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INTERVIEWS
WITH ECONOMISTS
PETER
SCOTT
Peter Scott is the General Manager of Perishable Merchandise
for Coles Supermarkets, an operator of 410 Supermarkets throughout
Australia.
Mr Scott has extensive supermarket experience gained during 23
years with the company. He joined Coles in 1976 as an Executive
Trainee. Following store management experience, he was promoted
to the Merchandise Department in 1981 where he held various positions
including Buyer, Promotions Manager, Merchandise Manager and Controller
of Merchandise. In December 1990 he assumed responsibility for
Commodity Foods, following the centralisation of Coles Buying
and the commencement of Category Management.
In October 1991, Mr Scott was appointed to the position of General
Manager. In 1993 he was appointed to the position of General Manager
Chilled Foods and in October 1994 General Manager Merchandise
and Marketing for Coles Supermarkets. In September 1996 he was
appointed General Manager Perishable Merchandise. As a result
of this appointment he also assumed responsibility for the Red
Rooster Fast Food business.
What factors does your firm take into account when making product
placement decisions?
All decisions relating to product are the outcome of consumer
demand. Our value proposition is totally orientated to meeting/exceeding
customer expectations. If you are in the service industry, in
this case retail, you must be market focused as opposed to internally
focused if you are to achieve long-term sustainable growth. This
demand-driven cycle is simply stated but necessitates a significant
investment in people and systems to achieve.
Once the organisation is geared to market demand, you then have
the ability to extract and optimise efficiency in terms of labour,
inventory and variable costs, which then allows for creation and
ongoing reinvestment via the productivity loop process.
What costs does your firm consider and how are these classified;
i.e. fixed, variable etc.?
The identification, understanding and control of all cost inputs
is critical to the long-term success of any corporation. Costs
are generally viewed as variable and fixed.
Within the retail sector variable costs allow you to modify and
adapt to the vagaries of consumer shopping habits. This requires
a high degree of flexibility to ensure strict profit and loss
control over the operation. Areas such as labour, expenses and
advertising are areas that offer high levels of flexibility based
on trading conditions.
Fixed costs are relatively constant but should reduce, based on
sales revenue growth. This would include areas such as rent and
administration expenses.
How does your firm choose the level of product supply that
maximises profits?
In the retail sector inventory has a significant impact on working
capital and the more efficient and streamlined inventory management
is, the greater the impact on the overall balance sheet.
Given that retail is a totally market focused operation, you need
to ensure that you have the right product at the right price at
the right time for customers. This does not mean carrying surplus
inventory to requirements but, rather, managing the effective
flow to meet customer and shareholder needs.
Effective product supply, therefore, must touch all links upstream
in the value chain which will add value to raw material suppliers,
processors, retailers and – ultimately – consumers.
The real world is far more complex than that typically described
in economics textbooks. What insights, if any, does economics
add to your firm's decisions?
The overriding issue in terms of real world experience is that
you must continually challenge and grow sales revenue to sustain
your business. Change is a constant and you must embrace a learning
culture to continually evolve as markets evolve.
Retail is a very turbulent and dynamic industry. Therefore, business
and financial planning require a degree of ongoing flexibility
in order to adapt and meet changing market conditions. One constant
is the need for increased shareholder value, which is achievable
if you are meeting and exceeding consumer needs.
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