How to scale effectively in retail

Time: the morning of January 14, 2003
Location: Beijing China International Trade Center
Moderator: Lan Liu, Editor-in-Chief of CEConlines Digest
Discussers :
Wu Jianzhong, Vice President of Beijing Wumart Commercial Group Co., Ltd.
Ai Xiao, General Manager of North China Region of China Resources Wanjia Supermarket Co., Ltd.
Guo Qing, Manager of North China Enterprise Development Department of China Resources Wanjia Supermarket Co., Ltd.
Zhang Yukuan, General Manager of Beijing Deweizhi Pharmacy Co., Ltd.
Deputy General Manager of Wang Yingjia Shitang Pharmaceutical Co., Ltd.
Zhang Yu, Deputy General Manager of Beijing Qizheng Software System Co., Ltd.
Deputy General Manager of Longkai Beijing Huaen Technology Development Co., Ltd.
Yuan Fei, Manager of Beijing Henderson Electronic Products Co., Ltd.
Wang Yongmei, Training Manager of Beijing Lishi Jiaxun Management Consulting Co., Ltd.
Liu Baocheng University of International Business and Economics Dean of Sino-French International School of Management
Wang Chengwei Senior Manager of Deloitte Consulting (Shanghai) Co., Ltd. Beijing Branch
Ma Fang SAP Beijing Senior Application Consultant

Monthly CEConline Website The third phase of the "Management Salon" was held in Beijing to discuss the dilemma of retail expansion. A total of 12 managers from retail enterprises, management experts in related fields, and website users discussed four major problems that plagued the efficient expansion of retail enterprises.

According to statistics, in 2001, the sales growth rate of the top 20 chain enterprises in China was 43%, and the number of chain stores increased by 46.7%. However, scale does not equal efficiency. In 2001, the top 91 supermarket chains, in addition to the increase in the average human efficiency, the average land efficiency decreased by 1,500 yuan, and the average net profit rate decreased by 0.32%. From the evidence of chain enterprises, we can get a glimpse of the development of the retail industry. How can the retail industry ensure efficient expansion?

Facing the competition of large hypermarkets, how should specialty stores respond?

Yuan Fei, who raised this question, explained in detail, Henderson Albert once opened a specialty store to sell PDA products. The initial profit was relatively high, but later it was hit hard by large hypermarkets, and the profit became very poor.

Making a fuss about the word "specialized" Wang Ying believes that specialty stores have relatively no scale advantage and higher costs. Large hypermarkets have different formats, operate different types of products, store a large amount, and focus on buying and selling, which is incomparable to specialty stores. But specialty stores also have their own advantages. The most prominent one is specialization, so they can make a fuss about the word "specialized". For example, Jiashitang Pharmaceutical promotes pharmaceutical services and requires shop assistants to provide consumers with services like health care doctors, rather than just staying in the concept of general commercial services. In general, hypermarkets pursue wide-ranging and wide-ranging, and specialty stores need to enhance personalized things, such as professional services.

Complementing the advantages of hypermarkets From another perspective, specialty stores are not only incompatible with hypermarkets. In fact, both parties can complement each other's advantages and achieve common development.

Jiasitang Pharmaceutical has been cooperating with hypermarkets in recent years, such as Wumart, Pursmart, Makro, and many other supermarkets. The most typical is the cooperation with Little Aries Supermarket. The two joint ventures established a pharmaceutical company, and Jiasitang Pharmaceutical entered the Little Aries Supermarket to open specialty stores. For hypermarkets, a new format has been added, while bringing convenience to customers. In addition, the professional quality possessed by the personnel of the speciality store makes up for the lack of professionalism of the hypermarket in a timely manner. For specialty stores, the first benefit is passenger flow. The passenger flow of hypermarkets is much stronger than that of specialty stores. Secondly, the management ideas of hypermarkets are more open, innovative and advanced than pharmacies, which can promote the improvement of the management and service level of specialty stores.

How to effectively manage the relationship between the head office and branches, especially in terms of personnel control and training?

Wang Yongmei, who used to work at Yansha, said that if the branches are in the same city, it is easier to manage. For example, the head office can recruit and train staff uniformly. If the branch is expanded to other cities, it will increase the difficulty of management, bring about problems in personnel control and training, and may even lead to a decline in the overall service level, which will have an irreversible impact on the brand.

Unified strategy, effective management When many domestic retail companies are expanding, the headquarters seems to have no systematic guidance plan except for leading the detailed operation of business links and helping store layout. The Achilles heel of China's retail industry is the lack of an accurate grasp of the market and a clear strategic layout. China Resources paid special attention to this point when expanding, and realized that there must be a unified strategy first.

Ai Xiao introduced that China Resources asked Roland Berger to make an overall marketing strategy, including regional strategy and format strategy. The regional strategy refers to the expansion and positioning in the more developed regions in China, including the three major regions of South China, East China and North China. The business strategy is mainly positioned in three aspects: the first is a comprehensive supermarket, which meets customers' requirements for one-stop shopping for consumer goods; the second is a hypermarket, where China Resources acquired Wanjia Department Store, the largest chain enterprise in Guangdong Province, the year before last; The third is the discount store, which will be launched in Beijing this year.

How will the strategy be implemented? China Resources has taken a series of measures. First, a cross-regional and multi-format organizational structure was set up. The headquarters is responsible for strategic functions, and standard setting, human resources, and financial control are managed by the headquarters. The three major regions are mainly responsible for core business functions, including procurement, logistics, and branch management, all of which are under regional management. In this way, the management framework of the headquarters management standard and the regional management business has been formed. Second, a new business process system developed across regions and multiple formats was developed. Third, a set of corresponding management and control systems have been formulated, including reporting systems and assessment systems. From strategy to organizational structure, to business processes, to management and control systems, to achieve effective management of large systems.

Fine-tuning according to the specific situation Wu Jianzhong introduced: Wumart's approach is that the corporate development strategy, standard business model, unified allocation of human resources, and unified financial control are all managed by the headquarters. Each branch in East China Market and North China Market has the same main framework from business orientation to product structure. At the same time, it is authorized to the local regional headquarters or local stores in accordance with the actual needs of local suppliers, local product characteristics and the special needs of local consumers. Fine-tune the situation.

Wang Ying introduced the experience of Jia Shi Tang is that in the relationship between the head office and the branch, it emphasizes the controllable type, and finds the position of how much it can be controlled. If you can manage it, you must manage it. Can manage.

Wang Chengwei concluded that in the business model of the head office and branches, each enterprise has formed its own cultural characteristics in the process of creation and development, and has its own model. Too much centralization may constrain the following The hands and feet of the people, the enthusiasm is not fully exerted, and the excessive delegation of power will also get out of control, and various problems will occur.

How can retailers improve supply chain efficiency? How to form an interdependent relationship with suppliers?

The logistics of the retail industry are widely related, involving many links such as cargo transportation, warehousing, cargo tracking, customer return service, payment collection service, information exchange, and document circulation. How can we effectively manage the supply chain?

Forming strategic alliances with suppliers From the perspective of the pharmaceutical retail industry, Zhang Yukuan said that the potential problem is the link and breakage of the supply chain. There may be only three or four drug wholesalers in the United States, while China has more than 6,000 drug wholesalers and manufacturers. As the master of the terminal, that is, the enterprise that masters the wholesale distribution is not in an advantageous position. Therefore, the connection of supply chain links is the most important issue. Seeing this, Dulwich Pharmacy took an early step in procurement, developed an order procurement system of 200 million yuan, and formed strategic alliances with 12 well-known domestic enterprises. In this way, we have won the initiative in terms of product quality, supply channels, and regional agents. This effort will be more obvious after three years.

Working hard in every link of the supply chain Guo Qing introduced that China Resources has worked in the retail industry for so many years and believes that there is still a lot of potential to be tapped in the supply chain. In the group's new "Four Five" plan, the integration of the supply chain and the improvement of supply chain efficiency are placed at the core. The supply chain involves a wide range of aspects, from the exchange of information with suppliers, the flow of documents, to the arrangement of its own logistics, to the layout of the distribution center, to the flow of goods between the distribution center and the store, all aspects are very close. connect. To improve the efficiency of the supply chain, we must work hard at every link. Logistics is a very important link that reflects the core competence of retail enterprises.

Wu Jianzhong introduced that among Wumart's three business formats, the hypermarkets and chain stores are directly delivered by suppliers to the stores, and the delivery volume is relatively large, with an interval of two or three days. There are more than 300 convenience supermarkets in total. They built a unified distribution center by themselves and entrusted third-party logistics management.

Using Information Technology to Improve Supply Chain Efficiency According to the statistics of SAP, all kinds of enterprises around the world rely on information systems, except for the financial industry and the telecommunications industry, followed by the retail industry. There is not a large retail enterprise in the world that is not a globally networked information system, and their average investment in information technology accounts for 10% to 17% of their profits every year.

For Chinese retail enterprises, the use of information technology must first be unified planning. Ma Fang said, "I have come into contact with many domestic retail companies. Ten years ago, most of them had various information systems. But in the past ten years, the systems have been constantly changed, and some companies have invested more than 10 million yuan in total. But it’s not good.” The problem is that the vision is not long-term enough, the consideration is not comprehensive enough, and the overall planning is not done well in the early stage. This does not mean to buy a very large system at the beginning, but to consider the subsequent scalability of the system. In addition, there must be differences between the headquarters and branches of a retail enterprise. The flexibility of the software should be fully considered, and it should be able to provide support for multiple branches, not just meet the needs of the headquarters.

How to rely on financial management to control the huge cash flow generated by each store every day?

The retail industry has a peculiarity that generates huge cash flow every day. How can we achieve effective management?

The centralized management of cash flow Ai Xiao introduced by the headquarters, China Resources adopts a centralized management method for cash flow to ensure that the funds are fully utilized. Specifically, the headquarters establishes business relationships with several banks. All cash flow management is based on two lines of revenue and expenditure. Daily cash flow and cash recovery are reflected in the headquarters every day through cooperative banks. All expenditures are managed according to the budget, and the headquarters is unified in accordance with the budget.

Wang Chengwei also agrees with the centralized cash flow management model in the retail industry. At the same time, he suggested that the retail industry should make good use of the cash flow management methods and services provided by the banking industry. In addition to using the internal IT platform of the enterprise, it should also make good use of the ready-made and leading IT systems of the banking industry. Waste of investment, adding unnecessary costs.

Management of cash flow with budget means From the consulting projects Deloitte has done in the past two years, Wang Chengwei said that more and more companies are using budget means to manage cash flow. Because cash flow is the most direct application, including support for cost management, performance management, etc., it can best reflect the benefits.

According to Wu Jianzhong, Wumart has cooperated, merged and reorganized with many enterprises in recent years, and has a lot of experience in budget control. They make budgets every year based on the performance of different stores, adopt different budgeting methods for mature stores and new stores, and take into account the two factors of absolute growth and year-on-year growth between stores. The budget is more than 100, and the responsibility is assigned to the person. The assessment of the regional general manager and each store manager is linked to the budget. The company headquarters allocated funds according to the budget, and after many years of operation, there were basically no problems in the flow of funds and liquidity.

Wang Chengwei finally concluded that the retail industry must be carefully managed in every link in order to maximize profits. As an industry with a large amount of capital, retail enterprises should pay special attention to achieving a balance in the three aspects of financial resources, operating efficiency and growth scale in the process of rapid expansion. Otherwise, the expansion will be too rapid, the internal financing capacity will not be strong, and there will be problems with external financing, and there will be a collapse effect.

This article was organized by Susan Hu. Want to attend your next in-person "management salon"? Please log in to the CEConline website.