Non-financial performance indicators
Service-oriented and competent employees
The DOUGLAS Group’s employees again made a major contribution to the Group’s success in fiscal year 2005/06. Their professional expertise, friendliness and commitment to service all helped to distinguish the DOUGLAS Group from its competitors.
As of September 30, 2006, the DOUGLAS Group employed a total of 21,002 employees. The number of employees rose by 1,414 or 7.2 percent in 2005/06 (09/30/05: 19,588). The major increase was in the Perfumeries and Books divisions, which enjoyed vigorous growth as a result of the numerous new openings and acquisitions.
Personnel expenses in the DOUGLAS Group totaled 580.8 million EUR in fiscal year 2005/06. This represents a 9.7 percent increase year-on year and is largely the result of personnel expansions in the Perfumeries and Books divisions. The ratio of personnel expenses to sales fell slightly to 21.7 percent (previous year: 21.9 percent).
Further information on this topic can be found in the section “Human Resources” on pages 20 to 25 of this annual report.
Future-oriented innovative spirit
In a retail group such as the DOUGLAS Group, there are no research and development (R&D) expenses in the traditional sense. Nevertheless, the markets are closely and continually monitored, and emerging trends analyzed. The knowledge obtained is central to the creation of new formats and sales channels, and for ensuring contemporary and attractive products and services. It is also used for developing modern store-design concepts, for up to date training and further education concepts for the staff, for modern marketing instruments, and in the development of new IT systems. With the opening of numerous new stores, the DOUGLAS Group’s subsidiaries are setting trends and accents year for year in their respective sectors.
Because innovation plays such a vital role in the DOUGLAS Group’s future development, the motto coined for 2006 by the Executive Board was “Year of Innovation”; a Group-wide innovation competition was launched in this context. All employees were asked to submit proposals in the competition categories: “Best innovation for customers,” “Best innovation for employees,” “Best innovation for business partners” and “Best innovation for resource efficiency.” A total of more than 3,000 proposals were submitted. The best ones were given an award by an internal jury. As many as possible of these innovative ideas are planned to be put into action in 2007.
Effective and customer-oriented procurement and logistics
As an international retail group, the DOUGLAS Group’s procurement activities involve a large number of national and international suppliers. All of these activities seek to ensure top product quality and compliance with delivery deadlines via close, long-standing partnerships with suppliers – thus generating sustained competitive advantages. The DOUGLAS Group continued optimizing working relationships with its suppliers in 2005/06 as well. This is exemplified by the continuing work being done in the area of electronic data exchange. This involves the use of the Electronic Data Interchange system (EDI) and the optimization of merchandise supplying through the Supply Chain Management system (SCM).
The logistics unit of the Perfumeries division works with so-called cross-docking centers. At the nine German cross-docking locations, the goods from all of the division’s suppliers are made ready for sale (disposal of packaging, pricing, security tags, booking, invoice pro cessing and control) without long interim storage periods; they are then delivered in lots to the respective stores at set times. The purpose is to relieve the stores as far as possible of non-sales activities and to minimize storage time of the products purchased. The crossdocking concept has already been introduced outside of Germany too. In addition to the cross-docking centers in Austria and the Netherlands, another center was opened in June 2006 in Bergamo, Italy. In a relatively short period of time, all of the stores in Northern Italy were linked in to this new crossdocking center.
At the 7th Efficient Consumer Response (ECR) Conference 2006, the Douglas perfumeries’ supply chain strategy was honored with the ECR 2006 Award “Best Management Service for Consumers” for its successful implementation of the ECR concept, above all with respect to the integration of suppliers and logistics service providers.
The Books division has a central distribution warehouse in Dortmund. Parallel to this, appropriate products and all of the products of a large publishing group are delivered directly – as one unit and sorted according to subject – to the respective stores without any interim storage. This has also led to noticeable reductions of the time needed for reordering these products, and it has reduced the amount of nonsales related activities in the stores. In 2007, another large publishing group will start supplying Thalia stores directly. The agreement with Rhenus, a logistics services company, was also extended in fiscal year 2005/06. The goal is to promote the multichannel idea in the area of logistics processing as well and to continue to optimize delivery processes.
The Jewelry division also has a central distribution warehouse. In order to optimize internal logistics process and to further relieve the stores of administrative tasks, an additional goods out control system for central deliveries to the stores was introduced in the past year. This does away with the need for inspecting incoming goods at the stores. Because of its complex nature, the introduction of the new material management system is being postponed to the second half of 2007. It will be used to assist the integration of strategic suppliers. Planned, for example, is the automated and ready for sale re-supplying of certain specified products by the supplier. The advantage here is that ownership of these goods remains with the supplier up to the time of final sale. Thus the goods do not have to be paid for by Christ before this time.
Sustained conduct as a part of corporate culture
The DOUGLAS Group is committed to sustained economic success. Sustainability stands for a company’s ability to gear its business activities to the future while taking into account ecological and social factors. Sustainability becomes not only a part of corporate culture, but it is also a performance indicator that becomes increasingly important for customers, employees, investors, and other interested parties.
The DOUGLAS Group has been facing this challenge for many years now, and it is more aware than ever of its environmental, social and corporate responsibilities. Next to business success, sustainable conduct therefore has the highest priority for all of the Group’s subsidiaries. The DOUGLAS Group believes that sustainability is an ongoing and vital obligation imposed on management and on each and every employee.
The careful use of natural resources has always been a primary concern within the DOUGLAS Group. All of the Group’s stores and service centers avoid the unnecessary use of energy and materials. The focus of any sustainable environmental management system is the creative search for improved ways of optimizing energy efficiency and reducing resource consumption. For this reason, an intensive exchange of ideas among the various locations, and even across borders, is taking place. The desire to reduce and recycle waste has an impact as early as product selection and package designing. The DOUGLAS Group’s subsidiaries also encourage their manufacturers and suppliers to actively engage in environmental management.
Logistics processes are the subject of continual improvement as well. As a European retail company, the DOUGLAS Group endeavors to avoid hazardous substances or to reduce these to a minimum in the management of its international streams of merchandise – from the manufacturers through to the more than 1,500 stores in 18 countries.
Sustainable management also entails assuming responsibility for the social issues concerning one’s own employees and for society as a whole. The DOUGLAS Group is setting standards in this respect, especially through its commitment to its employees. These nearly 21,000 employees are the heart and soul of the DOUGLAS Group. The quality of their work and the competence they show are vital to the image of the individual companies. Ongoing training and qualification measures throughout the past year continued to reinforce the Group’s claim to having the friendliest, most dedicated and most competent employees. All employees are free to participate in an extensive choice of individual training activities.
The concept of training has always played a very important role in the DOUGLAS Group. Some 500 young people began their apprenticeships last year throughout the Group. Altogether, more than 1,300 young people are currently absolving an apprenticeship in the DOUGLAS Group. This means that almost 13 percent of the Group’s employees are apprentices, far above the industry average of approximately 7 percent. Around three quarters of the apprentices remain with the DOUGLAS Group after successful completion of their training. In this way, the Group assumes social responsibility for the futures of young people and helps to reduce apprenticeship shortages in Germany in a meaningful way. Of course investing in addition al trainees is equally an investment in the future of the DOUGLAS Group; many former apprentices now hold key positions within the company.
Taking responsibility for society also includes the obligation to set a good example by participating, for example, in fund-raising campaigns. During the period under review, the DOUGLAS Group donated 25,000 EUR, split equally between the distance-learning college “Fernuniversität Hagen” for the project “Establishing Study Centers in Eastern Europe” and the Volmarstein Lutheran Foundation for the “Assisted Living in Hagen” project, thus providing quick and unbureaucratic aid to both organizations. In addition, nearly all specialty stores are active in their communities organizing campaigns and donating the proceeds to charitable causes.