Salvation Army brocki.chScalable business model with better customer experience

At the beginning of 2015, following unsatisfactory profitability and business development, brocki.ch decided to adopt a new orientation, with support from Implement Consulting Group AG. Within just two years, branch profitability was up by over 30%, allowing Salvation Army brocki.ch and Implement Consulting Group AG to win "Best Business Transformation" at the 2017 Swiss Consulting Awards.

brocki.ch is part of the largest Swiss NGO, the Salvation Army, and as market leader operates almost 20 second hand shops.

At the beginning of 2015, following a sideways trend lasting years, brocki.ch decided to proceed with a strategic reorientation with the Implement Consulting Group. The main objective, which was in accordance with the Salvation Army's intentions and widely supported, was to maintain a medium-term, sustainable positive minimum return of 10%.

The following primary areas were identified early on:

• Profitable business concept, to enable agile expansion for the market leader, (closing, opening and operating branches using standard, tried-and-tested approaches)
• Improved customer experience, resulting in growth and significantly better understanding of the second hand market and its CRM
• Clarification of objectives relating to the compatibility of the social mission and profitability

Particular challenges

• As part of the Salvation Army, particular characteristics had to be taken into consideration. For example, in the past, brocki.ch branches received strong support from the "church side" of the Salvation Army. This legacy must always be handled with care and respect.
• The amount of data that was available regarding customers and their purchasing behaviour was very low. This made analyses and the development of mutual understanding very challenging.
• Different stakeholders held conflicting propositions about the future brocki.ch orientation and strategy, which accompanied a wide range of views about the factors for its success.

Phase 1: Clear market leader strategy with a focus on medium-term growth

The first phases focussed on identifying factors for the success of the Brocki business model and consolidating the various stakeholder views on the purpose and future of brocki.ch.

The most tangible result was portraying the strategy as a "Brocki journey" towards sustainable, healthy growth over three horizons. This helped the "Brockians" to mobilise early: First, the concept of a new manufacturing footprint/master plan was developed and tested (horizon 1). After improvement, this was implemented across Switzerland (horizon 2) and subsequently, customer processing was re-organised (horizon 3). On a hypothetical fourth horizon, the opening of multiple earmarked branches would bring in additional sales. At the same time, ambitious profitability targets were pursued, as growth and restructuring is being financed fully through generated earnings.

Phase 2: Scalable operating model throughout Switzerland

The future operating concept was deliberately developed and validated in a very diverse team, and includes the following statements about the future orientation of brocki.ch:

1. Decentralised organisation of locations (manufacturing footprint) on three levels – central, regional and branch
2. Simple but consistent performance management, which uses a few indicators to point branches in the direction of continuous improvement. Standardised studies help brocki.ch understand the factors for success better. Any changes to the objectives are handled with a multi-stage process to understand the cause of the weakness and introduce suitable measures.
3. Ideal value stream including customer promises and set provisions for the process times for services and handling goods. This defines anchor points for customer experience and working without wastage. The ideal value stream is the starting point for the (re)design of each branch.
4. Ideal branch layout/master plan “ (as for the value stream), which allows the layout of the value stream to be structured in a way that minimises waste.
5. Opening hours with associated staff schedule and structure, divided into two models to suit both small and large branches. This also describes the extent to which niche workplaces, program workplaces, volunteering and community service placements can be offered (Salvation Army social mandate).
6. Pricing guidelines (categories, guidelines and considerations regarding optimal pricing)

Phase 3: Market development with regard to customers and potential, using CRM

Based on the brand message, which is already established, and the target markets as defined in the strategy, all aspects of customer processing were re-structured and re-launched.

The approach was changed from product-oriented activities to customer and experience-based activities: This was made possible by grouping customers—those purchasing and those donating—into potential-based segments, and is unparalleled in the CRM landscape, as it illustrates both the suppliers (those making donations) and customers (those purchasing). A variety of measures and unique means of adding value, such as a removal service or simplified donation system, make buying from and donating to brocki.ch more attractive for both types of customers. All measures are facilitated electronically and digitally. To make the significance of the go-to-market concept understandable throughout the Brocki workforce, an unusual step was taken whereby measures that were already in the design stage were developed down to the very last detail and transformed into a target customer journey.

Jakob Amstutz, Manager at Salvation Army Brocki.ch says: "Working with consultants was and is unusual for us – and indeed for our field of work. Yet we have no regrets about this collaboration. On the contrary, during the project we have continued to expand our cooperation with Implement Consulting Group AG, as we are so convinced of its value. Ultimately, the figures speak for themselves and prove that investing in external consulting has been more than worth it. This is something that will become even stronger in the future, when we start scaling the business.“

Although at the time of writing this article—about two years into the collaboration between brocki.ch and Implement Consulting Group AG—the Brocki journey is nowhere near its final destination, the re-orientation has already been a resounding success. Once over half of the branches started operating in accordance with the new concept, we conducted an interim assessment.

Results

Measurable results

In comparison to the declining Swiss retail market, every aspect of brocki.ch achieves impressive results

• Increased branch profitability: The contribution margin per branch increased significantly in the period under review: In both 2015 and 2016, the contribution margin grew by almost one-third! Sales in this period increased by 17%, both by branch and by employee.
• The increase in sales per branch is clear proof that the new operating concept was not an "austerity program", and instead captured the customers' enthusiasm. For the first time in five years, brocki.ch managed to maintain a sales threshold of one million per branch.
• Unchallenged market leadership in second hand retail: With its scalable operating concept and unique, professional approach to customers, Brocki has clearly outpaced the competition and taken over the role of shaping the market.

Non-measurable results

• Strong alignment within the management team: The entire management team at brocki.ch and the Salvation Army is aware of the "Brocki journey" and how, with the operating concept and CRM, it can contribute to achieving these objectives.
• Faster rates of implementation and change, thanks to enthusiasm: The workforce was strongly mobilised by the level of understanding that now exists regarding what makes brocki.ch successful, how this can increase the strength of second hand retail in Switzerland, and the early measurable effect. The massive restructuring of the operating concept could already be implemented in half of the branches within the first year, while the regional distribution centres have also been closed in a socially responsible manner. This meant measurable results could be achieved more quickly. Implementation is clearly ahead of its three-year schedule. Finally, the attitude of the regional management during CRM concept workshops for planning implementation was "We could introduce that even faster".
• The most transparent value chain in Switzerland: All steps within the brocki.ch value chain—from the actual goods donated or origin of the goods and their processing, to their sale and use—take place in Switzerland or even locally. The new operating concept, which allows customers to participate in these processes visibly, (donated goods are on the shop shelves within an hour) makes brocki.ch the most transparent second hand company and, in contrast to competitors, guarantees "Swissness", respect for ecology and social responsibility along every step of each and every aspect: "Everybody knows where the goods come from and what happens to them".