The document is an internship project report submitted by Anas Ahmad and Suprateek Gulia to VAS Data Services in Gurgaon. It details the study conducted on expanding Yepme's presence from online to offline retail channels. It involved researching the existing watch distribution market and developing a franchise model for Yepme. Market research was conducted by visiting over 50 watch stores. Insights gathered informed Yepme's launch of watches in retail. A no-frills franchise model with no fees and SOR inventory was developed. Over 1000 leads were generated and 32 were identified as potential franchise conversions. The work contributed to Yepme's successful launch in retail markets across India.
2. Acknowledgement
The completion of this project could not have been possible without the participation and
assistance of so many people whose names may not all be enumerated. Their contributions are
sincerely appreciated and gratefully acknowledged. However, I would like to express my deep
appreciation and indebtedness particularly to the following:
The faculty of IIM Lucknow, all the knowledge gained in the lectures was applied in the
internship.
Our parents for their immense love and support throughout our lives.
Mr. Manish Srivastava, for his constant guidance and support throughout our internships and in
writing this report as well.
Mr. Joy Patra, for his guidance and his valuable suggestions in the report.
To all relative, friends and others who in one way or another shared their support, thank you.
And above all, to the Great Almighty, the author of knowledge and wisdom, for his countless
love.
We thank you.
3. Table of Contents
Executive Summary.................................................................................................1
1. About the Organization.......................................................................................2
2. Background of the Project...................................................................................3
3. Methodology ....................................................................................................6
1. Yepme Watches Retail Distribution .....................................................................6
2. Yepme Franchise Model...................................................................................7
4. Achievements...................................................................................................8
5. References ......................................................................................................9
Annexure............................................................................................................ 10
Figure 1 Retail Sales data .........................................................................................3
Figure 2 Profit Curve................................................................................................4
Figure 3 Socio-economic-classification .........................................................................5
4. 1
Executive Summary
The following report details out the study done at VAS Data Services during the internship
period. The company had decided to expand its presence by going offline with its distribution
and retail channels.
Watches were decided to be sold through the distribution channel considering that it was the
third highest selling category online. A study on the existing supply chain of the competitors
and also the various marketing schemes and promotions which they run was conducted.
Various watch stores in Delhi NCR were visited and data was collected. This data was later used
by the company when launching Yepme watches in the market.
In the second stage of the project, the retail end of the expansion was undergone. In order to
identify prospects physical visits were planned to stores. The model was explained and leads
were generated. Further the company came out with advertisements and more leads were
generated. We were assigned those leads and follow up was done.
The project report explains out in details the parameters on which the distribution outlets
surveyed. It also lists the insights gained from the market research. The Franchise model of the
company is also detailed out further in the project.
5. 2
1. About the Organization
Yepme is an online shopping company headquartered in Gurgaon, Haryana, India. It was
established in April 2011. The company specializes in the online retailing of men’s and women's
garments and accessories. In August 2011, the company positioned itself as a fully-fledged
private label fashion brand. In May 2016, the company celebrated the inauguration of its first
offline store at Gurgaon.
Yepme.com, was launched in April 2011 by three alumni of Indian Institutes of Technology and
Indian Institutes of Management: Vivek Gaur, Sandeep Sharma and Anand Jadhav. Mr. Vivek
Gaur (CEO) has experience building successfulonline companies like Bagittoday.com and has
also held senior positions in marketing and sales with HT Media Ltd, Living Media Pvt Ltd and
Hindustan Unilever Ltd. Mr. Sharma, the founder/COO and CTO, is an e-commerce, technology
and operations specialist having held senior positions with Accenture, Sapient, SBI Capital
Markets and HCL Technologies. Mr. Jadhav (President) is a merchandising and supply chain
expert and has worked with leading apparel retailers including Shoppers’ Stop, Globus,
Pantaloons and Reliance Trends.
In 2016, Yepme decided to enter the into the brick and mortar retail channel. It started with a
store in a mall called DT City Centre in Gurgaon. By mid-2016 it had opened 4 retail stores in
Gurgaon and 1 franchise store in Hyderabad. According to an interview with ET, the CEO Vivek
Gaur has a vision of opening 400 Yepme stores by the end of this year.
6. 3
2. Background of the Project
This project pertains to Yepme, an online ecommerce player entering into a brick and mortar
retail format. The company decided to go offline in order to scale up its revenues. Yepme is an
investor backed company, higher revenues would make the investors keener in the company. A
physical presence pan India would mean greater revenues and more brand awareness. Since
Yepme is not a listed company it has to rely on these investments to grow. Another reason for
going offline is that this industry has high margins. These margins can be shared with the
retailers and the distributors and the business would still be profitable for the company.
Figure 1 Retail Sales data
The above chart represents the total retail sales in India. According to a report from eMarketer,
the retails sales in India was $818 billion and the share of retail ecommerce sales was merely
$8 billion. Furthermore the rate at which the ecommerce industry is growing at present (45%)
which has dropped from 55% last year is expected to further drop to 27% in the year 2017.
This data explains why Yepme as a retail brand decided to capture the offline share of the
market.
Furthermore the company can share the margins which it currently has with the retailers. We
computed a graph which shows how the profits of the company will increase with increase in
the sales.
99%
1%
Retail Sales in Billion
Dollars($818billion)
Total Retail Sales Ecommerce sales
7. 4
Figure 2 Profit Curve
The company decided to go offline with mainly two formats: Retail stores and Distribution. The
company initially started with company owned stores in COCO (company owned and company
operated) model. Later it decided to give out franchisee with a FOFO (franchise owned and
franchise operated) model. It also started to roll out in the distribution model. Our scope of
study involved the distribution model and the FOFO model.
The USP of the company is its price point. It offers fresh fashion at an unbelievably affordable
prices. The brand is quite popular among the youth section of the society. The target customers
of the company are mainly the Sec B and Sec C consumers. The company identified a gap
between its target customer and internet penetration in that segment. Market research showed
that there are significant consumers in these sections who do not have access to internet. A
figure below represents the same.
0
100
200
300
400
500
600
700
800
900
1000
0 2 4 6 8 10 12
Profits of yepme
Fixed Cost Profit(online) Pofit(Omnichannel)
8. 5
Figure 3 Socio-economic-classification
Another reason for the company to go offline was to give the customers an additional value.
According a report by eMarketer, 12% of the total population has shopped online. This
opportunity to target the remaining 88% of the customers through its offline stores is being
grabbed by the company.
When a customer’s visits Yepme’s website he can only have a look at the product and will
eventually touch and feel it ones he buys it. In the case of a store the customer can touch, feel
and try the product before purchasing it. Another advantage of having a store is that the
customer can have visual capture in the store. When scrolling several screens he may feel he
missed out some products but in case of store that does not happen.
Our core focus in the project was to initially study the existing supply chain of watches in the
industry. We gave special attention to chronograph and analog digital watches. The reason was
that these watches were the highest selling watches online. We visited more than 50 stores in
Delhi NCR to understand distribution structure of watches.
The next stage of the project was to study the franchise model of the company and brief this
model to prospective leads which were generated from various different sources. Initially we
scouted Delhi NCR for existing stores who are not doing well and are willing to convert. Later
we talked with these people and explained our model before finalizing the leads. We also got a
chance to visit a master franchise show organized by Franchise India. This was an opportunity
for us to learn the franchisee models offered by other companies and compare it to Yepme’s.
9. 6
3. Methodology
1. Yepme Watches Retail Distribution
We began our internship with a project on the Retail Distribution of Yepme watches. Yepme
is foraying into brick and mortar retail. Watches are their third largest category. The project
aimed at market research and information gathering about the watch industry and our prime
competitors. The reason Yepme went for distribution of watches is that it was the 3rd
highest
selling category online (10% approximately) and it accounted for 0.7-1% sales in retail stores.
This led to the idea of selling the watches through a traditional watch store and a distribution
channel in place.
The following were the parameters on which the information was sought:
ASP (Average Selling Price)
Brands (competitors)
Service
Retail margins
Online sale
Schemes
Yepme is focusing on analog digital and chronograph watches in the low price range segment.
We mapped major portions of the Delhi retail market ranging from the rural regions of
Najafgarh to the upmarket Karol Bagh. Lead generation was done with the help of local
distributors.
The key insights we got were:
Average Selling Price (ASP): Ranged from 1000 to 1500INR for analog digital and 3000
onwards for chronograph.
The major competitors in that range are Sonata and Maxima
Service is done mainly at the retail end with Titan offering their service centers too at
certain locations.
Margins for retailers ranged from 15-20%
Most shop owners were not selling online
Company end schemes were target based with incentives and foreign trips.
The promotional material was by the company like branded counters, posters, banners
and rotating containers for watches.
10. 7
2. Yepme Franchise Model
Yepme decided to expand pan India with its retail outlets. We were part of this visionary
project. The franchise model which Yepme offered, was a no frills attached model. Existing
franchise models of different brands were studied and it was found out that there were terms
and conditions in their model which made prospective franchises hesitant in going ahead. Some
of them are listed below:
1. Franchisee fee
2. Renewal fee
3. Inventory risk
4. Logistics
5. No flexibility in deciding stock
Yepme decided to work on these issues and offered a unique model. The model is as follows.
1. No franchise fee
2. No renewal fee
3. The purchase stock would be on SOR (Sell of Return)
4. The logistics will be taken care of by the company
5. The franchise is flexible to decide which category he wants in his store
6. It would also provide the customer data regarding the customer tastes and preferences
in that particular area. This would help the franchise in decided on what stock to keep.
7. It would also make sure that the prices in stores are same as online.
The franchisee needs to get his infrastructure done and that’s it. The only risk he carries is
investment in his own store. Even the infrastructure could be done by his own contractors. This
would further reduce the capex of the franchise. The company would provide the layout of the
store and rest can be taken care of. A detailed franchise model is attached in the annexure.
Deciding this model the next step was to convey this to the prospective leads. Our job started
from here. We initially went FOS in the Delhi NCR region and targeted the brands which were
not doing well. We explained our model to all the prospects. In the next step the company
rolled out its print ads in various cities and followed the leads generated from these sources.
The major sources for lead generation were:
Advertisement
Website Leads
High Purchase customers
Feet on street
11. 8
4. Achievements
Performances is gauged by the results we achieve. The work done at YEPME was a factor in
achieving the following:
WATCHES DISTRIBUTION
The market research we did gave us key insights into the promotional and retail end strategy of
competitors in the market. The implementation of which helped the company in successfully
launching YEPME watches in the retail market in NCR, Bangalore and Hyderabad.
No of watch retail stores with YEPME watches: 1500 aprox
FRANCHISE OWNED FRANCHISE OPERATED
The Achievements of the FOFO operations team are:
There were a total of 1000+ leads generated from various sources.
Out these 1000 leads 32 leads were considered to be HOT leads. This meant that these leads
are in the final stages of conversion. These leads are being followed currently.
Another 9 cheques have been received and are in the process of opening the franchise.
12. 9
5. References
The following have been the sources from which information or data has been gathered.
http://dazeinfo.com/2015/01/07/retail-ecommerce-sales-in-india-growth-2014-2018-
report/ accessed on 27th
June 2016, Article titled ‘Retail Ecommerce Sales In India 2014
– 2018: Disappointing 1% Of Total Retail Sales’
http://yourstory.com/2016/04/online-offline-game-indian-retail-landscape/ accessed on
27th
June 2016, Article titled ‘Online or offline, which will win the game in the Indian
retail landscape?’
http://www.emarketer.com/Article/India-Ecommerce-Takes-Tiny-Share-of-Retail-
Sales/1011794 accessed on 27th June 2016, Article titled ‘In India, Ecommerce Takes
Tiny Share of Retail Sales’
13. 10
Annexure
Franchise Model
Area of the store A 500
Investment in the interior of the
store B 1800*A 900000
Investment in stock C 625*A 312500
Total Investment D B+C 1212500
Expected Sales Revenue E 800/sq.ft. 400000
Interest on deposit/month F 0.10*C/12 2604.167
Rent G Approx. 25000
Other expenses H
Staff salary+Store
maintance 30000
Expenses I G+H 55000
Gross Profit J 0.30*Expected Sales 120000
Net profit K J-I+F 67604.17
Payback period L 17.93529
The asumptions in the model are:
Area of the store is 500sq.ft.
There is no interior done in the
store
Average rent in a tier 2 city is taken
Other expenses includes:staff salary, electricity bill, maintance charges