Operations benchmarking survey TCS 8th feb

Copyright © 2013 Tata Consultancy Services Limited

Retail Operations Benchmarking & Excellence Survey

Global Consulting Practice - Retail Feb 08, 2013

Retail Operations Benchmarking & Excellence Survey TCS Public

Retail Operations Benchmarking & Excellence Survey Table of Contents

• Scope & Methodology –Parameters & Processes –Retail Segments

• Key Insights

–Performance –Priorities –Processes

• Summary

- 1 -


Key Performance Indicators (KPIs)

Priorities for FY 2014

Scope & Methodology Parameters & Processes

• First ever comprehensive “Store Operations” benchmarking • Following parameters were covered

- 2 -

Customer Service

Marketing & CRM

Inventory Management

People Management

Visual Merchandising

Space Management

Process Maturity

1 2 3


Scope & Methodology Retail Segments

- 3 -

FASHION

DEPARTMENT STORES

VALUE RETAIL

Bharti Retail is also a participant


Methodology

• TCS’ Process Maturity Framework was used to:

– Define process maturity from Level 1,L1 (Lowest) to Level 5 , L5 (Highest)

– Allocate scores to each level of maturity which ranged from 20% to 100%

• One to one, in-depth interactions with CxOs to capture data and insights

• 800 data points were covered across six process areas

- 4 -

LEVEL 2

LEVEL 3

LEVEL 4

LEVEL 5 100% scan at receiving and at sale

Partial scan at receiving; 100% scan at sale

No scan at receiving; 100% scan at sale

No scan at receiving; Ad hoc scan at sale

LEVEL 1 No scan at receiving or on sale

20%

40%

60%

80%

100%

Example of Inventory management- Scanning process

TCS Process Maturity Framework



• Scope & Methodology

• Key Insights

–Performance

–Priorities

–Processes

• Summary

- 5 -


Performance FY13

• At an industry level, over 60% retailers had like-to-like (LTL) growth rates of <10% over FY 2012

– About 50% fashion retailers had LTL growth rates of >15% – Department stores had LTL growth of about 6% – About 60% of value retailers had LTL growth of <10%

• Some fashion retailers reported impressive growth rates and EBIDTA

- 6 -

Challenging year in terms of like-to-like growth; but impressive growth with healthy EBIDTA for some

Challenging year in terms of like-to-like growth; but impressive growth with healthy EBIDTA for some

Retail Operations Benchmarking & Excellence Survey TCS Public - 7 -

Performance FY13

*Average cost benchmarks (% of top-line)

Rentals continue to adversely affect retailers’ expansion plans and profitability; Metrics like Gross Margin Return Over Sq.ft /Labor not measured by many

Rentals continue to adversely affect retailers’ expansion plans and profitability; Metrics like Gross Margin Return Over Sq.ft /Labor not measured by many

Metric Fashion Department Stores Value

Sales per square foot (Rs) 9000 -15000 8000 -12000 8000 -12000

Store Manpower Cost* 3%- 5% 6% 4%

Rental Cost* 10%- 15% 10%- 15% 6%- 8%

Marketing Cost* 3%- 5% 3% 1%- 3%




• Key Insights

–Performance

–Priorities

–Processes

• Summary

- 8 -


Priorities FY 2014 (% of retailers for whom this item is a Top Priority)

Priorities FY14

• ‘Store Profitability’ has been given the highest priority

• ‘Customer Service’ comes second, and is considered a key differentiator

• Surprisingly, ‘Multi – Channel’ is not one of the key priorities for FY 14

- 9 -

The priorities are in the right direction to help build profitable and customer centric models

The priorities are in the right direction to help build profitable and customer centric models




• Key Insights

–Priorities

–Performance

–Processes

• Summary

- 10 -


Industry - Level Process Maturity

- 11 -

72%

82%

66%

78%

76%

74%

Space Management

Visual Merchandising

People Management

Inventory Managment

Marketing & CRM

Customer Service

This is considered a “reasonable” score as the industry is still in its early stages of evolution

This is considered a “reasonable” score as the industry is still in its early stages of evolution


Industry - Level Process Maturity Is it good enough?

• With the following macro developments:

–E-commerce players redefining certain elements of retail and customer service

–Rapidly evolving consumers, staying ahead of the curve

–Relaxation of FDI norms and the likely entry of new players

Retailers would need to relook at their policies, processes, systems and in some cases their formats and expansion plans

- 12 -

Due to the rapidly changing environment, retailers would need to adapt

Due to the rapidly changing environment, retailers would need to adapt


Process Maturity

72%

82%

66%

78%

76%

74%

SpaceManagement

VisualMerchandising

PeopleManagement

InventoryManagement

Marketing& CRM

Customer Service

Customer Service

- 13 -

Areas Covered

• Handling customer feedback

• Interaction with sales staff and cash counter management

• Customer Satisfaction Index (CSI) and ‘mystery shopping’

• Customer Loyalty Programs


Customer Service Are Retailers Listening to their Customers?

• 50% of respondents do not have a single view of their customers across multiple channels

• Data and insights not leveraged effectively - only basic analytics in place

• CSI not measured by almost half of the respondents; so is the case with measuring billing efficiency (33%)

- 14 -

Although customer experience is a stated priority area, metrics to monitor it are not in place

Although customer experience is a stated priority area, metrics to monitor it are not in place


Share of Sales from Loyal Customers

Customer Service Loyalty Program

• 12% of respondents generated >50% of their sales from loyal customers

• 44% of respondents either did not run a loyalty program or do not measure loyalty

• Reward schemes are often confused with loyalty programs

- 15 -

Early days for a personalized and relevant customer loyalty program

Early days for a personalized and relevant customer loyalty program

44%

6%

6%

25%

19%

Notmeasured

>75%

50-75%

25-50%

<25%


Marketing & Customer Relationship Management (CRM)

- 16 -

Process Maturity

72%

82%

66%

78%

76%

74%

SpaceManagement

VisualMerchandising

PeopleManagement

InventoryManagement

Marketing& CRM

Customer Service

Areas Covered

• Process for Marketing and CRM evolution

• Process for promotion execution


Promotions Execution

Marketing & CRM Execution of Promotional Offers

• About 70% do not use tools to execute promotions. Depend on spreadsheets and email

• Effectively only 30% of respondents track the performance of their promotions

• Analytics can significantly improve the ROI

- 17 -

7%

4%

22%

37%

30%

L1= Processes notdefined or documented.Annual marketing…

L2= Some adhocprocesses, managed atstore. No annual…

L3= Well-defined anddocumented processes.No tools used.…

L4= L3 + Integrated withmarketing calendar,shared in advance…

L5= L4 + Integratedsales plan, merchandiseplan, markdown plan…

Promotion planning & execution can be improved considerably

Promotion planning & execution can be improved considerably


Inventory Management

- 18 -

Process Maturity

72%

82%

66%

78%

76%

74%

SpaceManagement

VisualMerchandising

PeopleManagement

InventoryManagement

Marketing& CRM

Customer Service

Areas Covered

• Availability levels

• Shrinkage levels and process of physical stock reconciliation


Inventory Management Availability Levels

• Retailers have considerably improved their availability levels over last three years

• About 40% of respondents claim to have availability levels of > 90%

• Achievement can be attributed to better planning at central level, vendor management and execution at store level

- 19 -

Retailers have shown considerable improvement in availability levels

Retailers have shown considerable improvement in availability levels

4%

4%

9%

9%

35%

39%

Not measured

<60%

60%-70%

70%-80%

80-90%

>90%

Merchandise Availability


Shrinkage (% of sales)

19%

23%

15%

15%

27%

>1%

0.75%-1%

0.5%-0.75%

0.25%-0.5%

0-0.25%

Inventory Management Shrinkage Levels

• Continues to be an area of concern due to low retailers’ margins

• About 40% of respondents have shrinkage level > 0.75% of sales

• About 75% of value retailers have shrinkage > 0.75% of sales

• The fashion segment has shown lower levels of shrinkage

- 20 -

Shrinkage continues to be an area of concern Shrinkage continues to be an area of concern


0%

4%

18%

32%

46%

L1=No perpetualInventory (PI) calendardefined

L2=Well defined PIcalendar.Not integratedwith IT System.…

L3=L2+ Frequencyquarterly

L4=L3+ integrated withIT System. Frequencytwice a year.

L5=L4+ Frequencyquarterly.

Inventory Management Stock Take Process

• Most respondents use mature processes to manage inventory or stock taking

• Increasing trend of outsourcing this to third parties; close coordination with finance

• Focus on daily global counts as a way to reduce shrinkage

- 21 -

Physical Stock reconciliation processes have matured

Physical Stock reconciliation processes have matured

Physical Stock Verification

Retail Operations Benchmarking & Excellence Survey TCS Public - 22 -

People Management

Process Maturity

72%

82%

66%

78%

76%

74%

SpaceManagement

VisualMerchandising

PeopleManagement

InventoryManagement

Marketing& CRM

Customer Service

Areas Covered

• Attrition Levels

• Employee Development and Benefits


Employee Attrition per month

People Management Attrition

• About 33% of respondents had average attrition rates of 8% per month

• Department stores exhibited the lowest levels of attrition

• 55 % of Value retailers have attrition levels of > 8% per month

- 23 -

26%

7%

15%

37%

15%

>10%

8-10%

6-8%

4-6%

<4%

Attrition continues to be an area of concern Attrition continues to be an area of concern


• 27% of respondents do not have well-defined and documented career plans - those who have it fail to adequately communicate or implement

• Tools for competency mapping not used by a large number of retailers

• Only 26% of respondents make training a part of the store manager’s KRA

• Bucking the trend, small format retailers and footwear retailers in particular have strong career development programs in place. Emotional connect has certainly worked in their favor

- 24 -

People Management Career Planning & Training

Scope for improvement in Career Planning process and its communication to floor staff Scope for improvement in Career Planning process and its communication to floor staff




• Key Insights

–Performance

–Priorities

–Processes

• Summary

- 25 -


Summary

The first ever Retail Operations Benchmarking & Excellence Survey reveals that:

• FY13 is a mixed bag in terms of performance

• Retailers have set the right priorities for FY14

• Augmenting presence through multi channels could be added as a priority area

• Marketing spends are in line with global trends, but effectiveness measurement could be the next logical step to pursue

- 26 -


Summary

- 27 -

• Key areas to focus are:

–People Management and Customer Service

–Technology adoption

• Key industry metrics* not being measured by many

• Moving to a higher process maturity across functions can lead to substantial savings every year

*GMROF: Gross margin return on square footage GMROI: Gross margin return on inventory GMROL: Gross margin return on labour


Suggested Next Steps…

- 28 -

Evaluate Self-Performance with industry-wide Survey Benchmarks

Identify Key Areas of Improvement vis-à-vis Industry

Sync with FY 2014 Priority Areas

Improve Operations

Thank You Anil Rajpal Head Practice - Retail & CPG Global Consulting Practice Tata Consultancy services [email protected]

Operations benchmarking survey TCS 8th feb

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