Self-service division, Sam’s Club, and Central America

In keeping with our stated strategy of simplifying the business, in 2014 we bore the fruits of having centralized Merchandising with the Self-service division in Mexico. With this adjustment we developed expert buyers by category, capable of conducting the best sort of negotiation with suppliers, which translates to more and better savings for our customers. In parallel, we announced pathways towards reinforcing Sam’s Club and recouping its value proposition, thus producing visible improvements in this format’s results. A strategic plan with sights on the next few years was created in response to the areas of opportunity that were identified. We created solid groundwork, which by the end of this year will resort in enhanced results. The plan is to drive those initiatives that proved effective and to implement them in all our clubs throughout 2015. All this will provide us with the tools needed to innovate and position ourselves as the best warehouse membership club in Mexico. On the other hand, the excellent performance achieved in Central America is a testimony to the successful integration of the region through the unification of processes, systems, and format standardization.

Our self-service stores were able to increase units per labor hour by 4.8%, equivalent to more than 22 million hours in savings. By the same token, we saved more than 32 million kWh, equivalent to a reduction of 2.3% in energy used during 2013. The implementation of assortment improvements and a more robust modular program served to create efficiencies in inventory management, thus providing a product mix more in line with the needs of our customers.

The organization changes in Sam’s Club were performed to support the strategy, by:

• Adding a second Vice President for Merchandising, in charge of Groceries, Consumables, and Perishables, focusing on key traffic-generating areas.
• Creating a position for Director of Membership, so as to drive the attraction and retention of members through aggressive member acquisition programs and increase our member base.
• Implementing a new commercial planning process whose purpose is to better align Merchandising, Membership, Marketing, and Operations. This process will enable us to have the right products for our members through insight on how they think, communicate and execute, and then exceeding their expectations.

Nighttime receiving and storage has been implemented and in this manner our clubs are ready with the merchandise our members want to find, without affecting service. Changes have also been made to our packaging, such that items are been designed especially for us, thereby helping our members, and also our associates in product handling in the clubs.

We are fully aware that Central America has considerable potential for improvement in the field of expense reduction, so we undertook successful productivity initiatives at the store and distribution center levels. Those initiatives which proved useful in matters concerning work management are being implemented, distributing activities when and where needed. There are also programs now in place that reduce energy use, optimizing efficiency. Likewise we invested in the placement of curtains on refrigeration displays, and in new, more energy-efficient technologies for both existing and new stores.

Regarding labor, we have made use of a tool known as Sister Stores, whose purpose is to identify improvement opportunities by comparing indicators within similar stores. Efficiency improvements were also achieved at the front-end, with a 4.7% increase in units per labor hour, which represents savings of over 300 thousand hours. Labor and energy-related productivity initiatives have meant more than 80 million pesos in savings, a clear reflection of the excellent performance in expense control for the region.