Hemtex puts the customer in focus

The Hemtex business model is based on efficiency and control of the entire value chain, from design and purchasing via distribution to store sales, which creates favorable conditions for making competitive offerings to customers.

Hemtex continuously monitors trends in home textiles and related sectors. When fashion trends are about to reach commercial volumes, Hemtex reacts rapidly. To hit the target in terms of the product range, time is an important factor – which is why it is important that design and purchasing occur as close as possible to the sales season. Consideration should also be given to the fact that manufacturing and delivery require a certain lead time in order to keep costs at a reasonable level. Central functions at the head office in Borås ensure that the entire value chain, from concept to retailing, is managed as efficiently as possible.

Focus on own design

Hemtex’s product range primarily consists of products of its own design. Textile patterns are produced by the design department at the Borås office, for example, or purchased from independent designers.

Hemtex’s designers work closely with purchasers and gather ideas from the world around them and from stores to ensure that the stores continuously have access to the right, up-to-date range.

A Product Line and Market Council, with participants from store operations and central functions at the Borås office, develops the product line, store concepts and activity plans. Hemtex also works actively with trial sales to identify products with substantial sales potential.

Proprietary and franchise stores

Hemtex stores have two forms of operation: proprietary stores and franchise stores. Regardless of their form of operation, the stores are managed in accordance with the Hemtex concept and guidelines, but with scope for local business influences. However, the target scenario, strategy and culture are the same for everyone working at Hemtex, regardless of the store’s ownership form or the country in which it is located.

The Hemtex Group operates proprietary or franchise stores in selected retail centers, primarily in large city areas and in strategic locations. In each geographic area, the number of stores should be sufficient to enable an operating organization to be formed to ensure sales, earnings and skills development.

By operating its stores on a proprietary basis, Hemtex establishes direct contact with the market, which is also advantageous for the wholesale operations. This enables Hemtex to become an even more efficient supplier, which also benefits franchise holders.

Supplementing operations through the franchising concept enables additional economies of scale, since expansion is accomplished with lower establishment costs and less tied-up capital than would otherwise be possible for the Group. At present, there are franchise stores in Sweden, Denmark and Poland.

Increased demands on the purchasing process

Hemtex owns no production plants; instead it purchases products from slightly less than 120 suppliers in some 18 countries. Hemtex is not dependent on one particular supplier; to a large extent, its current suppliers are all replaceable. Hemtex is working to develop and consolidate the number of suppliers.

As the home textile market has become more fashion-oriented in recent years, the demands placed on the purchasing process have grown. However, the level of fashion awareness is not as high as in the clothing industry, for example. At the same time, the lead time from design to availability of the product in stores is reduced. Contracts between Hemtex and its suppliers are normally order-specific. A written agreement, purchase order and quality control though Hemtex Purchasing Instructions are prepared with each supplier. The agreement regulates everything from product specifications to supply and terms of payment. It also includes a Code of Conduct with which the suppliers must pledge to comply.

Hemtex actively seeks new, and is continuously evaluating existing, suppliers and purchasing markets with regard to prices, quality, performance in terms of the Code of Conduct and delivery times.

By increasing the number of products purchased directly from manufacturers, purchase prices can be reduced, thereby strengthening Hemtex’s margins. This also provides Hemtex with better opportunities for controlling and influencing the production facilities than when purchasing takes place through an intermediary. The goal in purchasing work is to increase the proportion of goods purchased directly from producers to about 80%. The proportion of directly purchased goods currently amounts to slightly more than 81% and Hemtex believes that this share can be somewhat further increased. For purchases from Asia, the goal is 80%. The current proportion is 74%.

Purchasing offices in Dhaka and Shanghai

To facilitate the Group’s efforts to find the correct suppliers, Hemtex has established two purchasing offices in Asia in recent years – in Dhaka, Bangladesh, and in Shanghai, China. Together, the offices have slightly more than 20 employees. The purchasing offices are responsible for securing the right purchase prices, sourcing of new products, control of production and working conditions and coordination and optimization of the logistics flow. Ultimately, the office in Dhaka will function as a purchasing office for all of Southern Asia, including Bangladesh, India and Pakistan. The office in Shanghai is divided into two teams – one for textiles and one for hard goods – and will ultimately serve as a purchasing office for all of Southeast Asia. By concentrating its purchases to fewer suppliers, Hemtex’s controls will become even more effective.

Efficient IT and logistics are success factors

For a retail company such as Hemtex, efficient logistics is a key competitive factor.

Hemtex partners with Schenker for logistics and distribution. All product distribution to stores is carried out from a distribution center in Gothenburg. Basic products are purchased using an automatic replenishment system. When the number of products reaches a certain minimum level, the system automatically indicates that new purchases should be made. Fashion and seasonal products are replenished based on management’s assessment of future sales, current sales rates and forecast inventory levels. Purchasing of fashion and seasonal products takes place three to six months prior to the start of store sales, depending on the type of goods.

Packaging and delivery to stores are customized for efficient handling, which means that the stocks held by stores can be kept at a minimum. Instead of allocating space for stocks, the space can be used for sales.

Hemtex’s IT department is an integrated part of operations and has as its primary assignment to satisfy business requirements for efficient and reliable systems support. Hemtex works almost exclusively with standard systems, and the trend is towards greater simplification of work in the stores and central processing of more tasks. Over the past three years, Hemtex has upgraded the business system, thus creating prerequisites for expanding the system with new modules in order to increase efficiency and manage operations more successfully. Supply Chain and Assortment Planning are and will continue to be major focus areas.