Post on 20-Mar-2017
transcript
Leadership Strategy in Modern RetailConsumer Electronics Modern Retail: Gearing up for 2017
Team: The Three StarsMDI, Gurgaon
Ayan Dasguptapg16ayan_d@mdi.ac.in
Siddhi Sarafpg16siddhi_s@mdi.ac.in
Kamalika Poddarpg16kamalika_poddar@mdi.ac.in
1 Team: The Three Stars
Executive Summary Situation Analyses Strategies Recommendations Appendix
Objectives
• Identifying the threats and key challenges to Modern Retail channel and recommending ways of countering them
• Chalking out a master plan comprising overall and regional strategy for Samsung to achieve 20% growth in 2017
Research Methodology
Qualitative• Interviewed Retail Executives of Modern Retail, RR and BS and Distys • Discussion with Sales and Distribution Professors at MDI Gurgaon• Secondary Research from internet – IBEF, CRISIL, Statista, Forrester,
KearneyQuantitative• Primary Research through questionnaire – 362 respondents comprising students, teachers, neighbors, friends, relatives and shoppers at stores• Market Sizing Guesstimates Insights
• Retails Stores are still relevant87% of the respondents to the survey said that they plan to shop in stores as often as in the previous year
• Penetration of Modern Retail is not uniformThe eastern region of the country is less developed and penetrated by MR than the other regions
• Customer Retention is importantIt costs 6 times more to attract a new customer than to retain one
• Digital World has Significant ImpactIn store digital interactions influence 36 paise of every rupee spent in the store
• MR will face competition from other MRs in urban and growth-expansion related challenges in rurban areasDue to geographical barriers growth of MR is limited in some regions where only regional retailers and distributors will succeed
• However, MR potential is highMetros like Mumbai, NCR and Bangalore to reach 50% penetration in 10-20 years
Recommendations
Strategy North East West South
Primary Focus on MR
Leverage RR/Disty
Focus on MR
Focus on MR
Secondary RR/Disty Online/MR Online/B2B Online/B2B
Overall• Target reduction of cost – Highest focus on MR stores to be on North
and West zones, recruit manpower from more literate regions, lower rental cost in favor of future profit sharing
• Retain partners with high store count and growth, phase out those with low store count and growth for RR/Disty in rurban and online/enterprise in urban
• Add low cost products to the portfolio and target exports to minimize the risk of competition for domestic consumption
• Optimize region specific sales of products• Identify new growth centers and newer varieties of retail –
Omnichannel, Cross-Selling, Network Service Providers, etc.• Improve customer experience by use of technologyRegional
Situation Analyses
2 Team: The Three Stars
Executive Summary Situation Analyses Strategies Recommendations Appendix
Consumer Durables market in India to become the world’s 5th largest by 2025 from the current position of 12th
Currently at USD 12.5 billion, to grow to USD 20.6 billion by 2020 (10.5% CAGR)By 2020, Electronics market in India will increase to USD 400 billion from the current value of USD 94.2 billion (33.5% CAGR)
Organized retail forms 9% of India’s retailBetween 2016-2020, retail will grow at 10.8% CAGR in India, while Modern Retail will grow faster at 24.2% CAGR
Share of Consumer Electronics in Retail
Share of Consumer Electronics in MR
5% 12%19%
Penetration of MR in India
2015 20200
200
400
600
800
1000
1200
600
1000
525
750
60
180
1570
Retail Traditional Retail Modern Retail
2015 20200
5
10
15
20
25
12.5
20.6
Consumer Durables Linear (Consumer Durables)
Indian Consumer Durables market in billion USD
10.5% CAGR
Figures in billion USD
24.2% CAGR
5th
9%
Consumer Durables and Electronics Market Modern Retail in India
Team: The Three Stars3
Executive Summary Situation Analyses Strategies Recommendations Appendix
Rivalry among
Existing FirmsHIGH
Threat of New
EntrantsLOW to
MODERATE
Bargaining Power of
ConsumersHIGH
Threat of Substitutes
LOW to MODERATE
Bargaining Power of SuppliersLOW to
MODERATE
Porter’s Five ForcesSWOT
Strengths• Premium shopping destination
critical for brand equity and imagery
• Showcase premium product to compare
• Multi brand Retail experience addresses the Super Premium Customers
• Quality manpower to engage with the customers for demo, sale of hi-tech products
• Rub off effect on rest of the channels
• High revenue generated per unit area
Threats• Online retailers which offer discounts,
broader availability and doorstep delivery of products to the customers
• Customer preference to shop from the smaller specialty stores
• New entrants due to opening up of FDI – increased contractual costs and competition
• New growth to be seen from rurban regions where MR cannot succeed due to dispersed nature of such regions
Weaknesses• High real estate costs and rentals• High manpower training costs,
especially in regions with lower literacy rates
• High cost of operations
Opportunities• Organized retail is the future of retail –
growing faster than traditional retail• Rising disposable income of middle
class Indian consumers• Changing aspirations of Indian shoppers
– desire of a better customer experience
• Growth from rural markets with the government pushing for rural electrification
• Government support through EHTP, SRZ, M-SIPS, and skilling 500 million labors by 2022
SWOT and Porter’s Five Forces Analysis of Modern Retail in Consumer Durables in India
4 Team: The Three Stars
Executive Summary Situation Analyses Strategies Recommendations Appendix
PESTEL Analysis of the Indian Consumer Electronics and Appliances Market
Weaknesses• High real estate costs and rentals• High man power training costs,
especially in regions with lower literacy rates• High cost of operations
Economic SocialPolitical
Technological LegalEnvironmental
No. of Smart Cities8-124-72-3
1
Governance Ranking1-89-16
25-2917-24
> 25002000 - 25001500 - 2000< 1500
GDP per capita in USD> 85%80-85%70-80%< 70%
Literacy Rate
Ease of Doing Business
70-80%40-70%< 40%
> 80%Population Density
< 200200 - 500500 - 800> 800
Political
Technological
Economic
Social
• 51% FDI in multi-brand retail may lead to competition
• Different parties at center and states disrupt smooth functioning of retail
• Increased broadband penetration has led to faster growth of the online channel
• Availability of reliable and cheap energy at all districts in India
• Change in aspiration of Indian consumers, desiring a better customer experience
• Increasing nuclear families leads to greater demand for non-essentials like TVs
• Increasing disposable incomes of both rural and urban consumers
• Negotiation power of a retailer depends on the strength of its distribution network
Environmental Legal• Topological
challenges which affect population density
• Natural and man-made disasters
• Changing laws by the apex courts
• New Acts and amendments
5 Team: The Three Stars
Strategies Recommendations AppendixExecutive Summary Situation Analyses
Partner CY15 CY16 Str. Gr. 2017* Str. Gr. % Biz. Contr.
P1 302 308 2% 305 -1% 45%
P2 102 107 5% 107 0% 30%
P3 79 82 4% 82 0% 11%
P4 106 83 -22% 83 0% 8%
P5 25 19 -24% 15 -21% 1%
P6 23 26 13% 26 0% 2%
P7 25 25 0% 26 4% 2%
Total 662 650 -2% 644 -1%
0%20%40%60%80%100%120%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
Relative Store Share
Stor
e Gr
owthP1
P2 P3
P4P5
P6
P7
Cash Cows: P1, P2, P3, P4 | Question Marks: P6 | Dogs: P5, P7
Growth-Share Matrix
P1 – Largest partner High store countP2 – High store count Moderate growthP3 – Relatively high store count Moderate growth
P4 – High store count high negative growthP5 – Few stores negative growthP6 – Few stores, positive growthP7 – Few stores, stagnant growth
• MR Partners with lower store count will struggle• P5 and P7 - these will face scaling difficulties• Phase them out in favor of RR/Disty• Focus on P1, P2, P3, P4• Monitor P6
Analysis of Samsung’s Partners for Modern Retail
6 Team: The Three Stars
Strategies Recommendations AppendixExecutive Summary Situation Analyses
North East West South Overall
Store Count 165 55 212 218 650
Biz. Contr. 21% 7% 35% 38%
ASP X1 52,100 46,700 58,000 57,100 55,500
ASP X2 39,900 34,900 38,800 34,400 37,100
ASP X3 22,400 25,100 24,500 26,600 24,900
ASP X4 13,000 14,200 14,000 14,100 13,800
ASP X5 49,000 46,700 45,200 45,100 46,000ASP
Overall 37,200 35,400 38,000 38,800 37,900 Regional Growth
X1• Lower ASP in North and East• Experiencing high growth in South• Could be a ‘cooling appliance’ X2• Pricing does not follow a geographical
pattern, but growth does – fastest growing
Product North East West South
X1 6% 3% 4% 11%
X2 20% 14% 7% 9%
X3 9% 3% 6% 7%
X4 10% 2% 4% 8%
X5 3% 1% -2% 11%
Region
X3 and X4• Lower ASP only in North possibly due to
high regional competition• Higher ASP in South possibly due to
unsaturation of the product• Relatively higher growth in the Northern
and Southern markets
X5• Higher ASP in North and East• Experiencing high growth in South• Could be a ‘heating appliance’
Region wise Analysis of Samsung’s Products
Strategies
7
Executive Summary Situation Analyses Strategies Recommendations Appendix
Team: The Three Stars
Highest focus on MR stores to be in North and West zones
Make use of education belts to get quality human resource supply
Leverage Enterprise channel in ICT layered smart cities
Leverage RR/Disty in interior regions for increased penetration in dispersed geographies
Tap RR/Disty channels in topographically challenging regions
Phase out MR stores with low (sub 2%) or negative growth in favor of:• RR/Disty in low tier cities• Online in metros
Retain MR channel for partners with scale, and in smart cities
Target exports to bypass the competitive domestic consumption market
Develop new low cost products
Identify new growth centers through newer retail varieties
Optimize the sales of products according to the regions of their growth and market share
Overall Strategy – Focus on Modern Retail
8 Team: The Three Stars
Executive Summary Situation Analyses Strategies Recommendations Appendix
Challenges Political and social instability in Jammu
and Kashmir and parts of Punjab Low population in the Himalayan states of
J&K and Himachal Pradesh
Opportunities Dense agricultural and industrial belt to
drive rich rurban demand Uttar Pradesh to have 13 smart cities Delhi-Mumbai industrial corridor to come
up NCR has MR potential of Rs. 7,790 crores,
to reach 50% penetration by 2028
Strategies Focus on MR mainly – especially in
states like Uttar Pradesh and NCR belt
Uttar Pradesh is very dense, will be the driver of rurban sales
Government initiatives for technological inclusion of agricultural sectors will lead to spurt of smartphone sales – target agricultural belt of UP, Punjab, Haryana
Invest in RR/Disty to support MR in the less developed parts
Focus on sales of X2 as it is fast growing
NCR and Uttarakhand are manufacturing hubs – closeness to manufacturing will reduce operation costs – set up MR here
Set up MR outlets in smart cities – UP will have 13 smart cities
Leverage Enterprise sales in smart cities and existing metros
Online sales to be thrusted in NCR
Political Favorability
Social FavorabilityEconomic Favorability
Technological FavorabilityEnvironmental Favorability
Challenge-Opportunity Analysis
NORTHNo. of Stores: 165Percentage of Total Stores (PS): 25.4%Business Contribution (BC): 21%BC/PS: 0.827No. of Smart Cities: 25
Regional Strategy – North
9 Team: The Three Stars
Executive Summary Situation Analyses Strategies Recommendations Appendix
Challenges Poor economic development Low per capita income Low literacy levels Stunted infrastructure development Very few manufacturing centersOpportunities Government adamant about ‘Acting
East’ Renewed attention to Bengal-China-
India-Myanmar corridor that envisages MSME connectivity and infrastructure development
Strategies Focus on RR/Disty mainly –
especially in states like Bihar, Jharkhand and North Eastern states
In states like West Bengal, Odisha and Manipur, consider thrust of online sales
X3 and X4 have low growth in this region – RR/Disty required to leverage increased penetrative distribution of these products
Focus on sales of X2 as it is fast growing
Set up smaller Specialty/Express stores
Low literacy but cheap labor– recruit from more literate regions (short), set up local training program (long term)
Unfavorable government for business in the populous state of West Bengal – organize social campaigns
Consolidate the sales of X5 in the colder regions requiring artificial heating
Political Favorability
Social FavorabilityEconomic Favorability
Technological FavorabilityEnvironmental Favorability
Challenge-Opportunity Analysis
EASTNo. of Stores: 55Percentage of Total Stores (PS): 8.4%Business Contribution (BC): 7%BC/PS: 0.824No. of Smart Cities: 20
Regional Strategy – East
The Eastern region has the fewest number of electronics manufacturing centers
10 Team: The Three Stars
Executive Summary Situation Analyses Strategies Recommendations Appendix
Challenges Increased competition due to
government promoting FDIOpportunities Well connected, developed and
dense markets Maharashtra and Gujarat to have a
combined 18 Smart Cities Mumbai has the highest potential
for MR at Rs. 10,500 crores, to reach 50% penetration by 2036
Strategies Focus on MR mainly – especially in
states like Mumbai Metropolitan Region, and smart cities of Maharashtra and Gujarat
Reduce costs through production and logistics – set up MR stores along the Ahmedabad-Mumbai industrial corridor
Tie up with a foreign player Invest in Enterprise sales in high-
tech cities and proposed smart cities
For those stores which have not shown significant growth, replace them with Online B2B channel
Decentralize the distribution Phase out the sales of product X5
or leverage RR/Disty’s penetrative distribution of this product
Political Favorability
Social FavorabilityEconomic Favorability
Technological FavorabilityEnvironmental Favorability
Challenge-Opportunity Analysis
WESTNo. of Stores: 212Percentage of Total Stores (PS): 32.6%Business Contribution (BC): 35%BC/PS: 1.074No. of Smart Cities: 25
Regional Strategy – West
Maharashtra, Gujarat and MP have a combined 25 proposed smart cities
11 Team: The Three Stars
Executive Summary Situation Analyses Strategies Recommendations Appendix
Challenges Political difference with the Centre and
the rest of the country Eastern coastal regions prone to natural
disastersOpportunities Many manufacturing hubs in Tamil Nadu Tamil Nadu to have 12 Smart Cities Most technologically advanced region
with well developed IT infrastructure in Bangalore, Hyderabad and Chennai
Bangalore has MR potential of Rs. 4,860 crores, to reach 50% penetration by 2026
Strategies Focus on MR mainly – especially in
states like Tamil Nadu, Karnataka and Hyderabad metropolis in AP/Telengana
In the IT rich cities, consider thrust of online sales
RR/Disty required to leverage increased penetrative distribution in the hinterlands of Andhra Pradesh
Invest in Enterprise sales in high-tech cities and proposed smart cities
Focus on the sales of fast growing X5 in hilly regions where government is developing tourism through RR/Disty
Focus on the sales of fast growing X1 in the increasingly warming metros through MR
Political Favorability
Social FavorabilityEconomic Favorability
Technological FavorabilityEnvironmental Favorability
Challenge-Opportunity Analysis
SOUTHNo. of Stores: 218Percentage of Total Stores (PS): 33.5%Business Contribution (BC): 38%BC/PS: 1.134No. of Smart Cities: 27
Regional Strategy – South
Tamil Nadu has a high number of smart cities and electronics manufacturing centers
Recommendations
12 Team: The Three Stars
Executive Summary Situation Analyses Strategies Recommendations Appendix
Research Findings
Retail stores are still relevant87% of the respondents to the survey plan to shop in stores as much as in the previous yearConsumers prefer to shop in store65% reported that if an item of choice is available online and in a nearby store, they prefer to shop in store
Importance of ‘touch and feel’85% reported that they like to “touch and feel” products before buying
Expert advice counts90% seek expert advice of an in-store personnel while purchasing
Customer experience is paramount63% rate superior customer experience as the most important parameter of choosing a particular store over the others
Physical stores are preferred70% would prefer shopping at brick and mortar store of a traditional e-tailer
Existing customers are easierProbability of selling to a new customer is between 5-20% while that of selling to an existing client is between 60-70%Customer acquisition is costlyIt costs 6 times more to attract a new customer than to retain one2% increase in customer retention is equivalent to decreasing cost by 10%Serving customers well is criticalIt takes 12 positive customer experiences to make up for a negative one
Relevance of Physical Retail
Importance of Customer Retention
Significance of DigitalConsumers are becoming tech savvy65% resort to ‘webrooming’, i.e., look for and research about an item online before buying it from a physical store
Need in store digital interactionsIn store digital interactions influence 36 paise of every rupee spent in the retail store
87%
65%
70%
85%
90%
63%
60%
6x
12x
65%
36%
13 Team: The Three Stars
Executive Summary Situation Analyses Strategies Recommendations Appendix
Suggested Best Practices
Have an in-store GPS based app that guides the shopper to the areas having Samsung products – this lets them bypass competitor products.Have an app that lets shoppers view product reviews along with in-store curated deals based on their shopping behavior.
From the research data, customer experience is a key growth driver and success indicator and 82% shoppers use their phone instore
Improving Customer Experience
Have the better rated products in the more visible rows.Have faster checkout processes through self-checkout registers.Invest in technologies like cloud based POS, beacons, wearables and augmented reality.
Provide value added services like training for efficient smartphone usage to Baby Boomers/Gen X, microwave, washing machines to homemakers and interior decoration services for placing appliances like LED TVTarget the share of the shopper’s time than his wallet. Target increased sales on days people go out.
This could be done via exclusive launch of hyped devices with some MR partners. This adds brand value of the partner and they may return the favor with aggressive push for Samsung devices.Exclusive launch with P1, P2 and P3 in Q1, Q2 and Q3.
Minimize cannibalization - Especially in malls, put some products in certain stores and the rest in the others.
Enhance Partner Relationships
Invest in data analytic deals with MRs. This helps both the parties.Do this with P4 and P6 from Q1, and observe for 2 quarters. If the results are positive extend the benefits to P1, P2 and P3 from Q3.
Miscellaneous
Omnichannel in the form of click and collect, which is known to record 25% higher than planned spending of customers.Cross Selling through car and apparel showrooms.Network Service Providers - Leverage the reach and frenzy of new network subscriptions like Jio by selling phones with sim cards.
14 Team: The Three Stars
Executive Summary Situation Analyses Strategies Recommendations Appendix
Plan of Action - Timeline
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
R1: Discontinue partnership with P5 and
P7 in East
R2: Monitor growth of P6
R3: Exclusive launch of flagship product with P1
R4: If R3 succeeds, Exclusive launch of
flagship product with P2
R5: If R3/R4 succeed, Exclusive launch of flagship product with P3
R6: Monitor growth of P4
R7: If P6 growth < 5%, replace
R8: Data Analytics partnership with P4, P6
R9: If R8 leads to 6% increase in sales, extend it to P1, P2, P3
R10: If P4 growth < 2%, replace in selected regions
R11: Replace P5 with Disty in semi-urban North R12: If R11 leads to >5% revenue growth, replace P7 with Disty in semi-urban North
R14: If P6 growth < 3%, replace with RR
Jan
R13: Monitor growth of P6
R15: Promotional events and contests at MR stores during Valentines Day, Regional New Year Days, Rakshabandhan, Dussehra, Diwali, Christmas
R16: Increased sales of smartphones with Jio
R17: Cross-selling R18: If R17 leads to 1% revenue increase, continue
R19: B2B/Enterprise sales in South R20: B2B/Enterprise sales in West
R21: B2B/Enterprise sales in North
R22: Foreign Tie Up in West
Appendix
15 Team: The Three Stars
Executive Summary Situation Analyses Strategies Recommendations Appendix
Online
B2B
DD
BS
Modern Retail
RR
Disty
0 0.05 0.1 0.15 0.2 0.25 0.3 0.35 0.46.00%
10.00%
4.00%
5.00%
17.00%
23.00%
35.00%
Proposed Channel Contribution towards Revenue for CY17Channel ROI
Distributors 7.01%
Regional Retailers 7.13%
Modern Retail 7.98%
Brand Stores 6.83%
Direct Dealers 6.92%
B2B 8.92%
Online 5.95%
Revenue for CY 16 (in crore Rs.) Revenue for CY 17 (in crore Rs.)Contribution Rural Urban Total Contribution Rural Urban Total
Disty 40% 8180 9998 18178 35% 9687 9687 19374RR 27% 4295 7976 12270 23% 5092 7639 12731
Modern Retail 10% 227 4317 4545 17% 1600 7810 9410BS 8% 727 2909 3636 5% 277 2491 2768DD 6% 27 2699 2727 4% 11 2203 2214B2B 6% 27 2699 2727 10% 554 4982 5535
Online 3% 136 1227 1363 6% 498 2823 3321 GrowthTotal 100 13620 31826 45446 100 17719 37635 55353 21.8%
Questions?
Thank You