RETAIL INDUSTRY

Part 3 of Sector Specific SCM presentation

Group 6

GLOBAL RETAIL

• World’s largest private industry

• > US $ 8 trillion sales worldwide annually

• Accounts for almost 10% of GDP in most countries

• Major employer in most economies

16% in US

15% in Brazil

12% in Poland

07% in China

FACTSHEET

TOP RETAIL SALES: WORLD

Rank Country Sales (US $)

1 U.S.A $ 4 Tn

2 E.U $ 2 Tn

3 Japan $ 1 Tn

4 China $ 750 Bn

5 U.K $ 444 Bn

6 India $ 300 Bn

7 Russia $ 200 Bn

GLOBAL PLAYERS

CHANGING TRENDS

Six core areas to win in the changing environment

MV

I (M

an

ag

em

en

t ve

ntu

res

Inc)

in

2008

GRDI 2008 Market Attractiveness

ORGANIZED RETAIL (AS A %OF TOTAL SALES

INDIAN RETAIL

Weekly MarketsVillage FairsMelas

Convenience StoresMom and Pop/Kiranas

PDS OutletsKhadi StoresCooperatives

Exclusive Brand OutletsHyper/Super MarketsDepartment StoresShopping Malls

Traditional/Pervasive Reach

Government Supported

Historic/Rural Reach

Modern Formats/ International

Source of Entertainmen

t

Neighborhood Stores/Convenie

nce

Availability/ Low Costs /

Distribution

Shopping Experience/Efficie

ncy

EVOLUTION OF INDIAN RETAIL

MAJOR PLAYERS: INDIA

• Future Group – PRIL

• TATA Group

• RPG Group

• Reliance Retail

• AV Birla Group

• Landmark Group

Source: Ernst & Young

Total Share Of Retail In India

Source : Datamonitor, 2009

Source India Retail Real Estate,The road ahead, ICICI white paper pg2-6

Retail store formats Store Format Non store

Format Small/Medium Size

Large scale Consumer Co-op Stores

Direct Mktg/Channel less Retailing

1. Mobile Retailers, Hawkers.

2. Convenience stores.

3. Specialty Stores

1.Super Market.

2.Departmental Stores.

3.Discount stores.

4.Manufacturer’s

Showroom

5.Super stores.

6.Entertainment

1.Co-op stores.

2 .Sahakari Bhandars.

1.In home Selling.

2.Tele shopping .

3.Online retailing.

4.Vending

Machine

RETAIL OPTIONS

• Strategic License Agreements

• Cash and Carry

• Distribution eg.International Cosmetic Brand

• Franchisee route

• Manufacturing

• Joint Venture

ANALYSIS OF INDIAN RETAIL

POTER’S 5 FORCES MODEL

Bargaining Power Of suppliers

Bargaining Power Of Buyers

Rivalry Amongst Competitors

P.E.S.T ANALYSIS OF INDIAN RETAIL

P.E.S.T - POLITICAL

FDI should be allowed in stages

Initial stages: 26% FDI

Establishment Phase: 49% FDI

Mature Phase: 100% FDI

No incentives needed to attract FDI; Market size and potential are sufficient

3 yrs.

3 yrs.

P.E.S.T - POLITICAL

P.E.S.T - ECONOMICAL

• Increasing disposable income

• Personal Consumption as a percentage of GDP

• Plastic money becoming a big pie of credit

P.E.S.T - SOCIAL

• Population as a growth driver

Growing working women populationAdoption of nuclear family cultureBaby boomer effectGrowth in urban population70% of organised retail is concentrated in 6 major cities. Of 300 million Indian middle class, only 15% live in these 6

major cities

P.E.S.T - TECHNOLOGICAL

•ERP/SAP

•Bar-coding

•RFID

•Convenient Packaging

•Transportation ( reefer vans etc)

SWOT OF INDIAN RETAIL

STRENGTHS

• Shopping convenience

• Wide range of retail formats to suit every consumer

• Plastic card revolution.

• Greater availability of quality retail space.

29

WEAKNESS

• Policy related issues

• Limited consumer insight

• Inadequate human resources

• Taxation hurdle

• Underdeveloped supply chain

• Lack of adequate utilities

30

OPPORTUNITIES• Rapid economic growth

• The young India

• Emergence of India as a retail hub

• Potential untapped markets

• Sectors with high growth potential

• Abundant availability of skilled labour

• Low cost of operations

OPPORTUNITIES

Opportunities

• Rural retail

• Wholesale trading

• E-retailing

• Retail franchising

33

Threats

• Political issues.

• Social issues.

• Inflation.

• Lack of differentiation among the malls that are coming.

34

BIG BAZAAR… isse sasta aur accha kahi nahi…

Big Bazaar Fact File..

Outlet 104 outletsLocated in India

Parent group Future group; Pantaloons Retail India Ltd.

Owner Kishore Biyani (CEO)

Founded 2001

Head quarter Jogeshwari , Mumbai

Industry Retail

Store Type Hypermarket

Business Model High Volume Low Price; WalMart Business Model

Website www.bigbazar.com

Tag line Isse sasta aur achha kahin nahi.

Vision Statement

To deliver every thing, everywhere, every time to every Indian consumers in the

most profitable manner….

Mission Statement

We share the vision and belief that our customers and stake holders shall be served

only by creating and executing future scenarios in the consumption space leading to economic

development…

Big Bazaar – The Big Pie of PRIL…

As of Mar’10

Big Bazaar Spread..

Big Bazaar Life Cycle

Big Bazaar’s Core Concept

Create• A blend of a typical Indian

Bazaar and International supermarket atmosphere…

Give• The customer all the

advantages of… • Quality, Range and Price• See, Touch and Feel

Product Portfolio…APPARELS FOOD FARM

PRODUCTCHILL STATION

HOME AND PERSONAL CARE

Denims and t-shirtsFabric and cut pieceFormalsCasualsParty wearEthnic wearAccessories Undergarments Night wear Dress materials Sarees

Staples Ready to eatReady to cookInternational foodSpices Imported bazaarTea and coffee

FruitsVegetables Imported fruitsDairy products

Soft drinksPackaged juicesMilk itemsFrozen foodsIce creams

ShampooDetergentsSoapsLiquid washCreams deodorants Home cleanersUtensils PlasticsCrockerySundries

Product portfolio…ELECTRONICS BAZAAR

FASHION & JWELLERY

FURNITURE BAZAAR

CHILD CARE AND TOYS

OTHER SERVICES

TV setsWashing machines Refrigerator Personal careSmall appliancesLaptops Computer accessories Kitchen appliances

Footwear Beauty careStar parivaar

Living room bed room KitchenDining roomKids roomPaintings Decorative rooms

Kids wear Toy bazaar stationaryChild care

MR. RIGHTBakery Loot martTulsi Future moneyFuture generally

Demand Forecasting @ Big Bazaar

Demand Forecasting Features

•Look beyond the obvious seasonal rush by

▫Weekly “Sabse sasta Din” (Wednesdays)

▫“Sabse saste char din” in January

▫“5 days maha bachat ” in August

▫Junk Exchange etc

•Half yearly basis for example:▫Diwali season – March▫Summer season- October

•Weekly forecasts for perishables

Demand Forecasting Features

Demand Forecasting Challenges•WHAT Scale of forecast???

•Sporadic demand

•WHAT and HOW to introduce new goods

•HOW to Change prices and promotions

Categorization of goods

SeasonalNon-Seasonal

Internal Constraints

•Batch size

•Third party manufacturing

Methods of Demand Forecasting -I

•Last 3 years data & growth rate of current year

Judgmental Techniques

Statistical

Techniques

Demand Forecast

ing

•For a few other important products expert analysis is obtained……

…..Delphi Technique

Methods of Demand Forecasting -II

Demand Forecasting Process

Beginning Early

Taking expert inputs

Avoiding over- dependence

on tools Thinking of

multiple solutions

Playing one’s role

Be on the field

LOGISTICS and SCM @ Big Bazaar

Supply Chain @ Big Bazaar

Transportation of Goods

Transportation charges paid to the transporter are Rs 17500/month up to 1500 Kms If the distance is more than this then 4.50Rs per kilo meter

Warehousing @ Big Bazaar• Economic Functions

Consolidation

Break-Bulk

Stockpiling

Value-Added Services

• Operational Functions:

Receiving goods

Keeping records

Proper handling; Quality Maintenance

Order receiving

Dispatching goods

Marketing intelligence

Other legal functions related to trade

Types of DCs @ Big Bazaar

•M.D.C. (Mother distribution centre) e.g. Tarapur warehouse

•R.D.C. (Regional distribution centre) e.g. Hassangarh warehouse

•C.D.C. (Centre distribution centre) e.g. Mumbai warehouse

SCM Macro Processes @ Big Bazaar

C.R.M• Market• Price• sell

I.S.C.M• Strategic

planning• Demand planning• Supply planning• Fulfilment• Field service

S.R.M• Source• Negotiate• Buy• Design

collaboration• Supply

collaboration

Logistics @ Big Bazaar

•Inward Logistics▫Non Perishables▫Perishables

•Outbound Logistics▫General ▫Reverse

Inward Logistics (Non-Perishables)

Front end team of particular department

Category team of Central office

Data

DC or WH

Stock Transfer Out (STO)

Stock pick

Start picking

Stock Transfer Note

Gate Pass

Stock

Goods are received; checked for real

condition and number mentioned

in the gate pass, delivery note

Security in the logistics dept randomly checks the number of cartons

Logistics department member Cross-checks items in front of the particular dept team member by the stock-in

transfer, number wise

Damaged

Details entered in the Stock

outward Register and sent back to the warehouse.

Details entered in the Goods Inward Register & goods

stocked in the shoppe

Right goods

Information

Perishable Goods Logistics department

Collection of stock

Vendor

Checks

TAX; INVOICE; PURCHASE ORDER

If all OK…Goods Received Note is generated for particular

dept

Particular dept

Inward Logistics (Perishables)

Less Perishable: Internal W/H

Highly Perishable: Shop Floor

Outbound Logistics

•Home Delivery

•Store to store Transfer

•Inter Warehouse

•Reverse logistics

Reverse Logistics (RL)

• Return of damaged or expired stock

• Return of non saleable items

• First retailer in India to apply reverse logistics

• 4 Reverse Logistics W/Hs

• Average spending on reverse logistics for▫Garments - 10 to 15%▫Furniture -20%

IT @ Big Bazaar

ERP/SAP @ Big Bazaar - Snapshot

WHEN 2005

AIM To deploy a robust transaction management system and an enterprise wide platform to run its operations

SOLUTION SAP Retail Solutions

IMPLEMENTED BY SAP Team (24) with the help of Novasoft, Singapore

PROJECT HEAD Chief Information Technology Officer, Chinar Deshpande

No. of users 1200

Time Taken About six months

Cost Of Implementation Around $10 million

ERP/SAP Implementation @ Big Bazaar

• Blueprinting existing processes and mapping them to the desired state

Phase I

Inventory Management @ Big Bazaar

Inventory Types

Cyclical

•FMCG, Food & Beverages

Safety

Stock

•FMCG

Seasonal

• Apparels

Inventory-Decision Making

•The Store Manager is the boss.

•He inspects▫Stocks time to time ▫Demands of Customer

•He maintains Stock-in & Stock-out to decide on level of inventory.

Re-Order Points for Inventory•Orders placed as and when required (JIT)

Apparels •If stock < 4 items per piece•1 Sample; 10 Back up pieces

General Merchandise •7 days •incl. 2 days transit time

Vegetables and fruits •Daily Basis from local vendor

Meeting Uncertain Demands•Strong Backward Integration

•If more pieces/stock required…

▫Ask other nearby Big Bazaar store

▫Transfer of interest: Divert customers to other store

•Example: In apparels stock lasts ~45 days. In case of emergency transfer the interest to Pantaloons

Waste Management @ Big Bazaar

Waste Management

Perishable goods

Damaged on deliveryGiven back to vendor

After keeping in

stockGiven to

alt. distribution channels

Non perishable goods

Damaged on

deliverySent back to DC/WH

After keeping in stockSent to

registered vendors of scrap

Assessment Process:

Customer Satisfaction Surveys Audits

Customer Satisfaction Surveys

Model •CEM- Customer Experience Management

Focus•Customer experience at every touch point•Ranging from their first impression of the store to their experience with the staff

Agency •MACRO-Market Analysis and consumer research Organization

Customer Satisfaction Survey Process

Agency sends “ Mystery Shopper”

Their experience is documented

Feedback is sent to Big Bazaar

Analysis is done for improvement

Advantages of CEM

Track performance at all levels

Identify opportunities to be leveraged upon

Continuous Improvement

In –house Initiative “Pragati”•Head office operation team personnel visits

the store and observes:

▫Store exterior ;Baggage window; Customer service

Store ambience etc…

•Done on a quarterly basis

•Encourages stores to improve performance on in-house competition level.

Audits @ Big Bazaar

•Ernst & YoungAudit Firm

•Process Audit •Risk ManagementFocus•Independent Audit Firm•Monthly/quarterly basis.

Internal Audit

Presence of the Company across all segments

Specialized services

Cost control initiatives and frugal culture

Periodical reviews of the various operations

Continuous Enterprise Risk Management

Controls in SAP.

Increased size of operation has the risk of execution and management.

Having appropriate locations => Maximum Customer reach for each format.

Foreign Investments (Indian Sub-continent)

Collaborations with high end brands to cater to high end consumers.

Impact on the margins due to changes in the business environment.

High business risk due to increased competition and dynamism in the industry.

Increase in the size of operation => increase in the risk of the execution and management.

Casual Observations @ Big Bazaar•Trolleys are not easily available.

•Little attention to cleanliness.

•Inefficient In-house packaging.

•Crowded store interiors.

•Sign boards are not prominent.

•Long Billing time

•Weak publicity of value added services

•Family crowd is evident. Youth only 10%.

•Food Bazaar efficiently managed. It is a bit over staffed but layout is very good.

Casual Observations @ Big Bazaar

Recommendations….• Improvement in supply chains

•Warehouse location

• Improvement in packaging

• Infrastructure

•Separate less paying billing counters

• Improvement in Cleanliness

Acknowledgement…

•Location: Chinchwad

•Contact Person: Mr. Aushutosh Sathe (Store Manager)•References:

▫Work Staff▫Customers▫Former SIIB Students (Tanya Grover; Mudit

Murarka)

•Visit details:

▫No. of visits: 3

28th Dec ‘10: Zahid and Raj ( 3 pm- 4 pm) 2nd Jan ’11: Divya, Sachin and Dhaval ( 1 pm-

3 pm) 10th Jan ‘11: Nitika, Rishika, Swati, Raj ( 4pm

– 6pm)

Thank You !!!