THE cost of supplying stores, many in remote areas, was what doomed the first version of the 1Malaysia People’s Grocery Stores (KR1M), said its operator, Ameer Ali Mydin.

The managing director of Mydin Mohamed Holdings, Ameer, said KR1M 2.0 which will replace the shuttered venture, will not likely inherit these logistic problems as it is based on a different business model.

The new model sees the government relying on partners which are existing retailers with logistics network and outlets, thus reducing costs.  

“KR1M 2.0 is ‘better in principle’ than the scheme’s first version, which chalked up losses of more than RM100 million and which is now known as KR1M 1.0,” he told The Malaysian Insight.

Ameer operated and supplied KR1M on resources from the popular Mydin chain of stores. Mydin would supply all 185 KR1M outlets in places as far away as Kapit and Belaga in Sarawak, with products from its own warehouses which were repackaged and sold under the 1Malaysia brand.

KR1M was Mydin’s corporate social responsibility (CSR) project but he did not expect it to record such huge losses.

The KR1M initiative was started in 2011 as part of the Najib administration’s strategy to help low-income Malaysians cope with rising prices of goods.  

“Our aim was to open stores in all areas of the country.”

Compared with other chains, which have more efficient supply-chain networks, KR1M stores would often be far away from Mydin’s warehouses.

“For instance, we have one mini-market in a remote area that does only about RM3,000 in sales. But the cost to transport goods to the store is RM1,000 almost every day from the warehouse,” Ameer said.  

“Logistics came to account for 20% of all our costs. So, to cover the cost is difficult because we also have to sell our products at below market price.”

In contrast, the KR1M 2.0 project does not involve opening and operating new stores. Instead, existing retailers and their stores would be signed on to provide products at lower-than-market prices.

“You avoid opening new stores, hiring new staff. Instead you use existing stores where staff and equipment are already in place,” said Ameer.

“You just ensure that the participating store sells a selection of goods at cheaper than market prices.”

More suppliers and retailers will also reduce the cost of stocking these items. 

Under KR1M 2.0, existing supermarkets, which retain their original names, will sell 50 selected household goods at lower prices. So far, the government has signed on two partners – the Tunas Manja Group ant KK Mart.

Unlike KR1M, these goods will not be labelled with a generic 1Malaysia logo but will be existing brands that consumers are already familiar with but sold at lower prices.

For a start, stores in the KR1M 2.0 programme will sell four items – rice, sugar, flour and cooking oil – said Prime Minister Najib Razak when launching the initiative last weekend.

A 10kg bag of 5% broken rice would be sold at RM24.90 compared with the market price of RM26, a 1kg bag of sugar will retail at RM2.85 instead of RM2.95, and 1kg of flour at RM1.30 instead of RM1.35.

Cooking oil will still be sold at its subsidised price of RM2.50 per kg.

About 50 retailers are currently participating in KR1M 2.0 and the government aims to increase this number to 3,000 nationwide in three years.

Ameer also refuted the popular belief that the government subsidised KR1M and that it lost public funds in the five years of operations.

“The government only paid for the asset, which is the physical store and its renovation. Everything else from the staff to utilities to the goods were all provided by Mydin.”

When Mydin decided to shut down all KR1M stores beginning in September, Ameer said the shop lots were returned to the government.

Some of those shop lots would have been taken up by other retailers. – February 6, 2018.