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Friday, April 28, 2017

Baby shark method: the secret of many successful retailing giants

Albert Gubay, the late billionaire, from humble beginning established United Kingdom’s most successful supermarket chain Kwik Save.

It started, in 1959, when he founded value foods. His aggressive price cuttings lead many distributors and suppliers to refuse him.

In 1964, he visited United States learning from there a technique which helped him built his retailing chain. Sooner his Value Foods changed to Kwik Save, a discount retailer chain boosting more than 1000 stores. The growth of his business was a direct result of his use of baby shark method.

In this method the retailer purchases goods on good payment terms, say for example, 60 or 90 days and then sell these items at or below costs. The interest on cash generated by the sale is then used to expand retailing business.

The interest on trade credit is received in form of discount. By selling these items he generated cash for expansion at the same time being able to pay suppliers when the payments became due. This method is a sort of OPM, other people’s money.

The use of baby shark method, along with other cost cutting methods learnt from West German retailing giant ALDI, he founded the empire consisting of hundreds of outlets. In 1973, he sold Kwik Save for £14 million, the first step to amass his £500 million fortune.

ALDI, the giant German retailer was using this method much before Gubay copied it. In fact, ALDI was where this method of retailing was perfected. Today ALDI owns more than 10000 stores in 18 countries, with total turnover of 50 billion €.

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