Operations Research


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Operations Research

  1. 1. A Thesis Report on “Strategies to overcome retailers’ woes” (Supermarkets) Submitted By Chinna Raja Giri.M Thesis ID: (FW79/01092/MKT) Under the guidance of Prof. Vijay Kumar Jayaram At The Indian Institute of Planning and Management Chennai Batch: PGP/FW/2007-2009 i
  2. 2. ABSTRACT Leading Indian corporate giants have noticed the importance of retail and it’s potential. They started setting up retail outlet all corners of the country but it’s an unplanned expansion, which led to disaster. This has led to closure of many outlets and resulted in loss of many jobs. This thesis work contains research methodology like qualitative and quantitative. Under qualitative techniques one can see direct and indirect method. In quantitative techniques one can see descriptive techniques. Going through the report will benefit the reader and provide understanding on consumer behavior, retail strategy, market psychology and government rules and regulations. This thesis work will give better understanding and insight to reader as well as the presenter. This report aims to give better options and solutions to the decision makers. ii
  3. 3. THESIS APPROVAL BY GUIDE I hereby signify that CHINNA RAJA GIRI.M of PGP/FW/07-09 of IIPM, Chennai, has completed this thesis work with my guidance. The topic of his thesis is “STRATEGIES TO OVERCOME RETAILER’S WOES (Supermarkets)”. I hereby approve this thesis as a complete and final work requiring no further alteration. With Regards, Prof. Vijay Kumar Jayaram (Signature of the guide) Faculty of IIPM, Chennai iii
  4. 4. TOPIC APPROVAL LETTER Prof.Vijay Kumar Jayaram" <prof_vkj@yahoo.com> View contact details To: getto.chinna@yahoo.co.in Dear Mr. Giri, Received your request. I hereby agree to guide you on your Retailing project subject to approval from your Dean's office. best wishes, Prof Dr Vijay kumar Jayaram PS. Your future work based on the synopsis should mention the name of the Supermarket under study. The issues should be elaborated before commencement of the research study. iv
  5. 5. THESIS TOPIC APPROVAL (MKT) FW / 07-09 Dear Chinnaraja Giri, I have received your synopsis as well as the confirmation that Dr. Vijay Kumar Jayram, Founder - Director (SIMERF.ORG) & Management Consultant would guide you through the thesis. This letter is a formal approval of the topic proposed by you “Strategies to Overcome Retailers’ Sufferings (Supermarkets)”. Please go ahead with the thesis. However, remember to focus on primary research based on an elaborate research methodology taking into account an overall sample size of approximately 100 + samples, spanning various sample segment groups, using appropriate sampling techniques. Your Thesis Id is FW79/01092/MKT, since this is your unique identification number you are advised to quote this id for any future correspondence. Remember that all theses need to be submitted, within 3 months after the completion of 5th trimester, as per the guidelines. I would like to inform you that for any late submission of the thesis beyond the last date, the institute reserves the right to impose a fine, as applicable for the batch. As per the last notification, late thesis submission fines are as follows: - The penalty for all ex-students up to 04-06 batches is Rs. 5000. From 05-07 batches onwards it is Rs.1000. Furthermore, you are required to send me at least 6 Thesis Guidance Response Sheets in all. Please ensure to send one response sheet for each interaction that you would have with your External Guide during the course of the Thesis, say, once a week / 10 days. The format of Response sheet is attached herewith. Kindly also go through the attached guidelines for Thesis Viva Voce. Kindly revert for any further clarifications. Regards, R. Krishnan v
  6. 6. ACKNOWLEDGEMENTS I take this opportunity to thank my academic dean Prof.R.Krishnan for providing me necessary guidance and support. I thank Prof.Vijay Kumar Jayaram for giving wonderful opportunity to work with him and gave me direction throughout this thesis work. I express my gratitude to Prof. Vijay Kumar Jayaram for spending his valuable time in helping my thesis work. I thank Mr.Tej (supplier of electrical and electronic items to Big Bazaar) for his time and contribution toward the thesis work. I thank Mr. Yousuf (Store Manager) Yesyesi supermarket, for his efforts and knowledge sharing. I also thank Mr.Karthik (Marketing Executive) Big Bazaar for his indirect support I also take this opportunity to thank all the teaching staff, friends of IIPM, CHENNAI for helping out to complete this thesis work I thank respective consumers for filling up the questions and helped to complete this thesis work. vi
  7. 7. TABLE OF CONTENTS SERIAL NO TABLE OF CONTENTS PAGE NO 1 Introduction 1 2 Literature review 4 3 Research Methodology 8 4 Data Analysis & Interpretation 13 5 Findings 29 6 Recommendations 33 7 Conclusion 37 8 Bibliography 39 9 Appendix 44 vii
  8. 8. LIST OF TABLES SERIAL NO TABLE OF CONTENTS PAGE NO 1 Rank Order- Score Allocation 17 2 Rank Order- Points Calculation 18 3 Location of shopper’s 21 viii
  9. 9. LIST OF CHARTS SERIAL NO TABLE OF CONTENTS PAGE NO 1 Movement of products in store 14 2 Sales people efficiency 15 3 Impulsive buying 15 4 Store opinion 16 5 Buying pattern 19 6 Loyalty program 19 7 Store rating 20 8 Positioning 20 9 Age of shoppers 21 10 Opinion about suppliers 22 11 Loyalty program acceptance level in India 23 12 Opinion about government 24 ix
  10. 10. x
  11. 11. INTRODUCTION 1
  12. 12. Introduction India is known for adapting the best things which are available around the world. Many changes had taken place after opening up the Indian market. Indian retail market is estimated to be around $350 billion, of which organized segment has only four percent and it estimated to reach $521 billion by 2012 1. Many products have entered into Indian market which enhanced the Indian consumer way of living. Lifestyle of people has changed over the years with introduction of many new things into their lives. Taking this change into consideration, many retailers (Supermarkets) have started stores with the objective of adding value to consumer lives and thought of capitalizing the situation but time had different answers for retailers. Though retailers visualized the potential of supermarket and its importance in future but they failed to visualize the pitfalls and never had backup to pull things up, when required. Supermarkets have started growing in India like our population without giving any thoughts, whether there is enough food to feed their growth. Many players have entered the market with the intention of providing service and utilizing the opportunities. They started opening the supermarket in important cities by taking the population and their purchasing power into consideration but things never turned out profitable. As a result many unviable stores were closed, man power reduced, pay reduction and cutting down other cost. Issues in current scenario • Retailers visualized potential of market but failed to capitalize. • Mismatch between retail format and strategy • Differences in political will and amendment of legal act • Infrastructure constraints like technology, financial security and connectivity. 2
  13. 13. Aim • To understand retail market and its potential • Insight and understanding of consumer behavior • Knowing the government initiative towards the retail industries • Learning about infrastructure constraints • Strategy followed by different retail giants to capture the market • Consumer attitudes toward these retail giants • Supplier initiative toward promotional activity • Promotional activity carried out by retail giants Scope This research will include various strategy adopted by the retailers and at the same time learning the government initiatives toward these industries. The information collected from the consumer, management, experts and government will help to formulate research plan. This report provides information and various options available to decision makers, to take decision. 3
  15. 15. Literature review Future Group, Chief Executive Officer, Kishore Biyani said there is nothing specific for this sector in the budget. Vishal Retail Group President Ambeek Khemka said the budget as disappointing from the retail industries perspective.2 Subhiksha once considered to be the successful retail enterprise in the country but now closed due to non-availability of cash to run the business. It needs Rs.300 crore from its lender and investor to bring back its operation. Creditors of the company has moved to court to file wind up petition against the company 3 The Indian government has restricted foreign investments on single brand in the country in order to protect vote as well as not upsetting the small shop owners and political factions. As a result, Sweden's IKEA, the world's biggest furniture retailer, recently called off a $1 billion investment plan due to the restrictions.4 The Government also fully recognizes the need to ensure that small retailers are not adversely affected by the growing organized retail and that there is no adverse effect on employment, said by Minister of State for Commerce and Industry Jyotiraditya Scindia 5 Mr. Divyendu Shekhar, principal and partner at Retail Analytics quoted “This is the time when the government should think of opening up even the front end retail to foreign investment, rather than creating more regulatory hurdles. This is under pressure from the trading community, but then protectionism is not going to help anyone”6. 5
  16. 16. US-based deep discount retailer MyDollarStore Inc., founded by an American of Indian origin, is the latest casualty of the economic slowdown in India that has forced organized retailers to apply the brakes on ambitious expansion plans. The country’s largest discount-store chain, Subhiksha, suspended its operations after it failed to raise cash either through the stock market or from banks. Other retailers including Pantaloon Retail (India) Ltd, Aditya Birla Retail Ltd and Reliance Retail Ltd have closed stores and pruned expansion plans.7 Spencer’s retail recently shut down loss making or unviable store. Spencer’s reduced man power and cut down cost in order to reduce the loss. The company have shut down nearly 150 unviable stores and given pink slip for nearly 3000 employees, which led the company to save around Rs. 100 crore.8 It is estimated that up to 40 per cent of all the fruit and vegetables grown in India rots on the way to market. Analysts blame bad roads, bullock cart transport and an excess of middlemen. Also, there is very little refrigeration along commercial supply chains.9 Parliamentary Standing Committee on Commerce (Committee) has laid down conditions which includes (a) the products sold should only be of a single brand, (b) the products should be sold under the same brand internationally, and (c) single brand product-retailing would cover only products which are branded during manufacturing 10 After three years of unplanned expansion, retailers are being forced to initiate corrective steps, especially in the food and grocery space. Retail companies are currently focused on bringing down distribution costs by eliminating intermediaries and transport delays between the sourcing point and point of sale11 The country is short by 10 million tonnes of cold storage capacity due to which about 30- 40% of agricultural produce goes waste every year. According to 6
  17. 17. Assocham's latest study report, against a requirement of over 31 million tonnes of cold storage, India has a capacity of nearly 21.7 million tonnes, leading to a loss of about 40% of the agri-produce post harvest 12 Bharti Enterprises Ltd launched its much talked about retail venture with a few stores in Punjab. Barely over a year into the business but the firm has already shut two stores, one each in Amritsar and Karnal, out of its two dozen outlets13 Reliance retail farm to fork initiative is in trouble with Punjab government. The Punjab Cabinet terminated the MoU for setting up agricultural mega projects in the State because the company had not complied with the terms of the memorandum of understanding. The MoU was inked in August 2006 during Congress Government led by Captain Amarinder Singh. The Akali Dal and the BJP, now governing the State, had opposed the project now. 14 Rising food prices and poor rains have driven many state governments, including Maharashtra, West Bengal, Madhya Pradesh and Rajasthan, to impose stock limits. This led to cutting down the stocks as result it will push up transaction cost and may eventually impact consumers as retailers will be forced to pass on the higher cost to consumers. “Referring to the Essential Commodities Act, which empowers government to impose such limits, said there was a need to take a relook at laws that were enacted in the 1950s when there was no modern retail in India”-Kishore Biyani 15 7
  18. 18. Research methodology 8
  19. 19. Research Methodology 1 Problem definition/hypothesis Indian retail market have faced and facing many problems these days. They getting no support from any where and all the doors were shut, hoping for miracle to happen to this industry. A sector which is second largest provider of employment and contributes nearly 8-10% to GDP, still suffering under hands of government rules and regulation Retailers visualized the potential but failed to capitalize and forecast the market behavior, which led to closure of many Supermarkets like, Spencer’s retail, More for you, Reliance fresh, My Dollar store, Easy Day by Bharti. The shut down has led to many job losses, halting the expansion plan, asking government for tax reduction and infrastructure facilities. In short “Retailers do not comprehend a clear strategy to combat the recession and economic down turn” Hypothesis 1 Visualized the potential but failed to capitalize Hypothesis 2 Mismatch of format & strategy Hypothesis 3 Apathy of government toward the retail sector Hypothesis 4 Infrastructure disorder 9
  20. 20. 2 Research Methodologies Research methodology decides the mode of collection of data through primary and secondary sources. It helps to solve the problem in systematic way. Two types research methods • Qualitative • Quantitative 3 Data survey Primary data Primary data will be collected from consumer purchasing at the supermarket. Questionnaires will be handed over to the respondents and request them to fill it up. Data is also collected from the management people or store manager or supervisor or person involved with the supermarket. Information is also obtained from the retail experts about the current scenario and future of retail industry Secondary data Secondary data is collected from the journals, articles, and reports etc. In this research, secondary data are mostly from newspaper and articles written by experts. 3 Sample design Sampling size The sample size will be around 103 which consist of 1experts, 2 managers and 100 consumers. Sampling unit 10
  21. 21. In the case of sampling unit will be, household, manager, employee and subject matter expert Type of sampling Simple random sampling or convenience sampling 4 Data collection • Questionnaire • Interview Primary data is collected through questionnaire and experts view is obtained through one to one interaction 5 Questionnaire Design Two type of questionnaire were framed, one for the consumer and other for store manger or supervisor or management experts. 6 Data analysis and interpretation Data validity The data is collected in the form of questionnaire and hence there is no manipulation is possible Data credibility Information obtained through questionnaire is credit worthy because it was collected in person and no manipulation is possible Interpretation Data collected is analyzed and placed in the form of charts and graphs, conclusion is drawn from charts and graphs. 7Justification for choosing particular project Retail industry is booming industry but it is always under estimated by the government. Supermarkets enhance people day to day life by providing humpty number of choice to consumers. I am always interested in learning consumer behavior and there day to day activity. 11
  22. 22. Plenty of opportunities are available in the retail industries and lots of learning is also available out here. Information collected from consumers through simple and convenience sampling, expert view is obtained through one to one interaction. Information was also collected from store manager with the help of questions. Questionnaire needs to be framed by keeping the current issue in mind, in order to make sure that questionnaire is not out of track. Questionnaire is hard to frame but helps to collect the information easily. Since the industry is suffering with many problems, this research will help them to put back on track. 12
  24. 24. Data analysis and interpretation The study has been conducted on comparative basis by including many retailers and there strategies. Stores taken are Big Bazaar, YESESI, Spencer’s, More for you & Saravana Stores. To corner on one store and to study there activities, Big Bazaar was chosen. The study has been conducted on Big Bazaar outlet at Vadapalani 1 Movement of products in stores In the below chart, the store products were listed and consumer preference toward these products at Big Bazaar, compared to other stores Analysis 14
  25. 25. • Big bazaar has huge product variety but shallow assortment • Take a look at the graph, one can clearly understand that clothing & apparel, Frozen foods, furniture, house appliance doing below the expected level • Items like, general groceries, toys, Veg/Fruits & dairy product are seeing good demand compared to other products under Big Bazaar portfolio • Other outlets like, VIP, Lifestyle, Hi-style, SKC, Witco, Nike, Pantaloons, McRennet, Globus, Shoppers stop, Adayar Bakery, Landmark, Archives Gallery & odyssey. People use to shop at these stores for buying baked products, clothes, and house appliance etc. 2 Sales people efficiency Analysis • Majority of the sales people are in a position to explain about the product and the rest is not able to do it or shying away from responsibilities 3 Impulsive Buying rate 15
  26. 26. Analysis • Expect the unexpected things; most of the respondents are ready to go for the products, which is not in the buying list. • Product purchase will take place, if the products are attractive in the following ways; price, health related, brand & good offers 4 Opinion about the store Analysis • The company needs to concentrate more on depth of product because it has huge variety but shallow assortments, which limits the choice as well as people purchase 16
  27. 27. • Consumer experience while shopping at Big Bazaar is good because it’s something new to Indian consumer, shopping at big space 5 Ranking the store characteristics to find out the criteria considered in choosing the store • Rank 1 highest point and rank 9 lowest point For the purpose of analysis, each rank has been assigned a point: Rank 1: 9 Rank 2: 8 Rank 3: 7 Rank 4: 6 Rank 5: 5 Rank 6: 4 Rank 7: 3 Rank 8: 2 Rank 9: 1 Table 1 A It shows the total number of times a particular criteria is chosen against rank Rank/ Location Quality Product Services Price Parking Ambience Diet Opening Criteria Variety products & closing Time 1 5 11 7 3 55 4 7 3 5 2 10 53 7 8 9 3 5 4 1 3 5 27 29 22 8 2 4 2 1 4 31 6 9 9 20 5 9 6 5 5 5 15 10 14 23 7 5 19 2 6 15 8 12 3 13 14 11 12 13 17
  28. 28. 7 7 5 6 7 8 45 2 8 12 8 2 4 3 5 7 3 7 65 4 9 3 5 1 3 15 4 27 19 23 Table 1 B The below table shows the total points of each criteria Location Quality Variety Services price Parking Ambience Diet Opening Products & Closing time 45 99 63 27 495 36 63 27 45 80 424 54 64 72 24 40 32 8 35 189 203 154 56 14 28 14 7 210 36 54 54 120 30 54 36 30 25 75 50 70 115 35 25 95 10 60 32 48 12 52 56 44 48 52 21 15 18 21 24 135 6 24 36 4 8 6 10 14 6 14 130 8 3 5 1 3 15 4 27 19 23 Grand 483 883 497 415 963 340 301 425 219 Total Analysis • It clearly shows shopper’s give more weight age to price, quality & location. As a result, price, quality & location should be one bundle 6 Criteria listed below will help to get opinion about the store 18
  29. 29. Analysis • Chart helped us to understand that promotional activity and quality are good. In terms of product assortment & diet conscious product, it is average • For the parking lot criteria, it varies from store to store 7 Buying pattern during recession Analysis 19
  30. 30. • Buying patterns have gone down due to recession. Though 70% have reduced their spending habit and remaining sticking to same spending habits due to offers and combo package 8 Loyalty program acceptance level in India Analysis • 70% say that loyalty program is good and the rest took opposites stances. But the critical issue always lies in collecting consumer personal information 9 Rating the store based on consumer experience Analysis • It clearly shows that Big Bazaar has long way to go, to capture the consumer attention toward there shop and needs to work hard to increase their satisfaction level. 20
  31. 31. • The rating clearly shows that nearly half of the consumer or customer are nearly satisfied but not completely satisfied, it has to make sure that it achieves the latter, as early as possible 10 Checking positioning Analysis • Positioning is not what you do to a product. Positioning is what you do to the mind of the prospect • Most of the consumer think that Biz Bazaar have great discounts & offers General Feedback In general feedback, couple of questions was asked to the consumers. Questions like, age, location or residence, budget & experiences in shopping other than this outlet 1 Age of Shoppers 21
  32. 32. Analysis • Big Bazaar needs to concentrate to increase the footfalls of youngsters, in order to sell the apparels, book and other items 2 Locations Location In & Around 2-3 Km Beyond 7- 10 Km 80% 20% Analysis • 80% of the shoppers to Big Bazaar are from in and around 2-3 Km area. It is necessary to reach beyond that area. Information collected from the management The questionnaire was framed for the management, in order to get their opinion about the present situation 1 Challenges faced by management during this hard time Management and store manager have few common things between them like;  Drop in sales  Rent issue  Supplier issue  Regulatory Norms  Rise in price of essential items 22
  33. 33. Analysis  Industry as a whole is facing many problem, which can be solved through collaborative efforts.  Certain issues, which are beyond control and it needs government to help, to sort things out. Government apathy toward these industries has led to many problems 2 Management opinions about suppliers Analysis  The industry given mixed response toward the behavior of supplier on this tough time. Problems like, flexible payments, rectifying goods and pushing stock are causing disputes between supplier and retailer 3 Loyalty program acceptances level in India 23
  34. 34. Analysis  Experts believe that loyalty program increases businesses but not easy to collect data and loyalty program need not necessarily increases loyalty among the shoppers 4 Management opinions about Government initiative 24
  35. 35. Analysis  Industries expert feel that the government has not done enough for the retail industries in the following areas; Tax rate, regulatory & Infrastructure Huff model 25
  36. 36. Without the huffs model the thesis is always incomplete. It will help to analyze the footfalls, based on size of the store and time taken to reach the store • Attraction of footfalls to the store is directly proportional to the size of the store and inversely proportional to the time taken to reach the store, having an exponent which could raise the levels of constraints Let’s explain the formula below; Pij = Sj / Tyij ∑n Sj / Tyij Where Pij = Probability that customer i shops at location j Sj = Size of the store at location j Tij= Travel time for the customer I to location j Its necessary to know the population which are dwelled around the store and number of competitor around the store Chennai Demographic • Chennai population- 41 Lacs • Two wheelers – 15 lacs • Car – 4.5 Lacs • Population at vadapalani around 3 Km- 70,000 Big Bazaar store snap shot Since the Big bazaar store was taken for the research purpose, it is necessary to know there product portfolio and size of the store, for the calculation purpose. Study conducted on Big Bazaar (Vadapalani) • Big Bazaar size – 13000 Sq. feet • Foot falls- 8000 ( week) • Total sales- Rs. 42,00,000 ( week) Product portfolio - Variety 26
  37. 37. • Cloths ( Kids, youth, ladies & gents) 2500 Sq. feet • White goods- 1300 Sq. feet • Footwear- 900 Sq. feet • Luggage & Bags- 800 Sq. feet • Toys- 800 Sq. feet • Supermarket – food, groceries, cosmetics & beverage -2300 Sq. feet • Furniture- 1800 Sq. feet • Decorating items (show case related items)- 1000 Sq. feet • Kitchen & plastics items- (Plastics, non-stick pan, & mugs)- 900 Sq. feet Calculation The probability calculation is carried out by taking the each categories size of Big Bazaar and compared to the size of competitor. For Ex. Size of Viveks is compared to size of electronic Bazaar not with entire Big Bazaar 1 Calculating car owner’s percentage 4.5/ 41 * 100 = 10.97% 2 Calculating Two wheelers percentage 15/41*100 = 33.33% 3 Calculating Two wheeler and car owners at the vadapalani population around three kilometers Car owners - 70000 * 10.97/100 = 7679 Two wheeler- 70000* 33.33/100 = 23331 Total- 31000 Calculation of footfalls 1 Probability of reaching Big Bazaar than Viveks Viveks - 2200 Sq. feet & Time taken to reach- 3 minutes Big Bazaar- 1300 Sq. feet & Time taken to reach – 12 minutes 1300 / 122 27
  38. 38. = ___________________________ (1300 / 122) + 2200 / 32 9 = ___________ 253 = 0.03 = 930 Explanation: Big Bazaar Electronic should pull 930 footfalls a day for white goods. In contrast Big Bazaar get only 2% of expected foot falls 2 Probability of reaching Big Bazaar Super Market than Nilgiris Big Bazaar – 2300 Sq. feet & Time 12 minutes Nilgiris- 2200 Sq. feet & Time 5 minutes 2300 / 122 = __________________ (2300 / 122) + 2200/ 52 16 = _____________ 104 = 0.15 = 31000 * .15 = 4650 Explanation: Based on the size of Big Bazaar supermarket, it should pull 4650 foot falls a day. Instead of that it gets only 600 foot falls a day for his supermarkets area 3 Probability of reaching Big Bazaar (Fashion Bazaar) than Mega Mart 28
  39. 39. Fashion Bazaar – 2500 Sq. feet & Time 12 minutes Mega Mart- 1200 Sq. feet & Time 8 minutes 2500 / 122 = _________________ (2500 / 122) + 1200/ 82 17 = _____________ 35 = .48 = 31000*.48 = 14880 Explanation: Fashion Bazaar needs to get 14880 for his cloths department but it gets nearly 3% of the expected footfalls 29
  40. 40. FINDINGS Findings 30
  41. 41. Whole Industries • Problem at back end operation like; transportation, warehousing & intermediaries • Unable to collect consumer database due to lack of faith among customers • Unplanned expansion has led to financial crunch and pile up of stock • Government apathy toward industries in the areas like; infrastructure & government amendments • Adapting incompatible strategies, formats & operational procedures • Suppliers reducing the pay cycles and restricting credit payments • Private label ratio is too high compared to branded label which is not good and it will under estimate the store image • Need to reconsider the applications of laws like Essential commodities act 1955, Shop establishments act 1948, Standards weights and measurements Act1976 & Consumer Act 1986 Specific Players Big Bazaar • Shallow assortments in the categories like, white goods, furniture & cloths • Too many private labels and with one or two brands in the all departments • Great potential for furniture and toys bazaar because non- availability of any dominant player near the Vadapalani store • Unable to collect consumer data through loyalty program because the shoppers’ believe there information will be sold or shared with other players. 31
  42. 42. • Area coverage is around 3 km, footfalls comes mostly form vadapalani and some from Kodambakkam. Population strength combining both area would be 1.5 Lacs but shopper’s are attracted from 70000 population of vadapalni (Not complete area) • Consumer wants affordable price and good quality to be one bundle Subhiksha • Subhiksha stepped into non-core activities and wrong format which led to confusion of subhiksha image • Wrong strategy has led to pile of stock and cash crunch situation • Suppliers & investors are unwilling to co-operate and demands immediate payments. Ex. Zash Investments-Venture Capital ( Azim Premji) & Kotak Mahindra moved to court for payments. Spencer’s • Spencer’s wrong location has led to closure of nearly 150 stores. Ex- Triplicane store was shut • Closing unviable store has led to pile of stocks and assets Reliance fresh • Reliance fresh outlet was closed in U.P because of political dominance ( based on amendment to APMC Act) • Reliance farm to fork initiative is in trouble with Punjab government due to political vengeance Vishal Retail • Vishal retail’s Mega Mart is in credit crunch due to excess stock and under performing store 32
  43. 43. • Bad forecast of demand and ended up purchasing huge stock • Unable to sell stock has led to debt of nearly Rs.750 Crores 33
  44. 44. Recommendations Recommendations To industries 34
  45. 45. • Work together at the back end operation in the areas like, transportation, warehouse & common intermediaries. Share the warehouse & logistics for movement of goods • Initiate the farm to fork concept in order to reduce the intermediaries which in return increases life of Veg/Fruits products • Move the assets like, store racks, chairs & stocks to the competitors or fellow players, who is at expansion mode • Have common hierarchy & common pay around industries which will reduce the manpower cost as well as reduces attrition rate • Private label is new mantra for success and it gives huge margins. Its better to have 60:40 ratio, means 60% private label & 40% branded label in the areas like cloths, electronic items & white goods • Good rapport with the supplier is must. Don’t buy goods from supplier, who is providing great discounts at the same time demands payments quickly • Try to have investors on board, who shares common goals, patience & provides long term commitments. • Creation of a separate Ministry for Retailing in India • Right time to buy properties at the cheap rate • Get into agreement with the landlords on rent and sign a pact stating that no increase in the rent for the next two years. Two years time will stabilize the business. It’s better to have some rent rather than no rent for property holders To Players Big Bazaar 35
  46. 46. • Concentrate on assortment for the categories like, white goods, furniture and cloths. • Furniture bazaar has great potential because of non-availability of dominant player around the store. Promote the products around the area and add medium assortments. Put sign board stating as new arrivals • Extend the area coverage beyond Vadapalni, and distribute products catalogs with new products in the list and provide offers as well as combo packing • Attract youth customer by finding out the number of schools, college, and other recreational spots. Distribute Pamphlet with latest products and offers. Conduct contest, game show outside schools, colleges & also provide birthday offers • Try to provide 2 to 3 brands in the departments like, cloths, Luggage, bags, shows, white goods & furniture • Collect consumer information with assurance of not leaking or selling to other players Subhiksha • In case of Subhiksha, only miracle should happen but Subhiksha can seek government help • They can sell the assets like, store racks, stock, and database to other players and raise the money Spencer’s 36
  47. 47. • Though being the early starter, they never utilized the condition. People will always learn lesson in a hard way, hope Spencer’s learned from there previous mistakes. Take decision by considering the lesson learned during hard times • Now it’s a right time to go for expansion mode because the real estate, properties and rent rate have come down. Reliance Fresh • Don’t go too closer too any political parties and always try to be diplomatic 37
  48. 48. CONCLUSION Conclusion 38
  49. 49. Retail Industry has great potential to bring the technology, infrastructure and enhance the people life style. Since the industry has experienced the bitter past, now its time to take off. The industry as a whole need to concentrate on few major things, which are listed below; • It’s clear that unplanned expansion will lead to disaster; a good concern will survive even during the hard times • Back end operation needs to be worked in order to keep the cost in tact. Only during hard times people will realize the mistakes. So mistakes once committed and next time, have to make sure its not repeated • Be clear; distinguish yourself rather than being one among the lot. • Push the Government to reconsider certain laws & in turn the government needs to support the industry players in order to keep the GDP growth in tact • Private label always good but too many private labels will put the store image under jeopardy • Prepare for the unexpected things and keep all the tools like, manpower, stock, and demand in tact to keep the recession away • Next big thing is online purchase and concentrate on that Supermarkets are back on track and ready for the expansion mode. Days ahead, one can see clear sky for the retail industries. 39
  50. 50. BIBLIOGRAPHY 40
  51. 51. BIBLIOGRAPHY 1 The Economic Times- “Indian retail sector to grow by 9 pc; to touch $521 bn by 2012” on 23 Jul 2009- http://economictimes.indiatimes.com/News/News-By- Industry/Services/Retailing/Indian-retail-sector-to-grow-by-9-pc-to-touch-521- bn-by-2012/articleshow/4812734.cms 2 Business Standard- “Retail sector disappointed; pins hope on incentives” on 06 July 2009- http://www.business- standard.com/india/news/retail-sector-disappointed-pins- hopeincentives/66757/on 3 The Live Mint- “Subhiksha to seek stay on winding-up petitions next week” on 10 July 2009- http://www.livemint.com/2009/07/10204626/Subhiksha-to-seek-stay-on- wind.html?h=B 4 Washington Post- “India's First Wal-Mart Draws Excitement, Not Protest” on 13 July 2009- http://www.washingtonpost.com/wp- dyn/content/article /2009/ 07/12/AR2009071202176.html 5 Business Standard-“India's retail trade to touch $590 bn in 2011-12: Scindia” on 13 July 2009-http://www.business-standard.com/india/ news /india %5Cs-retail-trade-to-touch-590-bn-in-2011-12-scindia/67522/on 6 Ndtv Profit- “Govt mulls regulator for cash & carry” on 22 July 2009 http://profit.ndtv.com/2009/07/21222304/Govt-mulls-regulator-for-cash.html 7 The Live Mint-“Slowdown-hit DollarStore shuts 41 stores” on 22 July 2009 http://www.livemint.com/2009/07/22213245/Slowdownhit-DollarStore-shuts .html ?h=B 8 My digital- “Spencer to add 2.5 lakh sq ft of retail space” on 13 July 2009 http://www.mydigitalfc.com/news/spencer-add-25-lakh-sq-ft-retail-space-052 41
  52. 52. 9 The Sydney morning herald- “Woolworths sees fresh hope in India” on 3 August 2009 http://business.smh.com.au/business/woolworths-sees- fresh-hope-in-india-20090802-e5tr.html 10 Article By Satvik Varma - Principal Associate at the law firm Amarchand & Mangaldas & Suresh A. Shroff & Co, India July 2009 http://www.halsburys.in/ retail-sector-bargaining.html 11 The Economic Times- “Retailers pool resources to beat slowdown blues” 10 August 2009 http://economictimes.indiatimes.com/News/News-By- Industry /Services/Retailing/Retailers-pool-resources-to-beat-slowdown-blues/ articles how/4875644.cms 12 FnB News- “India short by 10 million tonnes cold storage facility” 20 August 2009 http://www.fnbnews.com/article/detnews.asp?article id=25951 &sectionid=1 13 Live mint.com-“Retail stores continue to face slowdown troubles” On 22 August 2009 http://www.livemint.com/2009/08/22002857/Retail-stores- continue-to-face.html?h=B 14 Business Line-“Punjab Govt scraps deal with Reliance Retail” 25 August 2009 http://www.thehindubusinessline.com/2009/08/25/stories/20090825523 61 500.htm 15 The Economic Times-“Retailers reduce stocks to escape hoarding charges” on 31 August 2009 http://economictimes.indiatimes.com/News/News-By- Industry/Services/Retailing/Retailers-reduce-stocks-to-escape-hoarding- charges/articleshow/4952376.cms 16 Wikipedia http://en.wikipedia.org/wiki/Supermarket 17 Wikipedia http://en.wikipedia.org/wiki/Piggly_Wiggly 18 Daily mail-“Recession Hits Tesco” http://www.dailymail.co.uk/news/article-1091079/Recession-hits-Tesco- 42
  53. 53. Grocery-giants-sales-fall-lowest-figure-16-years-shoppers-turn-budget- supermarkets.html 19 bNET-“Target Reorganizes Workforce, Attitude to Cope with Recession” 28 January 2009 http://industry.bnet.com/retail/1000411/target-reorganizes- work force-attitude-to-cope-with-recession/ 20 Forbes.com-“Wal-Mart Scoffs At Recession” on 3 May 2009 http://www.forbes.com/2009/03/05/walmart-aeropostale-abercrombie- markets-equity_retail.html 21 DNA Read the world-“Mum on service tax on rentals” http://www.dnaindia.com/money/comment_mum-on-service-tax-on rentals _127 1743 22 Business Standard-“India's retail trade to touch $590 bn in 2011-12: Scindia” on 13July 2009 http://www.business-standard.com /india/news/india %5Cs-retail-trade-to-touch-590-bn-in-2011-12-scindia/67522/on 23 The Economic Times-“No plans to open up retail sector further: Minister” on 13 July 2009 http://economictimes.indiatimes.com/Economy/No- plans-to-open-retail-sector-further/articleshow/4781016.cms 24 The Wall Street journal-“Pharmacy retailing to grow exponentially if FDI norms eased” on16 August 2009 http://www.livemint.com/2009/08/16142 344 /Pharmacy-retailing-to-grow- exp.html 25 Rediff Business – “Bata: Putting the best foot forward” on 31 August 2009 http://business.rediff.com/report/2009/aug/31/bata-putting-the-best-foot- forward.htm 26 The wall street journal –“Retailers discover potential in the ‘back-to- school’ market” on 3 August 2009 http://www.livemint.com/20 09/08/03223321/ Retailers-discover-potential-i.html?h=B 27 The economic Times-“Cookie Man basket now includes puffs, pastries” on 21 July 2009 http://economictimes.indiatimes.com/News/News- 43
  54. 54. By-Industry/ Cookie-Man-basket-now-includes-puffs- pastries/articleshow/4803883.cms 28 Business Standard-“High way on is menu” on Aug 2009 http://www.business-standard.com/india/news/highwayhis-menu/363793/ 29 Business Line-“New Look to double retail clinics” 13 July 2009 http://www.thehindubusinessline.com/blnus/19131591.htm 44
  55. 55. APPENDIX 45
  56. 56. APPENDIX Meaning The word retail is derived from the French word retailer, which means to "cutting off, clip or divide the products, based on the consumer or customer needs16. A supermarket is a grocery store which provides products that satisfies daily needs of consumers, which is organized into departments. A supermarket will have a minimum of 1500 to the maximum of 50000 SKUs and traditional bigger than grocery store but small compared to hypermarket Evolution In olden days there is no such word called tailor made products to fulfill the customer needs. In the beginning of 19th century there is only a market where the buyers and sellers come together in one place and sell their products, which is still being practiced in most of the rural area. In between 1920-50 things were changing in the west; more concentration was given for the customer preference. During 1st and 2nd world war many revolution taken place like, industry revolution, technology, invention and innovation. These innovation and invention has led to development in many industries and one among them was retail industries. Before the concept of self services introduced to the general public, it was general stores taking care of the business of satisfying consumer. Then came the revolution in the form of self services which was introduced by American entrepreneur Clarence Saunders and his Piggly Wiggly stores17. It helped to reduce the time taken by serving every consumer. Most of the products never came in desired wrapped size rather than the merchants have to measure the size based on the consumer needs and it took lot of time to serve the consumer. Then self service concept was adopted by many merchants who want to start a supermarket to capitalize the market. After that many concept and types of services has evolved over the years, based on the changing environment and economic condition. 46
  57. 57. Types of formats Many formats have evolved over the years with a view of serving the consumer and by adapting to the changing environment. Following are the types of services evolved over the years; 47
  58. 58. FORMAT DESCRIPTION VALUE PROPOSITION Supermarket • Self service retail outlet One stop shop which provides consumer needs. • Size- 20000 to 30000 Sq. feet • SKUs- 20 to 40000 • Percentage of food- 80% • Average price, variety and assortments Shop which provides essential and staple goods Limited • Size 7–10000 Sq. feet and other stationary item. Assortment Supermarket • SKUs- 1000 to 1500 • Percentage of food- 90% • Lowest price, narrow variety & shallow assortments Hypermarket • Bigger than supermarket Low price, humpty choice in terms of size, product and refreshing centre range and mostly attached to it. located outside the city or edge of the city. • Deep assortment, broad variety & low price • Size – 1 to 2 Lacs • SKUs – 1 to 2 Lacs • Percentage of food – 70% Convenience • Small self services Extended hours of service store format located in busy and convenient location. urban areas • Size-2-3000 Sq. feet • SKUs- 2 to 3000 • Narrow variety, shallow assortment & high price Specialty • Focus on specific Large number of brands is 48 Store consumer need. provided. • Size- 4 -12000
  59. 59. International Players A) Tesco, world second largest retailer laid out strategy to beat recession Advertising board placed outside the store18 B) Target has reorganized the workforce to beat recession and listed certain measures to beat recession19  Suspending salary increases for senior management, Ending share repurchasing and Implementing store productivity improvements  Reducing planned new store openings and cutting capital spending by $1 billion  Curtailing outside contractor support, travel, entertainment and related headquarters operating expenses & Tightening up on credit cards C) WAL-MART footfalls have increased during recession due to its low price strategy, private label contribution and value for money20 Indian scenario The Indian retail sector accounts 12% of GDP and employs 7.3 % of total work force21. The retail trade is estimated to grow at 13 per cent per annum from $322 billion in 2006-07 to $590 billion in 2011-1222. The organized retail trade segment of the industry, which presently stands at just 4 percent, will grow at a much faster pace of 45-50 percent, to grab a 16-percent share of the market by 2011-1223 49
  60. 60. Market size snap shot  India’s pharmacy retail market is estimated at $4.5 billion24  The Indian footwear market is estimated to be about Rs 10,000 crore25 26  The back to school market is worth around Rs500-650 crore  The premium end biscuit market is worth of Rs 5,000 crore27  Coffee chain market in the country is worth around Rs 400 crore28  Indian organized health & wellness market estimated at Rs 250 crore 29 Indian retail players are listed below; • REI AGRO LTD- 6ten Hyper and 6ten super, launched at last quarter of fiscal year 06-07 • RPG Retail- Spencer’s daily-1996 • Pantaloon Retail – Big Bazaar 2001 • The Tata Group- Star India Bazaar- 2004 • K Raheja Corp Group- Hyper city – 2006 • Pyramid Retail- Trumart 2005 march • Nilgiri’s- Nilgiris 1973 • Subhiksha retail trading ltd - Subhiksha • Trinethra- Fab city super market • Reliance Retail- Reliance fresh, Reliance super & Reliance mart- 2006 • Aditya Birla Group – More for you- 2006 Questionnaire This is Chinna Raja Giri.M, doing survey on supermarkets. I would be grateful, if you go through these questions and give your feedback. Supermarket: Place: Time: Date: 1 How often do you shop the following items? 50
  61. 61. Product Frequency Place/ store Alcoholic Beverage Baby Foods Books& Magazines Breads and bakery Products CD/DVD Clothing & Footwear Dairy Products Frozen Foods Greeting Cards General Groceries House appliances Luggage/ Bags Snacks / Soft Drinks Toys Veg/Fruits 2 Do the sales people assist you during the purchase as and when required? (a) Yes (b) No 3 Sometimes do you purchase beyond planned budget? (a)Yes (b) No (c) Not sure/ May be ____________ 4 Given below are sentence which followed by space. Please fill the space which appropriately suits the sentence Some one who purchase at this supermarket experience is_______________ Products at this supermarket are______________ Purchasing at this Supermarket____________ Sales people at this Supermarket are_____________ 5 Please rank the criteria that is most important in choosing the supermarket 51
  62. 62. Criteria Rank Place or location ---------- Quality ---------- Product variety ---------- Services ---------- Price ---------- Car/ Bike parking ---------- Ambience ---------- Health related product ---------- Opening & Closing Time ---------- 6 Some criteria have listed below to describe Supermarket. Please select the best option that describes this store Excellent V.good Good Fair Poor Product variety Store ambience Price Service Location Parking space Diet product Loyalty program Promotion activity Easy to locate product Quality Food Coupon/Sodex Billing counter Offers/discounts 7 Has your buying pattern got affected by recession?  Yes gone down by 40% 52
  63. 63.  Yes gone down 20-40%  Yes gone down by 10-20%  Yes gone down by < 10%  No change  Gone up by ______ % 8 Say few words about loyalty program_______________________________ 9 How would you rate this store? Probably Worst__________________________________________ Probably Best 10 20 30 40 50 60 70 80 90 100 10. What comes to your mind when you think of this store? ___________________________________________ General feedback: Name: Age: Location: Questionnaire for Management Supermarket: Date: Place: Time: Dear supermarket store manager/ supervisor/ store in charger, it is a great pleasure to be on this reputed company. I would be grateful, if you help me in providing information for the following questions. Questionnaire 1 What challenge the company is facing during this hard time? 53
  64. 64. _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ 2Does the sales have come down? (a) Yes (b) No 3 We would like to get your opinion about the suppliers. Please select the option that suits to describe the suppliers Agree Neither agree Disagree - Nor Disagree Suppliers are highly co-operative during this hard time Suppliers accepts flexible payments Delivery of goods is made on time Damaged and expired goods are taken back Ads aired by suppliers during this time is effective Suppliers share losses Suppliers are taking the feed back and rectify accordingly Suppliers pushing stock or asking to overstock 4 Instruction: Please select the option which describes about loyalty program and it’s acceptance in India Agree Neither agree Disagree Nor disagree Loyalty program is an easy way to increase business One way to collect the data Increase the loyalty Helps in selling more products Difficult to convince the customer 54
  65. 65. 6 Instruction: We would like to get your opinion about the government contribution towards retail (Supermarket) development in the country. Please contribute your opinion about the government initiative Infrastructure provided by the government is __________________________________ Tax incentives by the government is _________________________________________ Rent and tax rate are______________________________________________________ Real estate constraints_____________________________________________________ Rules & regulation to start a supermarket is____________________________________ General feedback: Name: Signature: Designation: 55
  66. 66. RESPONSE SHEET Response sheet 1 Details of student Name: Chinna Raja Giri.M Batch: PGP/FW/07-09 Specialization: MBA (Marketing & Finance) Phone no: 9840692752 Email Id: getto.chinna@yahoo.co.in or getto.chinna@gmail.com 56
  67. 67. Thesis Id: (FW79/01092/MKT) Title of the thesis: “STRATEGIES TO OVERCOME RETAILER’S WOES (SUPERMARKETS)” Statement of Discussion: Conversation took place on the following area; Issues, project aim, scope, store under study and time span required to complete the work. Date when the guide was conducted: 20/08/09 Response sheet 2 Details of student Name: Chinna Raja Giri.M Batch: PGP/FW/07-09 Specialization: MBA (Marketing & Finance) Phone no: 9840692752 Email Id: getto.chinna@yahoo.co.in or getto.chinna@gmail.com 57
  68. 68. Thesis Id: (FW79/01092/MKT) Title of the thesis: “STRATEGIES TO OVERCOME RETAILER’S WOES (SUPERMARKETS)” Statement of Discussion: Rough outline for the questionnaire were framed and discussion were made on the area that needs to be touched in the questionnaire. Date the guide was conducted: 28/08/09 Response sheet 3 Details of student Name: Chinna Raja Giri.M Batch: PGP/FW/07-09 Specialization: MBA (Marketing & Finance) Phone no: 9840692752 Email Id: getto.chinna@yahoo.co.in or getto.chinna@gmail.com 58
  69. 69. Thesis Id: (FW79/01092/MKT) Title of the thesis: “STRATEGIES TO OVERCOME RETAILER’S WOES (SUPERMARKETS)” Statement of Discussion: Questions was handed over to the consumers and management people to find out any difficulty in filling the questions. Date the guide was conducted: 10/9/09 Response sheet 4 Details of student Name: Chinna Raja Giri.M Batch: PGP/FW/07-09 Specialization: MBA (Marketing & Finance) Phone no: 9840692752 Email Id: getto.chinna@yahoo.co.in or getto.chinna@gmail.com 59
  70. 70. Thesis Id: (FW79/01092/MKT) Title of the thesis: “STRATEGIES TO OVERCOME RETAILER’S WOES (SUPERMARKETS)” Statement of Discussion: Changes were made and final questions was given to the respondents Date the guide was conducted: 15/9/09 Response sheet 5 Details of student Name: Chinna Raja Giri.M Batch: PGP/FW/07-09 Specialization: MBA (Marketing & Finance) Phone no: 9840692752 Email Id: getto.chinna@yahoo.co.in or getto.chinna@gmail.com 60
  71. 71. Thesis Id: (FW79/01092/MKT) Title of the thesis: “STRATEGIES TO OVERCOME RETAILER’S WOES (SUPERMARKETS)” Statement of Discussion: Findings, recommendation and conclusion was discussed in order to make the correction Date the guide was conducted: 2/10/09 Response sheet 6 Details of student Name: Chinna Raja Giri.M Batch: PGP/FW/07-09 Specialization: MBA (Marketing & Finance) Phone no: 9840692752 Email Id: getto.chinna@yahoo.co.in or getto.chinna@gmail.com 61
  72. 72. Thesis Id: (FW79/01092/MKT) Title of the thesis: “STRATEGIES TO OVERCOME RETAILER’S WOES (SUPERMARKETS)” Statement of Discussion: Final lay out was decided and final discussion also included about the future of retail industries Date the guide was conducted: 4/10/09 62