simple business
Simplification is the key to an increase in profits, argues Gilroy

“Complexity is your enemy. Any fool can make something complicated. It is hard to make something simple.” So says Richard Branson. All the great bosses I’ve ever worked for have this knack of cutting through the complexity and getting to the core of what is really important.

Cash and carries came to prominence in the early ’60s when price maintenance legislation through The Resale Prices Act in 1964 released the shackles on pricing and changed the retail landscape forever.

Their business model was simple: high volume, tight margins and strong cash flow from the multitude of thriving small shop owners and traders queuing up to make savings. All goods were paid for at the time of purchase. Cash and carry – the clue is in the name. Straightforward and uncomplicated.

More opinion from Davil Gilroy: Can cash and carries effectively serve caterers alongside retailer customers?

However, the world has changed. Wholesale customers expect deliveries within hours, not days, ordering through online and apps, click and collect options, lines of credit, a range of payment types and a choice of goods that spans the world and covers all the lifestyle changes that have emerged in the past few years. Wholesalers are being forced to go to extraordinary lengths to maintain their sales and to support their customers. All these changes coupled with downward pressure on gross margins brought about by competitive entrants are adding complexity and twisting the original business model out of shape.

Just like the multiple grocers, cash and carries have bolted on processes and services to keep pace with changing demands from their customers. The most notable change being deliveries. It is incredibly difficult to deliver efficiently from a unit designed for self-service walk-in trade. Deliveries add layers of costly complexity, which adds costs.

One of the impressive characteristics of the Silicon Valley tech operators is their front to back approach to setting up their business models. Their systems and processes are continually refined to keep things as simple as possible, giving customers a great experience, while at the same time being operationally efficient.

What if wholesale was reimagined and redesigned using simple principles? There’s not enough space in this article to cover all aspects, but here’s a couple of areas. Large inventory is exceptionally costly. The product range has to be productive in terms of stock turn and it must be clear to customers.

Unnecessary duplication cannot be afforded. Just adding a new line requires a massive amount of administration to process the information.

Then there’s ordering, handling, merchandising and the distribution interfaces. By simplifying the range there are efficiency benefits right across the business, releasing savings and arguably generating increased sales.

Customer registration is another area where simplification could yield benefits for all. It is in the interests of both the potential customer and the wholesaler that purchasing starts immediately. Yet, there are often obstacles and unnecessary paperwork in the way before trading can begin. The process can be tortuous. A 60-second registration experience should be the objective by designing out all the pinch points and simplifying the journey.  Technology can help achieve this.

Setting up an electronic self-registration process enabling a smooth flow of completion resulting in a trading card for immediate use at the end would save time and money.

Simplification is a mindset and by critically looking at all operational processes in the business, much of the costly complexity could be removed. Simplicity equals efficiency equals productivity equals profit equals happiness. And Richard Branson always looks very happy.

David Gilroy is the founder and managing director of Store Excel

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David Gilroy
David Gilroy is the convenience retail lead at W2 Commercial. He was formerly the operations director at Bestway Wholesale and Nurdin & Peacock.

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