23 December 2011

Lean in retailing

Gekås Ullared is the biggest retail store in Sweden, with a turnover of 3.4 billion SEK (about $450 million USD). They are renowned for their low prices, though their business idea is to facilitate a shopping experience (i.e. the customers shall feel they made a great deal). Note that they only have a single store in the middle of nowhere with 1100 employees, I'm not talking about a chain of stores here.

I think Gekås is one of the businesses in Sweden with the most lean mindset. I have no idea if they have studied a lot of Japanese companies (or Wal-Mart), but they embody a lot of key lean elements in their business:
  • The experience as a customer is that everything flows, virtually no visible bottlenecks. There can be a line getting into the store, but inside you are amazed at smoothness of everything.
  • The company want to fully control key activities, like supplies and when to restock each shelf. Therefore restocking is done by company employees and to by suppliers.
  • The employees are encouraged to spend as much time among the customers as possible. Stocks are refilled during daytime and inventory is till done by browsing the shelves and taking notes with pen and paper to allow the employees to get a feel for the running of the store.
  • Key figures of sales, comparisons to previous years, number of customers presently inside the store etc. is automatically extracted form IT systems and available to all personnel in real-time.
  • The CEO has in several interviews said that a goal is that every day a hundred things should be improved by 1%, and that they don't aim to improve one thing 100%.
  • The employees are empowered to a very high degree. And they are really trying to help the customers (no, their salary does not depend on how much they personally sell).
  • Most of the changes in the daily running of things seem to come from employees.
  • The CEO spends at least 1 hour a day among the customers in the store to understand the running of the business.
  • Every investment is weighted against how much money it can save for the customers.
  • They focus only at retaining their existing customers (they don't advertise at all!). New customers are only by word of mouth.
  • Even though economists suggest they could retail their products for a higher price they are adamant in keeping overhead to a minimum. "When our purchasers make a deal it shall benefit our customers."
The items above are conclusions based on personal visits, information from their web page, youtube clips with the CEO (in Swedish) and a report from University of Borås (also in Swedish).

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