Thresher Group identifies a 4% profit improvement and 10% inventory savings with help of ARC Retail

Send to friend

UK drinks retailer extends contract to ARC Retail to review its business processes and identify potential IT solutions, by analysing core lines and levels of stock required for optimum sales and customer service

Thresher Group, the UK drinks retailer with over 1,700 stores, has recently extended a contract to ARC Retail in an effort to tackle its merchandising and supply chain processes and recommend ways to improve the 750 million business. ARC Retail, a specialist consultancy with an independent voice when it comes to advising on how to get the most from business process and technology change, has been working closely with Thresher Group since the end of 2007.

ARC Retail has assisted in data analysis to identify which stores fall into each of three distinct brands going forward, as best suited to either the Threshers, Wine Rack or The Local facias, depending on their performance and propensity for sales in a specific category mix. It has also analysed the existing product ranges and use of space and been able to determine that too many products are being stocked, or too much store space is being taken up with poor selling lines. As a result, a new range review process has since been introduced in order to narrow down a previous range of around 6,000 products, down to a range of about 1,000 best-selling lines. By carrying-out 'What if' analysis and looking more closely at the retailer's sales data, ARC Retail consultants have unravelled a 4% profit improvement with only very small price changes on certain lines (as little as 1 penny) and better use of space. Analysis of inventory has even revealed potential savings of up to 10% by delisting and selling through any poor selling lines.

"The Thresher Group business is an amalgamation of businesses assembled over time and under various ownerships and brands with strands from the brewing industry," said Yvonne Rankin, chief executive at Thresher Group. "The company historically was geared towards pushing out products, rather like a wholesaler, as opposed to acting more like a retailer and listening to what the customer really needs."

Rankin was brought in to turn the business around after a buyout by Vision Capital - a private equity special situations investor - and P.I.C. in mid-2007. A lot of investment had already gone into overhauling its enterprise wide IT systems through SAP (a system which goes-live this autumn), but Rankin said she needed objective help and advice on how to improve some of the fragmented retail processes within the group given its history.

"We needed to be a retailer primarily based on retail best practices and realised that robust process and also technology is part of making more profit," said Rankin.

The challenges the business faced, which Rankin gave to ARC Retail as objectives, were the need to develop an effective price and promotions strategy, as well as help with merchandising and selecting winning product ranges.

ARC Retail focused on the retail importance of the customer first of all. By looking at product ranges, it found that occasionally ten times too many products were being ranged in some stores, instead of maybe the ten per cent that really drive profit. And by looking at the retailer's use of space, it felt that many regional stores had too much space for the sales they were achieving. For instance, 14% space cuts have since been identified across the Group, giving rise to significant cost savings and other opportunities.

ARC Retail has recommended how stores should be laid out for improved sales and has also advised on managing promotions more effectively through the potential use of forecasting and planning software. Promotions have previously only consisted of 'three for two' offers at Thresher Group and ARC Retail has assisted in the trialing of new promotional mechanics.

"Before, store staff had a little more autonomy and flexibility in what to stock - but this and other issues have led to range proliferation over time" said Rankin.

What products to sell, what promotions to run, or what prices to offer, are now centrally managed - based largely on analysing store performance and what the local customers are likely to want. Improved reporting systems are also helping the retailer get to grips with how profit can vary quite drastically with what ranges are stocked.

Rankin said that ARC Retail is helping to increase Thresher Group returns on space by around three per cent over a twelve-month period, and is striving for savings of up to ten per cent in the longer term.

"Getting smarter in terms of how we use store space and cutting down on poor sellers is worth millions in savings," she said.

Going forward, Thresher Group is looking at new tools to help with promotional planning and space management, with ARC Retail acting as an independent advisor.

"Off-the-shelf technology is actually very hard to implement and vendors don't necessarily go to the depths of retail expertise that independent consultants like ARC Retail do," said Rankin. "I don't think of ARC Retail consultants as IT people really; they're retail consultants, first and foremost, with a pragmatic approach to making some sense out of the minefield of technology solutions that are out there. Big consultancies can charge a fortune for a similar service."

Comments (0)

Add a Comment

This thread has been closed from taking new comments.