MySales implementation at Chudo Market grocery chain resulted in a significantly increased business efficiency. Sales forecasting accuracy exceeds 80%, employees spend significantly less time on placing orders. With 97% OSA (on-shelf availability), the retailer almost entirely eliminated the problem of lost sales. Turnover increase of 15-20% released funding for new initiatives, write-offs significantly dropped. How did that happen?
Chudo Market operates in a proximity store format with 30 locations across Kharkiv and Donetsk regions. The assortment consists of a wide range of everyday use products, groceries, including private label products. Constant improvement of internal process efficiency coupled with ensuring high-quality products and customer service is what Chudo Market considers vital to success.
High OSA is one of the key determinants of customer satisfaction according to the retailer.
Demand forecasting and product replenishment are key processes in the FMCG retail business. Sales are influenced by prices, promotional activity, seasonality and a number of other factors. Incorrect forecasts and orders lead to lost sales, write-offs and frozen working capital.
MySales help retailers with automating sales forecasts and ordering. Chudo Market entirely migrated its forecasting and auto-ordering operations to MySales in April 2020. The results are impressive.
Any retail business faces a challenge of satisfying customer needs. The key role plays the availability of goods at the right time and at the right place - says Chudo Market co-founder Oleksandr Udovenko. Excessive stock generates costs and inconvenience for warehouse staff. With too little goods on shelves customer leaves disappointed. The other big thing is ordering predictability and the possibility of planning the purchases ahead. This is especially important for imported goods which take much more time to deliver.
Retail sales are affected by factors such as price, promotions, seasonality, weather, quarantine. It is almost impossible to manually make an accurate prediction of hundreds of thousands of SKU combinations for all stores by analyzing huge data sets. MySales performs this complex calculation for Chudo Market automatically.
Forecasts are built even for new stores and new SKUs (with or without an analogue). "We help businesses to order as many goods as they need. Enough for customers but not too much due to write-off risks" - says the founder of MySales, Alexey Ivasiuk.
Retailers using MySales forecasting do it at the most granular, SKU-store level. For each such a combination factors such as price elasticity, price changes in a group of products, past sales history and weather conditions (temperature, snow, rain) are taken into account. The system also analyzes the cannibalization of products in the event of a reduction or price increases. Separate module dedicated just to promotions allows for checking sales at certain promo conditions. After approval, the promotion is merged to the global forecast.
Forecasts are recalculated every day, taking into account new data points on products, price changes and promotions launched. Hundreds of thousands of positions for forecasts and orders get created automatically. The forecast is built 52 weeks ahead, but adjusted for the next 2 weeks by taking into account the sales of the last days. It allows for reacting to the factors that were not apparent in the past.
After the integration of MySales, the accuracy of sales forecast at Chudo Market exceeds 80%. This indicator depends on the volume of sales - the larger the volume, the more accurate the forecast. For popular items like bananas and sugar, the forecast accuracy is even over 95%.
Auto-ordering and promo modules
Promotions have a strong impact on sales and most retail chains conduct promos all over the year. 70-80% of consumers are promo hunters according to Nielsen research. Typically, retail chains make sales from 30% to 80% turnover from promos.
During promotions, sales of some products can increase tenfold. If the retailer does not order enough goods, the customers will be disappointed. After all, many consumers come specifically for a promotional product. Re-ordering the product may lead to crowding warehouses, write-offs and leftovers, which will have to be sold for a long time after promotion took place.
"When it comes to over-ordering products from the food category, the math is simple: if you write off 10%, then depending on the margin, you are most likely operating at a loss." says Alexey Ivasiuk.
In addition to promos, FMCG retail observes increased seasonal demand connected to events such as Christmas, Valentine's Day, summer period among others. For each of these peaks, it is necessary to make an advance order of goods from suppliers in the required volume.
MySales provides Chudo Market with auto-ordering for the entire assortment, including ingredients for its own production. The system supports both direct orders from stores to suppliers and orders through a distribution center. Thanks to MySales, the retailer pre-loads the stores with top positions on the eve of high sales, and does it according to the forecast. The system sets the delivery dates, which allows to reduce write-offs. MySales also takes into account the bull whip effect.
After the introduction of auto-ordering from MySales in Chudo Market, the time dedicated to ordering by employees significantly decreased. It became possible to plan vacations and holidays for suppliers and employees involved in ordering, which is very important during New Year's holidays and long weekends.
Turnover indicators improved by an average of 15-20%. On-Shelf Availability reached 97% with only 1% accounting for incorrect orders. With MySales it is easy to accurately measure these indicators and analyze the reasons for the absence of goods on shelves.
"We are aiming for maximum automation in the supply chain process: from orders and processing to delivery to stores," says Oleksandr Udovenko. This allows us to reduce costs and offer the most competitive prices to customers."