Customers flock to Shwapno as it offers cheap rates

Sabbir Hasan Nasir is one of the pioneers of the modern retail sector in Bangladesh.

‘Shwapno’ become the largest supermarket chain under his dynamic leadership. Besides, it built a coordinated and technology-based market system between the farmers, suppliers, and customers.

Customers flock to Shwapno as it offers cheap rate in most of the items.

The farm is now providing services to over one lakh customers through its above 965 outlets in 64 districts.

Sabbir Hasan Nasir obtained higher education from BUET, IBA, MIT and Barkley. Then he achieved vast experience of working in multi-national company.

He is distinguished for his corporate leadership, business transformations, future oriented strategic thinking.

Sabbir Hasan Nasir has shared his childhood memories, working life’s experience, the growing of Shwapno and the future of Bangladesh’s economy in an exclusive interview with Asia Post’s especial arrangement ‘Beyond Business’ recently. Riazul Karim conducted his interview.

Details of the interview published here:

Asia Post: Would please share the memories of your childhood, growing and education? How were the days of your beginning?

Sabbir Hasan Nasir: I borne in Khulna. I have started my education in the ‘School of Music’. Then I’ve taken education from Khulna Saint Joseph’s Highschool and later Khulna BL College.

Then I obtained graduation as Mechanical Engineer from Bangladesh University of Engineering and Technology (BUET).

I studied Mechanical Engineering from Bangladesh University of Engineering and Technology (BUET), after BUET I did my MBA from Institute of Business Administration (IBA) of the University of Dhaka, followed by higher studies at MIT Sloan School of Management and learning Data Science at UC Berkeley.

Asia Post: You mostly studied engineering, but we have heard that your real area of interest was something else. Could you tell us about that?

Sabbir Hasan Nasir: Actually, I studied engineering because of my father. I had no particular desire to study engineering. My ambition was to become a theoretical physicist because I had an innate love and attraction toward mathematics. My uncle, who was a gold medalist in mathematics passed away recently.

I believe my attraction to mathematics came either from him or from my grandfather, who was also highly skilled in mathematics and was an academic. I could naturally develop many mathematical models and give philosophical interpretations to different subjects.

But my father told me, “You cannot go to the University of Dhaka because there is always a lot of trouble there. You have to get admitted to BUET.” So, I joined BUET at my father’s insistence.

Asia Post: What year was that, and how long did it take you to complete your studies?

Sabbir Hasan Nasir: I was admitted to BUET in 1989. At that time, the anti-Ershad movement was taking place across the country. As a result, we faced a severe session backlog. I was supposed to graduate in 1993, but because of the session backlog, I graduated in 1996.

However, there was also a positive side to it. Immediately after graduation, I had the opportunity to work for one year as a research assistant to world-renowned physicist Professor Jamal Nazrul Islam. He was looking for an assistant, and after passing the selection process, I got the opportunity to work with him. Through that experience, Allah partially fulfilled my deep desire to work as a theoretical physicist.

Asia Post: How did your professional career begin? What was your experience working for multinational companies such as Bata and Unilever?

Sabbir Hasan Nasir: At the beginning of my career, I joined Bata’s global talent recruitment programme. While working at Bata, I was involved in a very important project in Malaysia. It was a project aimed at increasing the company’s productivity and profitability. Many of the major foundations of time-motion engineering in Bata’s history were developed under my leadership.

After that, I went to Angola in Africa for a Unilever project. The war there had just ended, but the country had not yet returned to complete peace. Landmines and weapons were scattered everywhere. In that war-torn environment, I was given the major responsibility of developing Unilever’s project and distribution network.

Asia Post: You later became the CEO of one of Bangladesh’s largest brands, Otobi. What was that experience like?

Sabbir Hasan Nasir: Yes. After Unilever, I joined Otobi as its first CEO. At that time, the position of CEO did not exist at Otobi. Its founder, Nitun Kundu, personally ran everything. When he took over as managing director, I was appointed CEO to help avoid some administrative conflicts within the organisation.

During my tenure, Otobi not only became a major brand in Bangladesh, but we also established stores and billboards in India, expanded operations in Kolkata, began exporting products to the Middle East and started manufacturing specialised furniture for hospitals.

When I left Otobi, its annual turnover was around Tk550 crore and its net profit was Tk60 crore. During our time, Otobi had no bank loans. Bankers used to approach me repeatedly to offer loans, but I did not believe in depending on debt. I believed in equity and self-funding.

Asia Post: How did you subsequently become associated with Shwapno?

Sabbir Hasan Nasir: After leaving Otobi, I began working as part of a UK- and US-based consulting firm. At that time, ACI Group CEO Dr Arif Daula and Syed Alamgir, who was then heading Shwapno, contacted me. They offered me a consulting role to help transform Shwapno.

Initially, I joined Shwapno as a consultant for only three months. Interestingly, despite having been the CEO of such a large company as Otobi, after joining Shwapno as a consultant, I was given a small desk beside the bathroom. I continued doing my work there with dedication, which later made things much easier for me when I took on the role of CEO.

Asia Post: What were your main findings or observations while working as a consultant at Shwapno?

Sabbir Hasan Nasir: At that time, Shwapno was suffering significant losses. My main finding was that the core problem was not merely a business problem; it was an issue of organisational culture and structure.

There was a major conflict between the fundamental philosophy of the retail industry and Shwapno’s internal organisational philosophy. Retail businesses essentially have to be outlet-centric or store-centric.

But at Shwapno, I found that large leaders were sitting in huge chairs at the head office without making meaningful contributions or having a proper understanding of retail, while the stores at the field level had no authority or independence.

Second, the company was not customer-centric. There was no culture of listening to or understanding customer complaints.

Therefore, my key consulting recommendations were to reduce unnecessary expenses at the head office, empower the stores, build an efficient supply chain and procurement system, and redesign the brand positioning based on customers’ preferences and complaints.

Asia Post: But you had no previous direct experience in supermarket or grocery retail. How did you deal with this new challenge?

Sabbir Hasan Nasir: I had general experience in retail because Otobi was also a retail- and manufacturing-based company. But it is absolutely true that I had never directly worked in grocery retail.

However, my father was a successful businessman and entrepreneur. From childhood, I had observed business very closely. I tried to learn the details of the grocery business from the grassroots level. In reality, the fundamental principles of business are similar across different sectors.

Asia Post: After joining Shwapno, you managed to increase the gross margin while simultaneously reducing operating expenses. How was that possible?

Sabbir Hasan Nasir: When I joined Shwapno, the gross margin was only 9 percent. Within a year of my joining, it increased, and Shwapno currently operates at a gross margin of around 22 percent.

I applied a famous theory that I learned from an MIT professor in a systems dynamics class. It is called the “productivity loop.” Walmart and Amazon also operate their businesses based on systems dynamics.

The basic idea of the productivity loop is that the impact of one positive action affects another factor, which in turn comes back and helps the first factor.

If you have a large scale of operations, your purchasing power or bargaining power increases significantly, allowing you to buy products in bulk at much lower prices. We initially focused on increasing our sales or scale. As our scale increased, the cost of purchasing products directly from the source declined and our margins continued to rise.

Asia Post: In Bangladesh, middle-class and ordinary consumers were not traditionally accustomed to leaving wet markets and shopping at supermarkets. How did you change their shopping habits?

Sabbir Hasan Nasir: This is actually a billion-dollar question. Changing people’s long-standing habits is one of the most difficult things in the world.

Through research and extensive surveys, we identified three major fears or perceptual barriers among consumers:

1. Supermarkets are extremely expensive and are only for the rich.

2. Fresh products are not available there; instead, frozen or stale fish and meat are sold.

3. When the familiar neighbourhood shopkeeper delivers products to your home or allows you to buy on credit, why would you go through the trouble of pushing a trolley around to shop?

Changing people’s perceptions from this point was extremely difficult.

We then selected some categories where we were strongest. Beef and rice were among them. After ensuring quality, we decided to break the existing price perception.

I was inspired by the posters for religious gatherings that were hung on the walls of dilapidated grey buildings in Old Dhaka, with black lettering on yellow backgrounds. Keeping that image in mind, I launched our “Yellow Banner” campaign.

Large green and yellow banners were put up throughout the neighbourhoods with messages in large letters such as: “Miniket rice Tk30” or “Beef Tk235.”

When beef was selling for Tk300 elsewhere but consumers saw it for Tk235 at Shwapno, it created a huge shock in their minds. By breaking this price perception, consumers gradually began leaving the wet markets and coming to Shwapno in large numbers.

Asia Post: At that time, there were strong competitors in the market, such as Agora and Meena Bazar. Did you follow or copy any of your competitors’ best practices?

Sabbir Hasan Nasir: I have never copied any competitor. However, after seeing our strategy at that time, Andre, the then French CEO of Agora, started copying our same price-discount strategy. As a result, some of our customers were moving toward them.

I then thought about differentiating ourselves through a new area. At the time, there was intense fear among people across the country about formalin in fish and food.

We contacted the Ministry of Food, the Food Safety Authority and BCSIR. They provided us with formalin-testing kits and meters. We kept those kits and meters at our stores and announced to customers: even if you do not buy products from our stores, you can bring fish or fruit purchased from anywhere else and have them tested for formalin completely free of charge.

This was not merely about testing formalin. It was about creating a deep sense of trust in Shwapno in the minds of customers.

Asia Post: During the Covid period, online platforms such as Chaldal were performing extremely well. What was Shwapno’s position at that time? Were you competing with online platforms?

Sabbir Hasan Nasir: We did not actually compete; we collaborated. We believe that during a crisis, collaboration is more important than competition.

At that time, the main strength of online platforms was technology or apps, but they did not have strong supply chains or physical backends. On the other hand, Shwapno had a very strong supply chain.

We joined hands with them, and through excellent collaboration, both we and they grew. This was one of the major turning points for Bangladesh’s modern trade or modern retail sector.

Asia Post: Currently, many of Bangladesh’s major online grocery and e-commerce platforms are going through severe business struggles or crises. Why do you think they have failed to succeed?

Sabbir Hasan Nasir: The main mistake our country’s startups make is that they believe having good technology and attractive coding is enough to build a successful business. This is completely wrong.

When Amazon founder Jeff Bezos built the world-famous e-commerce company, his first decision was not to start coding. He understood that the lifeblood of an online business is its physical backend and supply chain.

If the backend is not strong, you cannot survive simply by building a frontend or an app. The gross margins of online platforms in our country are negative.

The model of bringing in investors’ money, burning cash and attracting customers through negative gross margins is completely destructive and unrealistic.

Asia Post: Please tell us about Shwapno’s future plans. Could you also tell us about the process of making the company debt-free?

Sabbir Hasan Nasir: Retail, or food retail, is essentially a “high-volume, low-margin” business. Globally, food retail businesses generally have an EBIT margin of 2 to 4 percent and a net profit margin of 1 to 2 percent.

Taking on debt or loans and maintaining high leverage is extremely risky in this business.

Our management and ACI’s board made a farsighted decision long ago that Shwapno’s balance sheet needed to be restructured and its debt reduced.

As a result of cleaning up the balance sheet, Shwapno is expected to become PBT-positive this year or next year and recover all of its previous losses.

We currently have more than 400 outlets. This huge network requires substantial new investment in logistics, supply chains, warehousing and technology. We are discussing joint investments with Japanese and other foreign partners.

Asia Post: Recently, Shwapno’s name appeared in the news in connection with a case filed by BSTI. How can such an incident happen at a large and responsible chain like Shwapno?

Sabbir Hasan Nasir: This is a very important and relevant question.

First, the products available at Shwapno come directly from all established brands and importers in the country. Suppliers or importers submit all their legal documents, including BSTI licences and import certificates, to us.

But the problem lies elsewhere. Our monthly turnover is around Tk300 crore. More than 42,000 different products across various categories enter and leave our distribution centres and stores every day.

It is physically impossible for a person to manually check whether the BSTI seal or licence has been properly printed on every product.

The only solution to this problem is to make QR codes mandatory at the government level. If BSTI introduces a QR-code system for every approved product, we will immediately be able to determine whether a product is approved simply by scanning it.

Asia Post: You have introduced a franchise model. Given the shortage of business ethics in Bangladesh, what assurance is there that franchisees will not sell substandard products from outside Shwapno?

Sabbir Hasan Nasir: Considering the context of Bangladesh, I designed this particular model, which is highly unique. We call it a “pseudo-equity-driven model.”

Under this model, the franchise or outlet owner mainly invests in the location, air conditioning, POS machines and internal infrastructure. But procurement, supply of products and staffing of the outlet remain completely under Shwapno’s control.

We purchase everything ourselves, from the products to the staffing, and control the entire operation. Therefore, even if a franchise owner wants to, they cannot sell outside products or substandard goods at a Shwapno store.

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Asia Post: Shwapno has direct partnerships with more than 2,000 farmers across the country. Given the traditional dadon or moneylending system in the rural economy, how are you working with farmers while avoiding this system?

Sabbir Hasan Nasir: Bangladesh’s rural agricultural economy is highly disorganised and fragmented. Shwapno’s main objective is to bring this food value chain within a fair, transparent and equitable framework.

Like every story, our story of an agricultural revolution also has heroes and villains. Here, our marginal farmers are the heroes, while middlemen and moneylenders are the villains who keep farmers trapped in debt through the dadon system.

We have to fight continuously to free farmers from this invisible form of bondage.

I am not a socialist; I am a human capitalist, or a conscious capitalist. We eliminate the middlemen or brokers, identify marginal farmers who are free from debt, and engage them in contract farming at fair prices.

As a result, farmers receive the proper price for their produce and are protected from exploitation by middlemen.

Asia Post: Under your leadership, Shwapno’s growth and transformation over the past decade have been truly remarkable. What advice would you give to those who are new to the corporate world and aspire to become a leader like you in the future?

Sabbir Hasan Nasir: When I took charge of Shwapno, its annual turnover was below Tk100 crore. Today, it has exceeded Tk3,100 crore.

I have several pieces of advice for those who want to become corporate leaders in the future:

1. Be humble: Humility is the greatest virtue in life.

2. Develop the mindset to face adversity and criticism: When you undertake a major transformation or project, you will make many enemies. Be mentally prepared to face constant humiliation and misunderstanding.

3. Build a spiritual connection with people: You have to understand people’s minds and establish connections with them while properly combining those insights with data and information.

4. Keep yourself continuously engaged in learning.

5. Always motivate your teammates and maintain life and spirit in your work.

Asia Post: Let us now turn to the broader economy of the country. Businesses are currently facing various challenges, including gas shortages, power shortages, traffic congestion, deterioration in the law-and-order situation and declining foreign direct investment. How do you view the country’s economic future?

Sabbir Hasan Nasir: I believe it would not be reasonable to blame only the current government for this long-term economic crisis. The trajectory of our country’s economy is much deeper.

At one point, we became the world’s second-largest ready-made garment exporter, which created employment for us. But the problems began mainly with Covid-19 and later the Russia-Ukraine war.

As a result, global prices of fuel and energy rose sharply, increasing our import costs. At exactly that time, we had a large amount of foreign exchange reserves, and we focused on building various high-cost mega infrastructure projects with that money.

Much more money was spent on these mega projects than estimated and foreseen, but the main problem is that the economic productivity due to these mega-infrastructure projects did not deliver the promised results.

Massive investments in non-essential and non-productive sectors have damaged the economy.

Asia Post: What do we need to do to get out of this crisis?

Sabbir Hasan Nasir: First of all, it is necessary to qualitatively train our great young people and form a professional labor force. Instead of sending untrained people to work abroad, train nurses, restaurant and retail managers.

Second, it is necessary to develop our processing industry on the example of Vietnam, which exports agricultural and related products worth billions of dollars.

We are losing about 30% of our harvest due to post-harvest losses. Instead of storing the harvested potatoes and onions in cellars, we could process fruits and vegetables, including mangos and lychees, and repeat the success of Vietnam’s agricultural processing industry.

Third, it is necessary to develop the electronics industry at the level of India, China, and South Korea and not burden the environment with waste and emissions.

Fourth, it is necessary to clean up the banking sector and regulate credit policy. Without lowering the interest rates, new industries will not be able to be created.

Bangladesh Bank and Bangladesh’s best economists need to come up with an innovative credit rating system. The vicious circle of “bad loan moratorium” must be broken, and viable companies must be financed through recapitalization.