Arezzo&Co has focused on developing its retail operations over the last 5 years through three main strategies:
1. Growing its owned-store channel which now accounts for 21% of sales and has driven the development of retail competencies.
2. Investing in information technology to integrate retail systems, provide data insights, and better manage inventory, sales performance, and customer relationships.
3. Improving people productivity through training, incentives, and performance management to increase engagement and operational execution.
3. .1 Creation of retail-oriented culture
1
Growth of owned-store channel, 21% of sales over the last twelve months, has driven
Arezzo&Co retail culture for the last 5 years
Evolution of number of owned stores
50 Development of retailing competences
45
owned stores as benchmark
29
21 Closer relations with end customers
10
6 Maximize shareholder value generation
2007 2008 2009 2010 2011 2Q12
2T12
# owned stores
3
4. .2 Development of competencies
1
Growth of owned-store operation boosted the involvement and support
from the entire Company for the retail operation: owned stores and franchises
Sell-Out Focus
Information Technology - importance of point-of-sale data
People - sales force productivity and creation pool of talents
R&D - process of creating collections with sell-out vision
Sourcing - supply strategy based on interpreting turnover
Financial - broader value chain management through :
• Working capital: accounts receivables and inventories
• Evaluation of investment in point-of-sale
• Retail management by results
4
5. .3 Management of franchisees
1 working capital
Extension of receivables terms aims to create incentives to maximize sales of chain of
stores
Objectives for more integrated management of franchisee due dates :
• Increase sell-out focus
• Smooth flow of payments
• Raise cash-flow predictability enabling more new investments in the business
• Detach payment period from flow of deliveries
Management of terms for settling receivables from franchisee
Payment terms for franchisee longer from scenario 1 to scenario 4
Launch .3 .4
.2 ILLUSTRATIVE / NOT TO SCALE
collection
Start invoicing
.1
.1 Smaller collection - buy 80% of target
Investment in stock
Start sell out .2 Smaller collection -buy 100% of target
.3
Bigger collection -buy 80% of target
.4
Bigger collection -buy 100% of target
Deadline for sell-out of product in store 5
6. .4 Feasibility analysis for single-brand
1 stores
Decision to open a store takes into account both geographic location and generation
of additional value for shareholders
Feasibility analysis owned-store strategy
• ROIC vs. NPV
• Sensitivity analysis for different scenarios
• Sales potential of POS in question
+
Net present value
owned • Key consumer centers
stores (mainly SP and RJ)
• High profitability + high operational efficiency
• Benchmark for franchisees
Franchise • Flagship stores ensure greater visibility and
stores reinforce brand image
-
- 20% +
ROIC 6
7. .5 Retail management by results
1 Monitoring results of each store individually
ensures healthy and sustainable results for the entire distribution network
e.g. variables e.g. corrective measures
• Analysis of actual versus planned sales
Revenue • Assessment of store's stock-out level and remainder
• Product Mix Review
• Review of lease agreements
Occupancy cost
• Adjust store's sales area
People • Store's team count
• Compensation and benefits package
Tax • Tax regime: "Simple" X "Presumed" X "Actual"
• Fixed / variable costs analysis - operational leverage
Back Office • Analysis of Back Office sharing between stores versus structure for
dedicated franchisee
7
9. .1 Integration of retail systems
2 The retail system’s integration process began in 2008 with the company owned
stores that became the benchmarks for the franchises, ensuring a
homogeneous reading of the performance indicators
Implement system in
Implement integrated Do rollout for entire
2-3 Arezzo franchisees
system in company network in all brands
(Pilot)
Strategic Demand Expected results
Obtain SSS information and other retail Automatic capture of sales data from stores
indicators
Allow the implementation of a smart and easy Data warehouse with consistent turnover information, product inventory, and sell-out information
to use supply model for the franchisees for R&D, Merchandising, and Sourcing.
Reduce the franchisee back office to improve Tools for managing sales performance in stores, products and their attributes, salespeople,
their results inventory control, integrated financial management, and monitoring of results
Provide CRM (Customer Relationship Tracking and sharing the profile of each client, their habits, customs, comments, and sales
Management) and other technologies transactions, creating aids for the strategic sales planning of the stores
9
10. .2 Evolution of Technology Applied to Retail
2 The conversion of 65 systems into a single platform required a standardization
process and a monitoring of the processes of the company and the
franchisees, capturing the benefits of system integration
Consolidation of the
Start of the Arezzo&CO project of privately owned
65 DIFFERENT stores and the pilot Roll-out of the Project
unified system project of
SYSTEMS project with franchised system for the chain conclusion
retail
stores
Year 2009 2010 2011 2012
% integrated stores
5% 46% 87% 95%
Review of store processes
Improvement of the store management reports and the
Main technological and customizations of the Consolidation of capture
development of new technologies for supplies
actions integrated system for the tools for POS information
management based on sell out
franchise network
Beginning of the continuing products project and
New solutions and B2B Consolidation for open collection, closed collection, replacement and sales actions based of sell out.
processes sale of products in production phase Effective use of sell-out information by R&D, collection
planning and POS management.
10
11. .3 Retail Operations Management Support
2
The processes and retail systems support not only store operations, but the
entire supply management and the relationship with the final client.
The use of technology to support the management process...
1 2 3
To manage
To optimize To get to
performance
supply and know the
indicators of
stock consumer
both the store
management profile
and the team
…to sell more, have no overstock … and achieve goals!
11
12. .4 Supply and Inventory Management
2
1 Optimize Supply and Inventory Management
Receiving Sales Replacement
Products in transit Turnover Report Arezzo Web, Schutz Web
Allows stores to identify billed Analysis of sales and inventory, B2B website to offer online products
merchandise ahead of time to adjust evaluating indicators by SKU (replacement inventory) automatically
space in inventory and notify clients generating actions for each item integrated to logistics operations
Novelties Sales Champions Continuing
Allows the manager to see the new Presents the high turnover Monitoring of replacement of
products daily preparing the team for products, integrated with the B2B continuing products for stores, based
daily sales activities (on-line replacement) on the reading of information from the
POS
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13. .5 Sell-out Performance Management
2
2 Manage Performance Indicators for Store and Team
Supplies indicators and sales information on
Control Panel a daily basis, facilitating immediate action on
the results leverage points
Salesperson Allows monitoring and actions regarding the
Ranking* performance of the online store sales team
Information about sales of stores with online
Daily sales* updating, providing the main store indicators
Sales achieved vs goal vs previous year - by
Comparative
date and by product category, projections for
Information closing and inventory
Allows daily management of the operational
Average Markup* results by store, period, collection and
product
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* Online monitoring
14. .6 Greater Proximity to the Final Client
2
3 Get to know the Customer Profile
Consumer purchases
Identify consumers by profile, products
purchased, purchase frequency, actions
and campaign yield
CRM Activities
Control and management of sales activities, based on
actual sales data, seeking to increase purchase
frequency
14
15. .7 Current Focus
2
After completing the unification system, a new cycle of seeking technology
solution to support the retail operation
Improve planning, creation, and distribution of new collections, reducing the
time to market;
Accelerate research and the adoption of the technologies for the store floor
(tablets, collectors, image and traffic monitoring, electronic media);
Technology to support Distribution Centers;
Constant training activities and adoption of good management practices and
operational processes with the franchisees;
CRM activities to obtain greater client interaction.
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17. .1 Retail Management: focus on productivity
3 Process of Improvement and
Team Focus Process Optimization Management Improvement
• Sales • Standardization of back • Sales + Excellent
service
• Operational projects office projects at the
of low perceived store • Business management
+
value • Simplification of • Follow up to the DRE
• High turnover rates controls and reports of the stores
+
among the team • Better use of available • Indicators management
systems
• People management
• Managerial treatment
MANAGEMENT EVOLUTION
MANAGEMENT EVOLUTION
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18. .2 Retail Management:
3 Training and Available Tools
A entire approach for training sales teams in the various fronts of the retail operation
Training Tools
• Product
• Fashion and trends
• Sales technique
• Store operations
• Visual merchandising
• Sales systems
• Integration of New operators
• Management Training
• Sales Conventions
• Sales Incentives (motivational)
• Over BRL 1M invested in training in
the first half of 2012
• 20% Retail turnover in Company
owned Stores during the first half of
2012
18
19. .3 Retail Management:
3 Training and Available Tools
Focus on increasing training and sales motivation, seeking to increase engagement
and guidance for results
Training Hours/HC
• Over BRL 1.5M invested in sales incentives in
2011. Reaching over 4,500 people in the
company and franchise network sales force
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20. .4 Retail Management:
3 Other incentives
Strengthening the retail culture
Initiatives
High
•“Belly on the Counter” project: periodic visits from Investment in
People
senior management to the store network
•“Pereirão” project: project of the 2011 apprentice
class, focused on store operations
Supporting Structure for Projects
R:152
G:216
B:218
R:208
G:240
Higher sales
B:232
Retail’s
Maintenance - Interface High
Visit the store for preventive or corrective maintenance
R:80
G:179
and
profitability
virtuous productivity
B:207
circle
R:216
G:181
Stores Support Service provider B:163
R:177
• Notifies maintenance G:181
demands B:121
• Schedules preventive
maintenance
• Notifies support team about the • Requests emergency visits
R:119 R:160 Efficient
G:119 G:160
maintenance demands that may
arise at the store
• Approves the estimation B:119 B:160 operational
for materials for repairs
and the visits provided by execution
• Notifies the store of the date the company R:217
of preventive maintenance • Recieve the visit reports G:217
from the company 1
B:217
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21. .5 Evolution of people schedule
3
Several implemented initiatives of the People schedule, seeking to attract, retain, and
develop Company talents
Initiatives 2012 People Cycle
• Trainee 2011 projects Feedback of the results of the previous Jan/Feb
• People Cycle year and Competence Evaluation
• 360º evaluation to “C level”
Payment of bonuses and Definition of Mar
the Goals for the Year
Partners People Committees July
Program
Feedback for Competences and Career /
Aug/Sep
Consolidation of the Development Plans
Principles:
• Real members Sep/Nov
Leader Development Program
• Meritocracy
• Long term perspective
Design of the Budget and People Plan Oct/Nov
•Adhesion of Company 1st line for the following year
•Talent Pool
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