Company Report: Retail Adventures - Simplifying the Community Brand

Company Report: Retail Adventures
Simplifying the Community Brand How the bargain brand giant retail adventures plans to consolidate under its Tasmania-based chickenfeed retailer

Written By: Meaghan Clark Produced By: William Piedmont | Wed Oct 27, 2010

For discount retail giant Retail Adventures, there is nowhere to go but up. The $1 billion company and current owner of Sam's Warehouse, Chickenfeed, My Place, Go-Lo and Crazy Clark's is the largest discount variety retailer provider in Australia, but few, if any, know this. Sure, customers get the weekly catalog in the mail or see the occasional television advertisements, but unknown to most shoppers is that all these community brands are housed under one roof. One roof, that is, and 345 stores in every territory and state in the country. The familiar brand has been providing the lower half of Australia's socioeconomic class for years, offering a variety of odds and ends to shoppers.
While familiar brands like Chickenfeed have been in the Tasmania community for two decades, Retail Adventures is a relatively new brand. The conglomerate took over Australian Discount Retailers, who took it over from Warehouse Group, two years ago. The original consolidation concept came about seven years ago originally from the Warehouse Group out of New Zealand, but according to CEO David Young, one of the newest members of the Retail Adventures team, "they didn't have a cultural understanding for the smaller, discount variety business and struggled to make it work."
Eventually, Warehouse Group's plan failed in most senses, and the private equity sector took over the business before Australia's top businesswoman Jan Cameron came into the picture. Well known for her retail work with Kathmandu, Cameron bought the business as a private individual "to hopefully be the fourth owner that will allow the company to grow from some consistent ownership," added Young. With Cameron's successful background, chances are that's going to happen. A prominent figure Down Under, Cameron is one of the most successful female entrepreneurs and is constantly profiled. Her attitude with Retail Adventures is much like her work with her other retail businesses – pushing it toward success.
Young has been with Retail Adventures for three months and realizes he has some big shoes to fill. The challenge, however, was all part of the draw. "I felt it was one of those businesses where the third or fourth owner stands to do extremely well out of capitalizing on the work of others, and all the opportunities in the business, because it had been unloved and poorly managed for a considerable period of time," he said. "This, it seemed, made it look like the perfect last job for me." While his enthusiasm for the company rivals that of a teenager, Young has a few years of experience under his belt. He began his retail career at Target, starting in Australia's largest retail chain as a sales manager and working his way up to Buying Director for the head office. After 12 years he moved to another corporate position with Diary Farm in Asia, followed by several more similar positions.

CHICKENFEED

To talk about the future of the company, Young and his colleagues are eager to begin what they have deemed "Project Simplify." To put it in the most rudimentary terms, Retail Adventures – or what Cameron acquired from Australian Discount Retailers – is simply too complicated. Rather than let it run itself into the ground, Young expects a plethora of changes to come in the next three years. The first and most important step in that process is through consolidation.
To understand Retail Adventures is to understand their brands. Within Retail Adventures lies several community owned and operated discount variety retailers that provide customer service and community support every province needs. Crazy Clark's has 150 stores nationwide and carries bulk items; Go-Lo's 150 stores have the familiar slogan "Low Price People" where any bargain is essential; Sam's Warehouse has an average of 2000 square meters and stocks the best deals on household good, storage supplies, toys, party favors, gardening tools, furniture and outdoor equipment. While there are several currently under the Retail Adventures name to date, before long there will only be one – Chickenfeed.
For those unfamiliar with the saying, which is most common in Australia, 'chickenfeed' is slang for "cheap". Much like feeding chickens, "Cheepa the Chicken" is the Chickenfeed symbol for excellent prices and services that the Tasmania - based retailer provides. The familiar brand, which is literally a chicken, "is just a fun and quirky brand for retail, compared to the rest of the discount variety business, which can be quite dull and boring," said Young.
A two decade year old business, Chickenfeed retailers are also the most successful, despite less extensive marketing techniques its brothers undertake. In the last twelve months Retail Adventures began moving Chickenfeed to Victoria, and already the outlet has outperformed all of the other Retail Adventures markets by at least 30 percent per square meter.
Young attributes Chickenfeed's success to the smart community strategies that have been implemented over its two decade career. "Chickenfeed dominates the Tasmanian market, and as a result of that we're able to move to a broad communications strategy where they are less reliant on catalogs as a vehicle of telling their proposition and are heavily into TV ads. The rest of the businesses, because they don't dominate the local markets to the same degree, are reliant on purely catalog advertising." The Chickenfeed community does a quarter less catalog advertisements compared to its counterparts, but works with 4-5 different television product commercials. Due to these financial successes, Retail Adventures will consolidate into one brand.

THE 80-20 PRINCIPAL

Retail Adventures is not built like most major retailers. While the Company is aware of basic sales strategies including sales per square meter and department performance, said Young, they are focused on their specific core, which is highly seasonal and promotional. "That core range is built on the 80-20 principle: 20 percent of our range will give us 80 percent of our business," he continued. "We value that and look after that part of the business as being the most critical piece of it."
The rest of the business platform is built on seasonal demand. This enables each community store to cater to the specific needs of their client and promote on a seasonal basis. Store shelves are constantly changing to compliment territory personalities. "As a result of that our stores are quite flexible in their ability to promote, display and plan," he said. This "merchant orientated" business has given each Retail Adventure conglomerate an edge in the bargain retail business, particularly Chickenfeed. As a result of this flexible growth, Retail Adventures demands a lot from their store management team.

THE LEARNING ACADEMY

Like any retailer, Retail Adventures has a high turnaround rate. In the past not only have the Company owners moved in and out of the business, but so have some of the 6000 retail employees. Young admits this is another area of improvement "Project Simplify" stems to benefit. As an example of someone who moved up in the business, Young can't imagine an environment where limitless opportunities aren't available to employees. Luckily, a strong basis has already been established. The Learning Academy is a project that allows the average employee to become educated on potential opportunities and provides them with a significant barrier for growth. "For the average employee this means that we can take people who join us for a job to developing them for a career through an academy that is actually recognized as an educational institution," said Young. "And that's a great thing."
More importantly, customers associate their experience with the service they receive, so ensuring both the customer and employee is satisfied is equally essential. "The key to our business is the people that are working here, and making our customers come first, and that employees understand their needs," he added.
"I think the potential for us now that we've made this strategic decision about where our future lies is that we have a very strong growth message," Young continued. This will begin with the training and development programs of its staff, and will include potential career development for anyone involved. "Our culture needs to be driven by our employees and we've got some fantastic people who have the potential to add significantly to the business. I benefited from working at Target with a career in one business, and we're starting to embark on that."

TECHNOLOGY

While the majority of Retail Adventures' structure needs to be "simplified," there is one aspect of this chain that needs to be reinvigorated. Like any retail platform, Retail Adventures is highly reliant on technology, and most specifically with the IT tool SAP for Retail. However, Young notes, the previous owners weren't able to fully take advantage of this technology's capability. "We have got the engine, but no one really built the vehicle around it," he said. "Project simplify is about using the technologies that we have available to us to better manage our whole forecasting, replenishment and allocation – the whole merchandising part of the process about getting the right product to the right store at the right time – and we're currently in the process of embarking on implementing that to give the business what it needs."

SUPPLY CHAIN

Much like "Project Simply" expects to consolidate its brands, a similar plan is in place for Retail Adventures' physical space as well. Currently the Company has "more space than we need" and expects to reduce its square footage through sale or additional retailers. The Company is looking to either become a third party logistics provider or in a matter of three years add an additional 150 Chickenfeed stores to the brand.
Currently, measures are taken to ensure the relationship between their biggest importer, China, remains strong; most recently the buying team attended a major trade fair in China to secure some of the best deals. "Buying better, buying smarter and buying direct" are all part of the process, said Young. The new CEO also likes to point out that due to Retail Adventures size, they currently have 900 containers on the water from China to Australia, "which is a sign of the significance of the business we have here."
A competitive business, Retail Adventures takes advantage of parallel imports or direct contact with third parties. While they are small compared to something like Target, they don't let trading terms get in the way of business. "It's a very merchant – trader mentality" where the Company is able to secure the best price for its clients in part because of the lack of trading complexities, added Young. This direct nature gives Retail Adventures some of the best prices in Australia.
Retail Adventures suppliers don't just come international; some of their top providers, including UCC Australia and FBA Imports, are both based in their home country. FBA Imports offers the business inexpensive housewares and much like Retail Adventures' growth, came from humble beginnings 15 years ago. Their wholesale facility is located in Victoria and services both Australia and New Zealand. UCC Australia is an exclusive distributor of extra heavy duty and alkaline batteries, as well as a major Kodak distributor. Formed in 1996 as the Universal Clearance Company, UCC Australia provides Sam's Warehouse and Go Lo with their beauty and health products. "One of the unique propositions of the business, and these two suppliers are in this category, is that it has a very large focus on taking advantage of opportunities globally for purchasing. That includes parallel imports, where both FBA Imports and UCC Australia are included, which allows us to take advantage of international pricing opportunities to bring product into Australia, and in some cases through third parties, at significant cheaper rates."

BARGAINS WITH A SMILE

Within the next three years Retail Adventures plans on transitioning all five brands into one: Chickenfeed. "The financial benefits of these conversions are significant," said Young. "It's the brand, attitude, look, feel and different approach to ranging, marketing and more that is driving these changes into one brand."
While "Cheepa the Chicken" will soon be a familiar face, so is the running theme "bargain with a smile." With the potential for Retail Adventures to become the biggest discount retailer provider in Australia, "bargain" is an essential part of its business. "We need to be famous for providing bargains," explained Young. The Company has an expensive supply chain, Young admits, but they have an effective one as well. With its substantial relationship with China, local and third party suppliers, Retail Adventures is capable of providing Australia's lower socioeconomic class with the best deals in the country.
The smile part is equally as complicated; today, Retail Adventures must build on its "quirky brand personality that is about fun." That all starts with "Project Simplify," and the transition toward Chickenfeed. This new project will turn the business around and keep production costs down, facilities in use and supply Australians with the best deals.
"The tougher it is for people out there, the better our business should be," said Young, who admits that the worldwide economic crisis hit Australia to a lesser degree than most. "The principal of value to a customer is more important today than it was yesterday, and it will be more important tomorrow than it is today. We are that value retailer and we have to live and breathe that, to make sure that we are the choice of the customer because of the value we represent."