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  1. 1. PROJECT DRIVING THE LOYALTY SALES PERCENTAGE OF RELIANCE FRESH STORE, VAISHALI NAGAR,JAIPUR.. Submitted To: Centurion Institute Of Professional Studies, Pratap Nagar, Jaipur. (In partial fulfillment for the requirement of degree of P.G.D.M.) (Two year full time Programme) SUBMITTED BY: Under the supervision of BHOMA RAM Dr. Raghuveer singh PGDM 2nd Semester (Director CIPS. ) BATCH 2007-2009 1
  2. 2. PREFACE For a management student theoretical knowledge as well as practically orientation exposes oneself to experiences, one can again be mastering it is best possible time. PGDM curriculum has been fine- tuned in such a way that a student not applies the theoretical knowledge but also gain it in a practical sense. Thus objective can be attained through application of theory tools concepts and techniques of Management. The Project Starts With Introduction about – Chapter -1 includes Introduction Chapter-2 includes Introduction to the company Chapter -3 includes understanding planogram Chapter-4 includes research methodology Chapter-5 includes data analysis and findings Chapter-6 includes conclusions and suggestions 2
  3. 3. ACKNOWLEDGEMENT There is always a sense of gratitude which one express to other for the helpful so needy services they render during all phases of life. I would like to express my gratitude towards all those who have been helpful to me in getting this mighty task of training to a successful end. First of all, I consider it a pleasant duty to express my heart felt appreciation, gratitude and indebtedness to Sir RAGHUVEER SINGH for there keen interest, invaluable pains taking & excellent guidance, patience, endurance, encouragement & thoughtful advice for the project work. I would take this opportunity to thank all my family members for their helps & suggestions during the course of project work. I am also thankful to all my friends who gave me constant & continuous inspiration to complete this project. (BHOMA RAM) 3
  4. 4. EXECUTIVE SUMMARY The project studies were conducted at Reliance Fresh convenience store of Reliance Retail situated at Vaishali Nagar, Jaipur. The Summary of the project is as follows: Project title is “DRIVING THE LOYALTY SALES PERCENTAGE OF RELIANCE FRESH STORE, VAISHALI NAGAR,JAIPUR. Research methodology is – Sampling plan :- Non Probability (convenience) Research design :- Exploratory research. Data collection method :- Interrogation through personal interview. Objectives of the study :-  To study & Increase the “Loyalty Sales Percentage” (in consultation with Franchisee Manager, Franchisee Development Manager (F.D.M.)).  Better utilization of available resources.  To increasing Loyalty Sales Percentage.  Aware customer about RealianceOne Membership card.  To increase store profit and methods to reduce costs.  Identify methods to study and evaluate the stock movement of Non Food Fast Moving Consumer Goods (NF-FMCG) & high value SKUs esp. large chocolates and house wares and suggest appropriate low value NF-FMCG product mix.  To study the effective utilization of Planogram of the store. 4
  5. 5. Limitation of the study: - The study was restricted to theoretical ground only so it was difficult to draw the true interpretations of the study. The conclusion arrived at are based on vary less experience of researcher in this field. 5
  7. 7. CHAPTER- 1 INTRODUCTION Evolution of Retail Retail, according to Concise Oxford English Dictionary, is “the sale of goods to the public for use or consumption rather than for resale”. The barter system was first known retail form; then the currency changed hands; we had the handcart vendor selling goods in the streets; of late we have a pop & mom stores which compliment the neighborhoods stores. The first retailer in India includes Bata, Pantaloon, Bombay Dyeing, Spencers, and Nilgiris & Higginbotham. The current retail scenario is controlled by the likes of Shoppers’ Stop, Brand Outlets, Big Bazaars etc. The top 4 world players include Wal-Mart, Carrefour, Tesco and Metro. The opportunities as mentioned are aplenty with close to 15000000 sq.feet of retail space is under construction for various malls & shopping centers across the country. Retailing consists of the sale of goods or merchandise, from a fixed location such as a department store or kiosk, in small or individual lots for direct consumption by the purchaser. Retailing may include subordinated services, such as delivery. Purchasers may be individuals or businesses. In commerce, a retailer buys goods or products in large quantities from manufacturers or importers, either directly or through a wholesaler, and then sells smaller quantities to the end-user. Retail establishments are often called shops or stores. Retailers are at the end of the supply chain. Manufacturing marketers 7
  8. 8. see the process of retailing as a necessary part of their overall distribution strategy. What is Retailing  The sale of goods or commodities in small quantities directly to consumers.  Buy, Sell & Move Buy, Move & Sell Having gone through some of the terminologies in retail and having seen a broad outline of retail now let’s look into the 3 basic things, which govern the retail market. 8
  9. 9. 1. Buy Buying would involve the following activities, which would mean setting the guiding principles for all the merchandise decisions that a retailer makes. It should reflect target market desires, retailer’s institutional type, market place positioning, defined value chain, supplier capabilities, costs, competitors & product trends. 2. Move It can be easily said but the processes that are involved in the “move” part are complex but simple. From the product stage through the processing stage to the packed ones the move stage would continue. Various levels that involves in “move” part are: The buyer shortlists the product, places the order. The vendors receives the order, process the same, packs and send it to the distribution center from where it reaches the store for the customer to buy. One of the fast picking up aspects of the logistic in India is the COLD CHAIN. More and more organizations are looking for various aspects of cold chain to ensure that the products where temperature plays a vital role is maintained and sustained till such time the sale happens. The Merchandising and Category management is another important function of the retail industry. In this we have to opt for right product, place, quantity, quality, mix, price and time. Each of the stores would operate on certain basic business projection and all others will follow a typical pattern. For this pattern to be arrived, the merchandise management plays a big role. The merchandise can make or break an organization of its profitability. 9
  10. 10. When we say category management, it would amply the assortments of products the customer sees as reasonable substitutes for each other with similar characteristics. It also covers the process of managing merchandise in a retail business with the objective of maximizing sales and profits of a category. The category manager is also responsible for developing assortment plans for the entire category, buying pricing and coordinating promotions. 3. Sell Finally of the Buy, Move & Sell comes the selling part of it which involves a running of a retail stores. Operations as it is known are the crucial functions, which derive its strength from various other faculties. The beginning of the day is done with the store being opened by the competent person. The first activity to happen will be the housekeeping activities followed by the staff scheduling. The morning’s meetings happen chaired by the head of the store. The stock outs are established and the replenishments happen as the day progresses, though it is suggested that replenishments of the stock should always happen when the customer is not there. The head of the store usually inspects any one or all the departments of the store, which is otherwise called the “FLOOR WALK”. The cashier would ensure that all the cashiers have enough and correct float cash, whether the POS role, card swap machine and pen is in place or not. In starting of the day head cashier gives all cashiers a sum of Rs.1500 as loan. Having set everything in place, the store would then be opened for the customers. 10
  11. 11. The department’s heads in turn would brief their team on the achievements of the previous day and set target of the day. During this brief any incidents worth mention would also be discussed and the promotion offers, which are current, will also be taken up. Orders will be placed for all the stock out SKU follows up will also be done for those articles, which are delivered during the day. Cleaning of the self and also ensuring that the stocks are kept as per the planogram are checked. It’s just not the duties mentioned above but selling also happen simultaneously. At the end of day the process of concluding the activities is called the “END OF THE DAY” activities. As the person who is in charge of closing the store goes around checking whether the locks are in place or not; the high value merchandise counters are properly secured; check for any person hidden in the change rooms or cloaks rooms; the cashier would ensure that all the money that has been given as float tallies apart from the money that need to be submitted by the respective cashiers. There will be a checklist that needs to sign off together by the security as well as the in charge for having checked for conformity at the end of the day. 1.1 - PROJECT INTRODUCTION The project was done at Reliance Fresh convenience store of Reliance Retail situated at Vaishali nagar. 11
  12. 12. This project is all about to increase the Loyalty Sales Percentage of the individual stores. What is Loyalty? The degree to which customers are predisposed to stay with one company and resist competitive offers. Building Customer Loyalty 1. SERVICE NETWORK:The mantra for marketing professionals is service, service and more service! That’s right! One of the best ways of ensuring your customers keep coming back to you is providing impeccable service. This includes everything from service at the point of sale to after-sales service, which builds a lasting relationship with the customer. Most manufacturers of white goods understand relationship marketing like no one else. The peculiarity lies in the product itself, where it might need to be serviced long after it is bought. Moreover, the purchase might have taken place somewhere different from where the service is required. Companies like Eureka Forbes and Whirlpool pride themselves on superb customer service satisfaction levels. They manufacture a wide range of durables which can be serviced at various locations throughout the country. Remember, the customer is smart. He will judge your company even on small things like whether the salesperson reached in time. If he is late, the customer will never trust any claims of “zero error” quality made by you. So, watch out for service, the buzzword of the industry. 2. QUALITY CONTROL:“You never get a second chance to make a first impression” was the tagline for ‘Head and Shoulders’ shampoo years ago. Impeccable service too cannot save you if you do not deliver a good quality product each and every time. This is true especially for restaurants, where the food served has to be of the same 12
  13. 13. quality time and again to keep customers coming back to you. Here, quality is conveyed via word-of-mouth. One bad experience is enough to ruin the impression forever. Another good way of assuring customers value the quality of your product is to get an outside agency or someone else to endorse the results. For instance, Colgate Toothpaste continually reminds the customer that it is endorsed by IDA, the Indian Dental Association and it is the brand trusted by most dentists. HLL gets customers to talk about their “Pond’s Age Miracle” range of cosmetics and Dove soaps in their television ads, to endorse the quality of their products. That is also the psyche behind prompting a customer to try out the product. If a Vim Bar is a good dishwashing bar for Mrs X, a housewife, it has to be good for you too! If others say that your product is good, it’s gotta be good! 3. CONSTANT INNOVATION:“Once a customer, always a customer”, is no longer true in these days of fluctuating brand usage. Customers now have more choices than before and are more willing to try out new brands. This fickle-minded buying warrants a constant focus on the changing mindset of the customer. The brand too has to change with customer tastes. Nestle India does it best with its brand of Maggi food products. They now have variants for their instant noodles like ‘Dal Atta Noodles’ and ‘Rice Noodle Mania’. Their competitors in the food segment, HLL (Hindustan Lever Limited, now called Hindustan Unilever Limited) tickled the Indian palate by making multiple variants of the traditional Tomato Ketchup in flavors like mint, tamarind and chilli. Amul, which has a strong presence in the ice- 13
  14. 14. cream segment, sensed the need to keep the health-conscious customer in its kitty by adding the new Probiotic range of sugar free ice-creams! Kellogg’s Chocos are now available in a new flavour – Chocos Toffee to keep the children happy and dedicated! Innovation is the name of the game and timing is everything! 4. DIVERSIFICATION INTO SIMILAR PRODUCT LINES:If a customer feels that Dove Soap is the best for her skin, why not make her think the same way about shampoos as well? That’s exactly why the brand name has now been extended to shampoos in the Indian market. Stretch the loyalty and benefits associated with a brand to include other similar products. Lotus Herbals, for instance, makes chemical-free skincare products like creams, lotions and sunscreens. It has a strong base of happy customers because of its USP - ‘herbal ingredients’. Now, it has also launched its ‘herbal’ range of cosmetics on the shelves. So the same customers have a choice of using herbal preparations for their lipsticks and eye shadows as well. Chances are, they will be only too eager to try them out! Even when it comes to food products, brand loyalties can be stretched further. Knorr Soups, manufactured by HLL, extended their “instant soup powder” mixes to include “instant make-a-meal” powders for Chinese recipes. They now offer instant Chinese Manchurian, Hot & Sour, Chilli and other preparations for a quick meal at home. Amul too capitalized on its distribution network to deliver different products to its customers. They started from milk and now provide butter, ghee, cheese and even ice-creams. 14
  15. 15. 5. STRONG DISTRIBUTION CHAINS:If I want to buy a product, it must simply be available. For fast moving consumer items, it means availability at the nearest grocer. From personal experience, I can tell you how important this is. I like Nestle’s Munch chocolate a lot, but many a time I end up coming home with a Cadbury’s Perk in hand, due to unavailability of the other brand. Perk tastes just as good, and pretty soon I ended up asking for Perk at the local grocery shop instead of Munch. This shows how just availability or lack of it can affect the customer’s brand choices forever. For a long period Amul faced a similar problem with its products. Originating from Gujarat, the availability of its products was restricted to the home state and a few neighboring ones. Consciously, after a lot of effort Amul successfully expanded its distribution chains throughout the country. An effective media campaign helped pass this advantage on to the customers. If you want people to keep buying your brands, make sure the grocery store around the corner stocks it. 6. REINFORCE THE DECISION:Lastly, after people have tried your product, tell them that they have made the right decision. What better example to give you than the Pepsi ad which said, “Yehi hee hai right choice baby, aha!” You will have customers hanging on to you forever. The human mind looks for signals to reinforce the decision made by it, to tell itself that yes, you were correct! It’s no wonder then that the L’Oreal ad shows Aishwarya Rai spouting the phrase “Because you’re worth it! Customer loyalty towards your brand can give you the advantage of decreased cost of advertising. You can also increase the price of your 15
  16. 16. brand to capitalize on the same. So, go ahead and take the plunge into the world of brand loyalty! Benefits •Customer loyalty towards your brand can give you the advantage of decreased cost of advertising. •You can also increase the price of your brand to capitalize on the same. Loyalty Sales % = Sales through the Loyalty Card X 100 Total Sales Customer Loyalty programs need to stay fresh, be easy to administer, and tightly integrate with the central price file and all the customer touch points. Successful Loyalty programs pinpoint value to a specific group of consumers. The continuous change in programs keeps consumers engaged and avoids the attitude of entitlement. The Retalix customer loyalty application suite, however, is not your run-of-the-mill solution. It is comprehensive, easy to administer, and effective. Retalix Loyalty is a real time, online, centralized system that manages the Loyalty and Promotional marketing campaigns for Grocery and Convenience Store Retailers. 16
  17. 17. Coupled with the Retalix 1-to-1 Targeted Marketing Analysis tool, a retailer can easily reward customers according to their specific taste and loyalty level via a multitude of reward programs to keep it fresh and fun. Moreover, through a tight integration with the Pricebook, POS and Fuel Pumps, electronic rewards can be fulfilled for the consumer right at their purchase location. Retalix Loyalty includes:  Integrated POS and Pump interface to collect data, print Loyalty program information on the receipt, display messages to the cashier and customer, discount items, and redeem e-gift certificates, tender credits, and loyalty points  Net-based online communications architecture  Multiple set of basic programs (Charity, Continuity, Sweepstakes, e-Coupons, Points)  Tiered pricing rewards (electronic discounts) including fuel, according to loyalty levels  Reports to measure loyalty not only by gross spending but also by gross profit  Reports to measure program participation by store and chain  Net-based Centralized Management System  Retalix 1-to-1, Targeted Marketing Why the card is not being used?  Customer forget their card.  Customer don’t know the benefits of card. 17
  18. 18.  Quality of temporary card is very poor.  Cashier forget to ask about the card.  Many unwanted details are to be filled in form by customer. 1.2 - RETAIL IN DETAIL The Indian Retail market is worth a whooping 930000 crores. If one has to divide between the organized and unorganized sectors the major contribution comes from the unorganized sector, which contributes close to 98% of the total retail market. The balance of 2% amounts anywhere between 18-2000 crores. The difference between organized and unorganized sectors in the US & some of the Far East Asian countries are pretty low unlike in India. With the advent of seasoned players in the field of retail in India, the gap is likely to be abridged in the coming years. The difference between them is 85:15 in favor of organized sector in the US and 81:19 in the favor of the organized sector in Taiwan. The employment opportunities in retail is pretty high. But again the ratio of organized and unorganized is skewed towards the unorganized sector. While the organized retail sectors deploys 500000 people & the unorganized sector deploys close to 80 times the workforce. Factors that influence the growth in retail The DINK/HINK families, working women, working parents and the rising disposable income has contributed to the growth of Retail 18
  19. 19. across. The middle-income group is the fastest growing segment in the country today. Further the electronic media is also aiding the growth of the Retail industry. To summarize the top 6 factors that drive the growth of the retail industry in India would be as follows:  The Demographics  Lifestyles  Needs and Desires  Shopping Attitudes and Behavior  Retailers action  Environmental Factors These six factors clubbed with a co-coordinated logistics make the sale happen. As in any industry there is a social commitment also to be fulfilled. These can be recapitulated as under:  Quality products  Competitive prices  Wide range to choose from  Employment opportunities that are created  The economy would experience sea of change and  Would mean a WIN WIN situation to everyone Support Functions: The entire operation is possible with the help of a support team. This support team consists of the following: Human Relation-Involves itself in recruitment, training and welfare apart from their 19
  20. 20. regular activities Good Receiving-This department is responsible not just for the receipt of goods but also checking for their conformity and returns goods to the suppliers as need arises. Maintenance-The entire stores furniture and fixtures are taken care of by the maintenance team Accounts-the department, which receives all the cash, charge slips and other types of tenders; keeps a tag on the local store expenditure and also monitors any deviation in the transactions. Housekeeping- Mostly it’s an outsourced agency, which does the work. They keep the premises clean and tidy at all levels. Security-They are responsible for safeguarding men and material of the organization. VM-This department maintains the displays and the signage across the stores. CSD-Otherwise known as the customer service desk takes care of the customer complaints and issuance of merchandise credit and taking care of the loyalty programmed. IT-The IT department takes care of all the Networking, data maintenance and upkeep of all the tills. 1.3 RETAIL TERMINOLOGIES Alike any other industry the retail industry also has a wide range of terminologies, which are in use on a day-to-day basis. Few samples of them would include the following: 20
  21. 21. Till - The cash point Tender - The type of payment the customer is making SKU - Stock keeping unit Merchandise Credit - Credit note Assortment - Range of products and so forth Maximum Bay Quantity - It is the maximum quantity of each product, which can be placed on each shelf. Maximum Display Quantity – It is the number of SKUs, which can be directly seen by the customer in the front side. Retail types There are three major types of retailing. The first is the market, a physical location where buyers and sellers converge. Usually this is done on town squares, sidewalks or designated streets and may involve the construction of temporary structures (market stalls). The second form is shop or store trading. Some shops use counter-service, where goods are out of reach of buyers, and must be obtained from the seller. This type of retail is common for small expensive itms (e.g. jewelry) and controlled items like medicine and liquor. Self-service, where goods may be handled and examined prior to purchase, has become more common since the Twentieth Century. A third form of retail is virtual retail, where products are ordered via mail, telephone or online without having been examined physically but instead in a catalog, on television or on a website. Sometimes this kind of retailing replicates existing retail types such as online shops or virtual marketplaces such as eBay or Amazon. 21
  22. 22. Retail pricing The pricing technique used by most retailers is cost-plus pricing. This involves adding a markup amount (or percentage) to the retailers cost. Another common technique is suggested retail pricing. This simply involves charging the amount suggested by the manufacturer and usually printed on the product by the manufacturer. In Western countries, retail prices are often so-called psychological prices or odd prices: a little less than a round number, e.g. $6.95. In Chinese societies, prices are generally either a round number or sometimes a lucky number. This creates price points. Often prices are fixed and displayed on signs or labels. Alternatively, there can be price discrimination for a variety of reasons. The retailer charges higher prices to some customers and lower prices to others. For example, a customer may have to pay more if the seller determines that he or she is willing to. The retailer may conclude this due to the customer's wealth, carelessness, lack of knowledge, or eagerness to buy. Price discrimination can lead to a bargaining situation often called haggling — a negotiation about the price. Economists see this as determining how the transaction's total surplus will be divided into consumer and producer surplus. Neither party has a clear advantage, because the threat of no sale exists, whence the surplus vanishes for both. Retailers who are overstocked, or need to raise cash to renew stocks may resort to "Sales", where prices are "marked down", often by advertised percentages - "50% off" for example."Sales" are often held 22
  23. 23. at fixed times of the year, for example January sales, or end-of-season sales, or Blue Cross Sale. Top Retailer Worldwide Rank Retailer Home Country 1 Wal-Mart Stores, Inc. U.S.A. 2 Carrefour Group France 3 The Kroger Co. U.S.A. 4 The Home Depot, Inc. U.S.A. 5 Metro Germany (Source: Stores/Deloitte Touche Tomahatsu) 1.4 RETAIL SECTOR IN INDIA As the corporate – the Piramals, the Tatas, the Rahejas, ITC Ltd, S.Kumar’s, RPG Enterprises, Shopper’s Stop, Pantaloons, Reliance Retail, Vishal Mega Mart, Aditya Birla Group, Subhiksha, Landmark Group, True Mart race to revolutionize the retailing sector, retail as an industry in India is coming alive. Across the country, retail sales in real termss are predicted to rise more rapidly than consumer expenditure during 2003-08. The forecast growth in real retail sales during 2003- 2008 is 8.3% per year, compared with 7.1% for consumer expenditure. Modernization of the Indian retail sector will be reflected in rapid growth in sales of supermarkets, departmental stores and hyper marts. Sales from these large-format stores are to expand at growth rates ranging from 24% to 49% per year during 2003-2008, according to a latest report by Euro 23
  24. 24. monitor International, a leading provider of global consumer-market intelligence. A. T. Kearney Inc. places India 6th on a global retail development index. The country has the highest per capita outlets in the world - 5.5 outlets per 1000 population. Around 7% of the population in India is engaged in retailing, as compared to 20% in the USA. The factors responsible for the development of the retail sector in India can be broadly summarized as follows:  Rising incomes and improvements in infrastructure are enlarging consumer markets and accelerating the convergence of consumer tastes.  Looking at income classification, the National Council of Applied Economic Research (NCAER) classified approximately 50% of the Indian population as low income in 1994-95; this has declined to 17.8% in 2006-07.  Liberalization of the Indian economy which has led to the opening up of the market for consumer goods has helped the MNC brands like Kellogg, Unilever, Nestle, etc. to make significant inroads into the vast consumer market by offering a wide range of choices to the Indian consumers.  Shift in consumer demand to foreign brands like McDonalds, Sony, Panasonic, etc. The internet revolution is making the Indian consumer more accessible to the growing influences of domestic and foreign retail chains. Reach of satellite T.V. channels is helping in creating awareness about global products for local markets. About 47% of 24
  25. 25. India’s population is under the age of 25; and this will increase to 55% by 2015. This young population, which is technology-savvy, watch more than 50 TV satellite channels, and display the highest propensity to spend, will immensely contribute to the growth of the retail sector in the country. As India continues to get strongly integrated with the world economy riding the waves of globalization, the retail sector is bound to take big leaps in the years to come. The Indian retail sector is estimated to have a market size of about $ 180 billion; but the organized sector represents only 3% share of this market. Most of the organized retailing in the country has just started recently, and has been concentrated mainly in the metro cities. India is the last large Asian economy to liberalize its retail sector. In Thailand, more than 40% of all consumer goods are sold through the super markets and departmental stores. A similar phenomenon has swept through all other Asian countries. Organized retailing in India has a huge scope because of the vast market and the growing consciousness of the consumer about product quality and services. A study conducted by Fitch, expects the organized retail industry to continue to grow rapidly, especially through increased levels of penetration in larger towns and metros and also as it begins to spread to smaller cities and B class towns. Fuelling this growth is the growth in development of the retail-specific properties and malls. According to the estimates available with Fitch, close to 25mn sq. ft. of retail space is being developed and will be available for occupation over the next 36-48 months. Fitch expects organized retail to capture 15%-20% market share by 2010. 25
  26. 26. A McKinsey report on India says organized retailing would increase the efficiency and productivity of entire gamut of economic activities, and would help in achieving higher GDP growth. At 6%, the share of employment of retail in India is low, even when compared to Brazil (14%), and Poland (12%). Total Private Consumption Expenditure in India – 375 Billion USD Retail Sale – 205 Billion USD Organized Retail – 6.2 Billion USD (3%) Retailing – 35% of GDP 1.5 RETAILING FORMATS IN INDIA Malls:The largest form of organized retailing today. Located mainly in metro cities, in proximity to urban outskirts. Ranges from 60,000 sq ft to 7,00,000 sq ft and above. They lend an ideal shopping experience with an amalgamation of product, service and entertainment, all under a common roof.Examples include Shoppers Stop, Piramyd, Pantaloon. Specialty Stores:Chains such as the Bangalore based Kids Kemp, the Mumbai books retailer Crossword, RPG's Music World and the Times Group's music chain Planet M, are focusing on specific market segments and have established themselves strongly in their sectors. 26
  27. 27. Discount Stores:As the name suggests, discount stores or factory outlets, offer discounts on the MRP through selling in bulk reaching economies of scale or excess stock left over at the season. The product category can range from a variety of perishable/ non perishable goods. Department Stores:Large stores ranging from 20000-50000 sq. ft, catering to a variety of consumer needs. Further classified into localized departments such as clothing, toys, home, groceries, etc. Department Stores: Departmental Stores are expected to take over the apparel business from exclusive brand showrooms. Among these, the biggest success is K Raheja's Shoppers Stop, which started in Mumbai and now has more than seven large stores (over 30,000 sq. ft) across India and even has its own in store brand for clothes called Stop!. Hypermarts/Supermarkets:Large self service outlets, catering to varied shopper needs are termed as Supermarkets. These are located in or near residential high streets. These stores today contribute to 30% of all food & grocery organized retail sales. Super Markets can further be classified in to mini supermarkets typically 1,000 sq ft to 2,000 sq ft and large supermarkets ranging from of 3,500 sq ft to 5,000 sq ft. having a strong focus on food & grocery and personal sales. 27
  28. 28. Convenience Stores:These are relatively small stores 400-2,000 sq. feet located near residential areas. They stock a limited range of high-turnover convenience products and are usually open for extended periods during the day, seven days a week. Prices are slightly higher due to the convenience premium. MBO’s:Multi Brand outlets, also known as Category Killers, offer several brands across a single product category. These usually do well in busy market places and Metros. CHAPTER-2 INTRODUCTION TO THE COMPANY 2.1 reliance group 28
  29. 29. Founder Chairman of Reliance Group "Growth has no limit at Reliance. I keep revising my vision.Only when you can dream it, you can do it." Dhirubhai H. Ambani Founder Chairman Reliance Group December 28, 1932 - July 6, 2002 Shri Dhirubhai Ambani was an exceptional human being and an outstanding leader. He dared to dream on a scale unimaginable before in Indian industry. His life and achievements prove that backed by confidence, courage and conviction, man can achieve the impossible. From a humble beginning, he went on to create an enviable business empire within a span of just 25 years. The US$ 54 billion Reliance Group is a living testimony to his indomitable will, single-minded dedication and an unrelenting commitment to his goals. 29
  30. 30. The Group's track record of consistent growth is unparalleled in Indian industry and perhaps internationally too. Today, the Group's turnover represents nearly 3 percent of India's GDP. The corporate philosophy he followed was short, simple and succinct - "Think big. Think differently. Think fast. Think ahead. Aim for the best". He inspired the Reliance team to do better than the best - not only in India but in the world. He was probably the first Indian businessman to recognize the strategic significance of investors and discover the vast untapped potential of the capital markets and channelise it for the growth and development of industry. He was supremely confident that finance would never be a constraint in executing his projects because, as he said proudly, Indian investors would provide him with the necessary resources. For him, his people were his most important asset. He scouted around for the best and most talented professionals, nurtured them and continuously propelled them to aim for still higher goals. These highly motivated people comprise the core of what he named: "The Reliance Family". Shri Dhirubhai Ambani visualized the growth of Reliance as an integral part of his grand vision for India. He was convinced that India could become an economic superpower within a short period of time and wanted Reliance to play an important role in realizing this goal. The Bhagavad Gita states, "The actions of a great man are an inspiration for others. Whatever he does, becomes a standard for others to follow." This certainly applies to Shri Dhirubhai Ambani. 30
  31. 31. The Reliance Group is India's largest private sector enterprise, with businesses in the energy and materials value chain. Group's annual revenues are in excess of USD 22 billion. The flagship company, Reliance Industries Limited, is a Fortune Global 500 company and is the largest private sector company in India. Backward vertical integration has been the cornerstone of the evolution and growth of Reliance. Starting with textiles in the late seventies, Reliance pursued a strategy of backward vertical integration - in polyester, fiber intermediates, plastics, petrochemicals, petroleum refining and oil and gas exploration and production - to be fully integrated along the materials and energy value chain. The Group's activities span exploration and production of oil and gas, petroleum refining and marketing, petrochemicals (polyester, fiber intermediates, plastics and chemicals), textiles and retail. Reliance enjoys global leadership in its businesses, being the largest polyester yarn and fiber producer in the world and among the top five to ten producers in the world in major petrochemical products. The Group exports products in excess of USD 7 billion to more than 100 countries in the world. There are more than 25,000 employees on the rolls of Group Companies. Major Group Companies are Reliance Industries Limited (including main subsidiaries Reliance Petroleum Limited and Reliance Retail Limited), Indian Petrochemicals Corporation Limited and Reliance Industrial Infrastructure Limited. 31
  32. 32. Mr. Mukesh Ambani Chairman & Managing Director Mr. Mukesh D. Ambani, age 49, is a Chemical Engineer from the University of Bombay and pursued MBA from Stanford University, USA. He is the son of Mr. Dhirubhai H. Ambani, Founder Chairman of the Company Mukesh Ambani is the chairman, managing director and the largest shareholder of Reliance Industries, India's largest private sector company and a Fortune 500 Company. His personal stake in Reliance Industries is 48%. His wealth is US$ 20.1 billion as of March 2007, making him the world's 14th richest person and the second richest person in India. Mukesh and younger brother Anil are sons of the late founder of Reliance Industries. Mukesh Ambani joined Reliance in 1981 and initiated Reliance's backward integration from textiles into polyester fibres and further into petrochemicals. In this process, he directed the creation of 60 new, world-class manufacturing facilities involving diverse technologies that have raised Reliance's manufacturing capacities from less than a million tonnes to twelve million tonnes per year. Mukesh Ambani is also steering Reliance's initiatives in a world scale, offshore, deep water oil and gas exploration and production program, 32
  33. 33. a pan-India petroleum retail network involving 5,800 outlets and a research-led life sciences initiative covering medical, plant and industrial biotechnology. Mr. Mukesh D. Ambani joined Reliance in 1981 and initiated Reliance's backward integration from textiles into polyester fibers and further into petrochemicals. In this process, he directed the creation of several new and large world-class manufacturing facilities involving diverse technologies that have raised Reliance's petrochemicals manufacturing capacities from less than a million tones to over thirteen million tones per year. He directed and led the creation of the world's largest grassroots petroleum refinery at Jamnagar, India, with a present capacity of 660,000 barrels per day (33 million tones per year) integrated with petrochemicals, power generation and port and related infrastructure. He had set up the Reliance's communications technology initiative that is the largest and most complex information and communications technology initiative in the world. Mr. Ambani is steering Reliance's initiatives in a world scale, offshore and onshore oil and gas exploration and production program, creation of a pan-India petroleum retail network and setting up of a new export oriented refinery through RIL's subsidiary Reliance Petroleum Limited (RPL) with a capacity of approximately 580,000 barrels per stream day integrated with a 0.9 MMTPA polypropylene plant. Mr. Ambani's Achievements include: Conferred 'ET Business Leader of the Year' Award by The Economic Times (India) in the year 2006. 33
  34. 34. Had the distinction and honor of being the co-chair at the World Economic Forum Annual Meeting 2006 in Davos, Switzerland. Ranked 42nd among the 'World's Most Respected Business Leaders' and second among the four Indian CEOs featured in a survey conducted by Pricewaterhouse Coopers and published in Financial Times, London, November 2004. Conferred the World Communication Award for the 'Most Influential Person in Telecommunications in 2004' by Total Telecom, October 2004. Chosen 'Telecom Man of the Year 2004' by Voice and Data magazine, September 2004. Ranked 13th in Asia's Power 25 list of 'The Most Powerful People in Business' published by Fortune magazine, August 2004. 30 Growth is Life Conferred the 'Asia Society Leadership Award' by the Asia Society, Washington D.C., USA, May 2004. Ranked No.1 for the second consecutive year, in The Power List 2004 published by India Today, March 2004. Mr. Mukesh D. Ambani is the Chairman of Indian Petrochemicals Corporation Limited, Reliance Petroleum Limited and Reliance Retail Limited. He is member of the Shareholders'/ Investors' Grievance Committee of the Company. Major Subsidiaries & Associates:- The Reliance Industries Limited is the flagship company of Reliance Group which has ownership interest in the following subsidiaries & associates 34
  35. 35. Major Subsidiaries Reliance Petroleum Limited Reliance Netherlands BV (including Trevira) Reliance Retail Limited Ranger Farms Private Limited Retail Concepts and Services Private Limited Reliance Retail Insurance Broking Limited Reliance Dairy Foods Limited Reliance Retail Finance Limited RESQ Limited Reliance digital Retail Limited Reliance Service Solutions Limited Reliance Jamnagar Infrastructure Limited Reliance Haryana SEZ Limited Reliance Industrial Investment & Holdings Limited Reliance Ventures Limited Reliance Strategic Investments Limited Reliance Exploration & Production - DMCC Reliance Industries (Middle East) DMCC Reliance Global Management Services (P) Limited Reliance Commercial Associates Private Limited RIL (Australia) Pty Limited Major Associates Indian Petrochemicals Corporation Limited Reliance Industrial Infrastructure Limited 35
  36. 36. RELIANCE RETAIL LIMITED Growth through Value Creation Reliance is gearing up to revolutionize the retailing industry in India. Towards this end, they are aggressively working on introducing a pan- India network of retail outlets in multiple formats. A world class shopping environment, state of art technology, a seamless supply chain infrastructure, a host of unique value-added services and above all, unmatched customer experience, is what this initiative is all about. The retail initiative of Reliance will be without a parallel in size and spread and make India proud. Ensuring better returns to Indian farmers and manufacturers and greater value for the Indian consumer, both in quality and quantity, will be an integral feature of this project. By creating value at all levels they will actively endeavor to contribute to India's growth. The project will boast of a seamless supply chain infrastructure, unprecedented even by world standards. Through multiple formats and a wide range of categories, Reliance is aiming to touch almost every Indian customer and supplier. The magnitude and strategy of RIL's retail foray is sure to have far reaching social and economic implications by directly influencing the lifestyles of hundreds of millions of consumers, besides indirectly impacting the livelihood of tens of millions. This indirect impact will be on those engaged in a wide range of economic activities including farming, consumer goods manufacturing, and a host of myriad other 36
  37. 37. services that bring hundreds of categories of goods and services from the producers to the final consumers. Business analysts feel that Mukesh Ambani's advantage is his huge financial strength coupled with a track record of implementing mega projects in record time, at globally competitive capital costs. Mukesh Ambani has learned to dream big from his great visionary father, the late Dhirubhai H Ambani, who is acknowledged as one of India's tallest, most ambitious and successful business leaders for his sharp business acumen and skilled people management ability. If the announced retail project is any indication, Mukesh Ambani has indeed inherited all these skills from his father. Re-writing the rules of business has been the forte of Dhirubhai and Mukesh is attempting the same in retail. Quite clearly, RIL is now all set and ready to conquer the organized retail domain. The Indian retail scene is now going to witness some real fast-paced action, with the consumer – as always – having the best deal. So, as they say, let the action begin! Reliance Digital:Mukesh Ambani's Reliance Industries Ltd launched a second group of retail stores called RELIANCE DIGITAL which will sell consumer electronics and other household appliances. Reliance Digital Store has been launched five months after the company first introduced its fresh food format outlets, Reliance Fresh, that stock its own label of groceries under the brand, Reliance Staple. 37
  38. 38. The first of the stores was unveiled at the Shipra Mall at Indirapuram in Ghaziabad on the outskirts of the national capital New Delhi April 24 Reliance Retail Ltd, the mega retail venture from the Mukesh Ambani stable, marked its foray into speciality retail with the launch of its first consumer durable outlet, Reliance Digital, in the NCR region. Reliance is planning to open a total of 150 Reliance Digital stores across 70 cities with investment of Rs 1,000 crore over the next three to four years One-stop shops:The stores size approx 15,000-30,000 sq. ft, will function as one-stop shops for all technological solutions in the consume durables and IT telecommunications segment to cater to the tastes and requirement of customers. Reliance Digital stores would sell everything from TV sets, home theatres, refrigerators, cooking ranges, dishwashers to computers and mobile phones from across brands. Each store would be set up at an investment of Rs4 to Rs7 crore and also provide after-sales services On private labels, RELIANCE DIGITAL has on offer of more than 4,000 products from over 150 brands. As part of their overall business strategy they will have their own consumer durable private labels, but not immediately. With its own labels in the consumer durables segment, Reliance Retail will be fighting for a share of the $5.6-billion domestic market, which is dominated by South Korean brands LG and Samsung and Japan's Sony. The domestic consumer electronics market is growing by 10 per cent annually and is split between imported South Korean brands such LG 38
  39. 39. and Samsung and Japan’s Sony on the one hand and Indian market leaders like Videocon and BPL The prices being offered at the Reliance Digital stores will be most competitive and if any consumer finds a cheaper product in the market within 30 days they will not hesitate to match the offer. Besides, the stores will also provide pre- and post sales services through its in-house RelianceresQ vertical. The stores will also offer finance schemes for consumers for which the retail majors are in talks for tie-ups with several financial institutions, Citi Financial being one of them. Reliance Digital will also be offering customers Reliance One, a common membership and loyalty Programme across all its formats, which means users, would be able to redeem points earned on purchases. Other formats of Reliance Retail such as supermarkets and hypermarkets are soon to launch. Reliance Industries had last year announced an investment of Rs 25,000 crore for the retail business, which it hopes would help the company earn around Rs 100,000 crore revenues in the next five years, 10-15 per cent of which will be contributed through retailing of consumer durables at its Reliance Digital stores and hypermarkets. Industry estimates suggest India's retail market is worth $320 billion, of which organized retail accounts for $7.5 billion and expected to grow to $21.5 billion by 2010. Reliance Fresh 39
  40. 40. Reliance Industries launched its first retail format called Reliance Fresh in Hyderabad. Spread over 2,000-5,000 sq ft, 11 such Reliance Fresh neighborhood convenience stores were come up in the city. These stores sell fresh fruit and vegetables besides staples (dal, atta, rice) as well the company’s in-house brand Reliance Select and Reliance Value. Reliance is gearing up to revolutionize the retailing industry in India. Towards this end, we are aggressively working on introducing a pan- India network of retail outlets in multiple formats. A world class shopping environment, state of art technology, a seamless supply chain infrastructure, a host of unique value-added services and above all, unmatched customer experience, is what this initiative is all about. The retail initiative of Reliance will be without a parallel in size and spread and make India proud. Ensuring better returns to Indian farmers and manufacturers and greater value for the Indian consumer, both in quality and quantity, will be an integral feature of this project. By creating value at all levels, we will actively endeavor to contribute to India's growth. The project will boast of a seamless supply chain infrastructure, unprecedented even by world standards. Through multiple formats and a wide range of categories, Reliance is aiming to touch almost every Indian customer and supplier. The Fresh stores at Hyderabad are part of a pilot project, which will help company understand customer needs. The pilot for this format will be taken to many other cities over the next few months. Next on the company’s list are bigger cities including Delhi and Mumbai 40
  41. 41. RIL intends to invest close to Rs 25,000 crore over the next five years in the retail business. The company plans to establish 4,000 retail outlets across various formats by then, and is eyeing sales of Rs 1,00,000 crore over the 5-year period from the retail business. Besides Reliance Fresh, the company also plans to launch larger format stores called “Feel Fresh Plus” which will be spread over 10,000-15,000 sq ft. The Fresh Plus stores will stock fruit and vegetables as well as apparel, consumer electronics, FMCG items and even medicines. From Hyderabad, these stores will travel to Mumbai and Delhi where Reliance has identified up to 80 locations each. But even as the retail debut kicks off with fruit and vegetables, it seems the company is doing a rethink on whether to get into the larger formats such as hypermarkets and supermarkets. These two formats require over 1 lakh sq ft of space and may not come up at prime city locations. Instead, Reliance is contemplating tapping alterative sites such as the SEZs for opening hypermarket The strategy is to open one Reliance Fresh store in a radius of three to four km to serve 1,000-2,000 families. This means about 30-40 stores in the major metros. Reliance Fresh is selling vegetables and fruits sourced from farmers through the company’s agri hubs. Reliance Fresh would carry fresh fruits and vegetables, staples, top- up grocery, non-food items and dairy products and a whole lot of other categories at very competitive prices. All the stores opened have an average area of about 1,800 sq ft and an average of about 20 sales associates attending to customers in each store open from 8 a.m. to 10 p.m. on all seven days of the week. 41
  42. 42. A targeted sales turnover of Rs 90,000 crore (US$ 20 billion) by 2010 with a planned investment of Rs 30,000 crore over the next five years – that's the retail vision of Mukesh Ambani and his RIL retail team. RIL's retail venture seems all set to achieve the status of being the flag-bearer of India Retail Inc, and that too in record time! Culling information from all possible sources, Images F&R Research attempts to put the Reliance Retail jigsaw in order and see how the concept and strategy differentiates from the existing competition, how it impacts the intermediaries and consumers, and more interestingly, how will it stand up to the real competition from global retail powerhouses like Wal-Mart, Carrefour, Target, Metro, Sears and Tesco that are eager to enter the Indian retail arena once the FDI barrier is lifted. Read on for the full story… It's been in the news for quite some time now. Earlier, about a year ago, it was only whispered in close industry circles. Slowly the whispers become louder, and the word gained ground that India's largest private sector company, Reliance Industries Limited (RIL), is entering the Indian retail sector in a real big way. But with virtually nothing coming from anyone in the know inside RIL about their retail plans, this has to be one of the most closely guarded secrets of India's corporate story. Amidst all sorts of speculations in the media circles about RIL's intended retail foray, the word finally came out on January 23, 2006, when the Mukesh Ambani-controlled Reliance Industries Limited presented the mega retail initiative plans to its board of directors who subsequently gave their consent to pursue the retail business through 42
  43. 43. a wholly-owned subsidiary of the company – likely to be christened Reliance Retail Limited. The Reliance Retail blueprint envisages nation-wide chains of hypermarkets, supermarkets, discount stores, department stores, convenience stores and specialty stores, in about 800-odd cities and towns across the length and breadth of India. The RIL board of directors approved the initial phase of the retail foray at an estimated cost of Rs 3,350 crore (US$ 750 million). That was big news for both the national and international media, which went all agog again with intense speculation. Giving full respect to the importance of this announcement, more than one leading international daily – chiefly, The Financial Times – gave this news a front-page treatment, speculating (like many others) that this investment could just be an initial tranche of a much larger commitment from Reliance Industries towards the retail project. Just how big and grand this investment is for the Indian retail sector can be gauged by the simple fact that the entire Indian retail sector is estimated to be at Rs 1050,000 crore (US$ 233 billion) – growing at five per cent annually – and the estimated share of organised retail is only Rs 36,000 crore (US$ 8 billion), at present, albeit growing at over 30 per cent every year. That makes Reliance Retail's proposed investments equivalent to about 10 per cent of India's organised retail market – such a level of investment in the Indian retail arena has been unprecedented in the country's most promising sunrise industry – retail. So much so, projections by the Images-KSA India Retail Report 2005 of an organised retail market of Rs 100,000 crore (US$ 22 billion) by 43
  44. 44. 2010 now appears conservative, likely to be achieved much earlier than 2010. If Indian retail was lacking a whole-hearted and full-blooded thrust from a big and large corporate house (apart from the lukewarm investments made by the Tatas and ITC), it is now all set to change. Mukesh Ambani, who has been nourishing retail ambitions for quite some time now, has clearly positioned himself in to the role of redefining the entire landscape of Indian retail. RIL Set To Become World's Largest Real Estate Property Owner What is even more interesting is that Reliance Industries Limited will far out-surpass the Catholic Church in becoming the world's largest owner of real-estate property by virtue of its mega Retail and Satellite Township plans, in the next two to three years! Now what exactly does this mega retail plan portend for the Indian retail sector? In fact, what exactly are RIL's plans, in terms of retail strategy? How will RIL differentiate its stores and concept from existing players who have already moved into the retail space earlier, and have already established a good foothold? How will this impact the existing retail majors – the likes of Pantaloon Retail, Trent India, Shoppers' Stop, RPG, etc? How will the consumer benefit from RIL's venture and how will intermediaries like traders, suppliers and farmers all along the supply chain network benefit? What will be the USP of Reliance Retail? And, more significantly, how will this impact the major international retailers who plan to enter the Indian retail market? Reliance Retail is in fact giving India for the first time a real feel of the scale at which these global retail powerhouses actually operate, it is preparing India 44
  45. 45. to stand up to the ensuing competition and in the process, allow consumers the full benefits of modern retail. Retail Will Become Core Business of RIL Reliance Industries Limited is the largest and one of the fastest growing private sector companies in India, with business activities encompassing almost all major growth sectors of the Indian economy. The company manufactures and markets a wide range of products with market leadership in almost all its businesses. All of Reliance Group production and services ventures have one common feature – global scale operations employing state-of-the-art technology in all fields. The company is truly emerging as a well diversified conglomerate with global competence in technology, management and financial capabilities to meet the needs of a rapidly growing Indian market. With domestic market shares ranging from 40-80 per cent, RIL is also ranked among the top 10 producers globally, for all its major product segments. It is one of India's largest business conglomerates with total revenues of Rs 1,00,650 crore (US$ 22.6 billion). It is being speculated within the industry that the ROIs made by RIL in the retail space will far out-shadow its existing core flagship businesses – and very soon retail will become the core business for the Mukesh Ambani-controlled Reliance empire. Future Planning:- 45
  46. 46. Company plans to have a pan-India presence by opening stores in 784 cities and 600 small towns and achieve a target of Rs.10 billion revenue by 2010 by which time it hopes to complete Phase 1. In the first phase company plans to employ 500,000 people. It is following an all-inclusive model giving the right affordability across all income groups. Company is aggressively partnering farmers by following a farm-to-fork strategy in its supply chain management model and ensures that it delivers fresh fruits and vegetables at affordable prices to consumers. Currently, Reliance Fresh has over 100 stores across the country. Reliance Fresh also offers a membership and loyalty programme - Reliance One - to deliver customized benefits to frequent shoppers. Currently, it has 200,000 loyalty customers across Hyderabad, Jaipur and Chennai. Reliance Retail, the 100% subsidiary of Reliance Industries, on October 28 unveiled Reliance Fresh, the first of its multi-format retail foray involving an investment of Rs 25,000 crore. Reliance Fresh is the company’s brand for neighborhood fresh-food outlets. It will also sell kitchen equipment and other edibles. Besides, it has planned hypermarkets, supermarkets, discount stores, department stores, convenience stores and specialty stores, to be unveiled shortly. The Reliance Fresh supermarket chain is RIL’s Rs 25,000 crore venture and it plans to add more stores across different geographies, and eventually have a pan-India footprint by year 2011. 46
  47. 47. The super marts will sell fresh fruits and vegetables, staples, groceries, fresh juice bars and dairy products and also will sport a separate enclosure and supply-chain for non-vegetarian products. Currently, selling through company-owned stores currently totals just $8 billion in India. Industry estimates say that the country’s retail industry is worth $300 billion, that is about Rs 13, 50,000 crore. This stands a chance to blossom to $427 billion in the next four years. Organized retail accounts for just over Rs 35,000 crore. Reliance Fresh bids to tap the potential for organized retail in the country. Point of Sale Software System Retalix StoreLine is an open-standards, fully integrated and cross- functional Point of Sale (POS) and store management software system. Its uniqueness is in the functionality, world-wide install base, and hardware independence. Multi-Concept Functionality that delivers a fully integrated POS solution to meet all of your business needs Open by Design supports industry standards and is hardware independent plus integration with other third-party retail applications is straightforward, affordable and low risk Advanced Promotion Features enable a single point of update for pricing and promotions across all retail formats Graphical, Easy to Use flexible intuitive user interface, touch-screen capabilities and even graphical customer screens, means that cashier training is minimal and customer interaction is effortless Quick Service Deli, provides a powerful method of managing fresh- made sandwiches and deli items 47
  48. 48. Fuel provides full support for operating an onsite fuel station, supporting a full range of fuel station and supermarket services Retalix BackOffice is tightly integrated with Retalix StoreLine, and offers POS item management and reporting, DSD receiving, label and sign printing, handheld RF communications, host communications and in-store ordering Retalix PocketOffice is a mobile platform that enables users to manage store operations anywhere in the store, taking the application to the business decision point, while on the sales floor or receiving dock. Retalix StoreLine is installed in more than 250,000 POS terminals worldwide, and is the selected POS solution of top-tier retailers such as Tesco, Publix, Sainsbury's, Woolworths Australia, Delhaize Group, Hy-Vee, and the A.S. Watson Group. Supply Chain Management A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers. Supply chains exist in both service and manufacturing organizations, although the complexity of the chain may vary greatly from industry to industry and firm to firm. 48
  49. 49. Farmers Collection center Reliance Fresh Distribution center From the above pictorial representation of supply chain management of reliance fresh it is clear that raw material is procured from vendors, transformed into finished goods in a single step, and then transported to distribution centers, and ultimately, customers. Realistic supply chains have multiple end products with shared components, facilities and capacities. The flow of materials is not always along an arborescent network, various modes of transportation may be considered, and the bill of materials for the end items may be both deep and large. 2.2 Reliance Fresh Loyalty Programme 1. What is Loyalty Membership? 49
  50. 50. Loyalty Membership is a program devised by Reliance Industries Limited for Reliance Fresh to retain the customers visiting their stores. It is a program by which Reliance Fresh store issues a Loyalty Membership Card to its customers to encourage them to shop at the store regularly. Each time they buy something they collect points which will allow them to redeem cash vouchers to shop at store in future. Followings are the features of the program: • An electronic method of identifying customer purchases and translating that information to reward customers based on their shopping habits. • There is a reward point system by which customers receive reward points on every purchase made at the store. • For every purchase of Hundred Rupees customer will receive One reward point. • Customer should accumulate minimum of 25 points to get a reward voucher by which he can make purchase at the store equivalent to Rupees 25. • Customers can also retain these points and receive reward voucher whenever they want. • Members will also receive accidental insurance of Rupees 50,000 under this program. • Customer will be issued a permanent membership card after 180 days of issuing of temporary card. • 2. How Loyalty Membership Program benefit Retailers? 50
  51. 51. • The program data help retailers to adjust their product assortment to customer demands. • Retailers remove or cut back slow-moving items and devote more shelf space to the products that program members buy. • Identify their most loyal customers. • Learn more about their best customers buying habits. • Offer the products and services according to their best customers demand. 3. How do Loyalty-Membership Program works? • To enroll, customers typically complete an application form asking for their Name, address, gender, phone number, e-mail address, income etc. • Each time cardholders make a purchase, the store scans their membership card, tracks the sale and converts this data into useful information. • Loyalty Membership programs give customers points that accrue with their purchases and can be redeemed for rewards. • Cardholders receive their discounts by presenting their card at the checkout or by redeeming targeted coupons. 4. How can food retailers help consumers and Manage Operations with the data they collect? 51
  52. 52. Analyze shopping habits, refine marketing programs and fine-tune the product mix at the chain or individual store level. Stores use data gleaned from loyalty-marketing programs to: • Identify the promotions that appeal most to various customer groups, e.g., discounts or rebates for price-conscious shoppers; home delivery services for busy shoppers. • Reduce the shelf space devoted to slow-moving items in order to stock the products that customers prefer. • Reveal when products were sold and whether they were sold on or off promotion, and the profit margin on each sale. • Improve speed-to-shelf and decrease out-of-stocks. • Determine how product deletions affect their best customers, and take steps to keep those customers from taking their business elsewhere. 5. What are the advantages of this Loyalty Program for customers? Following are the advantages of Loyalty Program: • Loyalty Program gives customers the sense that the retailer values them personally and respects them. • This program has an inbuilt system of giving discount over the competitive prices of the goods, if compared from general retailers. • Besides this it also offers an accidental insurance of rupees 50,000. 6. How we can make Loyalty Program more effective? • We can make it effective by introducing various types of schemes which can attract customers. 52
  53. 53. • We can issue prepaid cards in different denominations to our customers and provide additional discounts and offers in addition to our normal reward point system. • We can also categories the cards as Platinum, Gold and Silver based on purchasing capacity/trend of different segments of customers. The advantages can be increased with the upgraded membership. • Card can be made attractive by issuing a plastic or a laminated card in place of the present paper card so that it can be retained for a long time. • Increase level of personalized service/interactive approach with the customers. Through interaction and personalize service the front line staff should ensure to make the customers feel that they are the valued clients. • Cashier should request and enlighten the customers to use their cards. • Regular announcement should be made to encourage customers to use their loyalty cards to redeem reward points. • There can be additional rewards depending on the frequency of usage of card or can be based on their visit to the store. • The Loyalty Program form can be bilingual and should be of one page so that customers find it easy to fill. • The form at present is very lengthy and it becomes irritating for the customer when too much information is being asked. Therefore, it is suggested that the form should be made simple and some irrelevant questions, if any, may be removed. • If need be in order to facilitate the customers, a separate person may be assigned the task for filling up the forms. 53
  54. 54. • Customers need instant answers to their queries. So store staff can be trained about this Loyalty Program so that they can also assist customers. • The FDM should ensure optimum utilization of available manpower. 7. Can Loyalty be bought? • Yes, it can be bought by winning the faithfulness of the customers by giving them quality services without interruption. Meeting the changing expectations of the customers will help strengthen a lasting relationship and ensure that the customers no longer feel like going elsewhere. 8. What is the percentage of customers using Loyalty Cards? • On an average every Reliance Fresh is issuing 80-120 loyalty cards per day. • The ratio of customers using this card floats between 50%-60%. • Educated people are giving more attention to the loyalty card. 9. How many customers are having more then one card? Why? • Customers are not able to retain existing paper card for a long time so customers can be issued a new card with the same number if the exiting card cannot be scanned by machine properly. • 10% cards cannot be scanned as these are paper cards and get distorted. • 10. How we can build our product awareness? 54
  55. 55. • The advantages of a customer card must be actively conveyed from the management to the customer via the staff. • We can utilize the time of customers by making them aware about the reward program when they are waiting for billing. • Regular announcements can be made by the MSR’s regarding the benefits of the Loyalty Card and asking customers to use the benefits of the program. • Clippings about the product may be flashed through the electronic media. • Details of the Loyalty Program may also be circulated through pamphlets in newspapers. 11. What are the problems being faced by customers? How we can work on it? • Token system should be introduced, as yet customers are facing problems as their belongings are not safe outside the store. • Customers have to wait for a long time for billing so we can introduce a system of separate queues for ladies and senior citizens and can also increase number of cash counters. • Customer is coming in Reliance Fresh due to a brand name and thinking its product would be of good quality, but sometimes there are rotten fruits and vegetables with the bunch of fresh ones this leads to a wrong impression on customers. So, there should be proper sorting to maintain the consistency in there quality. • Proper availability of stock should be maintained to cater to the needs of customers. 55
  56. 56. • Sometimes store staff are ignorant and don’t pay much attention to customers and this frustrates the customers. So store staff should be trained to assist the customers in a proper way. • Facility of drinking water should be provided at the store which is not available at present . • Toilets for customers should be made available. • There should be counting of items purchased by a customer at the billing point to prevent misplacement. 12. How to increase efficiency of employees? • Providing refreshments like tea, coffee at least in two intervals so that the employees feel energetic and work more efficiently. • Orientation program can be conducted for the employees to make them aware of the targets to be achieved. • The employees should be kept in high state of morale. This could be achieved by the effective leadership. • Career progression of the employees should be chalked out. 2.3 RELIANCEONE MEMBERSHIP CARD 56
  57. 57. This is a card which was given to the customer at free of cost. This card helps to increase the loyalty sales percentage of the store. Benefits of this card are: Customer will get 1% point of his purchasing amount added to hisher membership card. When these points will become 25, it means that 25 points is equivalent to 25/-. Heshe will be able to redeem hisher points & get a discount of 25/- With this card customer will get “Accidental Death Insurance” of 50000/- by default. If customer will recharge their Hutch, Reliance, Airtel & Idea mobile from CSD then also 15 point of the amount he recharge will be added to his card. In starting customer will get temporary card, which is valid for 180 days. Within 180 days customer will get permanent card, which is look like plastic card at postal address given by the customer in the form for issuing of RelianceOne Membership Card. Conditions for eligibility of permanent card are as follows: Customers have to do a purchasing of 1500/- with the help of card within 3 months from the issuing date OR he have to scan his card at least 10 times. If above criteria is not fulfill then in next 2 months customers have to do a purchasing of 600/- with the help of card OR he have to scan his card at least 6 times. CUSTOMER INFORMATION CHANGE REQUEST 57
  58. 58. If customer wants to change his Postal address, Telephone Number or Email ID then customer have to fill the “Customer Information Change request”. Process to be followed for change of Customer Information Take a printout of the Customer Information Change Request form. The customer has fill up all the required details mentioning his RelianceOne Membership card number. The customer has to sign the request form and hand it over to the MSR. The MSR checks for the following on the form RelianceOne membership number First Name Last Name Information regarding change request Date Customer Signature The MSR then fills up the information in the “FOR OFFICE USE” space. The format for request ID is store code- date in DDMYY- serial number stating from 0001. The MSR fills up the MSR code and signs in the space provided. This entire request should be filled separately and kept at the store under lock and key. Once the system for making these changes is live, all these forms have to be sent to the data entry center for the processing. The data for dispatch will be notified later. The format of Customer Change Request Form is: 58
  59. 59. Customer Information Change request Please incorporate the following changes in my RelianceOne membership details (Please tick the appropriate box) The format of Customer Change Request Form is: Customer Information Change request Please incorporate the following changes in my RelianceOne membership details (Please tick the appropriate box) RelianceOne Membership No. First Name Last Name I have moved to a new house. Please send all communication to my new address given below Address Line 1* Address Line 2 Landmark City Taluka* Pincode* My Phone Number has changed Std Code Phone (Res) Mobile Std Code Phone (Off) I have a new email address Email Date D D M M Y Y Y Y Signature 59
  60. 60. FOR OFFICE USE ONLY Store Code Request ID: CIC - D D M M Y Y - Store code Date Serial No MSR Code MSR Signature Replacement Card Request If the card of the customer is damaged or lost then he has to fill a “Application Form for Request for Replacement Card”. Process to be followed for Request for Replacement Card 1. Take a printout of the Application form for request for Replacement Card. 2. The customer has fill up all the required details mentioning his RelianceOne Membership card number, first name and last name. 3. The MSR has to handover the new temporary card to the customer and fill up the new card number in the space provided. The MSR has to destroy the corresponding application form by tearing it. 4. The customer has to sign the request form and hand it over to the MSR. 5. The MSR checks for the following on the form a. RelianceOne membership number b. First Name c. Last Name 60
  61. 61. d. If the card is damaged, the MSR has to collect the damaged card and tick the appropriate option on the application form. If the card is lost, then the appropriate option is ticked. e. Date f. Customer Signature 6. The MSR has to inform the customer that heshe will not be able to earn points using the old card since it will be deactivated. 7. The MSR should inform the customer that heshe would be able to use the new card with immediate effect. However, the customer can start redeeming only after a period of 21 working days, which are required for processing the replacement request. 8. The MSR then fills up the information in the “FOR OFFICE USE” space. 9. The format for request ID is store code- date in DDMYY- serial number stating from 0001. 10.The MSR fills up the MSR code and signs in the space provided. 11. All these damaged cards and application for replacement cards should be filled separately and kept at store under lock and key. 12.Once the system for making these changes is live, all these forms have to be sent to the data entry center for the processing. The data for dispatch will be notified later. The format of Application Form for Request for Replacement Card is: Application Form for Request for Replacement Card 61
  62. 62. RelianceOne Membership No. First Name Last Name This is to inform you that my RelianceOne membership card is lost/ damaged. I have been issued a replacement card with card number I request you to deactivate my old card and transfer all the points to my new card number mentioned above. I understand that I would not earn any points on usage of my old card. I declare that I have surrendered the damaged card at the customer service desk I declare that I will destroy the lost card if found. Date D D M M Y Y Y Y Signature FOR OFFICE USE ONLY Store Code Request ID: RRC - D D M M Y Y - Store code Date Serial No MSR Code MSR Signature CHAPTER- 3 UNDERSTANDING PLANOGRAM A planogram is a diagram of fixtures and products that illustrates how and where retail products should be displayed, usually on a store shelf in order to increase customer purchases. It is an arrangement of different products in the most appropriate order with optimum 62
  63. 63. utilization of available space. It also shows the exact quantity of each product in the store as well as its position on a particular bay & shelf. They may also be referred to as plannograms, plano's, plano-grams, plan-o-grams, schematics (archaic) or POGs. A planogram is often received before a product reaches a store, and is useful when a retailer wants multiple store displays to have the same look and feel. Often a consumer packaged goods manufacturer will release a new suggested planogram with their new product, to show how it relates to existing products in said category. Planograms differ significantly by retail sector. Fast-moving consumer goods organizations and supermarkets largely use text and box based planograms that optimize shelf space, inventory turns, and profit margins. Apparel brands and retailers are more focused on presentation and use pictorial planograms that illustrate "the look" and also identify each product. Since the purpose of a planogram is to communicate how to set the merchandise to increase customer purchases, much research often goes into the layout of a planogram. Attention is given to adjusting the visibility, appearance and presence of products to make them look more desirable, or to ensure sufficient inventory levels on the shelf or display. There are some consulting firms which specilize in retail space layout and planogramming. Some chain stores and wholesalers also create and maintain planograms for their stores. Planogramming is a skill developed in the fields of merchandising and retail space planning. A person with this skill can be referred to as a planogrammer. 63
  64. 64. Scope To study and re-engineer the existing Planogram. Purpose • To communicate how to set the merchandise. • To increase customer purchases. • To adjusting the visibility, appearance and presence of products • To make them look more desirable. • To ensure sufficient inventory levels on the shelf or display. • To use space effectively whether floor, page or virtual. • To optimize short- and long-term returns on investment into retail space. • To provide a logical, convenient and inspiring product-customer interface. • To make right selection of products available. • To facilitate communication of retailer’s brand identity. • To maximize profit per centimeter of shelf space. • Understand the relationship between space, sales and profit Merchandising Merchandising refers to the methods, practices and operations conducted to promote and sustain certain categories of commercial activity. 64
  65. 65. Visual Merchandising (VM) is the art of presentation, which puts the merchandise in focus. It educates the customers, creates desire and finally augments the selling process. Visual Merchandising helps in:  Educating the customers about the product/service in an effective and creative way.  Establishing a creative medium to present merchandise in 3D environment, thereby enabling long lasting impact and recall value.  Setting the company apart in an exclusive position.  Establishing linkage between fashion, product design and marketing by keeping the product in prime focus.  Combining the creative, technical and operational aspects of a product and the business.  Drawing the attention of the customer to enable him to take purchase decision within shortest possible time, and thus augmenting the selling process. PROCEDURE OF REPLENISHMENT OF STOCK 65
  66. 66. The whole system of RELIANCE FRESH is connected through an ERP SOFTWARE i.e. SAP and the replenishment procedure is based on auto indenting & manual indenting. Auto Indenting MBQ of each SKU is already stored in the system of DISTRIBUTION CENTRE. (D.C. is the place from where the required quantity of stock is sent to the respective stores.) As & when sales of a particular SKU takes place it is automatically recorded in the system. Within 3 days D.C. dispatches the required quantity of each SKU to the store, to maintain the MBQ level of each shelf. Manual Indenting Before closing the store daily CSA of each category identify the requirement of each SKU and communicate it to supervisor and finally it is feed to SAP or mailed to Distribution Centre (D.C.) to maintain the required level of inventory. CHAPTER- 4 RESEARCH METHODOLOGY 66
  67. 67. Step 1: Per day sales of each SKU was obtained. The SKUs list of Reliance Fresh which contains approximately 6000 SKUs/products of all different categories (Fruits & Vegetables, Staples, Process Food, Non-Food Fast Moving Consumer Goods, House wares, Beverages, Dairy, Backery, Frozen, etc.) is provided by the head office. With the help of this list, at store, daily sales of each SKU was obtained from CSAs by interviewing them in depth. The probable demand of those SKUs which were not in the Planogram of the store were also obtained so that these could also be introduced if found appropriate. Step 2: Per day sales was then multiplied by 3 so as to maintain the required stock level for 3 days. After getting the daily sales of each SKU, it was then multiplied by 3. Since, the supply of SKUs other than Fruits & vegetables and Dairy from Distribution Center is made after every 3 days and in order to maintain the required MBQ level the sales figure is multiplied by 3. For example, the daily sales of Parle Krackjack 75- gram biscuit were 5 units approximately told by the CSA. This projection of MBQ level was totally based on the judgments of CSAs and on the previous month’s sales report. Therefore, its required MBQ level should be 5x3, i.e., 15 units in the store. This approach was applied for all SKUs of each category in order to adjust the MBQ level of all SKUs of Planogram. Step 3: Figure obtained in step 2 was then compared with MBQ figure of current planogram for each SKU. The figure so 67
  68. 68. obtained for all the SKUs, by applying the same approach, was then compared with the actual MBQ level of respective SKUs in the Planogram. By this comparison the difference between actual and obtained MBQ level was found. This difference was then used to adjust the MBQ level. For example, the MBQ level as per current Planogram of FORTUNE SOYA OIL 1 LT POLY PACK was 56 units but actual per day sales of this were 32 units, therefore, according to this sales figure MBQ level should be 96 units. But this figure is more then actual MBQ level, therefore, its MBQ level was increased to 96 units by providing it single facing and double vertical stacking. Step 4: MBQ level of each SKU was adjusted by either increasing or decreasing its quantity. Similarly the MBQ level of each SKU was adjusted by either increasing or decreasing its quantity which was required for the optimum utilization of available bay space and better inventory management. This approach helped in better visibility of the SKUs and raising the profitability of the store. This step resulted in the empty spaces on the different bays. Step 5: Empty spaces obtained because of step 4 was then filled by new SKU which was obtained in consultation with CSAs, FDM, Franchisee Manager, on the basis of our judgment & based on feedback from store staff . After getting the empty shelves, those SKUs were finalized in consultation with 68
  69. 69. CSAs, FDM, and Franchisee manager and on the basis of our own judgments, which were mostly demanded by customers other than those SKUs which were available in the store. This helped in introducing some new SKUs in Planogram. Methodology Used For re-engineering Planogram, following research was done: 1. Research Design Research Design is the overall plan to conduct research. It covers: • data collection methods • sampling decisions • data analysis methods Often constraints on resources limit research design so that it is less ideal. For e.g. smaller sample size. The purpose of research design is to decide approach that answers our problem in best way, given constraints on resources. Types of Research Design There are three types of research designs: 1. Exploratory research design Used for discovering ideas and insights 2. Descriptive research design – longitudinal and cross- sectional Used for describing characteristics of population 3. Causal research design Used for proving cause-effect relationship 69
  70. 70. The research design used in re-engineering Planogram is Exploratory Research. 2. Exploratory Research Following designs (methods) are used for exploratory research: I. Secondary data II. Focus groups III. Depth interviews Projective techniques: It consists of following techniques I. Word Association II. Sentence completion III. Third person & Role playing IV. Thematic Apperception Test The tool used for research required in re-engineering Planogram is Depth interview. 3. Depth Interview Principle of Depth Interview  Respondent will reveal truth about sensitive issue after taking him in confidence.  Respondent’s answer will be obtained by probing Characteristics of Depth Interview  An unstructured interview of the respondent is taken  Only one respondent is interviewed at a time  Usually conducted by experienced researcher 70
  71. 71.  Interviewer’s role is extremely important since the emphasis is on probing  For re-engineering Planogram, the respondents selected were CSAs, store supervisors, FDM, Franchisee manager & customers. Collection of Data Secondary Data Secondary data is the data gathered by someone else prior to the current needs of the researcher. It is already available to the researcher before he starts conducting his research work. Advantages of secondary data  Quickly available  Economical  Dependable  Easy to Use  Accessible  Understandable While conducting study for re-engineering Planogram, the secondary data was collected as follows:  Analyse the following data from Management Information Systems (MIS)  Current Plano gram  Category vise Net Sales 71
  72. 72.  SKU vise Net Sales  Category vise unit sales  SKU vise unit sales  Maximum Bin/Bay Quantity (MBQ) Primary Data The researcher originates the primary data. The primary data for re- engineering Planogram was collected as follows:  Feedback from  CSA  FDM  Franchisee  Customer (limited to people known)  Customer demographics Feed Back Questions asked from CSAs 1. Which SKUs have the maximum queries? 2. Which SKUs have maximum complains? 3. Which SKUs customers are happy with? 4. Are there any SKUs that you suggest as a substitute? a.) For what SKUs? b.) What is the substitute? 5. Do you receive any queries for any SKUs which are not stocked? 6. How much does each SKU is being sold on daily basis? 7. Is the customer satisfied with the quality of products available in the store? 72
  73. 73. 8. Is the customer happy with the pack size available (especially for staples, ghee & vegetable oil) or they need big or small one? Feedback received from CSAs  Maximum demand is for Fruits & Vegetables (F&V) category.  Customers are happy with F&V and Process Food (P.F.) but for P.F. introduce some more products.  Substitute suggested is mainly for staples and P.F. category. For example:- Customer demanded a particular brand of atta but sometimes due to unavailability of stock, atta of other brand was offered.  Customers query more about NF FMCG & toiletries (Currently this category of SKUs is not available in the store.)  Sometimes customers complain about the freshness of F&V as they find it rotten and also fresh ones mixed with rotten ones.  Some customer also asks for smaller pack size for staple SKUs. All the findings were communicated to Franchisee Manager for which necessary steps were taken. 73
  74. 74. SWOT ANALYSIS Strengths Opportunities •Potential Market • Brand Name • Strong Financial Backup • Good employee base • Easily Reachable • First Mover advantage Weaknesses Threats • More time in billing •Local retailers • Fruits & Vegetables are not •Opposition by Govt. always fresh •Big retailers are entering • Offer’s announcements are not proper CHAPTER- 5 DATA ANALYSIS AND FINDINGS 74