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India is the fifth largest retail market globally, with a size of INR 16
During 2005-2007, the sector was in a hyper growth phase. In pursuit to capture market,
companies made strategic as well as operational errors which has been broadly
classified as follows:
Unviable formats.
3) High lease rentals: Retail is a tough business to operate, PAT margins are
as low as 2-3%. Indian organized retail follows the lease rental model due to
high real estate costs and paucity of quality malls. Lease rentals should ideally
be 3-6% of sales depending upon the format.
However, rentals in a few specialty stores touched Rs 300/sq feet/month
during the heydays - in a period of two years, lease rentals in general
increased 50-70%. The increase was more evident in FY08 and FY09 due to
decline in same store sales growth. Currently, the price/sq feet can reach in
thousands.
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In the global slowdown phase starting from 2007, the Indian retail players paused,
to realize their past mistakes and took time and efforts to re-organize themselves:
Focus on profitable growth
Exit from unprofitable stores/formats
Rental renegotiation/revenue sharing arrangements
Reduction in salaries/ higher manpower productivity
Significant investments in backend
Exit of unsuccessful new entrants
1)
Focus on profitable growth: Retailers paused and realized their errors and started
using analytics for insights into the business, but analytics used was only
concentrated towards the finding of most feasible location to open a new store.
2)Exit from unprofitable stores/formats: whole new set of formats and store sizes, with a
view to capture consumption and increase share in consumer wallet. The industry has
tried to control costs and address the issue by way of store closure, exit from formats,
restructuring of format, Change of location.
3)Rental renegotiation/revenue sharing arrangements: After touching the unprecedented
highs, lease rentals softened, revenue sharing arrangements came into picture.
4) Reduction in salaries/ higher manpower productivity: stopped paying fancy salaries to
attract the top talent.
5) Significant investments in backend: Post the slowdown, retailers have
huge investments to strengthen their backend systems.
been making
Transformational Change:
Apple changed the way people used to think about music, with proper planning they are the leaders in the
market now.
Retail industry should now have to act smart and move towards the transformational changes.
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Since, the fixed operating costs cant be reduced for any retail, hence this research
revolves around the following questions:
How to achieve the maximum positive footfalls?
What is the buying behavioral pattern of a customer?
What is the customers psychology while going to any retail store?
What if, the cost can be reduced through following a eco-green building
model?
This research will aim at attracting new customers as well as retaining old ones, and
suggest possible future models to increase profit and provide better value to a
customer
So we started this project to help reduce operating cost of existing retail business
and suggest possible future model to increase profit and provide better value to
customer
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Tools used:
Microsoft Office Excel 2007
Bas SAS 9.1
SAS Enterprise Miner 6.1
SAS Enterprise Guide 4.2
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45.89%
54.11%
Male
Female
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Marital Status
29.23%
70.77%
Married
Unmarried
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Employment
13.77%
7.73%
78.50%
Private employee
Government Employee
Other
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Age group
10.39%
1.21%
21.74%
66.67%
21-30 Year
31-40 Year
41-50 Year
Others
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As the focus is shifting towards Dmart and other retailer will have to
reduce their operating cost and think for implementing future preferred
model to do better business and give more value to customers.
Dmart
Reliance Fresh
Dorabjee
Big Bazaar
Others
14%
9%
47%
15%
15%
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STRENGTHS:
o Believes in providing more value to customers with attractive discounts.
o Efficient cost effective model.
o Usually located in the residential area.
o Moderate store size, though it provides wide variety of cost effective goods.
o Highly motivated staff
WEAKNESS:
o Lesser parking space.
o No rest rooms
o Compact store size, makes the in-store suffocating during peak times.
o No Customer loyalty programs.
OPPORTUNITIES:
o Heavy customer base, can still make it strong through various other models.
o Strongly headed for price sensitive population.
THREATS:
o Must concentrate more towards the hygiene and other convenient clean
o factors for its customers. It can help in attracting new buyers.
o Need to come up with an strategy to tackle peak hours.
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STRENGTHS:
Strong supplier tie-ups.
Huge advertising budgets, having potential to have new customers.
WEAKNESS:
Lesser savings comparatively to D-Mart.
Lesser variety of goods.
Discounts and offers are released for about to expire goods.
OPPORTUNITIES:
Should use the supplies efficiently.
Must concentrate on the quality of goods offered.
Should use the customer card in analyzing their buying trends.
THREATS:
Price sensitive population are continuously ignoring the store.
Major threat is for its survival.
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STRENGTHS
Owns the tag :: entered first into this business.
Big customer base.
Huge advertising budgets.
WEAKNESS:
Lesser savings comparatively with other competitors.
Poor arrangement of goods makes it difficult to search.
Few product racks are out of reach for some customers.
OPPORTUNITIES
Must know how to tackle large crowd specially Sabse Bada Din and other special days.
Must concentrate on the quality of goods offered.
THREATS
Price sensitive population are continuously ignoring the store.
Major threat is for its survival.
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the
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Based on day and time preference by most of customers we have suggested below solutions to retain
customers more happily coming on weekend and can reduce their operating cost.
HAPPY HOURS: Since the majority customers visit during weekends, after 3:00 PM, so the concept of happy
hours might help, which retailers can introduce from morning to 12:00 Noon and can start store little early in
morning on weekend or holidays.
EXPRESS COUNTERS: Increase the minimum items in express counters. In this way more customer will be
handled in express counter.
REDUCE MANPOWER AND ENERGY ON LEAST SHOPPED DAY: Retailer can return to old working style.
Keep store close on least shopping day and give more value to existing customers and can build long
relationship. So saving in operating cost and retaining customers.
CUSTOMER LOYALTY PROGRAM: Introducing customer loyalty programs to study the buying behavior of the
customers. Retail companies should work more towards customer satisfaction, e.g. wishing them on their
special days, offer special discounts to them on those days.
TOKEN SYSTEM: Retailers can introduce token system, to the customers standing in queue. Customers can
hang the token in their trolley and collect their goods later when they are called. In this way customer would
be happily retained.
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Retailers must select the proper channel to reach the customers. DMART believes
in people visiting their stores, thus it is reducing its operating costs.
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Below future models will help retailers utilize their existing space and
resources to attract more customers and better satisfy existing customers.
Based on our research, we conclude that people are interested for:
Mobile Application Home Delivery: 88.04%
Mobile Application Order and Pick-up: 92.39%
Shop and Drop: 97.82%
Online Home Delivery: 55.6%
Home Delivery Extra pay: 78.3%
Hence, we can assume that people are more interested towards the
online model, moreover they are also willing to pay some extra for the
same. Above model can help increasing customers and also retaining
customers happily for longer time.
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Order-Pick-up and Online model is the top preference for married couples. Married have prime
responsibility for grocery so retailer should think to act for such segment.
Lesser working days preferred by many married males if better offers are made available. While
unmarried has no such priority whether a store is functioning for all 7 days or 6 days.
Females influence more instead of males for shopping the grocery items, So retailers should think
whom to focus more.
Online model found to be more preferred among the population. Still, females were in favour of
rejecting the online model for the grocery item as they cant look and feel the items online, but at the
same time they wish branded products can be home delivered.
Based on our research, people are also even ready to pay extra for the home delivery.
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ORDER AND PICK UP: A process in which people can call and block their
order, the goods can be collected while returning on their way home. This
process can be implemented through online, mobile application or a small
call centre.
SHOP AND DROP: A process in which people visits the store, shops and in
turn has the option of delivering the goods at their doorstep.
ONLINE MODEL: This model can include both website and the mobile
application. Based on the analysis major population is even interested in
paying extra for home delivery.
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Green building can help reducing operating cost primarily in air conditioning and light.
Retailer can also opt for carbon credit too. Below building consume very little electricity in
lighting but it is without air conditioning but feel like centrally air conditioned.id retailers
can opt for carbon credit too.
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We have covered only operating cost and future option but many analytic
area is there in retailing which should also be taken care for better
business:
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MULTI CHANNEL ANALYTICS AND DATA INTEGRATION Integration of data and analytics across multiple customer channels or
touch points.
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Clientling analytics
Demand shaping analytics
Sentiment analysis
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Given the current retail environment, it may take a bit longer for retailers to
transform themselves into precision analytical machines.
However, the overall trends are clear: retail is a data-intensive industry, and
taking advantage of all that data to operate and manage the business better
requires analytics.
The good newsand the badfor retail analytics is that most retailers have
only scratched the surface of what is possible.
The food on the analytical table for retailers is both bounteous and delicious; all
that remains is for retail executives to revive their appetites, and eat heartily!
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Ultramaxit