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
Table of Contents
• Scope & Methodology
–Parameters & Processes
–Retail Segments
• Key Insights
–Performance
–Priorities
–Processes
• Summary
- 1 -

TCS Public
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

TCS Public
Scope & Methodology
Retail Segments
- 3 -
FASHION
DEPARTMENT STORES
VALUE RETAIL
Bharti Retail is also a participant

TCS Public
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

TCS Public
Table of Contents
• Key Insights
–Performance
–Priorities
–Processes
• Summary
- 5 -

TCS Public
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

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%

TCS Public
Table of Contents
• Key Insights
–Performance
–Priorities
–Processes
• Summary
- 8 -

TCS Public
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

TCS Public
Table of Contents
• Key Insights
–Priorities
–Performance
–Processes
• Summary
- 10 -

TCS Public
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

TCS Public
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

TCS Public
Process Maturity
72%
82%
66%
78%
76%
74%
Space
Management
Visual
Merchandising
People
Management
Inventory
Management
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

TCS Public
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

TCS Public
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%
Not
measured
>75%
50-75%
25-50%
<25%

TCS Public
Marketing & Customer Relationship Management
(CRM)
- 16 -
Process Maturity
72%
82%
66%
78%
76%
74%
Space
Management
Visual
Merchandising
People
Management
Inventory
Management
Marketing& CRM
Customer Service
Areas Covered
• Process for Marketing and
CRM evolution
• Process for promotion
execution

TCS Public
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 not
defined or documented.
Annual marketing…
L2= Some adhoc
processes, managed at
store. No annual…
L3= Well-defined and
documented processes.
No tools used.…
L4= L3 + Integrated with
marketing calendar,
shared in advance…
L5= L4 + Integrated
sales plan, merchandise
plan, markdown plan…
Promotion planning & execution can be improved
considerably
Promotion planning & execution can be improved
considerably

TCS Public
Inventory Management
- 18 -
Process Maturity
72%
82%
66%
78%
76%
74%
Space
Management
Visual
Merchandising
People
Management
Inventory
Management
Marketing& CRM
Customer Service
Areas Covered
• Availability levels
• Shrinkage levels and process
of physical stock reconciliation

TCS Public
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

TCS Public
Shrinkage (% of sales)
19%
23%
15%
15%
27%
>1%
0.75%-1%
0.5%-0.75%
0.25%-0.5%
0-0.25%
Shrinkage Levels
• Continues to be an area of
concern due to low retailers’
margins
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

TCS Public
0%
4%
18%
32%
46%
L1=No perpetual
Inventory (PI) calendar
defined
L2=Well defined PI
calendar.Not integrated
with IT System.…
L3=L2+ Frequency
quarterly
L4=L3+ integrated with
IT System. Frequency
twice a year.
L5=L4+ Frequency
quarterly.
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

TCS Public
- 22 -
People Management
Process Maturity
72%
82%
66%
78%
76%
74%
Space
Management
Visual
Merchandising
People
Management
Inventory
Management
Marketing& CRM
Customer Service
Areas Covered
• Attrition Levels
• Employee Development and
Benefits

TCS Public
Employee Attrition per month
People Management
Attrition
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

TCS Public
• 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

TCS Public
Table of Contents
• Key Insights
–Performance
–Priorities
–Processes
• Summary
- 25 -

TCS Public
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 -

TCS Public
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

TCS Public
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
a.rajpal@tcs.com

Operations benchmarking survey TCS 8th feb

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