Dramatic Improvement in Store Efficiency – A Case Study
We are all aware of tough trading conditions and a very competitive retail landscape in South Africa. It is therefore imperative that retailers optimise efficiency in their operations to ensure not only survival, but to also meet set-out growth objectives. Arch Retail, with functionality developed to meet these challenges, offers a tool to do just that.
In general, the challenge is to manage stock and margin efficiently trough processes. Typically, over-stocks tie up cash in stock, resulting in potential cash flow problems, whereas under-stock will not only result in loss of sales revenue, but also potential loss of customers. In the case of margin control, selling product at prices lower than target, will have a negative impact on profitability, whereas products priced too high will result in losing customer loyalty to your competitor(s).
A project was undertaken in a medium-sized supermarket, which has been running on Arch for a while to see how much we could grow turnover, whilst optimising efficiency. To achieve this, a multi-tier strategy was decided on. The growth strategy included the launching of a loyalty rewards system, complimented with unique sales promotions, as well as an aggressive price strategy, while the efficiency strategy included the implementation of Arch’s model stock and margin controls, as well as its recommended processes and disciplines.
The strategy above was implemented in the store earlier this year. Specific care was taken to ensure all underlying business processes, supporting the strategies were fully implemented and, instilled disciplines required to maintain these. The results for the 3 rd quarter of 2017 compared to 2016 figures are as follows:
- Sales (R-value) growth: 23% to R18million;
- Stockholding (R-value) down by 11%;
- Campaign sales (R-value) increased by 41%;
- Margin remained steady @ 23% with a slight increase of 0.3%.
While the 23% growth is pleasing, it was surprising to see an 11% reduction in stock value, where the opposite is usually the case. The stock efficiency was made possible by applying Arch’s integrated replenishment functionality, which increased stock turn as well as process efficiency, freeing up resources, another significant point.
Whilst the aggressive campaign and price strategy increased promotional sales R-value by 41%, it was again achieved without sacrificing any profit margin, in fact an increase of 0.3% was recorded, whilst the opposite is usually expected. This was achieved by the implementation of Arch’s integrated price automation functionality, which minimises losses, and over-pricing due to negligence and/or human error.
This store has already seen significant growth, and the foundation is laid for further growth/expansion. Says the owner of the store: “Care was taken to implement the plans correctly, it now runs like a well-oiled machine, with a dramatic improvement in figures, with much less effort”.
It is reassuring that Arch Retail, when correctly applied, will increase overall operational efficiency and process quality, resulting in growing the business profitably.