Retail Reflections… By Bela Gupta

Retail Reflections…By Bela Gupta Prelude: A Retail Story Global Retail, Challenges Versus Local Retail Trigonometry Customer Service Excellence Retail Johnny Interactions & Questions?? Source Data from Technopak, McKinsey Private & Confidential

Prelude: A Retail Story… A keen country lad applied for a salesman's job at a city department store. In fact it was the biggest store in the world - you could get anything there. The boss asked him, "Have you ever been a salesman before?" Yes, I was a salesman in the country" said the lad. The boss liked the cut of him and said, "You can start tomorrow and I'll come and see you when we close up." The day was long and arduous for the young man, but finally 5 o'clock came around. The boss duly fronted up and asked, "How many sales did you make today?" "One," said the young salesman. "Only one?" blurted the boss, "most of my staff make 20 or 30 sales a day. How much was the sale worth?" "Three hundred thousand dollars," said the young man. Source Data from Technopak, McKinsey Private & Confidential

Prelude: A Retail Story… "How did you manage that?" asked the flabbergasted boss. "Well," said the salesman "this man came in and I sold him a small fish hook, then a medium hook and finally a really large hook. Then I sold him a small fishing line, a medium one and a huge big one. I asked him where he was going fishing and he said down the coast. I said he would probably need a boat, so I took him down to the boat department and sold him that twenty foot schooner with the twin engines. Then he said his Volkswagen probably wouldn't be able to pull it, so I took him to the car department and sold him the new Deluxe Cruiser." The boss took two steps back and asked in astonishment, "You sold all that to a guy who came in for a fish hook?" "No," answered the salesman "He came in to buy a box of Tampons for his wife and I said to him, 'Your weekend's shot, you may as well go fishing.' Source Data from Technopak, McKinsey Private & Confidential

Global Retail… • One of the largest private industries exceeding USD 9 Tn • 56 of the Global Fortune 500 companies and 25 of Asia’s top 200 companies are retailers • Wal-Mart is the biggest retailer in the world with sales of USD 312 Bn • 12% of the Top Fortune 500 Companies are retailers • 10 out of Top 25 richest people in the world are retailers • 56 companies out of the Fortune Top 500 list are retailers • Out of the Top 50, 10 are retailers • Population is key to Growth of this Industry, 85% of the potential customers residing outside of the developed regions like India, China, Indonesia etc • Developing markets like BRICS which are led by economic growth are witnessing growth in retail Source Data from Technopak, McKinsey Private & Confidential

Global Retail Challenges… • Diversification of retail formats • International Diversification • Continued innovation & evolving value thru pricing • Site Selection • Economies of Scale • Private Labels • Supply Chain Efficiency, Increasing Supplier Efficiency • Use of innovation & evolving value thru IT • Focus on Cost Control Source Data from Technopak, McKinsey Private & Confidential

The Paradigm shift (Times have changed) Source Data from Technopak, McKinsey Private & Confidential

Indian Scenario… • India is all set to experience the phenomenon of a global village. • India presents a grand opportunity to the world at large, to use it as a business hub. • A ‘Vibrant Economy’, India tops A T Kearney’s list of emerging markets for global retailers for the 3rd consecutive year in terms of Investments. • India is rated among the top 10 FDI destinations. • India received $20.13 billion as foreign direct investment in April-February 2007-08, up 70 per cent from $11.88 billion that flowed in a year ago. The $20.13 billion inflow 'is the highest FDI into equity in the country during any year. • India is investing over US $130 billion in infrastructure by the end of this decade. Source Data from Technopak, McKinsey Private & Confidential

Indian Scenario… Source Data from Technopak, McKinsey Private & Confidential

The ‘Bird of Gold’ : The rise of Indian Consumer Market Source : McKinsey Global Institute Report - May 2007 Source Data from Technopak, McKinsey Private & Confidential

Indian Consumer… • With the largest young population in the world - over 890 million people below 45 years of age • India has more English speaking people than in the whole of Europe taken together. • Its 300 million odd middle class, the “Real” consumers & as the economy grows so does India's middle class. • It is estimated that 70 million Indians earn a salary of over INR 800,000 ($18,000) a year, a figure that is set to rise to 140 million by 2011. • While the consumer spending continues to grow at double-digit figures, leading retailers have recorded an increase in sales between 50 to 100 percent in the calendar year 2006 over the previous year. • According to India Retail Report 2007, the total private consumption touched INR 20,000 billion (US $ 445 billion) at current prices in the calendar year 2006 with organized sector accounting for INR 55000 crore ($12.4 billion) business • Moving forward, organized retailing is projected to grow at the rate of about 37 per cent in 2007 and 42 per cent in 2008. Source Data from Technopak, McKinsey Private & Confidential

Indian Consumer… Source Data from Technopak, McKinsey Private & Confidential

Indian Retail Industry Source Data from Technopak, McKinsey Private & Confidential

Indian Retail Industry… • Indian retail industry itself has attracted investment of over INR 200 billion (over $4 billion) in creating infrastructure, systems & shop-fit. • The additional retail space is expected to add INR 300 billion ($ 6.67 billion) of business to organized retail. • India’s stock market continues to rise at unprecedented levels & the quantum of investments is likely to skyrocket. Source Data from Technopak, McKinsey Private & Confidential

Indian Retail Industry Forecast… Source Data from Technopak, McKinsey Private & Confidential

Indian Retail Space Growth Source Data from Technopak, McKinsey Private & Confidential

Indian Retail Space Growth… • 100 million sq ft of quality shopping centre space by 2007-08 • To generate retail sales of over INR. 50,000 CR ($ 11 billion) • INR 20,000+ CR ($ 4 billion+) investment in pipeline for retail infrastructure, systems & shop-fit • Space for 15,000+ new outlets, 100 hypermarkets, 500 department stores and 2000 supermarkets • Over 10,000 small and big existing outlets to undergo complete facelift • By the Year 2010-11 this space will grow to 300 million sq. ft. offering business worth over $17 billion for Design, Shop Fit and support systems. Source Data from Technopak, McKinsey Private & Confidential

Indian Retail Space Growth… Source Data from Technopak, McKinsey Private & Confidential

India Summary… • The 2nd fastest growing economy in the world • The 3rd largest economy in terms of GDP in next 5 years • 4th largest economy in PPP terms after USA, China & Japan • Fastest-Growing Asia-Pacific market for International tourist spending, according to latest Visa Asia Pacific release. • Largest Young population in the world – over 890mn people below 45 years of age • Almost half of the country is below the age of 25 years and they are just about to join the productive consuming age group • 600mn + effective buyers by 2010 • 550mn + under the age of 20 by 2015 • 70mn + earn Rs.8, 00,000 + a year number to rise to 140mn by 2011 • Average Salaries hike of 15+ percent • FDI for Single Brand retail up to 51% open. Source Data from Technopak, McKinsey Private & Confidential

Indian Retail Challenges… • Retail yet to get Industry status • Real Estate Acquisition • Availability of Capital • Manpower • System and Infrastructure • Right Leadership or management • Ramp Up- Pace of Expansion • Differentiated Strategy and be a preferred retail destination • Government Policies & Regulations Source Data from Technopak, McKinsey Private & Confidential

Retail Trigonometry Source Data from Technopak, McKinsey Private & Confidential

Retail Trigonometry… • Customer Entry • Customer Conversion • Customer Cash memo size Source Data from Technopak, McKinsey Private & Confidential

Retail Trigonometry… • Location of store, Visibility of the store • Creation of customer awareness about the retail brand • Creation of loyalties with customer to the retail brand • Lack of focus - positioning of retail brand • Lack of focus - differentiation of retail brand • Store look and feel • Store circulation • Store lighting • Store music and smells • Store signage Source Data from Technopak, McKinsey Private & Confidential

Retail Trigonometry… • Merchandise Mix focus to match positioning and differentiation of retail brand • Merchandise category adjacencies • Merchandise that fulfills needs/wants and value every time • Merchandise availability • Visual merchandising in the store • Trained customer service personnel at the store • Friendly customer service • Even more friendlier standard sound customer service policy • Efficient cashiering services • Facilities like Parking, ATM’s, food courts, play areas, alterations, customization, home delivery and after sales service etc. Source Data from Technopak, McKinsey Private & Confidential

Retail Trigonometry… • Well then I must tell you of a little secret that we all know, heard or read whenever its in relation to retail…Retail is Detail…of little things that constitutes a lot, and it is very important in this part of the supply chain as this is the last link that interfaces directly with the end consumer. Source Data from Technopak, McKinsey Private & Confidential

Retail Trigonometry… • Gross margin return on Investments(GMROI) • Gross margin return on floor space(GMROF) • Gross margin return on labour(GMROL) Source Data from Technopak, McKinsey Private & Confidential

Retail Trigonometry… • Ensure that you know what kind of market size your concept would yield and what would you achieve as your targeted sales, a blue print or a business plan for your retail business • Plan the right size (Sq footage) of the retail store based on concept and range width planning • Ensure that you rent your property at realistic rates + any additional charges and what is the ratio of Chargeable rent to carpet rent. • Customer Service Index monitoring and Retention measurement tools • Plan your store design in sync with your Brand positioning and that your store design incorporates all the functionality required by your products and customers and also keeps aesthetics in mind, and not the other way around • Plot your Product Range width plan in a balanced and tight manner • Ensure that the average gross margins that you make are adequate to start of with and better as the business grows • Price your products correctly not too little not too high but just right so the customer can see and feel value Source Data from Technopak, McKinsey Private & Confidential

Retail Trigonometry… • Keep a tight control on Labor costs, my version to this cost head is ensure that you pay best as per industry standards to keep them motivated ,train them thru “training the trainer” process to keep a tight control on training costs, and thru correct HR practices ensure a growth plan for your employees • Look at proper CRM (customer relationship management) and DTH (direct to home) tools to manage marketing costs • Install correct IT systems to give you feedback on the business and support the logistics of your business • Partner with your vendors to ensure smooth business growth, pay them on time, sit with them to plan and develop future business and also review current business, cut unnecessary costs in the supply chain, look at development of your vendors and products • Plan a review and feedback mechanism from customers and competition to keep a track on your business • Exercise a right budgetary control month on month Source Data from Technopak, McKinsey Private & Confidential

Customer Service Excellence-Retail Value Proposition Source Data from Technopak, McKinsey Private & Confidential

Customer Service Excellence…-Value Proposition • Customer Centric strategy • Intangible offering of the retail Business • Constitutes paying attention to detail & passion • Manpower & Training investments • Customer Retention Management Systems & Infrastructure • It can differentiate your business story by miles Source Data from Technopak, McKinsey Private & Confidential

Retail Johnny… • http://www.stservicemovie.com/ Source Data from Technopak, McKinsey Private & Confidential

Interactions & Questions… • Interactions on Customer Service in your Business.. • Please illustrate with examples on how you lost customers coz of adequate service.. • Please illustrate with examples how you Wowed and retained customers with great service.. Source Data from Technopak, McKinsey Private & Confidential

Thank-You! :) Source Data from Technopak, McKinsey Private & Confidential

Retail Reflections… By Bela Gupta