How Retailers Can Benefit from Promotions

The margin per piece in retail business is low, so businesses must maximize profit by sales volume. And if your profit can only be maximized by sales volume, you can’t afford to miss any chances. Swedish grocery company Axfood implemented the SAP Promotion Management application to hit every opportunity.

In 2013, Axfood implemented SAP Promotion Management for Retail as a step in cutting costs in the promotion process. Ine Seidel, application expert at Axfood, explains how the last extension with SAPUI5 has helped cut costs even further.

Established in 2000 with 10,000 employees, the conglomerate of grocery stores, including Hemköp, D&D Dagligvaror, Spar Sverige, and Spar Inn Snabbgross, does retail and wholesale in 340 stores, with 274 run directly by Axfood. In addition, it collaborates with some 840 proprietor-run stores. Axfood’s biggest chains are Hemköp and Willys, while all chains are on e-commerce, a fast-growing sector. Sweden had a 2.3 percent increase in sales in 2017. Axfood itself increased sales by seven percent and a part of the success comes from SAP Promotion Management (formerly SAP Promotion Management for Retail).

The Promotion Process at Axfood

Axfood’s promotion process starts in its support company Dagab, which is responsible for selection, purchasing, and logistics. Category managers at Dagab handle vendor negotiations and decide how many happenings per chain and year will be run for the vendors.

The chains then take over to plan the promotion calendar on a higher level, down to the level of offer constructions. Axfood considers a price point in a flyer to be one happening. In addition, the happening appears as an offer in SAP Promotion Management. Each chain has their promotion team. Willys for instance, contains a promotion manager, eight planners, and six coordinators, all serving 200 stores on stock level.

After negotiating the number of happenings and making a higher level promotion plan, the chains start with the negotiation of scanbacks with the vendors. The scanbacks are the funding the vendors give Axfood to run a promotion on their articles. The scanbacks at Axfood are either a percentage of a list price, a fixed transfer price, or a fixed value off the list price. The scanback can be negotiated to be valid on the volume the stores buy from the warehouse or the actual volume that has passed POS.

The negotiated terms are entered in SAP Promotion Management via SAPUI5 in the object vendor fund, and the decided offer construction in the offer. Before Axfood got its new SAPUI5 toolkit, these tasks were performed by the coordinators in SAP Promotion Management. With the new SAPUI5 development toolkit, the planners do this registration themselves.

Once the whole offer construction and funding is in place in the app, this offer data eventually flows through from the app to the promotion solution and down to ECC, becoming a promotion. From ECC, the data will further flow to many more systems, including the stores web application for laying/confirming orders, the CRM system, and e-commerce solution, data warehouse for reporting and calculation, back-office system, and on to the POS system.

“The rule at Axfood is, if you send an offer down to ECC with the same promotion period, same promotion type, and the same stores, it will fall into an existing promotion in ECC,” explains Seidel. “If it varies on any of these filters, the system will automatically create a new promotion.”

They are most often precise calculators at Axfood; with 15,000 offers a year, they have the same amount of vendor funds. Seidel shares, “We don’t do many offers without financing.”

On average, Axfood has five products per offer at a maximum of 300 stores per offer. By holding down the combinations, they  benefit from the performance of SAP Promotion Management. One flyer at Axfood is about 60 offers from that solution becoming one promotion in ECC. The loyalty or personnel programs all go through this channel.

The Start of the SAP Story at Axfood

In 2006, Axfood started with the SAP Forecasting and Replenishment application as its first involvement with the SAP landscape. Finance, merchandising, and supply chain followed from 2007 to 2013. SAP Promotion Management for Retail was rolled out in the last program release in 2013. The SAP Customer Activity Repository application was not part of SAP’s portfolio at the time, so the promotion solution on the repository was not an option. Axfood is still on the 8.0 version of SAP Promotion Management.

One major reason for Axfood’s move to SAP Promotion Management for Retail was that the current system was sitting on a costly old platform. Among other things, standard integration to SAP helps Axfood save time in the promotion process by removing the need to manually enter the same promotion data into two systems. And the faster path of fresh master data was another major benefit, along with reduced time to make changes to ongoing promotions in stores.

Axfood enhanced the promotion management tool over the years. A new integration was set up to connect the SAP solution to its vendor portal to give vendors an overview of coming promotions; vendors can see the negotiated scanbacks, expected volume, and the promotion price. The enhancement also makes it possible to trigger notifications to vendors of changes to a planned promotion. Another enhancement was the integration built to Axfood’s data warehouse in order to monitor the promotion transactional data from SAP Promotion Management with current sales from the data warehouse. The standard integration to BW could not be used as the POS data is in another data warehouse at Axfood.

Another time-saving extension to SAP solution was built for the data scientists who manually entered the forecast per offer within the solution. They can now upload a file of the calculated forecast to SAP Promotion Management directly in the back end on offer or article level. This extension helps saves them half a day per week of manual work per chain.

“With SAP Promotion Management as a tool, there was still much promotion planning performed outside of that solution for Axfood,” explains Seidel. “The promotion planners were still working on spreadsheets for all planning prior to the offer registration and vendor fund in SAP Promotion Management. With the latest extension of the solution – SAPUI5 – even the spreadsheets are now no longer needed and the planners can work in SAPUI5 with calendar functionality. In one and the same view, they now have fresh master data daily and can compare with historic promotions and play with the constructions to see financial outcome of the planned happenings.”

Planning Apps Using SAPUI5

The early promotion planning was still stuck in spreadsheets after implementing SAP Promotion Management for Retail. Working in these spreadsheets gave poor quality as they were not uploaded with fresh master data information often enough. Not only incorrect prices, but also missing new articles or flavors, and so on could appear. This aspect of the promotion process was due for a change. After a pre-study, Axfood decided to invest more on SAP Promotion Management and build the new tool with SAPUI5.

During the pre-study, Axfood scanned the market for standard tools for promotion planning with calendar features. Gartner’s suggestions were considered but none of the different systems they suggested suited the company’s landscape. Axfood searched the market for a suitable partner to build on SAP Promotion Management. The company was lucky to sign up with Retailsolutions, which has great experience in this area and with other promotion customers in Europe, according to Seidel.

“The promotion process at Axfood is one of the most complex processes, because the promotion details run in and out and back and forth in so many of Axfood’s IT systems,” Seidel points out. “This process also includes many late changes, which complicates it even further. There are  also many various roles and departments of the firm involved.”

Axfood wanted to reduce the amount of paper work and put all various spreadsheets behind them. Many requests were noted for the new tool. At the top of the list was the ability to plan in a calendar view with fresh master data and a feature to easily keep track of master data changes and to be able to monitor the negotiated activities. All the planning created in SAPUI5 was to be passed on to SAP Promotion Management, automatically becoming offers and vendor fund objects. This last feature saves hours of registration per week. The Hemköp chain says it saves them an amazing two days per week.

The scope of the new features was divided into four apps that are connected in various ways:

  • App planned happenings: Number of negotiated happenings per vendor, presentation group, and year
  • App annual plan: Promotion planning on a higher level, showing the commercial calendar and yearly promotion plan
  • App detailed plan: Overview planning of happenings on main merchandise group level and vendor; as time passes, dressing the happenings with further detailed information as funding and offer constructions
  • App report planned versus actual: Report to keep track of negotiated happenings per vendor versus planned

“It has been a fun project to deliver to the business, especially as the end users are so pleased with the outcome” Seidel says. “A large part of the success is thanks to the very knowledgeable implementation partner Retailsolutions, but also the decision to bring in the business very early and work shoulder to shoulder through the whole implementation.”

App Benefits

“Together with these fantastic apps built by Retailsolutions, very much part of the success here are my business partners from the promotion team, who got the different chains to sit down and work out a leaner and more unified promotion process,” Seidel mentions. “With the business pre-study in hand, which took quite some time, it made the rest of the road to the result of the apps so much easier.”

“Users have commented how easy the tool has been to adapt and work in,” added Seidel, who summarizes some of the benefits of the apps as the following:

  • Reduced time on actual registration of promotion data
  • Planning performed on fresh master data
  • Easy to keep track of negotiated number of happenings
  • Commercial calendar view inside the planning tool to keep track of important commercial happenings
  • Feature to keep track of master data changes for planned promotions
  • Common tool across the chains
  • Time-saving copy/paste features saves registration work
  • User-friendly interface