Australian Geographic adopts TM1 merchandise planning

In less than two decades Australian Geographic has become an iconic brand for most Australians, firmly linked with environmental concerns, community education, science, discovery and adventure. With more than 50 retail outlets in some of the busiest shopping centres around Australia, mail order and online catalogues, and the immediately identifiable Australian Geographic journal, the organisation has done much to encourage the average Australian’s interest in the natural environment.

In 2002 Australian Geographic’s management recognized that faster and much deeper analysis of the activities within its retail business could help to greatly improve margins and efficiencies. At the time, the company had 43 stores and more than 3000 stock items under the four broad categories of The Australian Experience; Kids World; Science and Discovery; and Travel and Outdoor. Operating without any decision support system in place, the company was data rich, but information poor.

According to Gavin Skews, Australian Geographic’s Chief Financial Officer, “We were trying to create a rapidly growing retail business without any numbers. We had a great transaction processing system, but no management information.”

The solution was to introduce TM1 as a business intelligence tool on top of the existing corporate systems. The primary requirement was to use TM1 for merchandise planning, with plans for expansion into general ledger and general management reporting and analysis once this was complete.

From the moment the decision was made, Australian Geographic moved quickly. Within two weeks, TM1 was fully installed and an initial series of standardized weekly reports had been developed. Two years later, these reports are still being used to run the retail business.

Skews commented, “I had used TM1 before, so I had a good idea what it was capable of and I knew exactly what we wanted out of it. One of the major benefits of TM1 is that it is so easy to implement, so easy to use and you can achieve results in an exceptionally short period of time.”

Merchandising Planning with TM1

Skews describes the TM1-based merchandise planning system as “The why behind the buy or science for creative people. It’s about managing and planning the merchandising mix, in-stock position, sales and profitability.”

The main elements of Australian Geographic’s merchandise planning system involve strategic margin and stock planning. In addition, category analysis is crucial. Using this, Australian Geographic is able to readily identify its best and worst selling products; measure overall performance; measure promotional effectiveness; and conduct analysis about its suppliers. The system is also used for budgeting – by store and by category - and for a variety of planning exercises involving the product range, distribution, and forecasting.

Results

In the two years since the system was put in place Australian Geographic has grown to a total of 51 stores. The total number of products in the range has been reduced to 1600. In 2004, the acquisition of the Socrates retail company, saw another seven stores being brought into the organisation. Australian Geographic has opened five stores in the past five months and plans to open another eight to ten retail outlets within the next twelve months. Behind all the activity, the TM1-based merchandise planning system is being used to manage stock in all outlets.

Using the full flexibility and power of TM1, combined with better ranging, marketing and incentive plans, Australian Geographic has increased retail sales substantially, lifted gross margin percentages and increased store profitability.

Skews believes a large proportion of the sales growth has been driven by better decision making due to the fact that through TM1, management now has greater information to the retail data.

"There are two main reasons for the margin improvement,” he added. “Firstly we have been better able to manage margins by changing the merchandise mix. Secondly, we are able to remove the poorly performing products very quickly, reinvesting instead in those that sell well.”

“Overall, the gains we have made since implementing TM1 give us a measurable return on investment.”

The future

Following its initial success in merchandise planning, TM1 is now used extensively by Australian Geographic in its finance department. In addition the publishing arm of the company is using TM1 to help in customer retention through better analysis of, and marketing to, the subscriber base.

The next step, according to Skews, is to investigate using TM1 to gain better metrics on Australian Geographic’s warehouse operations. “We’re also considering using TM1 as a communications tool, publishing information to the web for our stores and suppliers.”