In an interview at the company headquarters in Lawnton, Queensland, I spoke with Super Retail Group (ASX: SUL) Managing Director and CEO Peter Birtles about the business and growth of his company, which operates Supercheap Auto, BCF, Rebel Sports, Amart Sports, Goldcross, Ray's Outdoors and FCO.
Over the past few years the company has made several acquisitions and started two new businesses while growing its existing business units, so it has been a busy time of integration and fine tuning performance.
Mr. Birtles explained that to drive cost control and bottom line earnings, its strategy is to purchase goods as close to the point of manufacturing as possible, and bring those goods into stores at more efficient costs.
When sourcing products from overseas, it is looking for partners that can produce to the company's specifications, assuring higher quality items that meet the needs and standards of its customers. Eliminating the various layers of middlemen keeps costs low.
With the strong Aussie dollar, it has more purchasing power overseas, but rather than buying more of the cheapest goods, it buys higher quality goods for the original price points. Mr. Birtles emphasized, "The company believes that if you only chase price downwards, then ultimately you won't be able to sustain yourself in the market."
The new consolidation centre in Singapore, managed by a third-party logistics supplier, will control the flow of goods coming from southeast Asia and even as far away as Europe to manage costs. Super Retail has plans for one in Shanghai, and potentially one in southern China.
The company is also developing two new distribution centres in Sydney and Brisbane, which will handle all of the goods for each respective state. Currently it has two warehouse sites in the Brisbane area that will be combined within the new, much larger centre, and in Melbourne there is an existing centre to support Victoria stores.
These new facilities will allow the company to purchase at greater volumes to achieve better wholesale pricing from suppliers, yet be able to maintain store inventory according to the level of the individual store sales. "The inventory levels will be more efficient with the new DCs, and the company could possibly see about $30-$40 million in inventory reduction coming out of the change in the supply chain," he said.
Supercheap Auto's customer loyalty program, SCA Club Plus, launched in conjunction with its multi-channel marketing, but the company made it a goal beforehand to build up product quality and brand attributes that customers can identify. Because that groundwork has been done, club membership is increasing and sales targets are being hit. It will use the sales data to identify what customers are buying, and guide promotions and sales accordingly.
For auto accessories retailing, Supercheap Auto has the largest market share, and the company's outdoor and leisure segment, which includes BCF, Rebel Sports, Amart Sports, and Ray's Outdoor, is also the leader in the sport and camping equipment retailing industry.
At the end of our talk, Mr. Birtles summed up the company's performance and outlook by saying that retention and engagement of good people, a mindset created by the previous management, is his ongoing goal — creating the right company culture to continue strong growth.
"There is still plenty of growth in the existing business. The look and feel of every store can be improved and developed. Multi-channel marketing and sales have great potential, but the core dynamics of inventory management and space utilization offer many opportunities to improve", Mr Birtles said.
