. In Bataras’ case, this can be attributed to high logistics and supply chain operational costs in the east Malaysia region, as well as high costs for imported goods, which as of July 2024 are estimated to cost 30% more as compared to peninsular Malaysia.
• These factors likely play a key role in the high operational expenditure of Bataras, owing to their need for complex and elaborate logistics infrastructure to cater to both the upstream (imports, sourcing, storing) and downstream (delivery) movement of goods and products.
• Bataras probably strategizes to reduce operational costs through increasing efficiency and lowering expenditure on their supply chains, as well as their sourcing, storing, and delivery of goods. This includes strategies for cost-effective inventory management, labour efficiency, energy efficiency, and overall streamlining of operations.

Challenges and Opportunities

Bataras faces several challenges within its operating environment:

Challenges:

Supply Chain Disruptions

• Logistical complexities in remote areas: Operating in regions like Sabah and Labuan introduces logistical challenges due to the reliance on sea and air freight. Frequent delays in these channels—whether caused by natural disasters, port congestion, or geopolitical issues—can lead to inventory shortages. For example, during the COVID-19 pandemic, Bataras struggled with restricted shipping routes, which affected the timely delivery of goods.
• Rising transportation costs: Fluctuating fuel prices and increased shipping costs can significantly impact profit margins. Supermarkets operating in geographically isolated areas face higher transportation costs, which can make it difficult to offer competitive pricing.
• Supplier relationships and dependency: Bataras, like other supermarkets, relies on a mix of local and international suppliers. Global supply chain disruptions, such as the Suez Canal blockage or manufacturing delays in export countries, could cause delays and stock outages. Securing reliable suppliers and diversifying the supply base becomes a challenge when logistics are already complex.

Price Sensitivity and Competition

• Balancing affordability and profitability: Bataras must offer competitive prices, particularly in regions where consumers are highly price-sensitive. However, price wars with other retailers or discount stores can lead to thin margins. Maintaining affordability while dealing with fluctuating costs (such as raw material prices, import taxes, and inflation) can be difficult. Additionally, any increase in transportation or sourcing costs must be absorbed or passed on to consumers, which may hurt customer loyalty.
• Competitive landscape: Bataras competes not only with national and international chains like Tesco, Mydin, and AEON, but also with small local stores that often have lower overheads. International players have more sophisticated logistics, supply chains, and digital platforms, making it harder for regional players to compete. Additionally, the rise of e-commerce giants like Lazada or Shopee in the grocery sector has created more competition, especially in the delivery space.

Digital Transformation and E-Commerce Integration

• Investing in digital infrastructure: As consumer demand shifts toward online shopping, Bataras must continue investing in its digital transformation. Building, maintaining, and upgrading e-commerce platforms like the Bataras E-store app requires significant capital investment. The backend infrastructure for handling online orders, inventory management, and delivery logistics must be robust and scalable to accommodate growing customer demand.
• Delivery and last-mile logistics: Launching an online shopping platform comes with its own logistical challenges. Ensuring that delivery services are timely and cost-efficient in geographically dispersed areas like Sabah and Labuan is complex. Bataras will need to invest in its logistics network or partner with third-party delivery providers, adding to operational costs.
• Competing with digital-native platforms: As more consumers shift to online grocery shopping, Bataras must compete with established e-commerce players that may have superior technological capabilities, such as personalized shopping experiences and faster delivery times. These platforms often use sophisticated data analytics to optimize user experience, and catching up in terms of digital capabilities is expensive and time-consuming.

Inventory Management

• Managing perishable goods: Supermarkets, particularly those with large fresh produce sections like Bataras Fresh Mart, face significant challenges in managing perishable inventory. Short shelf lives, supply chain delays, and varying consumer demand all contribute to food waste and lost revenue. Optimizing inventory turnover and minimizing waste while ensuring sufficient stock availability is a difficult balancing act.
• Demand forecasting accuracy: Accurate demand forecasting is critical but difficult, especially for a retailer like Bataras that serves both urban and rural areas. Consumer buying patterns can vary widely based on location, local events, and economic conditions. Poor demand forecasting can result in overstocking, leading to waste, or understocking, which results in lost sales and dissatisfied customers.
• Supply chain transparency: Ensuring that suppliers consistently deliver the right quantity and quality of goods can be difficult, especially if transparency is lacking in the supply chain. Supermarkets must monitor supplier performance and ensure the freshness and quality of products, particularly in fresh produce, meats, and seafood.

Operational Efficiency

• High operational costs: Supermarkets must manage significant operating costs, from labor to utilities, and this can be especially challenging when expanding or opening new stores. In regions like Sabah and Labuan, where labor shortages may occur, Bataras faces higher wage costs to attract and retain employees, particularly for specialized roles like logistics or inventory management.
• Technology integration: To remain competitive, supermarkets need to integrate technology into their operations. This includes investing in point-of-sale systems, warehouse management software, and inventory control systems. However, such investments come with high upfront costs and ongoing maintenance expenses. Supermarkets also need to train staff to efficiently use these technologies, further adding to operational complexities.
• Energy costs: Operating multiple large retail outlets and hypermarkets involves significant energy consumption. Rising energy prices or changes in energy policies can strain operational budgets, particularly for refrigeration and lighting costs in large outlets.

Consumer Trends and Expectations

• Changing consumer preferences: Consumer preferences in the supermarket and grocery market are volatile and dependent on a wide range of factors such as price, brand recognition, product placement and more. Due to this, consumers preferences tend to change over time . Supermarkets need to cater to these shifting preferences while balancing the price sensitivity of many consumers. Sourcing organic or sustainable products often comes with higher costs, which can make it difficult for supermarkets to maintain their low-price guarantees.
• Personalization of the shopping experience: With the rise of big data and AI, consumers increasingly expect personalized shopping experiences—such as tailored promotions or product recommendations—both online and in-store. To meet these expectations, supermarkets need to invest in data analytics, customer segmentation tools, and loyalty programs, which require significant resources and technical expertise.
• Sustainability demands: Growing environmental awareness among consumers has pressured retailers to adopt sustainable practices, such as reducing plastic packaging or promoting eco-friendly products. While beneficial in the long term, implementing these initiatives often requires costly changes in packaging, sourcing, and logistics. For Bataras, meeting these expectations while operating in remote regions with limited local sourcing options adds an extra layer of complexity.

Opportunities:

Integrated Logistics and Fleet Management Solutions

• Opportunity: Introduce IoT-enabled devices across Bataras’ transportation fleet to provide real-time tracking and condition monitoring, overcoming logistical challenges in remote areas like Sabah and Labuan.
• Benefits:
  • Optimizes route planning
  • Reduces dependency on disrupted shipping routes
  • Enhances fuel efficiency, lowering overall transportation costs

Advanced Data Analytics for Pricing and Inventory Management

• Opportunity: Utilize advanced analytics tools that integrate market and sales data to inform pricing strategies and inventory planning.
• Benefits:
  • Facilitates dynamic pricing adjustments based on market trends
  • Improves profitability and accuracy in demand forecasting
  • Minimizes overstock and stockouts, particularly for perishable goods

E-Commerce Platform Enhancement and Integration

• Opportunity: Strengthen Bataras’ e-commerce platform by integrating online ordering, CRM systems, and backend analytics for seamless operations.
• Benefits:
  • Expands market reach and competitiveness against larger e-commerce platforms
  • Boosts customer loyalty with personalized interactions and targeted promotions
  • Provides a seamless and efficient online shopping experience

Digital Supply Chain Management (SCM) Solutions

• Opportunity: Implement a digital SCM platform for end-to-end supply chain visibility and control, from suppliers to retail locations.
• Benefits:
  • Increases transparency and control over supply chain operations
  • Strengthens supplier relationships and improves management
  • Enables supplier diversification, reducing reliance on single sources

Smart Energy Management Systems for Cost Efficiency

• Opportunity: Deploy IoT-based energy management systems in stores to optimize consumption in critical areas such as refrigeration and lighting.
• Benefits:
  • Reduces operational energy costs
  • Supports Bataras’ sustainability efforts
  • Highlights the company’s commitment to environmental responsibility

Workforce Optimization and Training Solutions

• Opportunity: Adopt digital tools for workforce management, including scheduling, performance monitoring, and online training platforms.
• Benefits:
  • Addresses potential labor shortages
  • Enhances employee productivity and service quality
  • Equips staff with essential skills, especially in remote or growing markets

Key Stakeholders

1. Goh Thian Teck – Director, Chairman, CEO
2. Lim Chee Wi – COO
3. Pei Shun Liew – General Manager (Commercial)

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