Store Turnaround Assignment

Retail Management Strategy

Group 8 | Section B
Anshul Yadav | 2019PGP064
Bhagat Amey Pranav | 2019PGP102
Debanu Sinha | 2019PGP121
Debrupa Kar | 2019PGP123
Janakjit Singh Sethi | 2019PGP482
Manjula S | 2016IPM058
Samyukta Sankaralingam | 2016IPM089
Yadav Richa Yaduvir Singh | 2019PGP479
 Store Turnaround

Diagnosis of Problem
• Communication - Has not been the focus. Not spending up to targets, which could indicate an incorrect
Expenses

estimate of the budget, or not spending enough as required, and in proportion to sales
• Shrinkages – Actuals are Way higher than targets in most of the months, except a couple
• Damages & Expiries - Targeted for 0, but have at least had about 0.25 lacs per month

• Staples, Plastics & Kitchenware, Apparel, FMCG, E&E, Bakery and Liquor have not met targets in several
months
• F&V has met targets in most of months except for December
Sales per Sqft.

• Fish and meat has remained close to targets

• Dairy & Frozen seems to have met targets in the months from September since targets have been revised
lower
• Actual sales of Apparel have remained similar to the previous months post September, but exceeded targets
since targets have bee pushed lower
• Difference between targets and actuals has been very high for Bakery since October, and for E&E always
• E&E exhibits seasonality with spike in sales in May to June, and September

• Conversion has reduced from 70% in April to 60% in December, while footfall has remained the same, which
Gross Sales

might indicate an issue with merchandise management (customers might switch away to other store)
• ABV has remained around the average of Rs. 500 per month
• Gross Sales has remained close to Rs. 185 per month
• Overall, Gross Sales has seen a peak at Rs. 228, even when conversion was low at 64%, due to high ABV

Group 8 | Sec B 2
 Store Turnaround

Diagnosis of Problem
Ranking of Categories based on RGM (%) and Occasion of Purchase

Category RGM (%) Occasion of Purchase Attract Footfall

Plastics, Utensils, & Kitchenware 29 Occasional No
FMCG 28.56 Weekly Yes
Apparel 28.22 Seasonal No
Bakery 17.11 Daily Yes
Fruits & Vegetables 14.78 Daily/Weekly Yes
Fish & Meat 14.78 Daily/Weekly Yes
Staples 14.67 Weekly Yes
Liquor 13.78 Weekly/Monthly No
Electrical & Electronics 11.11 Seasonal No
Dairy & Frozen 9.56 Daily/Weekly Yes

Can help identify categories which are high margin, which ones would attract footfall, and thereby those which
can be targeted in the short term, long term or both, based on their current performance (Sales per sqft., RGM
per sqft.)
Group 8 | Sec B 3
 Store Turnaround

Breakeven

Objective: Increase Average Bill Value and Conversion in the short term for increase in sales, and
RGM to achieve breakeven (EBITDA = 0)

Variables under
Variables Revised
Consideration
• Sales • Sales increase to 208.89
• Other Income • RGM increase to 45.73
• RGM • Damages and Expiries (DAD)
• Total Personnel Expense decreased to 0.59 (average of
• Total Admin Expense DAD across previous 9 months)
• Selling Expense • Shrinkages (aiming to achieve
the target of 1.4)
• Total Non Cont. Expense
• Communication expenses
increase to 0.3 for advertising
promotions and loyalty
programs
Variables kept Constant
• Other Income
• Rent (Not revised higher in the
short term due to fixed
contract, even because of real
estate market changes)
• Personnel expenses (not hiring
or firing personnel, no
overtime expected)
• Freight Inward (not changing
because of merchandise
assortment changes are only
within store, not varying due
to procurement)

Group 8 | Sec B 4
 Store Turnaround

Strategy to Achieve Breakeven

Considering December figures as the base to estimate for June and make EBITDA = 0
• Reduce DAD to 0.59 (average of the previous 9 months) by estimating demand
and inventory requirement, especially for products like Dairy and Frozen, Fish &
Expenses Meat, F&V, Bakery (daily purchases which are easy to observe and correct)
• Reduce Shrinkages to 1.4 which the store wants to achieve (regular monitoring
by the store manager, inventory count check)
• Increase Communication expenses to 0.3 so that customers are informed about
promotions in the store

• Loyalty Program - similar to the program of Big Bazaar, keep it flexible across
categories (increased loyalty from the customer) and can help increase ABV
and increase footfall by making the customers visit the store repeatedly
Sales & • Increase floor space for FMCG and F &V instead of E&E and plastics, kitchen
RGM (since FMCG is high margin, F&V and FMCG would give recurring sales)
• Focus promotions (% off on products) in FMCG, and Staples (since they attract
footfall)
• Improve product assortment and variety in FMCG, Staples, Apparel (since they
are high margin products), decrease variety in E&E, and plastics (since they are
not the primary drivers of footfall)

Group 8 | Sec B 5

EBITDA = 100
Objective: Increase Footfall in the long term for increase in sales, and RGM to achieve EBITDA = 100
Variables under
Variables Revised
Consideration
• Sales • Sales (increase to 666.24)
• Other Income • RGM (increase to 145.84)
• RGM • Damages and Expiries (DAD)
• Total Personnel Expense decreased to 0.59 (average of
• Total Admin Expense DAD across previous 9 months)
• Selling Expense • Shrinkages (aiming to achieve the
target of 1.4)
• Total Non Cont. Expense
• Communication increase to 1 for
advertising (to attract footfall)
• Security increase since higher
monitoring and bar code
scanner)
Group 8 | Sec B
Store Turnaround
Variables kept Constant
• Other Income
• Rent (Not revised higher in the
short term due to fixed contract,
even because of real estate
market changes)
• Personnel expenses (not hiring or
firing personnel, no overtime
expected)
• Freight Inward (not changing
because of merchandise
assortment changes are only
within store, not varying due to
procurement)
6
 Store Turnaround

Strategy to Achieve EBITDA = 100

Considering figures post 6 months as base to estimate for 2 years from now & make EBITDA = 100

• Reduce DAD to 0.25 (actuals achieved in December) by estimating demand and inventory
requirement, across categories (daily purchase categories have been sorted in 6 months),
the focus cold shift to FMCG, Apparel, E&E, and Liquor, possible to accommodate for
Expenses seasonality in 2 years time frame
• Reduce Shrinkages to 1 which the store wants to achieve (regular monitoring by the store
manager, inventory count check, make sure every product has a barcode and bar code
detector if the product is unbilled)
• Security costs increased to 2 as a result
• Increase Communication expenses to 1 in terms of advertising, for attracting footfall

• Continue with loyalty program across categories

• Increase floor space for plastics, E&E considering that demand and product assortment
Sales & issues have been resolved, footfall increase is expected, and can achieve higher margins with
RGM these categories
• Provide offers on FMCG (like Buy 2 Get 1 Free) for increasing RGM (FMCG is the second
highest in terms of margins after plastics)
- Might require higher purchase of FMCG products, and renegotiation of supplier terms to
procure at lower cost (since volumes are higher)
- Store space and inventory cycle is not changing, so we do not expect freight costs to
change

Group 8 | Sec B 7