Retail cumulative assessment of performance (cap) score

Professional Services Training & Consulting

Retail Cumulative Assessment of
Performance (CAP) Score

Using A CAP Score As a Diagnostic Tool

OBJECTIVE
ZENeSYS CAP Score benchmarks peer group of companies to arrive at a relative positioning in four key functional areas. By
analyzing its relative position, a firm can diagnose set new directions for improvement. Since the CAP score will be created
every quarter, a firm can monitor its score to evaluate the effectiveness of its strategic improvement initiatives.

CAP SCORE
• Four functional areas of measurement are:
• Financial Strength
• Consumer Acceptance
• Online Presence
• Operational Efficiency
• The peer groups of companies being benchmarked are WAL-MART, TARGET, MACY’S INC., J.C.PENNEY COMPANY
INC., KOHL’S CORPORATION and NORDSTROM INC.
BENEFITS OF CAP SCORE
• Key messages for sales force to become more competition aware
• Devise customized marketing campaigns
• Create customized initiative to improve Online Presence and Branding

2 Copyright © Zenesys & Kuber Professional Services Training & Consulting

4 Step approach to measure Retail Cumulative
Assessment of Performance (CAP) Score

1. Identified four components for CAP:
a. Financial Strength
b. Consumer Acceptance & Selling Capability
c. Online Presence
d. Operational Efficiency
2. Developed indicative ratios/indices for each from public data
3. Developed the indices for Competitiors (peer firms of CLIENT)
4. Derived a cumulative score


CAP - Financial Strength Component

INDICES INCLUDED
1. Stock Performance:
I. Market Capitalization,
II. Stock Price,
III. P/E Ratio
2. Financial Performance:
I. Current Ratio,
II. Quick ratio
III. Interest coverage ratio.

EXPECTED TAKE AWAY
Financial performance helps in summarizing the overall positioning and sets the tone to understand how CLIENT fairs against
its competitors.


Financial Strength (1/2) – Stock Performance

Stock Price & P/E Ratio Market Capitalization (Bn USD)
120 250
100
200
80

60 150
Stock Price
40 Market Cap
100
P/E Ratio
20
50
0
SEARS Walmart Costco Target Kohl
-20 0
SEARS Walmart Costco Target Kohl
-40

Assigned CLIENT Weighted
Indices
Weights Rank Parameter

F1 - Market Capitalization 1/6 5 .833
F2 - Stock Price 1/6 4 .66
F3 - P/E Ration 1/6 5 .833

Inference
Stock performance has provided clear indication of CLIENT’ current standing vis-à-vis its peers. This lays ground for further
detailed analysis in subsequent components.


Financial Strength (2/2) – Financial Performance

Consumer Confidence Correlation with Revenue Growth
2 35
1.8 30
1.6 25 Interest Coverage
Growth Rate (%)

1.4 Ration
20
Current Ratio
1.2
15
1
10
0.8
5
0.6 Assigned CLIENT Weighted
Indices
0.4 0 Weights Rank Parameter

0.2 -5 F4- Current Ratio 1/6 3 .5
0 -10 F5 - Quick Ratio 1/6 5 .833
SEARS Wal-Mart Costco Target Kohl
F6 - Interest Coverage ratio 1/6 5 .833

Inference
Financial performance has provided clear indication of current CLIENT standing against the peers. Lays ground for further
detailed analysis in subsequent components.


Indicative

Financial Strength– Component Ranking

Indices Assigned CLIEN Weighted
Weights T Rank Parameter
Component Rank for CLIENT – 4.5
F1 - Market Capitalization 5 .833
1/6

F2 - Stock Price
Ideal Ranking – 1
1/6 4 .66

F3 - P/E Ration 1/6 5 .833 Best Performer Ranking (COSTCO) – 2.33
F4- Current Ratio 1/6 3 .5
F5 - Quick Ratio 1/6 5 .833
F6 - Interest Coverage ratio 1/6 5 .833

Inference
• No clear Leader as far as financial strength is concerned


CAP - Consumer Acceptance & Selling Capability
Component
INDICES INCLUDED
1. Market Ranking – Reflecting the Offline sales market share
2. US Consumer Confidence Correlation Index: How much better or worse has any firm performed w.r.t. the Consumer
Confidence Index
3. US Retail Sales Correlation Index: How much better or worse has any firm performed w.r.t. the US retail sale growth
4. Total Number of stores
5. Customer Sentiment Index

EXPECTED TAKE AWAY
Gauge the consumer point of view and understand how CLIENT perform on the elemental Component i.e. Attracting
consumers and resulting into successful sales


Dummy Data

Consumer Acceptance & Sales Capability (1/5) –
Market Rank

Revenue * Rank (Year
Firm Assigned CLIENT Weighted
(Bn USD) 2012) Indices
Weights Rank Rank
CLIENT 40 3 C1 – Market Rank 1/6 3 .5
Wal-Mart 150 1
Peer 2 30 4
Peer 3 45 2
Peer 4 25 5

Inference
• Offline retail performance of CLIENT should be a strong focus area for CLIENT marketing team.


Dummy Data

Consumer Confidence Correlation Index
Consumer Confidence Correlation with Revenue Growth
7 Firm Delta Delta Delta Delta Total Delta
(Q1) Q2 Q3 Q4
6
CLIENT -2 +2 -1.5 -1.5 -3
Consumer
Growth Rate (%)

5 Confidence Index Wal-Mart +.5 +3.5 +.5 -2.5 +11
4 Peer 2 -2.5 +.5 -1.5 -3.5 -7
SEARS

3
Walmart
2 Assigned CLIEN Weighted
Indices Weights T Rank Rank
1 Peer 2 C2 – Consumer Confidence
Correlation
1/6 2 .33
0
March'12 June'12 Sept'12 Dec'12

Inference
• Wal-Mart has consistently beaten the consumer confidence index
• CLIENT witnessed exceptional season during Quarter 2.


Dummy Data

US Retail Sale Correlation Index
US Retail Index Correlation with Revenue Growth
7 Firm Delta Delta Delta Delta Total Delta
(Q1) Q2 Q3 Q4
6
CLIENT 0 +2 -1.5 -1.5 -1
US Retail Sale
Growth Rate (%)

5 Growth Wal-Mart +.5 +3.5 +.5 -2.5 +11
4 Peer 2 -2.5 +.5 -1.5 -3.5 -7
SEARS

3
Walmart
2 Assigned CLIENT Weighted
Indices Weights Rank Rank
1 Peer 2 C3 – US Retail Sale Correlation
Index
1/6 2 .33
0
March'12 June'12 Sept'12 Dec'12

Inference
• Wal-Mart has consistently beaten the consumer confidence index
• CLIENT witnessed below market performance in last two quarters


Dummy Data

No. of Stores & Revenue Per Store

Firm No of Rank Revenue Rank
Stores Per Store Assigned CLIENT Weighted
(Mn USD)
C4 – No. of Stores 1/6 2 .33
CLIENT 2000 2 10 5 C5 – Revenue Per Store 1/6 5 .83

Wal-Mart 4400 1 100 1
Peer 2 400 4 25 4
Peer 3 1700 3 30 3
Peer 4 40 5 31 2

Inference
CLIENT Scores high on overall market reach, but the revenue per store is the lowest amongst peers. This calls for due
diligence for each Store’s business case.


Dummy Data

Consumer Sentiments
Net Sentiment
Net Sentiment Score Firm
Score (%)
Rank

60
CLIENT 6 1
50
Positive Sentiment
Wal-Mart 5 2
Growth Rate (%)

40 Negative Sentiment Peer 2 -4 4
Net Sentiment Score Peer 3 0 3
30
Peer 4 -5 5
20

Indices
0
SEARS Wal-Mart Peer 2 Peer 3 Peer 4
C6- Consumer Sentiment 1/6 1 .166
-10

Inference
• CLIENT Clearly enjoys net positive consumer sentiment
• Can be leveraged for both online and offline sales
• Will be interesting to understand the demographical
break up of this index


Indicative

Consumer Acceptance & Sales Capability–
Component Ranking
Assigned CLIEN Weighted
Indices
Weights T Rank Parameter
Component Rank for CLIENT – 2.5
C1 – Market Rank 1/6 3 .5
C2 – Consumer Confidence
1/6 2 .33 Ideal Ranking – 1
Correlation

C3 – US Retail Sale Correlation Index 1/6 2 .33 Best Performer Ranking (Wal-Mart)– 1.3
C4 – No. of Stores 1/6 2 .33
Worst Performer Ranking (Peer 4) – 4.8
C5 – Revenue Per Store 1/6 5 .83
C6- Consumer Sentiment 1/6 1 .166

Inference
• CLIENT scores high on consumer sentiment.
• Revenue per store index has been key dampener for CLIENT in this Component.


CAP - Online Presence Component

INDICES INCLUDED

1. Online Market Share
2. Website Acceptance: Analysis of CLIENT business via online channel with competitors on parameters such as : CLIENTch
Traffic rank, Reach, Page views, Reputation.
3. Social media popularity index: A percentage share of the internet influence of CLIENT with respect to top 6 department
stores on Social media Sites such as Facebook, Twitter and Google trends
4. CLIENTch Intensity Index : Measures how often a firms’ name has been used while CLIENTching any product. Indicates a
brand recall/association amongst the consumers.

EXPECTED TAKE AWAY
Understand how CLIENT is positioned to adopt the next phase of retail i.e.. Online Retail and E-Commerce


Dummy Data

Online Presence (1/4) – Online Market Share

Firm Market Share Rank

Walmart.com 14 1 Indices Weights Rank Rank

O1 – Online Market Share 1/6 4 .667
Target.com 4.1 2

Kohls.com 3.6 3
CLIENT.com 2.5 4
Macy’2 2 5

Inference
• CLIENT clearly lags behind when it comes to commercial activity on CLIENT website. Subsequent analysis may throw in
better comprehension.


Dummy Data

Online Presence (2/4) – Website Acceptance

Page View & Bounce Rate Time Spent on Website
8 60%
8
7 7
50%
6 Page View/User
6

Time Spent (Mins)
Time Spent (Mins)
Page View (No.)

40% Bounce Rate
5
5
4 30% 4
3
3
20% 2
2
10% 1
1 0
0 0% SEARS Wal-Mart Peer 2 Peer 3 Peer 4


O2 – Page View/User 1/6 2 .33
O3 – Bounce Rate 1/6 3 .5
O4 – Time on Site 1/6 2 .33

Inference
• CLIENT can definitely leverage comfortable website acceptance level.
• Makes a string case for increased web based product sales and marketing, especially given that currently the online
market share for CLIENT is low (People do visit CLIENT often, but it doesn't reflect in online sales). Probably online
efficiency will throw in better light on this.


Dummy Data

Online Presence (3/4) – Social Media Popularity

Social Media & CLIENTch Trend Share
40%
35%
30% Facebook
Share in Social Media (%)

Twitter
25%
Google Trends
20%
15%
10%
5%
0%
SEARS Wal-Mart Peer 2 Peer 3 Peer 4 Assigned CLIENT Weighted
Indices
Weights Rank Rank

O5 – Social Media Popularity 1/6 3 .5

Inference
• Except Wal-Mart, all the peers are still very nascent when it comes to establishing presence in Social media. A white
space opportunity for CLIENT, especially given their relatively better position in Google CLIENTch trends.


Dummy Data

Online Presence (4/4) – CLIENTch Intensity Index

60

50

40 SEARS Indices Weights Rank Rank
CLIENTch Intensity Index

Wal-Mart
O6 – CLIENTch Intensity Index 1/6 3 .5
30 Peer 2
Peer 3
Peer 4
20

10

0
Home Appliance Kitchen Appliance Exercise Equipment Garden Equipment

Inference
• Product association for Kitchen equipment and home appliances is high for CLIENT
• Clear need to re-position itself as an exercise equipment and garden equipment retailer
as well


Indicative

Online Presence– Component Ranking

Indices
Component Rank for CLIENT – 3
O1 – Online Market Share 1/6 5 .833

O2 – Page View/User 1/6 2 .33 Ideal Ranking – 1
O3 – Bounce Rate 1/6 3 .5 Best Performer Ranking (Wal-Mart)– 1.01
O4 – Time on Site 1/6 2 .33
O5 – Social Media Popularity 1/6 3 .5
Worst Performer Ranking (Peer 2) – 4.8
O6 – CLIENTch Intensity Index 1/6 3 .5

Inference
• Wal-mart has clear monopoly when it comes to Online presence
• CLIENT lags behind Wal-Mart but has a clear lead over other peers. It must leverage this position.


CAP - Operational Efficiency Component

INDICES INCLUDED

1. Retail Floor Space Utilization: Average revenue per Square feet area
2. Manpower Utilization: Average revenue per employee
3. Inventory Management: This index includes Inventory Turnover ratio and inventory Day Sales
4. Online efficiency: Average load time, CLIENTch engine reference, speed, success rate

EXPECTED TAKE AWAY
Identify key operational improvement areas and understand industry benchmarks.


Dummy Data

Operational Efficiency (1/3) – Retail Floor Space
Utilization & Manpower Utilization
Retail Floor Utilization Employee Utilization

600 350
300
500

Revenue/ Employee
250
Revenue/Square

400 200
feet($/sqft)

(000$/sqft)
300 150
200 100
100 50
0 0

Indices
Weights Rank Rank
E1 – Retail Floor Utilization 1/6 4 .66
E2 – Employee Utilization 1/6 4 .66

Inference
• Clear transformational opportunity for CLIENT in terms of improving employee and floor space utilization


Dummy Data

Operational Efficiency (2/3) – Inventory
Management
Inventory Management
14 0.04
12
10 0.03 Indices
Inventory Turnover Weights Rank Rank
8
0.02 Ratio (%) E3 – Inventory Turnover Ratio 1/6 4 .66
6
Inventory Day Sales E4 – Inventory Day Sales 1/6 1 .166
4 0.01
2
0 0

Inference
• CLIENT has a low Inventory day sales and thus is managing inventory better. CLIENT should keep this ratio to the lowest
as possible and maintain it.
• CLIENT is not able to sell as regularly as Walmart or Peer 3 and has a Low Inventory Turnover. This may be due to
inaccurate forecast of demand or poor sales. CLIENT has to improve inventory turnover.


Dummy Data

Operational Efficiency (3/3) – Online Efficiency

Online Efficiency
4 101.0%
3.5 100.0%

3 99.0% Response Time
Response Time (Sec)

98.0% Success Rate
2.5
97.0%
2
96.0%
1.5
95.0%
94.0% Indices Weights Rank Rank
0.5 93.0% E5 – Response Time 1/6 5 .833
0 92.0% E6 – Success rate 1/6 2 .33

Inference
• Response Time of CLIENT is also well above the peers.
• These could be due to the design of the CLIENT website which needs to be looked into.
• However, CLIENT website has a success rate of 99.9%, which is well above the “Top Retailer Index” of 99.5%.


Indicative

Online Presence– Component Ranking

Assigned CLIEN Weighted
Indices Weights T Rank Parameter

E1 – Retail Floor Utilization 1/6 4 .66

E2 – Employee Utilization 1/6 4 .66 Component Rank for CLIENT – 3.3
E3 – Inventory Turnover Ratio 1/6 4 .66 Ideal Ranking – 1
E4 – Inventory Day Sales 1/6 1 .166
E5 – Response Time 1/6 5 .833 Best Performer Ranking (Peer 2)– 2
E6 – Success rate 1/6 2 .33 Worst Performer Ranking (Peer 3) – 3.9

Inference
• Clearly the weakest link in CLIENT’ CAP score. Opportunity for Transformational initiatives.


Indicative

Cumulative Assessment of Performance Score

Financial Strength (25%) Online Presence (25%)

Component Rank – 4.5 Component Rank – 3

CLIENT CAP
Score = 3.4
Operational Excellence Consumer Acceptance &
(25%) Selling Capability (25%)

Component Rank- 3.3 Component Rank – 2.5
Industry Best Performer CAP
Score = 1.9
Value in brackets indicate weightages of each Component to calculate CAP Score

Inference
• CLIENT does enjoy relatively comfortable consumer acceptance. However, lower operational efficiency and online presence
may dampen the leverage.


Thank You!!!


Retail cumulative assessment of performance (cap) score

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