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March 2009

Microsoft Retail Innovation forum

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Making Macro “Retail Ready” –Our Technology Experience

Glenn Elith, Chief Financial Officer

Macro Wholefoods Market

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Who is Macro Wholefoods?

Macro has grown to become the largest multi-site specialty retailer of

organic and natural food in Australia, harnessing the strong trend

towards healthier eating and sustainable agricultural practices.

“Strong Industry Growth” – Australian organic retail sales have achieved

over 18% compound growth in the last 5 years (14% globally).

“Rapid Business Roll-out” - zero to 9 large format stores in under 3 years.

“Large Product Range” - over 12,000 active product lines across 5 quite

distinct departments (grocery, produce, delicatessen, café and naturopathy).

“Large Fragmented Supply Chain” - over 300 different suppliers, who deliver

either direct to store or via National Distribution Centre.

“Large Customer Base” - over 40,000 customer transactions every week.

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Why Macro Invested in Technology Early?Macro decided to invest in a robust end-to-end system early in its life,

seeing an investment in technology as a “core foundation” for developing

genuine retail capability.

Get a good system bedded down whist business was still relatively small to

avoid a massive distraction and greater complexity later on.

Forced us to think about how we use technology as a “strategic enabler” to

drive business process efficiency, service customer needs, and respond to

competition.

Decided to be a leader in driving „sophistication‟ in the overall Organics

industry – become the benchmark.

We wanted to harness the power of „information‟ early in life of the business

– “what is measured in managed.”

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The Technology Decision?

Macro was effectively a „start-up‟ business with plans for rapid growth, and

needed a robust system solution to grow with it. Key selection criteria

included:

Genuine “end-to-end” solution on a strong software platform.

Cost effective – could not afford (and didn‟t need) a Rolls Royce.

Confidence in vendor commitment – didn‟t want to deal with a small player who

might not be around in the future.

Needed to be highly scaleable – handle multiple locations; add functionality as

business needs became more sophisticated.

Support for retail innovation – looking for competitive advantage

Easy/Intuitive to use – especially for team members serving customers.

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The Technology Solution?

Macro selected and installed an end-to-end Microsoft retail solution in

December 2004, with the help of our Microsoft Partner Hands-on Systems.

Microsoft Dynamics NAV

(Back-end)

General Ledger

Warehouse & Distribution

Stock Ordering & Receiving

Product & Pricing Maintenance

Payables & Receivables

Customer Loyalty Database

Reporting / Business Intell

Microsoft RMS

(Front-end)

Customer Transactions

POS Customizations

EFT Integration

Scale & Scanner Integration

Store Level reporting

Live interface between the

front-end and back-end.

Daily downloading of RMS

transactions into Dynamics.

Robust reporting from both

RMS and NAV.

The only business function

outside of this system is

Time Attendance and

Payroll processing.

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Retail Innovation - Systems

We recognized technology innovation was critical to

achieving business efficiencies and competitive

advantage.

In the early days we implemented:-

Customer facing marketing screens at POS (very early

adopters).

Creative “scanning” noises used at POS (sensory theatre).

Customization of POS Screens to facilitate customer

service (user friendly layout, hot-keys).

Flexible product discounting functionality (% off, multi-buys,

spend level discount, promo periods, gift vouchers).

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Retail Innovation - Systems

As Macro grew, we implemented further innovations, all of which have

been readily supported by our Microsoft partners Hands-on Systems:-

Paperless supplier Purchase Orders, Remittances, and correspondence

(replacing the old print & fax/mail methodology).

Electronic Receipting of stock into stores and warehouse using hand-held

devices (eliminating duplication, lost paperwork and delays).

Automated “Ticket” generation for store ticketing (price changes, new

products & promotions).

Warehouse „bin locations‟, and stock picking „workflow‟ for warehouse team

(more efficient use of warehouse space).

Sales reporting distribution by mobile phones.

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Macro Minded – Knowing

Our Customer Better Loyalty Database of over 30,000 customers

managed on the Microsoft NAV database.

Targeted/segmented promotional and

educational activities based on purchase

histories (maintained on system), location,

dietary preferences (eg gluten free), and other

interests (eg. organic agriculture).

Loyalty customer specific promotional activities,

including „deeper‟ promotional price cuts.

Integrated with Internet for „on-line‟ registration

and maintenance of personal details.

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Auto-Replenishment – Leap in Efficiency

18 months ago we commenced rolling out automated stock replenishment in

Microsoft Dynamics based on sales trends, stock on hand, and other

important factors such as supplier lead-times and minimum order levels.

Removed guesswork of manual ordering.

Cut excess stock levels, reduced out-of-stocks, and reduced overall inventory

holding by over 20%.

Improved store compliance with product range and store planograms – positively

impacting store sales & customer satisfaction (5% increase in ave basket size).

Reduced each store headcount by over 1.5 FTE, partly offset by creation of a

centralized Demand Planning function.

Reduced stock receiving errors and shrinkage.

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System Innovation in Tough Times

Tough economic conditions have caused Macro to be even more “hungry” in

using available system information and functionality to formulate actions.

We can be very „agile‟ with our promotional activities and responses to

competitor initiatives.

We can be „ruthless‟ with costs and inefficiencies (duplication, low value tasks).

We can drill down on transactional information to really understand our

Customer needs, and emerging trends.

New technology innovations (including those I have discussed today) are largely

inexpensive and fast to implement with the assistance of our Microsoft Partners

Hands-on Systems.

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Our Microsoft Partners – Hands-on Systems

We don‟t want to be system experts….. We want to focus on retailing,

which is what we are good at! That is why Macro engaged the services of

our Microsoft Partners from the very beginning, and have maintained an

active close relationship.

Hands-on Systems participated right up front by helping Macro define our

system architecture and solution.

Macro has access to a broad range of IT expertise without the fixed

overhead cost.

We scale-up and scale-down IT resources as required.

Helpdesk coverage for extended retail trading hours.

Pro-active in staying up-to-date with retail functionality opportunities.

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Implementation Tips – What Macro learnt the hard way

Allow realistic time for initial system installation and data migration – and

don‟t forget data „cleansing‟.

Think about the functionality you want “now”, but also functionality you might

want down the track – can impact your solution framework.

Re-engineer „broken‟ processes as part of design & implementation – don‟t

create a system to support existing inefficiencies.

Walk before you run – auto-replenishment might sound very sexy, but get

the retail basics right first.

Put lots of effort into team training – otherwise those newly „cleansed‟

databases will be “swamps” again in no time at all.

Planning, Planning, Planning – engage the right resources & expertise;

communicate lots to your team (build trust & confidence).

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Contact Microsoft:

Speak to one of our Microsoft Solution Consultants,

we can help you:

• Find your local, certified Microsoft partner

• Request more information

• Find the best Microsoft solution for your business

www.microsoft.com.au/retail

Phone |+ 1800 197 960

E-mail | askdyn@microsoft.com

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Thank you………