From word ‘go’ Supercheap Auto has been riding the high road. The business was established in 1972 by Reg and Hazel Rowe as an automotive accessories mail order business. Within two years the business was generating a turnover of $1 million and its first store was established in Brisbane. By 1993 the business was operating seven stores and in the same year Bob Thorn was appointed Director of Retail Operations. Within twelve months Supercheap Auto grew to 14 stores and by 1997 Thorn took over as Managing Director. By the time Thorn stepped down from the top job, he had grown the business to over 200 stores.
When Peter Birtles took over from Thorn, he knew he had big shoes to fill.
From Boots to cars:
Birtles had started his career as a Chartered Accountant before taking on a finance role with UK pharmaceutical retail giant, Boots. During his time at Boots he progressed through senior finance, operations and information technology roles and in the course of his professional development made the transition into the retail side of the business as Head of Finance and Planning.
Birtles says his time at Boots was integral to his development, as it provided him with a greater understanding of how larger retail businesses function within the broader market. He points out that in particular, there are two aspects that have stayed with him as a result of his tenure with the UK retailer.
“One of the most important lessons I learned from my 12 years with Boots was that customer expectations change over time. The biggest mistake you can make in business is getting stuck providing the same offer.
“Having a stake in the direction of the company, I quickly realised if you don’t adapt to changing customer expectations, customers will go elsewhere. The key to staying competitive is to review and renew.
“The other lesson I learned was everything within a business must produce a result to ensure the business is highly profitable. If it’s not, then it’s a liability draining resources that could be better used elsewhere.”
After earning his stripes in the UK, Birtles moved to Australia and in 2001 joined the Supercheap Auto team as its Chief Financial Officer. As Supercheap Auto’s CFO, Birtles worked closely with Bob Thorn and came to understand the intricacies of the business. In early 2006, Thorn stepped down from the top job and Birtles was next in line.
Making changes – from single to multi brand business:
Birtles took the reins at an interesting and somewhat challenging time in SCA Group’s development. Only a few months earlier, the company had launched its Boating, Camping, Fishing (BCF) camping and outdoor leisure stores.
The decision to expand into a different retail category came about in 2003 when the company recognised its successful business model would reach maturity in four to five years. To continue the company’s momentum, a decision was made to introduce a new business.
“We identified a number of retail categories that were of interest. Our criteria stipulated the product range had to have similar characteristics to the Supercheap Auto offering – in other words, products should not be fashionable or perishable and should be predominantly hardware oriented or consumer leisure goods,” Birtles explains.
“We were also searching for an industry over a billion dollars in size with no clear market leader.
“We conducted some research of the retail categories we were considering and we found that 56 percent of people who camp also go fishing. We also found that 88 percent of people who go boating go fishing. Fishing was the link and we developed a brand and retail offering around the concept.”
In January 2005 the SCA Group purchased CampMart – a four store camping and outdoor leisure business based in Brisbane. The business was the ideal platform to build the company’s new BCF brand which was then launched in October of the same year.
As the company’s new MD, Birtles realised he would need to make some changes to the company to reflect its new structure and direction moving forward. His first move was to restructure the management team and change some of the systems and programs to accommodate these adjustments.
“Operating under a multi-brand format, the goal posts had shifted and we needed a senior management team that was able to handle that. Under the new structure, we gave a greater level of delegation to the senior management team. By increasing their level of responsibility and accountability, we felt senior managers would be more inclined to take ownership over what they did,” he recalls.
“Also, operating under a multi-brand structure, we were able to leverage common systems and programs which reduced our outgoings in a number of areas.”
SCA Group’s systems and programs have been part of its arsenal in maintaining a cutting edge supply chain. The company’s supply chain structure ensures that 97 percent of available stock is in all stores at all times and 98 percent of the top 200 lines are in stock.
“Several years ago Supercheap Auto heavily invested in its inventory. One of the business’s key differentiators is its weight of product in store. We carry a wide range and keep significant quantities in store to satiate customer expectations.”
“The problem we faced was money was tied up in stock, so we needed to move stock as quickly and efficiently as possible. To do so, it was important to understand potential demand and this became the key driver of our stock replenishment practices.”
“To foster a demand-driven supply chain system, we required a fully integrated IT system that could forecast every product line in every location. We have installed a system and we are part of the way through that journey.”
By tightening up the company’s forecasting and stock replenishment practices, the company was able to reduce inventory by 12 percent and free up $12 million in working capital to invest in new infrastructure and new opportunities.
Staying ahead of the pack:
SCA Group has weathered the economic downturn quite well in comparison to the competition. The company reported a net profit of $25.8 million for the 2008 financial year – up 15.5 percent on last year.
Sales also increased by 6.3 percent to $558.8 million.
Birtles attributes Supercheap Auto’s resilience in a struggling retail market to the business’s “renew and refresh” approach.
“Almost 25 percent of Supercheap Auto’s range of products is relatively new, having been brought in over the past 12 months. We have been updating store formats to reflect Supercheap Auto’s new approach and branding strategy.
“Our brand development strategy has been a driving force within the company and this has proven to be highly successful.
“We’ve also placed a strong emphasis on increasing the number of units per transaction. This has been a key component in maintaining our strength in a floundering market.”
Since its launch in 2006, BCF has also been performing well. In little over two years, BCF has grown from four stores in Brisbane to 53 stores across every state except South Australia and Tasmania.
Birtles foreshadows a move into the South Australia market but is yet to determine the feasibility of the Tasmanian market.
Now the SCA Group has proven it can take on other retail categories, it is about to make a foray into the bicycle market.
SCA Group’s decision to move into bicycle retailing was based on similar criteria to its decision to launch Camping, Fishing and Boating. According to Birtles, the bicycle retail category has no established market leader and is a $1.2 billion market. The bicycle market was also experiencing good growth due to demographic changes and environmental concerns and the company saw an opportunity to get a foothold in the market.
SCA Group is starting with a small acquisition of the Goldcross Bicycle’s 11 store retail business and will extend it to 50 stores in the next four to five years. Birtles wants to move the store into suburban and regional areas and plans to develop the store into a large “category killer” format.
There has been speculation of Flight Centre also making a move into the bicycle retail market. We asked Birtles whether he sees the Flight Centre’s possible move into bicycle retailing as a threat to SCA Group’s plans, however he indicated that details of Flight Centre’s acquisition and development of 99 Bikes are yet to emerge.
“Competition is a reality of business, and it’s something we deal with both in Supercheap Auto and BCF. From what I know, Flight Centre’s bicycle business will be more of a high street offering whereas Goldcross will be more of a destination model.”
A winning team:
The SCA Group currently has over 4000 team members throughout Australia and New Zealand and this figure will continue to grow as the company expands.
SCA Group places a lot of value on its organisational culture and its people. Birtles says SCA Group’s recruitment and retention strategy is vital to the business’ sustainability and is based around personal and professional development.
“I think it’s important to create an environment where team members are passionate about what they do so they can remain motivated. We try to achieve this by getting talented team members to work on leading projects within the business.
“We also offer a range of staff development programs including post-graduate studies, on-the-job training, strategic development and leadership courses.”
When searching for potential leaders to fill high-level roles, Birtles indicates a broad skills base is highly desirable because it enables the person to grasp the range of variables within the business.
Birtles adds an ideal leader is someone who has the intelligence and creativity to develop viable strategies, as well as the discipline to implement the strategy and make it work.
“In my view, a good leader will also be prepared to roll up their sleeves when necessary and do their part no matter what the task is, whether it is moving stock, sweeping floors or some other manual task. If they lead by example, they’ll earn the respect of others and will be able to lead more effectively.”
The road ahead:
SCA Group’s strong management team and well executed strategies have set a benchmark in its retail categories. In the last fifteen years, SCA Group has experienced more than 25 percent compound annual revenue growth and there are no signs of it slowing down.
It appears the SCA Group is on a roll and Birtles is determined to maintain its momentum. He says he wants to grow the organisation through new projects and initiatives and is exploring other avenues to move the company forward.
“My aim for SCA Group is to be the largest retailer of automotive and leisure products in Australia and New Zealand turning over more than a billion dollars.
“I would like to see us move into one or two more categories over the next few years so we have four or five brands in the retail market.”
First it was cars, then it was boats, and now it is bikes. Who knows what lies on the road ahead.