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209 million households, Indian Retail Industry is the largest employer after Agriculture (around 8% of
46 million consuming the Indian population) and it has the highest outlet density in the world
classes however the organized retail industry is still in a very nascent stage. The
market is mostly unorganized and it is dominated by fragmented Kirana
Modern Retail accounts stores (mom-and-pop stores) further weakened, by poor supply chain and
for 2-3% of the $350 backward integration. Desired skill sets (for e.g. logistics, demand planning,
billion Indian retail merchandizing, etc.) are not easily available due to the low maturity of the
industry. industry.
Indian Food market is Retailer‘s attraction for India is understandable but there are various reasons
estimated at $182 billion why the organized sector is still a negligible component of the complete retail
industry in India. Regional tastes in the Indian context take on a completely
new dimension – the purchasing parity, language, food, religion, and festivals
acquire a distinctly local element, within a few 100 kilometers. Understanding
these and tailoring the product offering, while maintaining the operational
profitability is a key skill that retailers will need to build to survive in this very
dynamic market.
KINDUZ research shows that retailers need a system where the assortment
planning starts and ends with the customer. A system where the analysis of
customer trends and behavior, catchment analysis & competitor analysis are
all key to the assortment plan. A system where subsequently the actual
assortment is planned on a more granular level, for example by item and by
store cluster, which achieves previously set targets and supports the
assortment architecture from the category plans.
Key Conclusion 1: Retailers across the globe are struggling with shrinking top lines
The toll of the recession is visible in full swing and most retailers around the world are struggling to uplift
their receding top lines. Ambitious business plans had been set during the 2007- 08 economic boom and
had been supported by aggressive resource allocations. Retailers are now figuring out how best to
salvage what is left of their resources, going into a consolidation and cost cutting mode.
Key Conclusion 2: For a store’s success, merchandise mix is the second most critical factor after
location
Good locations without a mix that captures the interest of the catchment, cannot sustain themselves for
long. If the location and mix are right for the target customer they would be pulled to the store and
reduces the need for push selling. Spending on aspects like right location, benchmarking against local
competitors can minimize the excess resource drain to market a concept.
While global retailers understand the importance of a localized mix, there are gaps in customer profiling
and catchment analytics to help customize the range to local requirements. In the Indian context – while
mix and location are given equal importance, customer profiling does not feature at any priority level,
reinforcing the need for Indian retailers to research their target market segments before allocating serious
resources for unplanned expansions both geographically and categorically.
Key Conclusion 4: Store clustering and mix standardization form the basis of assortment planning
Since resource efficiency and economies of scale will be hit if each store was to have a different mix,
stores are normally clustered based on average sales for mix optimization. However average bill sizes
need to be also reviewed while taking the average sale into account.
A wide variety of Stock Keeping Units (SKUs) could theoretically provide the Average Sale and Bill Size
projected for a store – however the regional brand mix already existing at a location should never be
overlooked. The regional brands, be it at a store or product level, have over their period of operation,
acquired insights and relationships with their customers which reflect in their brand positioning.
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Release Date: February 25th 09 Confidential, All Rights Reserved
Customer Centric Assortment Planning – India vs. Rest
A KINDUZ Research Initiative
Key Conclusion 6: Backward integration of store requirements is critical to prevent bottom line
depletion
If decentralized sourcing is considered to inject the local feel into the merchandise mix, it is advisable to
maintain a pull strategy through the system whereby localized orders are consolidated at the corporate
level. This will help maintain predictable bottom lines and reduces the risk of brand dilution.
Key Conclusion 7: Inventory visibility across the chain is required to keep ageing under control.
In both decentralized and centralized environments, ‗Stock On Hand‘ visibility across the chain of
operation is critical, in order to improve Return on Investment (ROI) and prevent accumulation of ageing
inventory. This requires dedicated and integrated Information Technology (IT) and Supply Chain
Management (SCM) departments to take charge of the complete Supply Chain.
While a localized merchandise mix would definitely benefit both the top
line and the bottom line, achieving it, requires resources to be invested in
terms of catchment studies, customer profiling, benchmarking local
competitors etc. Since resource efficiency and economies of scale will be
hit if each store was to have a different mix, stores need to be clustered
based on some common parameters which will help standardize the mix
for that particular lot. Average sales are globally favored as the basis for
store clustering followed by geographical span. Clustering stores
geographically works well logistically, and helps combine similar regional
preferences. However, clusters based on average sales definitely need
to be viewed along with average ticket sizes to be able to arrive at the
correct pricing strategy for the target market segment. Ideally a mix of
geography and sales volumes should be considered, to arrive at the
most commercially viable basis for store clustering.
Research Methodology
Target respondents across the globe were approached
through emails, blog posts, invitations on various retail forums
and through personal meetings, to complete the survey
questionnaire. Post the initial contact three weeks time was
allowed to pass before the required sample size was
collected. Responses were then aggregated to provide an
overview. The respondents were further clustered into Indian
and international participants and responses were
aggregated again. The analysis also takes into account the
feedback received during face to face meetings with twelve
Indian retailers.
Respondent Profile
The survey received three hundred and twenty six responses
from all over the world, out which 69% were from India while
38% were from the rest of the world – primarily USA, UK,
Ireland, Russia and Thailand. 72% of responses were
received from people functioning in managerial to leadership
levels with greater than 4 years of industry experience. In
terms of business formats hypermarkets took the lead with
32% respondents selecting that format as the basis for their
choices. Department stores and mass discounters featured in
the same proportion with 25% respondents selecting each of
these formats. 43% of the respondents claimed that their
business format was meeting existing requirements of
customers while 32% were involved in aspirational selling of
select brands.
The retail vertical at KINDUZ provides end-to- KINDUZ Business Consulting enables
end consulting and implementation solutions. 'Sustainable Business Excellence' for its clients,
through its services around Industry Research
The retail team consists of experts from varied and Insights, Business Process Management,
retail domains covering the complete retail cycle Human Development Management and
from sourcing, merchandising, supply chain Business Excellence.
management to operations. The senior team
jointly holds over 40 years of retail experience Founded in 2008 by senior industry experts from
with established retailers like Future Group global companies like Capgemini, Motorola,
(Pantaloon), Aditya Birla (Trinethra), Landmark Wipro, Oracle, Ford, ING, TATA Group, and
Group ( Lifestyle) and Odyssey. Lifestyle, KINDUZ currently provides consulting
services in India and Middle East.
Our endeavor is to maintain a constant track of
relevant trends in the global and Indian retail Head Office Address:
industry through regular research initiatives. #5-62/9/22-B, V.V. Nagar,
St. No.8, Habsiguda,
Our retail services include: Hyderabad,
Andhra Pradesh,
1. Catchment Analytics
India.
2. Customer Profiling ZIP: 500 007
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