STM Assignment WorkbookFaculty: Prof. Anshuman TripathyContents

41Executive Summary

52Industry Overview

52.1Nature and Size of the Industry

62.2Key Growth drivers for the industry

62.3Identification of Critical Success Factors (CSF)

72.4Market Analysis based on CSFs

72.5Industry Benchmarks

122.6PESTEL Analysis

132.7Porters Five Forces Analysis

132.8Strategic Group Mapping

132.9Competitive Landscape

142.10Market Segmentation

142.11Buying Criteria Analysis of the Industry

152.12Key trends and future developments

163Company Overview

163.1Company background

163.2Timeline with key milestones and their strategic impact

163.3Vision, Mission, Goals, and Strategic Themes

163.4Key Product and Service Portfolio

163.5Core Competencies of the firm

163.6Business Model of the organization

193.73rd Generation Balanced Scorecard (Amalgamation of 1st Generation BSC and Activity System Map)

193.8SWOT Analysis

193.9Competitor Analysis (identify competitors)

193.9.1Based on Critical Success factors

193.9.2Based on Financial indicators

204Future Growth Strategy for the organization

204.1Portfolio Analysis

204.1.1Based on BCG Matrix

204.2Companys Strategic Roadmap for future

214.3Product Market Investment Strategy

214.4Re-imagining the Organization with the transformed business model or Use-case based on SMAC and IOE

1 Executive Summary

GuidelinesThe executive summary should provide a brief overview of the organization and the industry in which it operates. It should also illustrate the results of the analysis made in the report. It should provide the future growth prospects in the industry for the organization. It should also highlight on the strategy for any organization to gain competitive advantage in this industry.

India is the 5th largest retail market in the world. The country ranks fourth among the surveyed 30 countries in terms of global retail development. The current market size of Indian retail industry is about US$ 520 bn (Source: IBEF). Retail growth of 14% to 15% per year is expected through 2015. By 2018, the Indian retail sector is likely to grow at a CAGR of 13% to reach a size of US$ 950 bn. Retailing has played a major role the world over in increasing productivity across a wide range of consumer goods and services. In the developed countries, the organised retail industry accounts for almost 80% of the total retail trade. In contrast, in India organised retail trade accounts for merely 8-10% of the total retail trade. This highlights a lot of scope for further penetration of organized retail in India.

The sector can be broadly divided into two segments: Value retailing, which is typically a low margin-high volume business (primarily food and groceries) and Lifestyle retailing, a high margin-low volume business (apparel, footwear, etc). The sector is further divided into various categories, depending on the types of products offered. Food dominates market consumption with 60% share followed by fashion. The relatively low contribution of other categories indicates opportunity for organised retail growth in these segments, especially with India being one of the world's youngest markets.

Because retail depends so vitally on the strength of the economy, and factors like job growth and interest rates, the economy in general will have to become healthy again before the retail sector can rebound fully. Particularly, retail sales related to homes, home improvement services and furniture need a rebound in the real estate market in order to turn around. As demographics change, retailers will have to keep up with the changing needs of the populations in their locations. Ethnic minorities, such as hispanics, are estimated to account for 30 percent of the United States' population by the middle of the century and this may affect the success of some stores and the desirability of different products in these stores.

Transition from traditional retail to organised retail is taking place due to changing consumer expectations, growing middle class, higher disposable income, preference for luxury goods, and change in the demographic mix, etc. The convenience of shopping with multiplicity of choice under one roof (Shop-in-Shop), and the increase of mall culture etc. are factors appreciated by the new generation. These factors are expected to drive organized retail growth in India over the long run.

2 Industry Overview

2.1 Nature and Size of the Industry Guidelines Brief Description of the industry segment or sub segment History and Evolution of the Industry Position of Industry depending on Industry Life Cycle (Introduction, Growth, maturity, decline) Size (% of National GDP) of the industry

History and Evolution of the industryThe origins of retail are old as trade itself. Barter was the oldest form of trade. For centuries, most merchandise was sold in market place or by peddlers. Medieval markets were dependent on local sources for supplies of perishable food because Journey was far too slow to allow for long distance transportation. However, customer did travel considerable distance for specialty items. The peddler who provided people with the basic goods and necessities that they could not be self-sufficient in, followed one of the earliest forms of retail trade. Even in prehistoric time, the peddler travelled long distances to bring products to locations which were in short supply. They could be termed as early entrepreneurs who saw the opportunity in serving the needs of the consumers at a profit Later retailers opened small shops, stocking them with such produce. As towns and cities grew, these retail stores began stocking a mix of convenience merchandise, enabling the formation of high-street bazaars that become the hub retail activity in every city. The modern retail industry is booming across the world. Revenues from retail sales in the US alone stood at $4.48 trillion in 2007, according to a report by the US Census Bureau.

Key Consumers of this industry and their changing needsThe retail industry has reached a tipping point. Tough economic times have brought into rapid focus the reality of changing consumer behaviours. A shopper today has vastly different expectations of product, service, value and environment than even five years ago. In this new reality, incremental adjustments to the store format and portfolio will no longer be sufficient to survive, a radical rethink of the purpose of the store in the consumer shopping journey and the number of stores required to reach the consumer is necessary.1. Personalized Customer Service

Customers want in-person service they cant get online. This is crucial to differentiating your store from the one-dimensional online shopping experience.

2. A Sensory Experience

Retail locations that are visually attractive and appealing are a big draw. Sensory experiences can take opposite forms. If your target market is kids or teens, you might want sensory overload with lots of excitement. If its moms, you might want a restful, relaxing escape from the stress of daily life.

3. Fun and Entertainment

Customers no longer have to go to stores to buy, so you have to work harder. Its always been the case that retail is competing for discretionary dollars, but today its even clearer that your store is competing with other leisure activities like going to a park, museum or sporting event.

4. A Curated Experience

Buying online is convenient, but can also lead to overload, as anyone whos ever shopped for shoes on Zappos.com can attest. Consumers often feel overwhelmed by the abundance [of choices] offered online and want retailers to curate, the report states.

5. Online/Offline Integration

Customers expect a seamless transition between shopping on your website (if you have an e-commerce site) and shopping at your store. If your business has both an eCommerce and brick-and-mortar component, make sure the experiences are integrated so one is an extension of the other.

6. Mobile Technology

Big retailers are taking advantage of customers reliance on mobile phones to grab tons of data and personalize the sales experience. Lots of this is still beyond a small businesss budget, but its important to be aware of.

Stage in the Industry Life cycleThe retail industry is presently in the Growth stage of the Life cycle because Retailing has played a major role in the global economy. In developed markets, retailing is one of the most prominent industries. In 2008, the US retail sector contributed 31% to the GDP at current market prices. In developed economies, organised retail has a 75-80% share in total retail as compared with developing economies, where un-organised retail has a dominant share.

Total Available Market Size (National and Global)The size of Indias current retail market is estimated at 3,893,425 crore ($ 648.90 billion), according to the India Retail Report 2015 produced by the Images Group.

Total Serviceable Market Size (National and Global)Global: $22.492 trillion India: US$520 billionSource: http://www.emarketer.com/Article/Retail-Sales-Worldwide-Will-Top-22-Trillion-This-Year/1011765

http://www.rai.net.in/EY-RAI_Pulse_of_Indian_retail_market_Final.pdf

2.2 Key Growth drivers for the IndustryKey Growth driversRationale

1. Location

2. Removal of entry barriers:

Foreign Direct Investment(in India)

3. Market Size(in India)

4. Demography(in India)

5. Expansion in e-commerce(in India)

6. Economic Factors(in India)Finding a large patch of land which can be used for industrial purpose (not an agricultural land) used to be difficult. That was followed by a lot of completion and negotiation to acquire the land. Moreover, the stringent laws made it difficult to gain ownership of land. Hence, renting high-priced land being the only option, the profitability matrix for company used to be skewed. Due to change in scenario by entry of foreign players and positive change in consumer sentiments, owning a place has become easier which leads to better profitability.

Source: http://www.pwc.in/industries/retail-and-consumer-key-success-factors.jhtmlIn January and December 2012, Indian Government allowed 100% ownership in single brand retail (with a requirement that the single brand retailer source 30% of its goods from India) and 51% ownership in multi-brand retail. This attracts foreign investment due to which A T Kearney, A US based Global management consulting firm has ranked India as the fourth most attractive nation for retail investment among 30 developing markets.The sheer market size of 1.2 billion is a motivator for investment in retail. Indias retail market is likely to touch Rs 47 trillion (US$ 738.71 billion) by 2016-17, expanding at a CAGR of 15 per cent, a Yes Bank-Assocham study says.

Half of Indias population is less than 30 years of age. Youth is more inclined towards spending money on retail. Roughly one-third of Indian population lives in cities. They hence have better access to retail stores. Moreover since the rest of the population lives in villages and rural market is almost unexploited, there is great potential.

Source: http://www.ibef.org/industry/retail-india.aspxOn account of digital revolution, there is rapid expansion of e-commerce in the country due to which the online retail market is expected to touch USD 14.5 billion by 2018.

Source: http://www.ibef.org/industry/retail-india.aspxAvailability of Credit(liberal monetary policy)

Purchasing Power Parity(According to CIA World Fact book, India ranks third with a PPP of $ 4990 billion) as a result of which disposable income of people has increased

GDP growth(it increases consumer confidence)

Decrease in Interest rates(liberal monetary policy)

2.3 Identification of Critical Success Factors (CSF)Critical Success Factor identifiedRationale

CSF 1 Understanding Consumer Behaviour

Retailers have the opportunity to access masses of data on product sales, the impact of promotions on sales and individual consumers purchase histories. They must analyze and use that data to plan the product lines they will carry, in-store promotional activity and relationship programs aimed at consumers.

CSF 2 Operating Multichannel Strategies

Offering consumers a choice of buying in-store, online or from a call centre improves convenience for the customer and gives retailers the opportunity to capture a higher share of the customers wallet. Retailers may also open different types of stores to meet local shopping needs. Supermarket operators, for example, may open neighbourhood convenience stores or shops within gas stations to capture last-minute or impulse purchases.

CSF 3 Improving Operational Efficiency

Operational excellence is a key factor in retail success. Retailers must aim to optimize store layouts to maximize display space and increase the productivity of their staff through effective training and supervision. Streamlining checkout processes and introducing facilities such as mobile payment and self-scanning can realize further efficiencies, as well as improving convenience for customers. Inventory databases enable greater control over stock levels, simplify ordering and help retailers plan effective promotional programs. By improving operational efficiency, retailers can also maintain or reduce their costs, enabling them to offer lower prices and compete effectively against other outlets.

CSF 4 Enhancing Customer Experience

The quality of customer experience is critical to the success of stores and online retailers. Consumers in stores expect clear layouts, convenient parking and opening hours, prompt service at the customer service desk or checkout, and clear policies on refunds and warranties. Mobile technology offers retailers new opportunities to improve the customer experience. By capturing data from Smartphone users who browse their websites, retailers can provide relevant product information and personalized offers when consumers use their phones in store. Online shoppers want a clear website structure, with navigation that is easy to follow and an ordering procedure that is simple and secure. The website should also include contact details for customer service, including facilities such as chat or instant messaging.

2.4 Market Analysis based on CSFs RegionCSF 1CSF 2CSF 3CSF 4

Global

IndiaNorth

South

East

West

North-East

Central

Note: Use data for the year 2013-142.5 Industry Benchmarks

Size of industry: 3,893,425 crore ($ 648.90 billion)

Source: http://www.thehindubusinessline.com/features/brandline/the-detail-in-indias-retail/article6442623.eceCategoryIndicatorIndustry Average of Top 5 Firms or players serving 75-80% of the marketMarket Leader

2011-122012-132013-142014-15 (till Q3)2011-122012-132013-142014-15 (till Q3)

Industry Level (National)Market Size1035.351235.861623.361385.541634.351935.35

Size as % of GDP.0847%.1035%.1279%.1357%.1637%.1957%

Activity RatiosInventory turnover5.366.485.852.483.263.72

Receivables turnover30.2538.2541.2528.0139.9048.34

Payables turnover

Asset turnover1.06892.25781.59780.861.091.36

Liquidity RatiosCurrent ratio1.581.511.411.051.221.02

Quick ratio0.620.730.880.580.810.84

Cash ratio0.150.180.200.120.170.17

Solvency RatiosDebt-to-assets ratio3.581.582.691.251.471.68

Debt-to-capital ratio2.251.011.950.550.801.28

Debt-to-equity ratio2.853.012.510.820.961.69

Interest coverage ratio2.181.851.912.021.070.96

Profitability RatiosGross profit margin8.96%8.06%7.51%6.76%6.64%5.48%

Operating profit margin11.68%12.62%9.48%10.15%11.10%8.98%

Net profit margin3.21%3.48%2.61%1.81%3.89%0.02%

Return on assets (ROA)168.25185.57161.35125.06143.47140.41

Return on equity (ROE)6.88%7.56%4.85%2.90%8.22%0.08%

Valuation Ratios or Price RatiosPrice to Earnings (P/E) 65.91

(as on 06.02.2014)

PEG Ratio = (P/E Ratio) / Projected Annual Growth in Earnings per Share

Price to Cash Flow

Price to Book (P/B)1.18(as on 06.02.2014)

Price to Sales

Dividend Yield0.49(as on 06.02.2014)

Dividend Pay-out Ratio8.456.254.259.004.363.43

Enterprise value (EV is market capitalisation plus debt minus cash)/ EBITDA

Competitive Ratios

Staff Turnover or Industry Attrition Rate

Staff Cost/ Salary as percentage of Sales7.68%11.25%6.48%9.58%13.15%8.27%

Operating Expenses as percentage of Sales88.86%87.48%90.35%89.25%90.49%92.47%

Depreciation as percentage of Sales44.57%49.35%52.47%35.18%41.81%44.15%

Fixed Assets to Sales Revenue0.81350.86150.89140.71380.76580.7851

Advertising as percentage of Sales

Source: http://www.moneycontrol.com/financials/futureretail/ratios/PR03

http://www.futureretail.co.in/pdf/FRL%20Annual%20Report%202013-14.pdfIn case you come across other benchmark ratios used in particular Industry, then please include them as well.

2.6 PESTEL AnalysisCategoryDescriptionKey factors for analysisRationale

PoliticalDegree of intervention of government, subsidies, tax rates

1. Policies regarding FDI2. Change in tax rates

3. Labour laws4. Real estate laws and infrastructure1. 100% ownership in single brand retail and 51% ownership in multi-brand retail has changed the retail scenario in India.2. Decrease in tax rate leads to more money left for consumption.

3. Forbidden employment of staff on contractual basis makes it difficult for 365 days round operations.4. Easy availability of real estate and secondary infrastructure support for logistics is vital to setting up retail shops.

EconomicInterest rates, Economic growth, Inflation, Exchange rate, Discretionary income, Stage of Business Cycle-Prosperity, Recession and Recovery1. Liberal monetary policy2. Economic growth

3. Inflation

4. Discretionary Income

5. Stage of business cycle1. Low rate of interest leads to easy borrowing of money which further leads to more consumption.2. Economic growth would lead to increase in demand.

3. Inflation provokes high wage demand and hence increases cost and hence price.4. Increase in discretionary income would lead to increase in consumption and vice versa.

5. Stage of business cycle in the economy affects consumer behaviour and sentiments.

SocialDemographics

Class structure

Education

Culture

Entrepreneurial spirit

Attitudes sentiment, health, environmental consciousness,

Leisure

1. Social Media2. Health

3. Age-Leisure-culture1. The increasing advent of social media can boost online retail.2. The current health conscious mass is more inclined towards trusting organized retail and food is the biggest retail industry.

3. The young population is more open towards retail buying as they do not show traditional buying behaviour and have more disposable income. Half Indian population is less than 30 years old and one third of that lives in cities with better access to retail.

TechnologicalInnovation

1. Technological innovation It can lead to better supply chain management, increase operational efficiency and reduce costs.

Economies of scale can reduce cost.

It can help with in-store personalization.

Digital marketing can offer positive online retail experience.

It can help better integration of buyers and suppliers(like Walmart)

It can help in better employee engagement.( http://www.retailtechnology.co.uk/)

EnvironmentalEnvironmental consciousness

1. Environment friendly consumer behaviour1. Customers are likely pay more to support retailers who assert sustainable practices, for instance, by buying products made with recycled material.(http://smallbusiness.chron.com/)

LegalConsumer Laws, Competition Laws, Employment Laws, Health and Safety Laws

1. Company Act2. Consumer protection Act

1. If the Company Act has a number of requirements for formation of a firm and the law is stringent, potential retailers might be lost. However substandard retailers would cause problem in the future.2. An apt Consumer Protection Act in place would encourage consumers.

2.7 Porters Five Forces Analysis Porters Five ForcesDescriptionKey factors for analysisRationale

Buyer Power

Power of buyers in the industrySwitching costs

Availability of competition

Diversification of buyers group

Buyers informationSwitching cost for buyer is very low.Competition is high as there are lot of players in retail-both local and global.

Buyers are diversified based on age, culture, need, paying capability, etc.

Buyers are more aware of prices due to internet.

Hence, buyers can said to have power in retail industry if they demand price change as a whole.

Supplier Power

Power of suppliers in the industryDifference in quality with marketQuick and timely delivery

Cost effectivenessIn 1970s, Sears in order to dominate the household appliance market set very high standards for quality; suppliers that didn't meet these standards were dropped from the Sears line.

Wal-mart places strict control on its suppliers(as soon as shelves become empty, an order is sent to suppliers automatically)A contract with a large retailer such as Wal-Mart can make or break a small supplier.

In the retail industry, suppliers tend to have very little power.(www.investopedia.com)

Existing Competition

Competition scenarioPricingProduct availability

OperationsThe competition scenario is different country wise.

The slow market growth for the retail market means that firms must fight each other for market share. More recently, they have tried to reduce the cutthroat pricing competition by offering frequent flier points, memberships and other special services.(www.investopedia.com)

Threat to new entrants

Threat is high as retail is growing comparatively slowly and already has a lot of players.favorable supply contracts

leases

operational efficiencyThere is a decreasing number of independent retailers.However, organized retail is growing.

FDI has made new entry easier in India.

Threat to substitutes

Depends on product offered by firmQualityPrice

FeaturesRetail tendency is ideally not to specialize in a good or service but to provide a wide range of goods and services.However, the retail firms providing with good or service of superior quality, less price or extra features is likely to have less of a threat from others.

Effect of Complementors

2.8 Strategic Group Mapping

CompaniesNumber of brandsRevenue

Pantaloons2281285

Westside1357.6

Shoppers Stop241930

The figures are given in crores.Pantaloons was previously owned by Future Group, is now owned by Aditya Birla Nuvo Limited.Observations and Conclusions:

1. Shoppers Stop sells almost 10% of the number of brands compared to Pantaloons and still earns more. Hence, brand diversification after a certain extent does not add much value.

2. Westside sells 0.4% of the number of brands compared to Pantaloons and makes almost 28% of Pantaloons revenue. Marketing strategy of Westside should be studied and adopted to increase ROI.

3. Based on Pantaloons data, we find that every brand on an average contributes to 5.63% of revenue. 2.9 Competitive LandscapeCompanySubsidiary ofNumber of BrandsTurnoverNumber of stores

PantaloonsAditya Birla Nuvo Limited2281285 crore86

Shoppers StopPromoted by Raheja Corp Group241930 crore73

WestsideTata Group1357.6 crore60

LifestylePromoted by Landmark133000 crore43

FabIndiaWilliam BissellMany1000 crore177

GlobusRajan Raheja Group167 crore35

Value propositions ( Low Cost, Differentiation, Niche)

1. E-commerce is replacing physical stores. In fact, e-commerce is set to replace physical retail spaces altogether in some parts of the world. American companies like ToysRUs, looking to gain a foothold in foreign markets, plan to open mobile-friendly retail websites in places like China, Australia and France.

The way of the future is clearly to commit fewer resources towards opening brick-and-mortar stores and instead, cultivating virtual ones. More and more companies are acknowledging that this is where the real opportunity lies.

2. Smartphones are forcing retailers to keep prices competitive and websites active. This e-commerce explosion is thanks in no small part to the increasing use of phones and tablets for Web surfing and shopping. But our use of mobile devices isnt limited to shopping on-the-go or from the couch. A study by Pew Internet shows that more than half of all adult cell phone owners used their device to help with purchasing decisions while already in store. People either called friends for advice, used their phones to look up product reviews or investigated the prices of items they wanted. Smartphones give us direct access to the worlds information on nearly every retail product, which forces retailers to keep their prices competitive and their Web presence active lest they lose out to more aggressive online retailers and flash sale sites.

3. In-person shopping is being transformed by technology too. Tech in retail is not limited to the Web, of course. Impressive inventions that will transform the in-person shopping experience making it more interactive, personalized and helpful are on the horizon. These include interactive magic mirrors that can display how an outfit will look on you (without actually trying it on), suggest accessories and point you in the direction of similar items; virtual greeters that can handle everything from conducting eye exams to offering discounts through QR codes; and 3-D printers that consumers can use to create their own products on the spot, such as towels, utensils and clothes.Some analysts are predicting that the in-person retail experience may become something else entirely stores like the Gap and Best Buy will simply become touch-and-feel locations, test centers where people can browse options before getting the actual merchandise shipped to them at home.

Value propositions ( Low Cost, Differentiation, Niche)

Three of the most widely read books on competitive analysis in the 1980s were Michael Porter's Competitive Strategy, Competitive Advantage, and Competitive Advantage of Nations.Overall cost leadership requires firms to develop policies aimed at becoming and remaining the lowest-cost producer and/or distributor in the industry. Company strategies aimed at controlling costs include construction of efficient-scale facilities, tight control of costs and overhead, avoidance of marginal customer accounts, minimization of operating expenses, reduction of input costs, tight control of labor costs, and lower distribution costs. The low-cost leader gains competitive advantage by getting its costs of production or distribution lower than those of the other firms in its market. The strategy is especially important for firms selling unbranded commodities such as beef or steel.

The second generic strategy, differentiating the product or service, requires a firm to create something about its product or service that is perceived as unique throughout the industry. Whether the features are real or just in the mind of the customer, customers must perceive the product as having desirable features not commonly found in competing products. The customers also must be relatively price-insensitive. Adding product features means that the production or distribution costs of a differentiated product may be somewhat higher than the price of a generic, non-differentiated product. Customers must be willing to pay more than the marginal cost of adding the differentiating feature if a differentiation strategy is to succeed.

The generic strategies of cost leadership and differentiation are oriented toward industry-wide recognition. The final generic strategy, focusing (also called niche or segmentation strategy), involves concentrating on a particular customer, product line, geographical area, channel of distribution, stage in the production process, or market niche. The underlying premise of the focus strategy is that a firm is better able to serve a limited segment more efficiently than competitors can serve a broader range of customers. Firms using a focus strategy simply apply a cost leader or differentiation strategy to a segment of the larger market. Firms may thus be able to differentiate themselves based on meeting customer needs, or they may be able to achieve lower costs within limited markets. Focus strategies are most effective when customers have distinctive preferences or specialized needs

2.10 Market SegmentationKey Products and/or ServicesRegions

1. Food and Grocery2. Clothing and Accessories

3. Jewellery

4. Catering Services(F and B)

5. Electronics

6. Pharmaceuticals

7. Home and Office Improvement

8. Entertainment

9. Telecom

10. Footwear

11. Books, music and gifts

12. Beauty and wellness

13. Watches

Source- www.dnb.co.in

2.11 Buying Criteria Analysis of the IndustryParameterDetailsEnd-user SegmentsSignificance Attached (Low, Medium, High)

Distance from the retail outlet

Shoppers do not travel long distances for regular shopping (15 minute rule)Brazil(78%), US(74%), France(70%),China(69%), Russia(69%), India(64%)Shoppers buying food and grocery and other retail productsShoppers buying jewellery, apparel and electronics(Indian market)

HighLow

Value and PriceShoppers choose stores that provide value. Price comparison is common.US (39%), India (39%-KVI)Emerging markets

Developed Markets

(check value for different and different number of items)High

Low

Love for ShoppingSome people see shopping as a leisure activity while for others it is just another chore.Emerging shopping markets (India-63%, China-41%)

Mature shopping markets(US, France)High

Low/Average

Layout of storesIt should be pleasant for those who see shopping as a leisure activity and should be easier to locate items for those who see it as just another chore.Emerging shopping marketsMature shopping marketsHighHigh

Freshness(Food)Some shoppers insist on buying fresh food.India(unpacked vegetables)China(seafood)Depending on cooking habitsFresh food eaters(regular food shoppers)RestHigh

Low

Trust on retailersShoppers would not prefer going to stores where they might feel cheated.BRIC nations(India-67%, Brazil & China>60%)Developed nationsHigh

Medium

Availability of creditAvailability of credit encourages shopping at retail outlets.BRIC nations(India-33%, 270/400 million workforce is in Agriculture, Brazil-66.66%)

Developed NationsHigh

Low

Specific to the Indian Market:1. Occasion oriented shopping- Apparel and jewellery is shopped based on occasions, for weddings and during festivals mostly. 38% Indians agree to this.

2. Service- 65% electronics shoppers would pay extra for better after sales service and warranties.3. Convenience-64% Indians would pay a little more if it the stores are located as per their convenience.4. Pre-packaged fresh food-65% Indians would never buy pre-packaged vegetables and 41% would never buy packages seafood, meat, etc. since according to them that means lack of freshness.5. Loyalty-More than 60% Indians buy from more than one retail stores.6. Associating brands with quality- When there is not enough information, Indians buy branded products as they associate them with better quality.7. Culture- 75% of womens apparel is ethnic and 85% of jewellery bought is of traditional type. However, this is likely to change with the majority of population so young.(fusion wear is already in)

2.12 Key trends and future developmentsKey TrendImpact on Industry (Low, Medium, High)Certainty of Impact (Low probability, medium probability, high probability)

Personalized customer service(Be it online or offline, customers tend to buy from an environment that is more personalized.)(86% customers and 96% retailers feel that personalization has some impact on buying decision.

Source- http://www.retailtouchpoints.com/

Offline-Positive ambience in stores, same person assists a certain customer every timeOnline-Personalized email(transaction rate and revenue generation six times higher than non personalized email), language personalization, better recommendations using proper data analysis methods, based on geography, twitter trendsHigh Impact

High probability

Retail mobile apps(capable of engaging customers more than any other promotional tool, exponential growth in customer loyalty, greater revenues, better convenience)High Impact(according to past data)High probability

Occasion based discounts(India-Diwali, rakshabandhan, Independence Day,US-Christmas, New Year)Source-www.mckinsey.comHigh Impact(retailers can get rid of extra stock by selling at lower prices, win win for retailers and customers)Average probability

Social Media serving as shopping platforms(Nordstorm and Target retailers are using Like2Buy platform on Instagram)Source:www.vendhq.comHigh ImpactHigh Probability

Drawn to retailers who spend on CSR(makes customers feel good that they are donating to a noble cause, they feel they are making a difference)Average Impact

High Probability

Giving customers extra perks to gain loyaltyAverage ImpactHigh Probability

Insisting on buying from safe and secure portals(so that customer data is not leaked)High ImpactEg. Apple Pay, assigns unique Device Account Number to each phone, which combined with transaction specific security code is used to process purchase-never revealing the PIN numberHigh Probability

More ecommerce sites setting up shops offlineAverage ImpactEg. Birchbox opened a physical store in Soho in 2014Average Probability

Integration of technology in brick and mortar storesAverage ImpactEg. In London, Gucci set up five super high resolution displays enabling shoppers to browse products using hand gestures in 2014Average Probability

Bundle offerings by companies(Two companies might offer complementing products at a low cost in a bundle-low cost, less time)High ImpactHigh Probability

3 Company Overview

3.1 Company background1. SHOPPERS STOP

Shoppers Stop Ltd (SSL) is Indias prominent retail group. It offers customers an international shopping environment and a world-class shopping experience with a wide assortment of national and international brands across categories such as fashion apparel, accessories, cosmetics, perfumes, home and kitchenware. From a single store in 1991, the company today is the largest chain of department stores in the country.3.2 Timeline with key milestones and their strategic impact1. SHOPPERS STOP2010Ups stake in Hypercity Retail (India) Ltd to 51 per cent

2008Wins Emerging market retailer of the year award at the World Retail Congress

2005Launches Make-up Art Cosmetics (MAC) and Homestop retail store

2003Receives IT User award for best IT practices in Retail Category award

2000Acquires Crossword Indias leading retail book chain

3.3 Vision, Mission, Goals, and Strategic ThemesVision and Mission- To be a global retailer in India and maintain its No.1 position in the Indian market in the Department Store category.Values- Wewill not take what is not ours.

The obligation to dissent (against a viewpoint that is not acceptable).

Wewill have an environment conducive to openness.

Wewill believe in innovation.

Wewill have an environment conducive to development.

Wewill have the willingness to apologise and forgive.

Wewill respect our customers' rights.

We will create an environment of trust.

We shall be fair.

Wewill besocially responsible.

3.4 Key Product and Service Portfolio1. SHOPPERS STOP

Clothing for men, women, and kids; accessories, fragrances, cosmetics, footwear; home furnishing and decor products3.5 Core Competencies of the firm1. SHOPPERS STOP

Innovation- New philosophy of "Start Something New" to give retail a new dimension, Start Something New in performance, Start Something New in products, Start Something New in customer service, Start Something New in Life.3.6 Business Model of the organization

1. SHOPPERS STOPKey Partners Crossword Bookstores Homeshop

Brio

Desi Caf

Hyper City

MAC

Arcelia

MotherCare

Nuance Group

Hyper City Argos

TimezoneMotivations for partnerships

To get into books, music, stationery, toys To get into home dcor

To get into foods and grocery

To get into cosmetics

To get into maternity segment

To get into airport retailing

Key Activities Marketing

Loyalty Programs

Merchandising

Distribution

InnovationCategories

Production

Customer Retention-Convenience, Experience Customer Relations

Core Competency

Value Propositions Delivering a unique experience to customers

Identifying customer needs

Providing unique product

Providing a bundle of services through sister stores- everything for a great lifestyle For upper middle class youthCharacteristics

Newness

Customization

Design-Innovation Brand/Status

Price

Cost Reduction-For company Accessibility

Convenience/Usability

Customer Relationships Loyalty Program called First CitizenCard is valid across all the Shoppers Stop Stores*Parking charges can be reimbursed*Exclusive Sale Preview*Exclusive Cash Counter*Free Home-Delivery of altered garments.*Instore & Outstore Offers & Discounts*

Customer Segments Upper middle class High standard of living consumers Small homogeneous groups-geography, income

Key ResourcesFabric, Land, Technology to produce better products, Designers, Better transport, brand patents, copyrights, analysis of consumer data, financial capital

KEY RESOURCEHuman Resource-

1. Extraordinarily trained employees to make the experience better than others, to redefine the shopping experience for customers.

2. Designers to create innovative products.

3. Techies to help understand consumer preferences and needs.

Channels Stores(organized retail) Airport Retailing

Channel phases

1. Airport Retailing is in initial phase with tie up with Nuance Group.

2. More than 73 stores of Shoppers Stop

3. Many more of sister stores mentioned above

Cost StructureExpensive materials- fabric, land, technologyExpensive Activities- Distribution, creating experience, training employees, creating design, marketing, bringing innovationVALUE DRIVEN BUSINESSTargets niche customers with higher standard of living

Sell experience and innovationGreat economies of scope with sister stores

Great economies of scale with increase in number of stores

Revenue StreamsPay for:Experience

Innovation

Standard/ StatusFixed pricing-based on market evaluation and can anyway afford that as they are the market leaders with strategy of differentiation

3.7 3rd Generation Balanced Scorecard (Amalgamation of 1st Generation BSC and Activity System Map)1. SHOPPERS STOP

1. Financial PerformanceEconomies of scale and scope reduces cost

Increasing footfall and loyalty so more revenue

Turnover of more than 19.30 billion rupees

2. Customer

Shopping experience key differentiator

2 million loyalty card holders

3. Internal Business Processes

Better distribution with sister stores

More R&D leading to better designs

Better designs and loyal customers leading to different marketing strategy-low cost and maximum result

4. Learning and Growth

Achieving business vision and mission

Leader in Indian retail3.8 SWOT Analysis1. SHOPPERS STOP

1. Strength

a. Increasing footfall and conversion rates

b. Strong Management Team

c. Loyal Customer Base(2 mn loyalty card holders)

d. Shopping experience is the differentiator

2. Weakness

a. Follows low risk strategy

b. Employee Retention

c. Promotional strategies inadequate

3. Opportunity

a. Preferred partner for foreign players

b. Geographical Reach4. Threat

a. New Entrants as retail is attractive in India

b. Existing competition3.9 Competitor Analysis (identify competitors)3.9.1 Based on Critical Success factorsLifestyle, Globus, Central, Ebony, Pantaloons, Fabindia, Westside3.9.2 Based on Financial indicators(revenues close to Shoppers Stop based on table shown in Competitive Landscape)

a. Lifestyle

b. Fabindia

c. Pantaloons4. Future Growth Strategy for the organization4.1 Portfolio Analysis 1. SHOPPERS STOP

1. Homestop HomeStop is the first-of-its-kind premium home concept store at Bengaluru Magrath road and Royal Meenakshi Mall, Mumbai Malad, Vashi and R-City Mall, New Delhi, Pune, Lucknow, Ahmedabad and Vijayawada offering a wide range of products and some of the most reputed national and international brands. It is a one-stop-shop for all home needs ranging from home dcor to furniture, bath accessories to bedroom furnishings, mattresses to draperies, carpets to modular kitchens & health equipment all under one roof.

2. Crossword BookstoreSpacious, well laid out bookstores that feature methodical classifications, clear signages, dedicated enquiry /orders desks and attractive displays along with cafs, reading tables and chairs within the store make Crossword the leader in the lifestyle bookstore category. It currently has 86 stores. Its unique product mix of books, magazines, CD-ROMs, music, stationery and toys is further enhanced with services like Dial-a-book and Email-a-book and facilities like gift vouchers and Return, Exchange & Refunds policy.

Mothercare and Early Learning Centre

Shoppers Stop Ltd. has an exclusive retail arrangement (for the department store segment) with Mothercare PLC of UK to open & operate shop-in-shops of Mothercare and ELC stores in India within Shoppers Stop stores. Mothercare is UK's premium international brand for maternity, infant and childcare products. Currently there are 38 stores of Mothercare (including 6 standalone stores) with a presence in 11 cities.

Estee Lauder Group

Shoppers Stop Limited has entered into non exclusive retail agreement with worldrenowned cosmetics major Estee Lauder to open M.A.C, Clinique and Estee Lauder stores in India. M.A.C (Makeup-Art Cosmetics) the professional brand of choice, is the first brand under the Estee Lauder Group of Companies' portfolio to enter the Indian retail market. Currently, with Shoppers Stop Ltd. there are 20 M.A.C. stores operating in Mumbai, Bengaluru, Delhi, Amritsar, Chennai, Hyderabad, Pune, Kolkata and Ludhiana. Clinique currently has 10 stores/doors (including 2 standalone stores) and Estee Lauder has 5 stores/doors including 3 standalone stores, one each in Mumbai, Bengaluru and Delhi.

HyperCity

Shoppers Stop Limited has acquired a majority stake of 51% equity share capital in Hypercity Retail (India) Ltd, thus making it a subsidiary of Shoppers Stop Ltd. HyperCity operates 12 stores one store each in Ahmedabad, Pune, Ludhiana ,Amritsar, Bhopal, Jaipur, Navi Mumbai and Hyderabad and 2 stores each in Mumbai and Bengaluru. HyperCity has redefined the experience of the Indian consumer in the big store format. Its offering includes food and grocery, general merchandise and apparel. The business operates a More to Discover by-line and delivers quality product at great value in a bright, spacious, modern environment.

Airport Retailing

Currently has 1 store in Hyderabad domestic airport and 2 stores in Bengaluru domestic airport. 4 duty free stores are run by the JV Company in the international airport at Bengaluru.

TimeZone Entertainment

Shoppers Stop Ltd. believes that the Indian consumers are looking for multiple options to entertain themselves and their families. It has forayed into the Entertainment sector by acquiring a 45% stake in Time Zone Entertainment Private Limited which is in the business of operating Family Entertainment Centres (FECs). TimeZone currently has 17 doors in key cities in India.4.2 Based on BCG Matrix1. SHOPPERS STOP

MARKET SHARE

MARKET GROWTH

HIGH

HIGH

MARKET SHARE

MARKET GROWTH

HIGH

LOW

MARKET SHARE

MARKET GROWTH

LOW

HIGH

MARKET SHARE

MARKET GROWTH

LOW

LOW

STARCASH COWQUESTION MARKDOG

Louis Phillipe, Adidas, US PoloF21, Stop Mens, LevisCalvin Klein, EspritProvogue, Celio

4.3 Companys Strategic Roadmap for future

Near Term (