My name is Ansgar John Brenninkmeijer, I have worked at the family company C&A a few times as well as at IKEA, the HEMA, etc. and run my own self-serve eBay stores. Last year I set up the public equity ValueMachinesFund with WarrenBuffett.nl As part of my current role I visited B&S Group in Dordrecht, they are publicly listed so ValueMachinesFund might buy shares. B&S are involved in wholesale and retail. Here is an email I just sent to the B of the B&S Group, Willem Blijdorp.
"Dear Mr. Blijdorp,
Thank you for your hospitality in Dordrecht this week. I am writing in English in case you might want to share this email with others.
In the CC I have included one of my colleagues at ValueMachinesFund, Björn Kijl. Björn is getting his PhD at the University of Twente. His expertise and the students he works with might be able to help B&S. See https://people.utwente.nl/b.kijl
Björn was also my first co-author on a paper we wrote about retail frameworks. We tried to answer a question posed by IKEA founder Ingvar Kamprad in his autobiography. Kamprad was used to furniture factory management accounting and couldn't figure out why his retail experts used a different framework. He kept asking "What the hell are (gross margin) percentages anyway?" when he was told he couldn't discount articles because he "needed to maintain or increase the gross margin percentage to remain profitable". (Excerpt from Kamprad's book: http://sinaas.blogspot.com/2012/09/what-hell-is-percentage-anyhow-ingvar.html )
We think we have an answer which is a bit counter-intuitive. The answer to the question "What the hell are (GM) percentages anyway?" is that this percentage was a workaround used by retailers with many SKUs before the advent of modern Information Systems. Most retailers with thousands of SKUs didn't have the technology to keep track of individual items, so they used sub-optimal average percentages to keep track. We believe that when IT systems were first introduced, the programmers took the sub-optimal existing framework used by retailers and automated it.
In other words: Retail computers run software which is based on a framework that assumes that the computers themselves don't exist.
An interesting thing is that my family ( https://en.wikipedia.org/wiki/Brenninkmeijer_family ) have been using paper-based detailed information systems long before the advent of the barcode. We called the framework "Rekenen in Centen ipv Procenten" (Counting money instead of comparing margins) Another retailer ALDI only had a few hundred SKUs and could easily do the math by hand. We have described the use of the framework by these companies here: www.profitperx.blogspot.com
The German framework we describe is based on Deckungsbeitrag (gross profit dollars) and Opportunity Costs. Both Total Sales and Gross Margin Percentages are considered totally irrelevant and not even calculated or shown. Both ALDI and C&A used the German language and many German retailers use the system today. At educational centres like the Bildungszentrum Einzelhandel Niedersachsen www.bze.de it is taught by teachers like Suzanne Sievers (cc).
It seems Dutch retail academics have trouble grasping the concept of another retail paradigm. An exception is Lourens Sloot of the EFMI, but he thinks it too obvious to teach. I have been told it is impossible by the leading retail academics of the Netherlands and a number of retailers. Karel van Eerd of the Jumbo Supermarkets has been told it is impossible so many times that he wrote a book called: "My name is Karel van Eerd and I prove that it is possible". At his invitation, I recently taught the Van Eerd family the German framework.
Here are a few simple videos:
German instruction video made by Mrs. Sievers (cc) without mention of total sales of GM%s : https://youtu.be/2zeycs5NcYU
Introduction to frameworks and "lost in translation" at C&A: https://youtu.be/ThM4vwnZFWw
The most simple way I could figure out of describing the counter-intuitiveness of the GP$ framework without formulas or percentage calculations: https://youtu.be/jkiUjfp2_ro
Kind regards from Amsterdam,
Ansgar John Brenninkmeijer
Mobile phone +31629547689
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