Case Study Electronics Retailer

ABC is an Electronics retailer based in India with a market share of almost 30% in North, 40 % in West, 60 % in South and 45 % in East of India. The margins & other income have been steady.

ABC is a 20 year old chain. The service levels have improved as & when modern retailing has gained momentum in India. The customers are satisfied with the overall performance of the chain.

With the advent of Hypermarkets, XYZ chain of hypermarkets, have been rapidly expanding thereby eating onto some portion of ABCs sale.

XYZ is an international retailer hence is able to get very good support from the brand suppliers because of its global volume.

The major challenge which ABC now faces is to tackle the competition. It already enjoys the patronage of its loyal customers. Now, not only does it want to retain the loyal customers, but it also wants an inorganic growth of customers.

ABC has been able to get a mix of category sale and Profit & Loss of XYZ. The category mix & P&Ls of both the companies are given below.

You are appointed to devise a strategy which will help ABC to retain customers, increase customer base, overcome competition,

suggest any optimization in Merchandising, and increase top line & bottom line.

Market-Product Mix Product Categories 1 2 3 4 5 6 7 8 Personal Computers Laptops Mobile Handsets / Telephones MP3 Players Audio Equipment Televisions Digital Cameras CAM corders DVDs/VCDs & Accessories TOTAL % of sale 5% 10% 8% 18% 10% 22% 15% 12% 100%

Product Mix of M/s ABC % of Amt of Product Categories sale Sale 1 2 3 4 5 6 7 8 Personal Computers Laptops Mobile Handsets / Telephones MP3 Players Audio Equipment Televisions Digital Cameras CAM corders DVDs/VCDs & Accessories TOTAL 4% 13% 10% 16% 12% 15% 22% 8% 100 % 28 91 70 112 84 105 154 56 700

Margi n% 9% 12% 18% 16% 9% 10% 14% 25% 98 1 2 3 4 5 6 7 8

Product Mix of M/s XYZ % of Amt of Product Categories sale Sale Personal Computers Laptops Mobile Handsets / Telephones MP3 Players Audio Equipment Televisions Digital Cameras CAM corders DVDs/VCDs & Accessories TOTAL 5% 10% 15% 13% 8% 20% 17% 12% 100 % 60 120 180 156 96 240 204 144 1200

Margi n% 10% 12% 20% 15% 12% 8% 15% 25% 177

ABC Head of Accounts Revenue :COGS Margin % Margin B & M Income B & M Income % Gross Margin Effective Margin % Effective Margin Store Operations Cost Salaries Staff Welfare Expenses Marketing Expenses Loyalty Expenses Commission Charges Redistribution expenses Printing & Stationary Communication (Telephone & Internet) Total Store Cost Supply Chain Cost DC - Operating Expenses Electricity Packing Material Damages Shrinkage Total DC Expenses Back Office Cost Salaries Back office Staff Welfare Expenses - Back office Conveyance IT Support Cost Cash pick up charges Electricity Security Charges Housekeeping Legal & Professional Charges Pest Control AMC Charges Repair & Maintenance Charges Total Back Office Cost Total Expenses Net Margin (Profit / Loss) 18.00 1.00 0.16 2.00 3.00 2.50 1.00 2.00 1.00 0.60 2.00 0.14 33.4 101.0 6.8 20.00 0.60 4.00 3.00 1.00 28.60 13.00 0.65 8.40 8.40 2.10 4.00 0.70 1.80 39.05 Amt (Lacs) 700.00 602.70 13.9% 97.30 10.50 1.5% 107.80 15% 107.80 COGS Margin % Margin B & M Income B & M Income % Gross Margin Effective Margin % Effective Margin Store Operations Cost Salaries Staff Welfare Expenses Marketing Expenses Loyalty Expenses Commission Charges Redistribution expenses Printing & Stationary Communication (Telephone & Internet) Total Store Cost Supply Chain Cost DC - Operating Expenses Electricity Packing Material Damages Shrinkage Total DC Expenses Back Office Cost Salaries Back office Staff Welfare Expenses - Back office Conveyance IT Support Cost Cash pick up charges Electricity Security Charges Housekeeping Legal & Professional Charges Pest Control AMC Charges Repair & Maintenance Charges Total Back Office Cost Total Expenses Net Margin (Profit / Loss) Head of Accounts Revenue :-

XYZ Amt (Lacs) 1200.00 1022.40 14.8% 177.60 24.00 2.0% 201.60 17% 201.60 24.00 1.20 18.00 18.00 3.60 8.00 1.20 2.00 76.00 35.00 1.00 6.00 4.00 2.00 48.00 35.00 1.75 0.30 3.00 5.00 4.00 1.20 3.00 1.20 1.00 3.00 1.50 59.9 183.9 17.7

Net Margin % (Profit / Loss)

1.0%

1.5%