Global sourcing - Made In Asia, the sourcing symposium

Consumers
influence
on sourcing
strategy
Franck MORENO
General Manager
Kingfisher Sourcing,
Hong Kong
Agenda :
• An introduction to the Kingfisher Group
• Key consumer trends in our markets
• Impacts on our sourcing strategy
An introduction to the
Kingfisher Group
Kingfisher – at a glance
Kingfisher is Europe’s largest home improvement retailer
and the third largest in the world
• Sales : £11 billion
Retail Profit : £780 million
• 1,080 stores in 9 countries
• Over 78,000 employees
5 Retail Brands
6 million customers in our stores every week
Kingfisher Group Sales :
France
18%
40%
£11 bn
UK & Ireland
42%
Other
International
Retail formats : Home Improvement
40,000+ products
359 stores
19,000+ products
39 stores
25,000+ products
39 stores
www.diy.com
www.bnq.com.cn
www.koctas.com.tr
France
Poland
Russia
50,000+ products
105 stores
34,000+ products
72 stores
25,000+ products
19 stores
www.castorama.fr
www.castorama.pl
www.castorama.ru
Retail formats : Trade & Discount
Trade
Discount
France
20,000+ products online
335 trade counters
www.screwfix.com
18,000+ products
107 stores
www.bricodepot.com
Spain
15,000+ products
24 stores
www.bricodepot.es
Romania
15 stores
www.bricostore.ro
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Product offer : a strong portfolio of own brands,
differentiated between channels
Home Improvement
Distributed by :
Russia
11
Product offer : a strong portfolio of own brands,
differentiated between channels
Trade & Discount
Distributed by :
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An integrated network of sourcing
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offices in 10 locations worldwide
Warsaw
Shanghai
Israel
Istanbul
Shenzhen
India
Hong Kong
Vietnam
Indonesia
Brazil
Sourcing Hub
Satellite Sourcing Office
Size and scale :
400 People
70,000 containers
US$ 1.6 billion FOB
95 Ports
1000 Factories
36 Countries of Origin
We source, develop and supply
45,000
products
That generate
20% of the Group Sales
Over £ 2 billion
With high penetration on some categories :
With high penetration on some categories :
Consumers trends
There are global trends…
Socio-demographic
changes
Connectivity
Urbanisation
Resources scarcity
Mobility
Climate change
Search for health &
well-being
Which are influencing consumers behaviours…
Speed CRISIS Net income
Digital world Volatility Unemployment
Adventure Pollution Price sensitivity Bargain
Consumers behaviours
Experiment Environmental issues
Research of sense Ambiguity Health & well-being
Technology
1. “Going mobile”
2. “Buying sustainable” 3. Safe & secure
“Googlisation”
Users expect
procurement
experience matching
the e-commerce
“Considered
Consumption”
Consumer s want to
r eflect their beliefs
in the things they
buy or do
“House to Home”
A ‘safe haven’ and
comfortable place
to recharge is
more important
than ever
4. “The great
consumer reset “
Consumers
continue trading
down and buy
more & more on
promotions or
sales.
Transforming Retail :
1. The end of bricks & mortar ?
“Who needs shops anyway ?
Retailers are facing a digitally driven perfect storm. “
“Connectivity, rising consumer influence, time scarcity,
mobile payments and the internet of things, are changing where,
when and how we shop”
“E-commerce is growing ten times the rate of offline retail”
2. Or a new era of interactive retail ?
“Retail space becoming a hub of exploration,
interactivity and creativity.”
REVERSE SHOWROOMING
integrated online & offline service
“We expect to see retailers increasingly open smaller stores”
POP-UP STORES
MOBILE SHOP FLOOR
… and this will impact the entire supply
chain & manufacturing…
The New Industrial Revolution ?
“Global value chains are being redistributed
by new technologies and labor market shifts”
Technologies
3D and 4D printings
Crowdfunding Think it 3D it
Co-create
innovation
Design to shelves products
Mass-customisation
Labour market shifts
Near sourcing
Production closer to markets
Plug and play
Lean
factories Manufacturing
Small scale manufacturing
The Kingfisher European Home Report 2012
Home is where the heart is :
Homeowners right across Europe
enjoy improving their homes.
They prioritise spending money on
them and are doing so to improve
the quality of their lives at home,
rather than to increase the value of
the property.
Home is where the heart is :
9 out of 10
Europeans undertake
some form of home
improvement
The living room is the room people are
most proud of, followed by the kitchen
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Home improvement is about
lifestyle, not adding value only.
We are here to inspire them…
by creating an offer for all and everyone !
And we do so by coordinating our offer
through 4 style houses across our
decorative ranges :
Multicolour
Contemporary
Authentic
Heritage
Everybody is doing it
Nine out of 10 Europeans are
spending money improving their
homes, with nearly three
quarters doing the jobs
themselves.
About a third of consumers
undertake Do-It-Yourself tasks at
least once a month.
Everybody is doing it
Consumers in the
UK and Ireland
are the keenest
gardeners
The Germans
are confident
DIYers
29%
France spends
the most on
home
improvement
said in-store
demonstrations
would help
them do more
ambitious DIY
projects
We develop innovative products & services…
based on “ease of use” to make it easier to DIY !
“C’est Castoche !”
Innovation - easier
Internet is part of the toolkit
The internet is used extensively
when undertaking home
improvement jobs,
but mainly for research, comparing
prices and seeking advice, rather
than making purchases.
Internet is part of the toolkit
66%
of home improvers use
the internet for research
and price comparisons
Germany buys the most
home improvement
products online
We develop multi-channels solutions…
To make it easier to shop !
Apps
Click & collect How to videos
Eco is going mainstream
Making homes eco-friendly is an
increasingly important factor for
consumers across Europe,
with 32% saying it is “very
important” to them.
The most popular eco-investments
being energy-efficient installations.
Going green, saving energy
80%
say it is either “fairly
important” or “very
important” to them to live
in an eco-friendly house
42%
say energy saving
equipment is the best
eco-investment
Prefer eco- certified
products
84%
We have an ambitious Net Positive strategy
TIMBER
ENERGY
INNOVATION
COMMUNITY
But price remains key…
“Consumers are likely to continue trading down.
Today 18% of consumers are trading down across
a range of categories.
And 48% have reduced their purchases of
premium brands.
We expect to see continued private label
development in a bid to help consumers live
better for less.
We also expect retailers to capture cost savings
through further standardisation and improved
purchasing”.
Roland Berger
Consumer goods 2013
Impacts on sourcing
strategy
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We are moving towards new ways of
working…
• We are renewing our sourcing model &
organisation…
• To enable a more integrated new product
development process :
from customers to factories to customers
• While keeping a strong focus on costs &
initiating new ways of sourcing
ADDED VALUE
1. Our sourcing model has been evolving...
EXP
AND
OPCO
ORGANISATION
CATEGORY
ORGANISATION
GLOBAL
SOURCING
IMPORTS
1994
TIME
Moving from…
Direct Import
Global Sourcing
Manufacturer
Importer
Trader
Manufacturer
• Going direct :
Removing “middle men”
• Same products at lower prices :
Mainly OPP & seasonal buys
• China focused
• Category management :
Ranges of products sourced globally
• Differentiation & Innovation :
Unique products & brands
• Global sourcing :
Far & Near sourcing, TAC model…
• Removing cost
• Removing cost AND driving sales
And keeps evolving :
A New Sourcing & Offer Organisation :
OFFER DEVELOPMENT
COMMERCIAL SOURCING
SOURCING
GLOBAL SOURCING
COMMERCIAL
SOURCING
QUALITY
QUALITY
BRANDS
SUPPLY CHAIN
DESIGN
ENGINEERING
CLOSER TO CUSTOMERS
CLOSER TO FACTORIES
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2. We move towards an integrated NPD Process…
GLOBAL TRENDS &
CUSTOMER INSIGHTS
RANGE & SALES
ANALYSIS
DESIGN & DETAILED
SPECIFICATIONS
To create exclusive & best
in class product ranges
MANUFACTURING
CONTROL &
DELIVERY
SOURCING, TENDER &
VENDOR QUALIFICATION
PROTOTYPE & NPD
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We observe our customers in action:
The example of tiling :
 a real need to work on an easier, faster and less stressful way of laying floor
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And develop innovative solutions :
Our “Easy Tiles” offers…
We observe our customers in action…
The example of mowing the lawn :
1 #Preparation issues
Preparation is perceived as time-consuming
France & UK
5 #Mowing is unpleasant!
25 observations in situ
-”The mower must be self-sufficient
and ready for use any time”
2 #Storage problems
- All users must make space in the garage or in
the shed to store the lawnmower
 Access to the grass collector
4 #Handling issues
Mowing is a ‘man’s world’
3 # Power choice :
Electric = plug and play
Petrol = powerful and robust
‘Ideal mower?
Ease to start of electric, reliability of
petrol’ Daniel, UK
…
 Handling must be smoother, easier and more
precise (lighter machine, easy guidance…)
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And develop innovative solutions :
Our Easy Mower
Building up our Brands :
Ease of use
Easy to assemble
Easy to cook
Easy to clean
Easy to store
Quality
Design
Cooking performance
Materials durability
Familly look
Blooma signature
3. This gives a clear focus for sourcing…
But what are the key drivers for lower cost sourcing
- when cheap China is over ?
- and the alternatives are just emerging, sometimes limited or
risky… ?
Logistics &
distribution
cost
LCC Sourcing Model :
Benefits from low labor costs
on labor intensive industries.
Production
cost
Logistics &
distribution
cost
End-to-end SC solutions: new
routes to market, dynamic flow
control to decrease logistic costs
and inventory.
Real Global Sourcing: providing
agility, velocity and enabling
multiple sourcing.
Manufacturing engineering &
automation : selecting suppliers
able to invest & develop
Production
cost
Using scale to get lower FOB
prices.
Technical sourcing: using scale
to source components on behalf of
vendors. Reducing the quantity of
materials required while
maintaining quality.
Components
& materials
cost
Components
& materials
cost
Product Total
Acquisition Cost
Product Total
Acquisition Cost
Hence we are deploying New Sourcing Models :
GLOBAL SOURCING
E-SOURCING & TENDERS
VENDOR DEVELOPMENT
COMPONENT SOURCING
PRODUCT ENGINEERING
NPD & COSTING
WORKING CAPITAL
LOGISTIC OPTIMISATION
SUSTAINABILITY
As a conclusion :
- Closer to customers, closer to factories
- Building an end-to-end vision
- Expertise, coordination & agility !
Trends &
Consumer
Insights
Quality
Design
Innovation
Sourcing
Costing
Supply
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Your Logo
Key references :
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