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A Supermarket Boosts Operational Performance with Data-Rich Insights from Arch Retail

The importance of managing stock and margins
A successful retailer always walks a tight rope between overstocking and understocking, pricing too high or pricing too low.

To operate efficiently and profitably, a retailer needs to:

  • Carry optimal stock of the right products
  • Sell them at the correct prices
  • Know which products to order, when, and at what prices
A customer walks into your store and cannot find what they are looking for. It is about more than the sale of a single item. It is about your customers’ frustration. They have to return or go to another store to find what they are looking for. If it happens often enough, they might never return to your store again.

But overstocking is as disastrous to the success of your business. Your cash flow is tied up in stock, and if stock does not move fast enough, you end up with pilferage, breakage and expired stock.

You need stock to move fast enough and at the right prices to run a profitable business.

To do that, you need timely access to store performance reports to make sound business decisions.

This case study shows how the business intelligence (BI) component of Arch Retail helped a supermarket successfully walk the tightrope of retail business success and outperform its previous performance and that of its peers

Best practices for best results
The supermarket in this case study is medium sized with 6 POS points and all the standard service departments (butchery, bakery and deli) of a supermarket.

It has been running on Arch Retail for many years. However, as the store started using the BI component of Arch Retail, it noticed room for improvement in its stock management and margin control. As they implemented these changes with the aid of Arch Retail’s BI, they saw marked improvements in their performance.

However, they were not only improving their own performance compared to previous periods. They were also outperforming their peers.

The supermarket forms part of a well-known, national corporate group of supermarkets. Comparing its performance to similar stores from this group in the same area shows clearly that best practices work.

The right data to make the right decisions
The business intelligence (BI) component of Arch Retail gives you easy access to all the information about your business to make the right decisions. Store management can access the relevant store performance data in a user-friendly format and use it to make timely and calculated interventions.

The diagram below gives an overview of how Arch Retail functions. It is a comprehensive store management solution that addresses all the essential variables of a retail store.

The Stock Plan and Margin Plan modules are at the core of AR and this case study. It is the dynamo that drives efficiency and, ultimately, profitability.

The Stock Plan module allows you to maintain optimal stock levels and avoid overstocking or understocking. The Margin Plan module allows you to maximise profits through strategic and timeous sales price management.

When used correctly, these two modules give you the accurate data you need to make the right decisions for your business.

Results that speak for itself
The results below compare the performance of the store under discussion from 2019 to 2020. Despite altered consumer shopping trends due to COVID-19, the supermarket improved performance and outperformed its peers.

Proactively manage challenges & changes

The performance dashboard below compares the key performance indicators (KPIs) of the store for June 2020 with June 2019. The top figure in each block is for June 2020, the bottom left figure for June 2019 and the resultant percentage reflects the change.

Although transaction count was markedly lower in 2020, basket value increased significantly. Due to COVID-19, shoppers made less frequent visits to the store but with more bulk purchases per visit.

The effect of Covid-19 is visible below in the transaction count drop in March compared to the previous year.

However, despite fears of reduced sales, sales and gross profit margin showed a marked increase in March, April and May. Overall sales and margin were also up on 2019:

Basket size analysis shows the reason for the increased sales and gross profit. The line graph below shows that the basket size for the past 5 and 13 weeks were well above that of the previous year:

Even though the basket size analysis showed an improvement compared to the previous year, the five-week trend (light blue line above) indicates that there is a downward trend compared to the 13-week trend. It tells store management that action is required to reverse the trend.

Pinpoint & address problem areas

Individual departments must be monitored and managed to improve the overall sales and performance of the store. In the graph below, the effect of COVID-19 is again clearly visible in the liquor and cigarettes departments. The ban on these items during lockdown wiped sales in these departments completely. However, the store could recover these losses elsewhere through effective management.

In January 2020, the store had picked up a serious problem with items that were sold below the target margin. By focusing on sales prices, the issue was brought under control in one month. By the time the impact of COVID-19 was felt in March, they had further improved it to virtually zero:

As shown in the graph below, the store was able to increase gross profit due to less promotional sales. For this store, measuring house brand performance is an important factor to include in this scenario since the holding company give performance incentives for house brand sales.

Maximise Arch Loyalty trends

The Arch Loyalty card solution has been running in the store for a few years already. Loyalty sales were already in the order of 60% of total sales (see the graphs below), so it was important for store management to track sales by cardholders in relation to total sales in the store.

Contribution to sales (%):

Contribution to Sales (monetary value):

As the graph below shows, the margin on non-loyalty customers was slightly higher compared to loyalty customers. However, cash profit on loyalty customers was substantially higher than on non-loyalty customers.

The primary benefit of loyalty cardholders, however, was that they showed a significantly larger basket size, as per the graph below. The effect of COVID-19 from March onwards was the same for loyalty and non-loyalty customers, but the spike was highest for loyalty cardholders.

Outperform peers

As mentioned, the store is part of a national corporate group which allows them to compare their KPIs in Arch with their peers in the same region.

The figures in the graph below clearly indicate that the case study store is exceptionally well managed and outperforms its peers. The top figure in each block of the graph is for the case study store, the bottom left figure for the peers’ stores and the resultant percentage is the difference.

Even the higher stock holding, indicated in yellow, is positive as it was to sustain the store’s higher sales levels.

The exceptional performance of the store is greatly due to applying Ach Best Practises guidelines in the store, backed by management using BI pro-actively to intervene, where required.

Excel and succeed
To paraphrase the saying: If you can’t measure it, you can’t fix it.

This case study shows how the BI capability of Arch Retail allows you to do just that. It gives you the ability to pinpoint and address problems to improve operational efficiency and profitability and to excel above your competition.

The Arch suite of products is designed to give you the edge in retail. Our clients are our business partners, and we are only as successful as you are.