Page 119 - CRC_One Report 2021_EN

Business Overview and Performance Corporate Governance Financial Statements Enclosure

Central Retail generally receives an indemnity from competitively priced and has long life cycles with high
suppliers for merchandise, under standard terms and stock turnover. Central Retail also uses credit sales for
conditions. Central Retail also requires suppliers for top brands when agreements require them, as well
most of its merchandise to comply with its standard as to ensure that Central Retail has enough stock
purchase terms and conditions, to understand its of certain brands and can use a credit sale model
business direction, and to be committed to driving for its private labels, and generally sells them at a
growth with Central Retail. Relationships with suppliers higher margin than third party brands. The value of
are generally managed at the business unit level. merchandise is represented as inventory on balance
Large scale of operations provides Central Retail with sheet. Central Retail is therefore exposed to risks of
a strong bargaining position when negotiating with obsolescence, which Central Retail can mitigate by
suppliers. For example, where merchandise under offering discounts or increasing marketing activities.
the same segment is sold at stores across two or
more business units, Central Retail seeks to procure Central Retail uses consignment sales for more
merchandise at favorable terms. seasonal which are high turnover rate and require high
inventory holdings as well as high levels of customer
All of food segment suppliers have to meet the service to drive sales. Consignment suppliers are
standards with respect to costs, product specifications, generally responsible for their merchandise, inventory
marketing plans, production capacity, replenishment management and sales associates. Consignment
and logistics, and they also need to adhere to ethical suppliers are also responsible for the design, display
business practices and comply with food safety and fitting out of their store areas (both physical
standards, law and regulations. They are responsible and online) at their own cost under certain specified
for certain customers’ issues in accordance with conditions, set out by Central Retail. In addition,
consumer protection laws. consignment suppliers are also responsible for
repairing and maintaining their sales areas. Central
(2) Sales Models Retail can use consignment sales to optimize its
merchandise mix and inventory management
Central Retail works with suppliers on either a credit depends in large part on the sales potential at
sales or consignment sales basis, though some individual locations and ability to negotiate with
suppliers may use both models. For credit sales, relevant suppliers.
Central Retail is fully responsible for merchandise
mix and inventory management, and Central Retail However, Central Retail does not record the value of
determines retail prices and conducts market research consignment goods as inventory on balance sheet.
on pricing to ensure the prices that Central Retail sets Central Retail is therefore not exposed to risks of
are competitive. For consignment sales, Central Retail obsolescence with respect to consignment inventory.
and the supplier must negotiate aspects such as credit sales, by contrast, provide Central Retail with
merchandise mix, pricing and promotions. For both more freedom in deploying its merchandise to sell.
credit and consignment sales, Central Retail may offer
promotions including discounts, with the amount of (3) Logistics and Distribution
the discount taken from its expected margin on the
discounted merchandise. Central Retail manages the flow of merchandise
and supplies throughout its retail network through
The choice between using a credit sale or consignment 14 distribution and logistics centers in Thailand,
model depends on a number of factors that vary by 11 distribution centers in Vietnam and a single
category. For credit sales, Central Retail sources distribution center in Italy, having an aggregate
and sells its own directly purchased merchandise, area of approximately 379,000 square meters,
either under third party brands or private labels 40,000 square meters and 35,000 square meters,
that are sold exclusively in its stores, and Central respectively.
Retail tends to stock essential, repeats items that are

Annual Report 2021 (Form 56-1 One-Report) 119