7A.1. Buy and Large Corporation — Background

Introduction

Buy and Large, a prominent public retail chain, was established in 1998 by entrepreneur Michael Thompson and his business partner Sarah Li in Kitchener, Ontario. Originating from a small, 400-square-foot store, their business rapidly grew into a nationwide phenomenon known for offering a wide range of products at competitive prices. Today, Buy and Large operates over 150 stores across Canada and employs approximately 15,000 people. From the outset, the philosophy of Buy and Large has been centred on “affordable quality for everyone.” This guiding principle has been the cornerstone of their business model, ensuring that high-quality products are accessible at reasonable prices. The company aims to cater to the diverse needs of Canadian families by providing a one-stop shopping experience that offers both variety and value.

Buy and Large’s product range covers everything from clothing and household goods to electronics and groceries. This broad assortment allows the company to serve all demographics, maintaining a solid market presence in each category. Additionally, the company strongly emphasizes customer satisfaction and community engagement, often leading initiatives that benefit local communities and the environment. The company is structured to foster a culture of innovation and responsiveness, which has been crucial in adapting to the fast-evolving retail market. Buy and Large’s commitment to sustainability is reflected in its business practices and partnerships with suppliers who adhere to ethical production standards. This commitment is also evident in its progressive approach to reducing plastic usage and promoting recycling.

Buy and Large has been listed on the Toronto Stock Exchange since 2008, showing consistent financial performance and growth in shareholder value. This success is attributed to the company’s robust operational strategies and its dedication to upholding the values of community support and customer-centric service. As Buy and Large continues to expand, it remains a pivotal player in Canada’s retail sector, driven by its foundational commitment to enriching the lives of its customers while promoting sustainable business practices.

The Board and Senior Management

Buy and Large is governed by a board of directors composed of nine members, reflecting a mix of backgrounds in retail management, finance, technology, and non-profit sectors. The board is chaired by Linda Cho, a veteran in corporate governance with over two decades of experience in the financial industry. The directors, including two founding members, Michael Thompson and Sarah Li, meet quarterly to review company strategies and oversee corporate governance practices. The board is committed to upholding high standards of ethics and corporate governance, although it has occasionally faced challenges in balancing rapid business expansion with effective oversight.

The executive team at Buy and Large is led by CEO John Carter, who joined the company in 2010. Under his leadership, the company has achieved significant growth and has navigated the retail landscape adeptly during economic fluctuations. The CFO, Rachel Kim, manages the company’s finances, ensuring fiscal health and shareholder value. The CMO, Alex Ren, is responsible for all marketing and customer engagement aspects, driving the brand’s presence across various channels. Despite the company’s success, subtle governance challenges have surfaced at Buy and Large. For instance, there has been occasional tension among board members regarding strategic decisions, such as the degree of investment in online versus brick-and-mortar retailing. Such debates reflect a natural diversity of opinion but occasionally hint at more profound disagreements that could undermine board cohesion.

Further, while the tone at the top typically emphasizes ethical behaviour and compliance, there have been instances where the rush to achieve quarterly targets has led to decisions that marginally skirted company policies. These decisions were not unlawful, but they raised concerns among some senior managers about the pressure to prioritize financial results over strict adherence to established corporate standards. This scenario highlights a classic governance dilemma where the leadership’s drive for results might unintentionally encourage shortcuts or minor lapses in compliance. Another issue involves the company’s leadership development and succession planning approach. The CEO and other senior executives are highly competent but have been criticized internally for not developing their second-tier leaders as potential successors. This has led to concerns about the sustainability of leadership and whether the company could maintain its momentum under different management.

Moreover, the CMO’s innovative strategies have significantly boosted the company’s market share but have also led to an over-reliance on specific marketing channels, which poses a risk if market dynamics change. Board discussions have not adequately addressed this situation, suggesting a potential oversight in evaluating strategic vulnerabilities.

The Sales Process

An Overview of the Sales Process

The sales process at Buy and Large retail stores is engineered to optimize customer experience and operational efficiency. The experience begins when customers enter, greeted by a meticulously organized store layout. Each store is divided into clearly defined sections, such as clothing, electronics, groceries, and household goods, each marked with distinct colour-coded signs for easy navigation. Directional signage and store maps at entry points help customers find their desired sections quickly and efficiently. Once in the relevant section, customers encounter products arranged neatly on shelves and racks, with transparent, accurate pricing and promotional signage prominently displayed. This includes digital price tags, which can be instantly updated to reflect current promotions or sales, ensuring that pricing discrepancies are minimized. In areas like clothing or electronics, where variety and specifications are crucial, items are displayed in various sizes and models, with detailed information on the tag or via digital displays.

The Role of Employees

Staff members play a critical role throughout the shopping experience. They are strategically positioned across the store to assist customers. These employees are trained in customer service skills to enhance shopper satisfaction and handle queries or concerns. They also have significant product knowledge and can provide details, comparisons, and recommendations. The point of sale is streamlined to reduce wait times and improve the checkout experience. Multiple cashier stations are available, including self-checkout options for customers with fewer items or those who prefer a contactless payment experience. Cashiers are trained to be efficient and accurate, offering final purchase reviews and informing customers about return policies and loyalty programs, which incentivize repeat visits.

The Role of Technology

Furthermore, Buy and Large has embraced technology to enhance the sales process. Mobile apps allow customers to scan products for instant information, check stock availability, and even locate items within the store. Customers can pay through the app for added convenience, facilitating a quicker exit during peak times.

The Purchasing Process

At Buy and Large, the purchase process operates in a decentralized way, reflecting the autonomy given to individual store managers across various locations.

Decentralized Procurement

Each store at Buy and Large operates independently regarding procurement. Store managers are responsible for managing their inventory levels and ordering products according to the demand and preferences of their local market. This decentralized approach empowers managers to respond quickly to sales trends or customer requests. However, without centralized coordination, this can result in varying inventory levels and product offerings across different stores, potentially affecting brand consistency and economies of scale. Vendor selection is primarily driven by store managers who choose suppliers based on pricing, delivery schedules, and past performance. While this method allows for personalized service and potentially better deals at a local level, it lacks the standardized criteria and rigorous vetting process that might be implemented with a centralized purchasing system. Each manager’s expertise and diligence in selecting vendors can significantly influence product quality and reliability, leading to product quality disparities across different locations.

Purchase Orders

Purchase orders are generated by individual store managers or designated staff within each store. The process involves manually reviewing inventory levels, predicting customer demand, and placing orders accordingly. This system relies heavily on the judgment and experience of store personnel, who may use basic spreadsheets or simple database software to track inventory and orders. The lack of advanced forecasting tools or integrated inventory management systems can lead to overstocking or stockouts, impacting store performance. In some cases, orders above a certain monetary threshold require approval from regional managers. This step introduces a slight check on the decentralized purchasing decisions, but the criteria for approvals are often not standardized, depending heavily on the discretion of the regional manager. This can either delay the ordering process or lead to inconsistent purchasing decisions that do not align with broader corporate strategies or negotiated contracts at the corporate level.

Goods Receipt

Goods are received directly at individual stores, where staff inspect deliveries against purchase orders and quality standards. Given the varying levels of training and expertise among store employees, the rigour and thoroughness of these inspections can vary. Inconsistent procedures in handling damaged goods or delivery discrepancies can further complicate inventory management and supplier relations. The process for handling invoices and making payments is similarly decentralized. Store managers or staff check invoices against delivery receipts and purchase orders, approve them, and handle payment through local banking facilities. This approach can lead to delays in payments, discrepancies in invoice handling, and missed opportunities for early payment discounts. It also increases the administrative burden on store personnel, diverting attention from core sales and customer service activities.

Purchase Recording

Each store maintains its purchasing records, which are periodically reported to the regional offices and then to the corporate headquarters for consolidation in financial reports. The lack of a unified database for purchase records across the company complicates the process of financial reporting and analysis. It also limits the visibility of senior management into the purchasing patterns and challenges faced by individual stores. Feedback on supplier performance needs to be more consistently gathered and shared beyond the local store or regional level. Without a centralized system to collect and analyze supplier performance data, opportunities for improvement in procurement practices or supplier relationships are often missed.

Inventory Management

Buy and Large’s inventory receipt process is integral to its supply chain efficiency, operating seamlessly across its central warehouse and individual retail stores. This procedure ensures that products are received, inspected, and stocked efficiently to maintain a continuous flow of goods that meet the company’s quality standards and customer demand.

Warehouse Management

The central warehouse of Buy and Large is the primary receiving point for bulk shipments from suppliers. When goods arrive at the warehouse, they undergo a thorough inspection process. This begins with verifying the shipment against the purchase order and the delivery note to ensure that the quantities and products match the ordered items. This verification is critical in preventing discrepancies that can affect inventory levels across the entire network of stores. Following the initial check, warehouse staff perform a quality inspection of the goods. This inspection focuses on detecting defects, damages, or quality issues deviating from the company’s standards. Each product type has specific inspection criteria that must be met. These criteria are detailed in the company’s operational manuals. For example, electronic goods are checked for functionality and cosmetic defects, while perishables like food items are inspected for freshness and adherence to safety standards.

Quality Inspection

Once products pass these inspections, they are entered into the warehouse management system (WMS). This digital entry includes scanning barcodes or RFID tags, which track the inventory’s movement within the warehouse and eventually to the retail stores. The WMS is integrated with the Enterprise Resource Planning (ERP) system, allowing real-time inventory monitoring and management across the entire network. The goods are then sorted and stored in designated areas of the warehouse. The warehouse layout is strategically designed to optimize the flow of goods, with frequently moved items placed near dispatch areas to reduce handling times. High-volume or high-turnover products are positioned for easy access, facilitating quick dispatch to stores.

Inventory Management System

Once verified and approved, items are scanned into the store’s local inventory system, which updates the overall inventory count and provides sales forecasting and reordering data. The products are tagged and prepared for shelving, with perishable items prioritized to minimize spoilage. The inventory receipt process at both the central warehouse and retail stores is crucial for maintaining the accuracy of stock levels, ensuring product quality, and optimizing the product availability that Buy and Large promises its customers. This meticulous approach supports operational efficiency and enhances customer satisfaction by consistently meeting product availability and quality expectations.

Stocking

The stocking process at Buy and Large stores begins immediately after inventory receipt and quality checks. Products approved for sale are strategically placed based on their category and expected demand. High-demand items are positioned at eye level and in easy-to-access locations to facilitate quick customer access and encourage purchases. This placement strategy is informed by sales data analysis and customer behaviour patterns. Items are grouped logically to enhance the shopping experience. For example, products such as shampoo and conditioner are placed adjacent to one another. Signage guides customers to new products or items on promotion. During stocking, attention is also given to visual merchandising, ensuring that displays are attractive, thematic, and aligned with current marketing campaigns or seasonal trends.

Restocking

Restocking is a continuous process at small and large stores, crucial for maintaining adequate inventory levels throughout the business day. Store employees regularly check stock gaps, especially for fast-moving items. The restocking process is typically carried out during less busy hours to minimize disruption to the shopping experience. Night shifts are often utilized for major restocking activities, preparing the store for the next day’s business. The store’s inventory management system plays a vital role in the restocking process. It alerts staff to low-stock situations based on preset thresholds, prompting a restocking request. This request is either fulfilled from the central warehouse or, in cases of urgent need, through a faster direct order from suppliers. Efficient restocking is essential for sales maximization and maintaining customer satisfaction by ensuring that popular products are always available.

Purchase Returns

Processing returns is another critical aspect of store operations, directly impacting customer service and inventory management. Buy and Large has a customer-friendly return policy that allows returns within a specified period, provided customers have valid receipts and the items are in sellable condition. This policy is prominently displayed at all cashier stations and on receipts. When a customer returns a product, store employees verify the item against the company’s return criteria, including checking for any damage or usage signs that might prevent the item from being resold. Once the return is accepted, the product is scanned back into the inventory system, and the customer is issued a refund or store credit, depending on the original payment method and the nature of the return. Returned items that are in good condition are restocked. However, items that cannot be sold again due to damage or other issues are set aside. These items are then evaluated to determine if they can be returned to the supplier for credit or need to be disposed of according to the company’s waste management protocols. Handling returns efficiently is crucial for minimizing financial loss and maintaining customer trust. Buy and Large trains its staff extensively in the technical and customer service aspects of returns handling, ensuring that this process is handled as smoothly and professionally as possible.

Payroll Management

At Buy and Large, the payroll process for corporate employees stationed at the headquarters in Kitchener, Ontario, is managed centrally through the human resources department. This process is designed to be efficient and compliant with Canadian employment regulations. The payroll cycle for corporate employees is semi-monthly. Each employee’s payroll details, such as salary, bonuses, deductions, and benefits, are managed through a comprehensive Human Resource Information System (HRIS). This system is integrated with timekeeping software that tracks employee attendance and leave, ensuring accurate pay calculation based on actual hours worked and leave taken.

Review of Timekeeping Records

The HR team reviews each pay period’s time and attendance records for completeness and accuracy. Any discrepancies or adjustments, such as overtime or sick leave, are verified and updated in the system before the payroll is processed. Employees can log into their self-service portal to view their timesheets and submit necessary corrections for approval. Payroll calculations include statutory deductions such as federal and provincial taxes, Employment Insurance (EI), and Canada Pension Plan (CPP) contributions, as well as any voluntary deductions for benefits like health insurance or retirement savings plans. The HRIS automatically updates these calculations based on current tax rates and legislation, minimizing errors and ensuring compliance. Once the payroll is processed, funds are transferred via direct deposit into employees’ bank accounts. Payslips are generated electronically and made available to employees through the online portal, where they can also access their year-end tax forms, such as the T4 slips.

The Payroll Process

For retail store employees across Canada, Buy and Large employs a decentralized but standardized payroll process coordinated by regional managers and overseen by the central HR department to ensure uniformity in policies and practices. Retail employees are paid bi-weekly, and their payroll is closely tied to the point-of-sale (POS) systems in their respective stores, tracking hours worked through employee login IDs. This direct integration allows for real-time data capture of work hours, including overtime, which is critical for accurate payroll computation. Regional managers review the compiled time records from each store for accuracy and completeness. Adjustments, if any, are processed after validation. Like corporate employees, retail staff can access an online portal for timesheet verification and updates, encouraging transparency and allowing employees to engage actively with their payroll data.

Payroll Deductions

Payroll for retail employees also incorporates the statutory and voluntary deductions calculated by the centralized HRIS. The system ensures that payroll for all employees is consistently processed regardless of location, maintaining compliance with regional differences in employment laws. After payroll approval, salaries are disbursed through direct deposit, ensuring timely payment. Employees receive electronic payslips via the same portal used for timesheet management, maintaining consistency in how corporate and retail employees access their payroll information. This structured approach to payroll management at both corporate and retail levels ensures that Buy and Large maintains high accuracy, compliance, and employee satisfaction in its payroll processes.

Enterprise Risk Management

At Buy and Large, the risk management process, while essential, operates in a somewhat rudimentary and siloed fashion across different departments. Each department autonomously identifies and manages risks pertinent to its specific operations without a centralized or cohesive strategy. This approach means that while all units, including purchasing, sales, IT, and warehousing, conduct risk assessments, more information must be shared across these units.

The process generally begins with department heads informally listing potential risks based on their experiences and immediate challenges. Risk assessments are conducted sporadically, often triggered by a recent incident rather than as part of a proactive strategy. Consequently, the evaluation focuses on immediate and visible risks, like supplier reliability in purchasing or theft and damage in warehousing and retail operations. Once risks are identified, each department independently decides on mitigation strategies that are most convenient or familiar rather than those that may be most effective. This can lead to a patchwork of strategies that vary in effectiveness and efficiency. For example, the IT department might prioritize cybersecurity threats and invest in related security measures. In contrast, the sales department focuses on customer theft and product damage with minimal cross-departmental insights that could lead to more comprehensive risk mitigation. The risk management process is not regularly reviewed at a company-wide level, and there needs to be a formal risk reporting structure that reaches the executive team systematically. Updates or changes to risk management strategies are often communicated through ad hoc meetings or incident reports rather than through a structured reporting process.

Financial Accounting and Reporting

The first step in the financial workflow at Buy and Large involves capturing transaction data. This is conducted through POS systems located at each checkout counter within the retail stores. Each sale, return, and exchange is immediately recorded, capturing essential details such as the type of product sold, quantity, price, and transaction time. The POS systems are linked to inventory management systems, ensuring stock levels are automatically updated with each transaction. This real-time data capture is crucial for maintaining accurate inventory records and for immediate financial recording. Given Buy and Large’s numerous locations across Canada, transaction data from all stores are consolidated daily through a centralized database managed at the company’s headquarters in Kitchener, Ontario. This consolidation process is facilitated by an advanced ERP system, which integrates data from sales and other operational areas like purchasing, payroll, and logistics. This system allows for aggregating financial data uniformly, ensuring consistency across all stores and departments.

Once data is consolidated, the accounting process begins. Buy and Large employs the accrual basis of accounting to recognize revenues and expenses when earned or incurred, regardless of when the cash transactions occur. The accounting team uses the consolidated data to record journal entries for sales revenues, cost of goods sold, operating expenses, and other financial transactions. They also manage accounts receivable for B2B clients and accounts payable for supplier invoices. Regular reconciliations are performed to ensure that the entries in the general ledger accurately reflect all business transactions and adjustments. This meticulous approach helps in maintaining the integrity of financial data. Financial reporting at Buy and Large is a structured and continuous process. Monthly, quarterly, and annual financial statements are prepared to provide insights into the company’s economic status. These statements include the balance sheet, income statement, and cash flow statement, which are essential for internal management review and fulfilling regulatory requirements as a publicly traded company. Preparing these financial reports follows International Financial Reporting Standards (IFRS), which ensures that the financial statements are transparent, comparable, and consistent across international borders.