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Retail cumulative assessment of performance (cap) score

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  • 1. Professional Services Training & Consulting Retail Cumulative Assessment of Performance (CAP) Score
  • 2. Using A CAP Score As a Diagnostic Tool OBJECTIVE ZENeSYS CAP Score benchmarks peer group of companies to arrive at a relative positioning in four key functional areas. By analyzing its relative position, a firm can diagnose set new directions for improvement. Since the CAP score will be created every quarter, a firm can monitor its score to evaluate the effectiveness of its strategic improvement initiatives. CAP SCORE • Four functional areas of measurement are: • Financial Strength • Consumer Acceptance • Online Presence • Operational Efficiency • The peer groups of companies being benchmarked are WAL-MART, TARGET, MACY’S INC., J.C.PENNEY COMPANY INC., KOHL’S CORPORATION and NORDSTROM INC. BENEFITS OF CAP SCORE • Key messages for sales force to become more competition aware • Devise customized marketing campaigns • Create customized initiative to improve Online Presence and Branding2 Copyright © Zenesys & Kuber Professional Services Training & Consulting
  • 3. 4 Step approach to measure Retail CumulativeAssessment of Performance (CAP) Score 1. Identified four components for CAP: a. Financial Strength b. Consumer Acceptance & Selling Capability c. Online Presence d. Operational Efficiency 2. Developed indicative ratios/indices for each from public data 3. Developed the indices for Competitiors (peer firms of CLIENT) 4. Derived a cumulative score3 Copyright © Zenesys & Kuber Professional Services Training & Consulting
  • 4. CAP - Financial Strength Component INDICES INCLUDED 1. Stock Performance: I. Market Capitalization, II. Stock Price, III. P/E Ratio 2. Financial Performance: I. Current Ratio, II. Quick ratio III. Interest coverage ratio. EXPECTED TAKE AWAY Financial performance helps in summarizing the overall positioning and sets the tone to understand how CLIENT fairs against its competitors.4 Copyright © Zenesys & Kuber Professional Services Training & Consulting
  • 5. Financial Strength (1/2) – Stock Performance Stock Price & P/E Ratio Market Capitalization (Bn USD) 120 250 100 200 80 60 150 Stock Price 40 Market Cap 100 P/E Ratio 20 50 0 SEARS Walmart Costco Target Kohl -20 0 SEARS Walmart Costco Target Kohl -40 Assigned CLIENT Weighted Indices Weights Rank Parameter F1 - Market Capitalization 1/6 5 .833 F2 - Stock Price 1/6 4 .66 F3 - P/E Ration 1/6 5 .833 Inference Stock performance has provided clear indication of CLIENT’ current standing vis-à-vis its peers. This lays ground for further detailed analysis in subsequent components.5 Copyright © Zenesys & Kuber Professional Services Training & Consulting
  • 6. Financial Strength (2/2) – Financial Performance Consumer Confidence Correlation with Revenue Growth 2 35 1.8 30 1.6 25 Interest Coverage Growth Rate (%) 1.4 Ration 20 Current Ratio 1.2 15 1 10 0.8 5 0.6 Assigned CLIENT Weighted Indices 0.4 0 Weights Rank Parameter 0.2 -5 F4- Current Ratio 1/6 3 .5 0 -10 F5 - Quick Ratio 1/6 5 .833 SEARS Wal-Mart Costco Target Kohl F6 - Interest Coverage ratio 1/6 5 .833 Inference Financial performance has provided clear indication of current CLIENT standing against the peers. Lays ground for further detailed analysis in subsequent components.6 Copyright © Zenesys & Kuber Professional Services Training & Consulting
  • 7. Indicative Financial Strength– Component Ranking Indices Assigned CLIEN Weighted Weights T Rank Parameter Component Rank for CLIENT – 4.5 F1 - Market Capitalization 5 .833 1/6 F2 - Stock Price Ideal Ranking – 1 1/6 4 .66 F3 - P/E Ration 1/6 5 .833 Best Performer Ranking (COSTCO) – 2.33 F4- Current Ratio 1/6 3 .5 F5 - Quick Ratio 1/6 5 .833 F6 - Interest Coverage ratio 1/6 5 .833 Inference • No clear Leader as far as financial strength is concerned7 Copyright © Zenesys & Kuber Professional Services Training & Consulting
  • 8. CAP - Consumer Acceptance & Selling CapabilityComponent INDICES INCLUDED 1. Market Ranking – Reflecting the Offline sales market share 2. US Consumer Confidence Correlation Index: How much better or worse has any firm performed w.r.t. the Consumer Confidence Index 3. US Retail Sales Correlation Index: How much better or worse has any firm performed w.r.t. the US retail sale growth 4. Total Number of stores 5. Customer Sentiment Index EXPECTED TAKE AWAY Gauge the consumer point of view and understand how CLIENT perform on the elemental Component i.e. Attracting consumers and resulting into successful sales8 Copyright © Zenesys & Kuber Professional Services Training & Consulting
  • 9. Dummy DataConsumer Acceptance & Sales Capability (1/5) –Market Rank Revenue * Rank (Year Firm Assigned CLIENT Weighted (Bn USD) 2012) Indices Weights Rank Rank CLIENT 40 3 C1 – Market Rank 1/6 3 .5 Wal-Mart 150 1 Peer 2 30 4 Peer 3 45 2 Peer 4 25 5 Inference • Offline retail performance of CLIENT should be a strong focus area for CLIENT marketing team.9 Copyright © Zenesys & Kuber Professional Services Training & Consulting
  • 10. Dummy DataConsumer Acceptance & Sales Capability (2/5) –Consumer Confidence Correlation Index Consumer Confidence Correlation with Revenue Growth 7 Firm Delta Delta Delta Delta Total Delta (Q1) Q2 Q3 Q4 6 CLIENT -2 +2 -1.5 -1.5 -3 Consumer Growth Rate (%) 5 Confidence Index Wal-Mart +.5 +3.5 +.5 -2.5 +11 4 Peer 2 -2.5 +.5 -1.5 -3.5 -7 SEARS 3 Walmart 2 Assigned CLIEN Weighted Indices Weights T Rank Rank 1 Peer 2 C2 – Consumer Confidence Correlation 1/6 2 .33 0 March12 June12 Sept12 Dec12 Inference • Wal-Mart has consistently beaten the consumer confidence index • CLIENT witnessed exceptional season during Quarter 2.10 Copyright © Zenesys & Kuber Professional Services Training & Consulting
  • 11. Dummy DataConsumer Acceptance & Sales Capability (3/5) –US Retail Sale Correlation Index US Retail Index Correlation with Revenue Growth 7 Firm Delta Delta Delta Delta Total Delta (Q1) Q2 Q3 Q4 6 CLIENT 0 +2 -1.5 -1.5 -1 US Retail Sale Growth Rate (%) 5 Growth Wal-Mart +.5 +3.5 +.5 -2.5 +11 4 Peer 2 -2.5 +.5 -1.5 -3.5 -7 SEARS 3 Walmart 2 Assigned CLIENT Weighted Indices Weights Rank Rank 1 Peer 2 C3 – US Retail Sale Correlation Index 1/6 2 .33 0 March12 June12 Sept12 Dec12 Inference • Wal-Mart has consistently beaten the consumer confidence index • CLIENT witnessed below market performance in last two quarters11 Copyright © Zenesys & Kuber Professional Services Training & Consulting
  • 12. Dummy DataConsumer Acceptance & Sales Capability (4/5) –No. of Stores & Revenue Per Store Firm No of Rank Revenue Rank Stores Per Store Assigned CLIENT Weighted Indices Weights Rank Rank (Mn USD) C4 – No. of Stores 1/6 2 .33 CLIENT 2000 2 10 5 C5 – Revenue Per Store 1/6 5 .83 Wal-Mart 4400 1 100 1 Peer 2 400 4 25 4 Peer 3 1700 3 30 3 Peer 4 40 5 31 2 Inference CLIENT Scores high on overall market reach, but the revenue per store is the lowest amongst peers. This calls for due diligence for each Store’s business case.12 Copyright © Zenesys & Kuber Professional Services Training & Consulting
  • 13. Dummy DataConsumer Acceptance & Sales Capability (5/5) –Consumer Sentiments Net Sentiment Net Sentiment Score Firm Score (%) Rank 60 CLIENT 6 1 50 Positive Sentiment Wal-Mart 5 2 Growth Rate (%) 40 Negative Sentiment Peer 2 -4 4 Net Sentiment Score Peer 3 0 3 30 Peer 4 -5 5 20 10 Assigned CLIENT Weighted Indices Weights Rank Parameter 0 SEARS Wal-Mart Peer 2 Peer 3 Peer 4 C6- Consumer Sentiment 1/6 1 .166 -10 Inference • CLIENT Clearly enjoys net positive consumer sentiment • Can be leveraged for both online and offline sales • Will be interesting to understand the demographical break up of this index13 Copyright © Zenesys & Kuber Professional Services Training & Consulting
  • 14. Indicative Consumer Acceptance & Sales Capability– Component Ranking Assigned CLIEN Weighted Indices Weights T Rank Parameter Component Rank for CLIENT – 2.5 C1 – Market Rank 1/6 3 .5 C2 – Consumer Confidence 1/6 2 .33 Ideal Ranking – 1 Correlation C3 – US Retail Sale Correlation Index 1/6 2 .33 Best Performer Ranking (Wal-Mart)– 1.3 C4 – No. of Stores 1/6 2 .33 Worst Performer Ranking (Peer 4) – 4.8 C5 – Revenue Per Store 1/6 5 .83 C6- Consumer Sentiment 1/6 1 .166 Inference • CLIENT scores high on consumer sentiment. • Revenue per store index has been key dampener for CLIENT in this Component.14 Copyright © Zenesys & Kuber Professional Services Training & Consulting
  • 15. CAP - Online Presence Component INDICES INCLUDED 1. Online Market Share 2. Website Acceptance: Analysis of CLIENT business via online channel with competitors on parameters such as : CLIENTch Traffic rank, Reach, Page views, Reputation. 3. Social media popularity index: A percentage share of the internet influence of CLIENT with respect to top 6 department stores on Social media Sites such as Facebook, Twitter and Google trends 4. CLIENTch Intensity Index : Measures how often a firms’ name has been used while CLIENTching any product. Indicates a brand recall/association amongst the consumers. EXPECTED TAKE AWAY Understand how CLIENT is positioned to adopt the next phase of retail i.e.. Online Retail and E-Commerce15 Copyright © Zenesys & Kuber Professional Services Training & Consulting
  • 16. Dummy DataOnline Presence (1/4) – Online Market Share Firm Market Share Rank Assigned CLIENT Weighted Walmart.com 14 1 Indices Weights Rank Rank O1 – Online Market Share 1/6 4 .667 Target.com 4.1 2 Kohls.com 3.6 3 CLIENT.com 2.5 4 Macy’2 2 5 Inference • CLIENT clearly lags behind when it comes to commercial activity on CLIENT website. Subsequent analysis may throw in better comprehension.16 Copyright © Zenesys & Kuber Professional Services Training & Consulting
  • 17. Dummy DataOnline Presence (2/4) – Website Acceptance Page View & Bounce Rate Time Spent on Website 8 60% 8 7 7 50% 6 Page View/User 6 Time Spent (Mins) Time Spent (Mins) Page View (No.) 40% Bounce Rate 5 5 4 30% 4 3 3 20% 2 2 10% 1 1 0 0 0% SEARS Wal-Mart Peer 2 Peer 3 Peer 4 SEARS Wal-Mart Peer 2 Peer 3 Peer 4 Assigned CLIENT Weighted Indices Weights Rank Rank O2 – Page View/User 1/6 2 .33 O3 – Bounce Rate 1/6 3 .5 O4 – Time on Site 1/6 2 .33 Inference • CLIENT can definitely leverage comfortable website acceptance level. • Makes a string case for increased web based product sales and marketing, especially given that currently the online market share for CLIENT is low (People do visit CLIENT often, but it doesnt reflect in online sales). Probably online efficiency will throw in better light on this.17 Copyright © Zenesys & Kuber Professional Services Training & Consulting
  • 18. Dummy DataOnline Presence (3/4) – Social Media Popularity Social Media & CLIENTch Trend Share 40% 35% 30% Facebook Share in Social Media (%) Twitter 25% Google Trends 20% 15% 10% 5% 0% SEARS Wal-Mart Peer 2 Peer 3 Peer 4 Assigned CLIENT Weighted Indices Weights Rank Rank O5 – Social Media Popularity 1/6 3 .5 Inference • Except Wal-Mart, all the peers are still very nascent when it comes to establishing presence in Social media. A white space opportunity for CLIENT, especially given their relatively better position in Google CLIENTch trends.18 Copyright © Zenesys & Kuber Professional Services Training & Consulting
  • 19. Dummy Data Online Presence (4/4) – CLIENTch Intensity Index 60 50 Assigned CLIENT Weighted 40 SEARS Indices Weights Rank RankCLIENTch Intensity Index Wal-Mart O6 – CLIENTch Intensity Index 1/6 3 .5 30 Peer 2 Peer 3 Peer 4 20 10 0 Home Appliance Kitchen Appliance Exercise Equipment Garden Equipment Inference • Product association for Kitchen equipment and home appliances is high for CLIENT • Clear need to re-position itself as an exercise equipment and garden equipment retailer as well 19 Copyright © Zenesys & Kuber Professional Services Training & Consulting
  • 20. Indicative Online Presence– Component Ranking Assigned CLIENT Weighted Indices Weights Rank Parameter Component Rank for CLIENT – 3 O1 – Online Market Share 1/6 5 .833 O2 – Page View/User 1/6 2 .33 Ideal Ranking – 1 O3 – Bounce Rate 1/6 3 .5 Best Performer Ranking (Wal-Mart)– 1.01 O4 – Time on Site 1/6 2 .33 O5 – Social Media Popularity 1/6 3 .5 Worst Performer Ranking (Peer 2) – 4.8 O6 – CLIENTch Intensity Index 1/6 3 .5 Inference • Wal-mart has clear monopoly when it comes to Online presence • CLIENT lags behind Wal-Mart but has a clear lead over other peers. It must leverage this position.20 Copyright © Zenesys & Kuber Professional Services Training & Consulting
  • 21. CAP - Operational Efficiency Component INDICES INCLUDED 1. Retail Floor Space Utilization: Average revenue per Square feet area 2. Manpower Utilization: Average revenue per employee 3. Inventory Management: This index includes Inventory Turnover ratio and inventory Day Sales 4. Online efficiency: Average load time, CLIENTch engine reference, speed, success rate EXPECTED TAKE AWAY Identify key operational improvement areas and understand industry benchmarks.21 Copyright © Zenesys & Kuber Professional Services Training & Consulting
  • 22. Dummy DataOperational Efficiency (1/3) – Retail Floor SpaceUtilization & Manpower Utilization Retail Floor Utilization Employee Utilization 600 350 300 500 Revenue/ Employee 250Revenue/Square 400 200 feet($/sqft) (000$/sqft) 300 150 200 100 100 50 0 0 SEARS Wal-Mart Peer 2 Peer 3 Peer 4 SEARS Wal-Mart Peer 2 Peer 3 Peer 4 Assigned CLIENT Weighted Indices Weights Rank Rank E1 – Retail Floor Utilization 1/6 4 .66 E2 – Employee Utilization 1/6 4 .66 Inference • Clear transformational opportunity for CLIENT in terms of improving employee and floor space utilization22 Copyright © Zenesys & Kuber Professional Services Training & Consulting
  • 23. Dummy DataOperational Efficiency (2/3) – InventoryManagement Inventory Management 14 0.04 12 10 0.03 Indices Assigned CLIENT Weighted Inventory Turnover Weights Rank Rank 8 0.02 Ratio (%) E3 – Inventory Turnover Ratio 1/6 4 .66 6 Inventory Day Sales E4 – Inventory Day Sales 1/6 1 .166 4 0.01 2 0 0 SEARS Wal-Mart Peer 2 Peer 3 Peer 4 Inference • CLIENT has a low Inventory day sales and thus is managing inventory better. CLIENT should keep this ratio to the lowest as possible and maintain it. • CLIENT is not able to sell as regularly as Walmart or Peer 3 and has a Low Inventory Turnover. This may be due to inaccurate forecast of demand or poor sales. CLIENT has to improve inventory turnover.23 Copyright © Zenesys & Kuber Professional Services Training & Consulting
  • 24. Dummy DataOperational Efficiency (3/3) – Online Efficiency Online Efficiency 4 101.0% 3.5 100.0% 3 99.0% Response Time Response Time (Sec) 98.0% Success Rate 2.5 97.0% 2 96.0% 1.5 95.0% 1 Assigned CLIENT Weighted 94.0% Indices Weights Rank Rank 0.5 93.0% E5 – Response Time 1/6 5 .833 0 92.0% E6 – Success rate 1/6 2 .33 SEARS Wal-Mart Peer 2 Peer 3 Peer 4 Inference • Response Time of CLIENT is also well above the peers. • These could be due to the design of the CLIENT website which needs to be looked into. • However, CLIENT website has a success rate of 99.9%, which is well above the “Top Retailer Index” of 99.5%.24 Copyright © Zenesys & Kuber Professional Services Training & Consulting
  • 25. Indicative Online Presence– Component Ranking Assigned CLIEN Weighted Indices Weights T Rank Parameter E1 – Retail Floor Utilization 1/6 4 .66 E2 – Employee Utilization 1/6 4 .66 Component Rank for CLIENT – 3.3 E3 – Inventory Turnover Ratio 1/6 4 .66 Ideal Ranking – 1 E4 – Inventory Day Sales 1/6 1 .166 E5 – Response Time 1/6 5 .833 Best Performer Ranking (Peer 2)– 2 E6 – Success rate 1/6 2 .33 Worst Performer Ranking (Peer 3) – 3.9 Inference • Clearly the weakest link in CLIENT’ CAP score. Opportunity for Transformational initiatives.25 Copyright © Zenesys & Kuber Professional Services Training & Consulting
  • 26. Indicative Cumulative Assessment of Performance Score Financial Strength (25%) Online Presence (25%) Component Rank – 4.5 Component Rank – 3 CLIENT CAP Score = 3.4 Operational Excellence Consumer Acceptance & (25%) Selling Capability (25%) Component Rank- 3.3 Component Rank – 2.5 Industry Best Performer CAP Score = 1.9 Value in brackets indicate weightages of each Component to calculate CAP Score Inference • CLIENT does enjoy relatively comfortable consumer acceptance. However, lower operational efficiency and online presence may dampen the leverage.26 Copyright © Zenesys & Kuber Professional Services Training & Consulting
  • 27. Thank You!!!27 Copyright © Zenesys & Kuber Professional Services Training & Consulting