With disruptive technology catching up with brick-and-mortar business, Ek-Chai Distribution System, the operator of Tesco Lotus, Thailand's leading hypermarket chain, is seeking clues on how to better respond to customers in the digital era.
It is inviting startups to join its first hackathon in Thailand in order to beat stiff competition, particularly from convenience stores.
Under the scheme, the company will invite the burgeoning startup community in Thailand to create new innovations, with the winning ideas possibly implemented by Tesco Lotus in about 1,500 Tesco-Lotus Express stores across the country.
There is also the possibility that an idea implemented in Thailand could be used within the Tesco Group, which spans 10 countries, presenting a unique opportunity for Thai startups to enter the global arena, said Salinla Seehaphan, corporate affairs director of Tesco Lotus.
Thailand is the second country after England to see a Tesco Lotus Hackathon.
A hackathon (also known as a hack day, hackfest or codefest) is a design sprint-like event in which computer programmers and others involved in software development, including graphic designers, interface designers, project managers, and others, often including subject matter experts, collaborate intensively on software projects.
The goal of a hackathon is to create usable software. Hackathons tend to have a specific focus, which can include the programming language used, the operating system, an application, an application programming interface, or the subject and the demographic group of the programmers. In other cases, there is no restriction on the type of software being created.
The convenience store industry is seeing fiercer competition every year, as all major operators (Mini Big C, 7-Eleven, and Tops Daily) continue to expand into this retail sector.
"We aim at not only getting new fresh ideas from this partnership, but also faster time to market," she said.
Tesco Lotus Hackathon was launched by Tesco in Britain the past few years, yielding the Tesco Now app. The app-based delivery service lets customers order from a range of 1,000 products and have them delivered within one hour.
"Innovation is very important to improve our operation efficiency. What we are looking for is innovations that serve the needs of customers, which have been shaped by five megatrends, namely digital transformation, a healthy lifestyle, the changing family and population, convenience and experience, and sustainability," Ms Salinla said.
She said the partnership underpins innovation, with each party contributing their strength and expertise in their respective areas in the creation of innovations that address the needs of modern-day customers.
"The 'problem statement' we have chosen for the first hackathon is to redesign the Tesco Lotus Express experience for future neighbourhoods," said Ms Salinla. The company specifically chose Tesco Lotus Express as these are small community stores that interact with 415 million people per year.
She said the company is hopeful the ideas and solutions from the hackathon scheme will not only benefit its customers and its business, but can also be utilised by local community stores. This in turn will help to uplift Thailand's retail industry into Retail 4.0.
Tesco Lotus Hackathon 2018 invites individuals as well as teams, from startups to students, to submit their applications from Jan 8 until Feb 20, 2018.
"Aside from the prizes, we believe the opportunity to work with a large multinational corporation and see an idea come to life at Tesco Lotus stores will be an important milestone for the Thai startup community," said Ms Salinla.
Though Tesco's online business continues to grow 2-3 times more than the year before, the company plans to open more regular stores in various formats this year along with the renovating existing stores, she said.
"The number of Tesco stores to be opened in the Thai market is larger than in other countries because we believe in the market opportunity here," said Ms Salinla.
For its current fiscal year, which ends in February 2018, the company has opened about 100 Tesco Lotus stores.
Of the total, over 80 are Tesco Lotus Express stores and 10 are hypermarkets.
Tesco stores are expected to reach about 2,000 branches this fiscal year, up from about 1,900 branches the previous year.
In a related development, Chatchai Khunpitiluck, senior executive vice- president at Digital Economy Promotion Agency (Depa), said the agency will try to match startups with large corporations to solve pressing problems.
This March, Depa will kick off the 200-million-baht Depa Fund that aims to fund at least 50 startups in different stages of development. In the past the programme has partnered high-growth companies with corporate giants like Tesco Lotus.
Natcha Thawesaengskulthai, assistant to the president for strategy and innovation of Chulalongkorn University, said the university will act as a consultant to Tesco Lotus.
"Depa will consider startups in agriculture, healthcare, retail, travel and digital content," said Mr Chatchai.
Depa will not only support startups on the supply side, but also on the demand side, by subsidising the cost for SMEs that would like to use the technology provided by these startups, he said.
"We expect the fund to have an economic impact of at least 1 billion baht," said Mr Chatchai.
Amarit Charoenphan, chief executive of Hubba, said the retail, property, insurtech, fintech and automotive industries continue to attract investors.
"We will start to see local startups collaborating with corporations to access their customers and solve real challenges," he said.
In retail, he said the fund will continue to observe a shift from online to offline applications, as well as virtual and augmented reality to enhance customers' shopping experience in virtual and physical stores.
In 2017, its corporate venture capital fund held 8 billion baht, which the industry will continue to use to find and develop innovative startups. Hackathons and similar events will serve to build innovation faster.
