Chile's Sodimac steps up expansion, sharpens operations

Home Channel News, April 16, 2001

SANTIAGO, CHILE -- Sodimac, South America's largest home improvement retailer, plans to open seven new stores in Chile in 2001 and roll out a new store format that combines its home center and drive-through lumberyard concepts.

Of the seven planned new openings, four will feature the new format, which debuted in December in the Puente Alto section of Santiago. That unit covers a total of 200,000 square feet between its showroom, the drive-through and an attached nursery.

"It combines the best of Sodimac Constructor and Sodimac Home Center in one location," said Guillermo Aguero, the retailer's president, referring to the company's original two formats. "The results were very much unexpected, and we believe this is a powerful new weapon."

Despite its aggressive approach at home, however, Sodimac will put further international expansion on temporary hold, executives told more than 800 suppliers and guests during an annual vendor appreciation event March 29. The retailer, which operates five stores in Colombia and has laid the groundwork for expansion into Peru, has already assembled a team of executives and merchandisers and identified store sites in Buenos Aires, Argentina. But because of that country's recent economic turmoil, Sodimac will wait before opening stores there, according to Aguero.

"We know we need to be in Argentina, we just need to wait for the right time," Aguero said. He added that the company is also "exploring" Brazil, and in the long term is interested in expanding as far north as Mexico.

"The environment is much more competitive and global," Aguero told the assembled vendors, many of whom themselves are international companies. "That's the challenge before, and an invitation to, you."

Serving as backdrop to the event was what company executives referred to as a highly successful 2000 despite difficult economic circumstances and increased competition from Home Depot, which now operates five stores in Chile. Despite such pressures, sales at Sodimac's 47 stores rose 16.4 percent to US $635 million.

The retailer's executives also discussed a series of initiatives begun last year that helped improve its operational results, including:

* A sharper focus on price. The retailer's merchandising team shops competitors daily, tracking prices on 85 products, which represent 10 percent of its total sales. "Every day of the year we are opening our stores with the best possible prices," said Francisco Torres, Sodimac's merchandising director.

* The introduction of a new cross-docking system and Sodimac Online, which provides vendors with Internet access to information including inventory, pricing, invoices and calendars and schedules for orders. Some 85 suppliers representing 25 percent of Sodimac's merchandise participated in the cross docking program during the year; According to Ignacio Concha, the dealer's chief financial officer, the cross-dock system and the Internet effort improved product availability by 10 percent and slashed logistics costs. One supplier, he noted, went from sending 136 invoices a month to sending just six.

* A new marketing campaign called Da2. Participants in the campaign, which included special promotions and increased advertising, saw sales through Sodimac grow 24.7 percent for the year, according to Gonzalo Labbe, Sodimac's director of marketing. During the campaign, however, sales for four vendors -- 3M, Viled, Bosch and Black & Decker -- soared 496 percent.

* The "rationalization of its stock from 54,000 skus to 44,000 skus through the elimination of unnecessary and duplicate merchandise.