Chervonyi Market. Ukrainian non-food discounter automating stock replenishment, forecasting and pricing

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Chervonyi Market (chervonyi.com.ua) is a leading non-food discounter in Ukraine with over 170 retail outlets. 

Thanks to MySales Labs technology, the company increased the accuracy of regular and promo forecasts, optimized its inventory levels and minimized the impact of the human factor across the number of processes.

In this interview Olha Danilochka (VP Sales&Marketing) and Yuriy Tatsokha (Head of Inventory Management) shared how they use MySales Labs.

Could you quickly describe your business to provide the readers with more context?

Sure. Our first store opened in 2013 and it offered basically everything a household needs in terms of non-food products. After a successful launch, we decided to rebrand to "Best price" and scale up. During the first 2 years, we opened 20 stores in the Kiev city and region. During these two years, we analyzed a lot not only what sells well, but also dived deeper into who our customer is, what are her/his preferences, habits and needs. One of the conclusions was to move away from the brand "Best price", which is difficult to remember, to a simple, convenient one associated with our corporate color - Chervonyi Market (Red Market in English).

Our business kept expanding and it is still not slowing down. By business expansion we do not only refer to quantitative growth (number of stores), but also qualitative growth. After all, scaling any business is not possible without a review of existing business processes and adapting to new requirements - including the opening of own distribution center and introducing an automated replenishment system.

The clear sign that all these efforts were worth its effort was winning the award for the best 1 Dollar Store format chain in Ukraine in 2021.

How did you start your cooperation with MySales Labs. Which module have you implemented first?

With business growing rapidly, we were on a constant lookout for innovative and modern business solutions. The first task was to find a promo management tool. MySales was the most flexible and suited our criteria most out of all the tools we checked. Originally we were planning to introduce only a promo module. After analyzing in-depth other modules, we decided to immediately implement them and switch completely to a single solution for automating inventory management.

How do you organize the replenishment process?

Store replenishment is centralized around the distribution center and can take place according to several schemes. At the moment we use two.

First scenario:

Ordering from the distribution center takes place as per store replenishment schedule.

Schedules are formed in such a way that at the time of the next delivery, the balance of the goods is enough to cover the minimum stock on the shelf (layout).

Second scenario:

The delivery from distribution center to stores takes place on the day of goods arriving in the distribution center (Pick-to-Zero).

This tool was developed together with MySales Labs. It significantly increases the accuracy of meeting the needs of stores. 

In the event of a supplier delivering a different amount of goods than agreed, it eliminates the probability of suboptimal inventory redistribution across the stores.

Ordering from suppliers is organized in a way that there is a sufficient amount of goods at the distribution center to cover the needs of all the stores in line with any replenishment scenario. Until the next delivery from the supplier to the distribution center.

The orders are sent to suppliers automatically via email.

How do you organize the pricing process? What are the top factors affecting your sales volumes and how do you take them into account when forecasting sales? How accurate are the forecasts compared to the actual data?

We monitor the market very carefully and aim to be the most price competitive in each product segment. Thanks to the MySales Labs Monitoring module we have a solid view on competitors’ prices and a good understanding of price dynamics in the market overall.

The key determinant of our sales volumes is ensuring enough stock at great prices for products demanded in a given season.

The sales forecasting system takes into account many factors, such as price elasticity, seasonality, promo share, trends, exchange rate fluctuations and others. The system's forecasting accuracy is quite high.

How often do you run promotions? What is the share of promo sales in total? What would you say about the effectiveness of your promos?

Any promotional event must be approached thoroughly. All our promo activities are conducted according to the promotional calendar. It takes into account seasonal factors as well as popular holidays. Developing the calendar a year ahead allows us to prepare better for the promo implementation. It includes developing a communication strategy, selecting high-quality merchandise, preparing sales forecasts  and creating a solid ordering plan. For each promotional event we model which products should be playing the leading role. We fix clear KPIs based on which it is possible to determine whether we achieved what was planned and how satisfied were the clients with that particular promotional event.

While constructing our promotional plan, we make sure to run some promos any single day of the year.

Promo share in total sold goods depends on how intensely we push promos at the given time of the year. In high season promo sales share can reach up to 80-90% of total.

How long did the MySales integration process take? Which of your systems required integration? Could you share the results of implementing MySales?

The full integration process took us three months. Another 3 months took to fine-tune the system to our specifics and needs in all MySales modules. The systems connected to MySales were 1C UPP, 1C WMS Logistics.

In general, MySales technology helped us to increase the accuracy of forecasting for regular and promo sales; optimize inventory and minimize the impact of the human factor through maximum automation of processes.

Original source: https://retailers.ua/news/tehnologii/13154-yak-mereja-chervoniy-market-atomatizuvala-protsesi-popovnennya-zapasiv-prognozuvannya-ta-tsinoutvorennya