Approach Paper - “Red Dot” Article List Key SKUs from a customer grocery shopping perspective Peshwa AcharyaFurther details, contact:
Objectives of the ExerciseObjective The objective of the exercise to identify core products that are in the shopping list of majority of customers. The functional teams would then work towards ensuring• 100% availability of these products in store• Competitive pricing for these products in Reliance stores 2
Customer Insight perspectiveCustomer Insights Perspective • State wise - The ‘Red Dot Article list’ is Different sets of customers have different being made state wise to take care of choice and preferences of products based regional/ community tastes on demographics, income profile, lifestyle pattern etc. • All India Common - State wise lists can be analyzed to see what part of Red Dot Articles are common for all of IndiaKey aspects of customer behavior that needs to be studied for coming up with the list of • Seasonality factor - Few SKUs in ‘Red Dot common appeal SKUs : Article list’ will be flagged as seasonal items, these can be replaced on change of Geographies – The food/ grocery taste in season by other relevant SKUs (by India is very typical of the communities- merchandising teams). defined primarily by the geographical segments (state and language), caste etc State wise ‘Red Dot Article list’ selection- The rest of the presentation details theProduct preferences and purchase habits - approach and logic followed in preparing Identify products that would find its way in the ‘Red Dot Article List’ for Tamil Nadu the grocery shopping list of most customers in the geography, irrespective of The approach has been refined after their income profile, lifestyle, educational iterative discussions and inputs from DSS, backgrounds, price sensitivity levels Operations, D&L, Merchandising and Marketing teams 3
Approach for preparing ‘Red Dot SKU List’Based on Customer product selection and purchase habits Identify products that would find its way in the grocery shopping list of most customers in the geography, irrespective of their income profile, lifestyle, educational backgrounds, price sensitivity levelsApproach 1: Prepare a list of 70 items that would find its way in the list of most customers, and then find 200 SKUs that best represent these 70 itemsApproach 2: Identify key segments of customers a) Up market Customers (b) Mid segment Customers (c) Price Sensitive Customers - Identify products that all these segments (intersection) are likely to purchase. Prioritize these items to come up with the top 200 SKU listApproach 3: Top SKUs that we sell in our stores – Common set of SKUs that are present in each of the three lists – top 200 by value, by quantity and by bill penetration. This approach is being worked out by OPs Team (Saket, Pankaj & Pranay)Final ‘Red Dot SKU List’• Approach 1 and 2 are measures of the key product items in customers’ grocery shopping list (study based on RelianceOne customer database)• Approach 3 is the priority list of top SKUs that are selling in our store, based on complete sales data• Our final ‘Red Dot SKU list’ for a state takes the best of these three approach• A higher weightage is given to product bricks that are likely to be higher up on the grocery shopping list, rather than ones that the customers are currently purchasing in Fresh stores. 4
Approach 1 : Preparing ‘Red Dot SKU List’ Study customer On an average, 80,000 RelianceOne members have purchased from Reliance Freshpurchases in TN Fresh stores in TN in each of the last three months. Stores Product brick is the right surrogate for items that customers put in their shopping list. The choice of SKU (brand, pack size, price point) is the next level of decision.Top 70 items (product Top 70 bricks bought by maximum number of customers were selected from a total of bricks) in their 460 bricks (Food, NF FMCG, Houseware, Lifestyle-Cosmetics, Fragrances) that are sold in store. We have excluded F&V and Fresh Dairy shopping list The top bricks intuitively cover most grocery items that a household would purchase in that state There are about 2,900 SKUs belonging to these 70 product bricks that are available in our stores.Top 200 SKUs (most To prioritise we have prepared a list of the top 200 SKUs belonging to these bricks thatpurchased SKUs for should always be available in store.these 70 items in the Logic : SKUs within these 70 bricks with High Bill Penetration are products preferred by most customers (intersection of customer segments along demographics, price customer shopping sensitivities) list) List prepared by taking top 4 SKUs in terms of Bill Penetration for the top 30 bricks, and 2 SKUs each from the remaining 40 bricks 5
Approach 1: Further insights into key shopping habits Product Brick purchase frequency Customers are doing selective shopping in BASIC VEGETABLES - TEMPERATE VEGETABL Reliance Fresh Stores ROOTY VEGETABLES BANANA SUNFLOWER OIL • Out of 64,000 customers who CHOCOLATES have visited our stores in TN in Jan LAUNDRY DETERGENTS 2010, about 54% have purchase CORE BISCUITS F&V and 42% have purchased staples.Product Brick WASHING-PSONAL CITRUS FRUITS NOODLES SPICES - WHOLE • Key staples products consumed in ATTA TN – raw rice, boiled rice, chana DENTAL CLNSING dal and tur dal have very low CHANNA DAL penetration in the customers’ BOILED RICE TUR DAL basket (only about 9% customers RAW RICE bought boiled rice) HHOLD DISINFECTAN SANITARY NAPKINS • Only about 16% have purchase HAIR SHAMPOO laundry detergents, 5 % have 0% 5% 10% 15% 20% 25% 30% 35% 40% purchased hair shampoo Percentage of Customers who have visited TN - Fresh stores in Jan 2010Customers are doing selective shopping in our Reliance Fresh Stores.• The customer penetration of top items in the monthly shopping in TN like rice, laundry detergents, soaps and shampoosis extremely low and need to be addressed via assortment and price reviews• However, the top 100 bricks being bought by customers in our stores very closely represent items in their groceryshopping list and is a good starting point for identifying ‘Broad Appeal SKUs’ 6
Approach 2 : Preparing ‘Red Dot SKU List’ Surrogate Products were identified for a) Up market Customers (b) Mid segment Segment Customers Customers (c) Price Sensitive Customers for Tamil Nadu into a) Up market Customers Customers in the segment was extracted – ROne customers who shopped for these(b) Mid segment Customers surrogate products in TN during the last 6 months. (c) Price Sensitive • Up market Customers identified – 12,600 , Customers • Price Sensitive Customers identified – 21,200 • Overlapping Customers – 2,200 Based on purchase Nearly 20% of UPmarket Customers were overlapping with Price Sensitive Segment. history Taking another Mid-Market Segment would result in a base that has a huge overlap with the two extreme segments. Based on this input, the number of segments were limited to two. Up market Customers purchased a total of 8100 SKUs in the last three months. Price sensitive customers purchased a total of 8400 SKUs. Identify commonproducts that each of The Common list of SKUs bought by both segments is about 6300. This large overlap the customer in SKUs purchased also implies that the taste of both segments is very similar when itsegments are buying comes to grocery shopping. The product intersection might be much less in apparel, consumer durables or lifestyle shopping categories Identified top 100 bricks that are represented by these 6300 common SKUs. Only 2Prioritize from this list bricks were different from product brick list from Approach 1 of common SKUs: Prepared union of brick list (102 bricks)Top 70 bricks leading to List prepared by taking top 4 SKUs in terms of Bill Penetration for the top 30 bricks, top 200 SKUs and 2 SKUs each from the remaining 40 bricks 7
Approach 2: Further insights into key shopping habits Distribution of Customers for the Distribution of SKUs that the two unique Identified Customer Segments customer segments purchased Up-market Price sensitive Up-market Price sensitive 10,496 2,206 19,048 1,883 6,358 2,083The intersection of the two customer segments has been left out while identifying products purchased by these segments, so that that thedifference in product purchases can get more pronouncedThe grocery purchase pattern of Up-market and value seeking (price sensitive) customersegments is very similar. There is a large intersection in their product purchases• The top 100 bricks represented by the 6300 common SKUs has 98 bricks in common to the top bricks identified throughApproach 1• The identified segments would be useful in further studies in the purchase behaviour in product segments like appareland lifestyle 8
Summary : Red Dot Article List – Tamil Nadu Best of both Approaches 1. Union of the top 70 bricks given by Approach 1 and Approach 2 were taken 2. Red Dot SKUs given by : List prepared by taking top 4 SKUs in terms of Bill Penetration for the top 30 bricks, and 2 SKUs each from the remaining 40 bricks Reasoning: Each of these key items in the customer shopping list needs to be adequately represented in ‘Red Dot SKU list’. From a customer standpoint, higher weightage is given to brick level availability, rather than just top 200 SKUs by Sales Tamil Nadu - Red Dot SKU Summary Sum of **% Share in Product SBU Product Segment No of Bricks No of SKUs Total Store sale (B/E) FOOD BEVERAGES 9 18 2.6% CONFECTIONARY & SNACKS 8 22 0.7% DAIRY 3 6 0.6% FOOD & BEVERAGE SERVICES 2 6 0.4% NON VEGETARIAN 1 2 0.4% PROCESSED FOOD 13 40 2.7% STAPLES 20 67 12.5% FOOD Total 56 161 19.8% FMCG -NONFOOD HOME CARE 7 19 1.0% PERSONAL CARE 6 18 0.7% FMCG -NONFOOD Total 13 37 1.7% HOME HOUSEWARE 1 2 0.0% HOME Total 1 2 0.0% Grand Total 70 200 21.6% 9
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