Here is a compilation of top four case studies on retail management.
1. Case Study on Kanchi Silks:
Kanchi Silks is a well-known fashion saree retailer in Kanchipuram that provides one-stop shopping for all sarees. The product variety is truly amazing, covering a wide range including Arani, Bangalore, Dharmavaram, Kanchipuram, Kumbhakonam, Pochampalli, Salem, Tanjavur, Venkatagiri etc. Kanchi Silks was established in 1981 at Vilakadi Kovil Street.
Its original site of 500 sq. ft. has now grown to more than 1,00,000 sq. ft. in two or three floors in adjacent locations, with over 1,00,000 SKUs. The store sales revenue in 2007 was more than Rs.20 crore. The founder, Mr. Murugan, can often be seen serving customers, unrecognized by those whom he serves.
On normal weekdays, 15-25 customers visit the store with the number increasing to 100 plus customers at times on weekdays as well as the weekends. His early memories begin with the time he joined the family profession of manufacturing silk saree boxes, made out of paper boards which he supplied to leading silk saree manufacturers. He started his first store with an area of 500 sq. ft. at his residence in Kanchipuram.
Kanchipuram town is known as the silk city since the main profession of the people is weaving silk sarees. Its economy is entirely dependent on tourism and the well-established handloom industry. Approximately 70 per cent of Kanchi Silks customers are tourists and the rest are locals. The tourists are mainly from the neighboring states especially from Karnataka, Andhra Pradesh and Kerala.
In terms of competition, Kanchi Silks unique positioning is its location. This area is closer to the market area where all the leading silks manufactures have their stores. This store is located at residential area having some great advantages like ample parking facility and easy accessibility from the main road. Even local retailers find difficult to compete with Kanchi Silks on pricing due to higher overheads.
Kanchi Silks practices discounted pricing and provide fair value to its customers. Although it does not necessarily have the lowest prices in town, it is often perceived to be competitive by its customers. The gross margin on products is more than 40 per cent on an average, with the range between 25 to 30 per cent.
Kanchi Silks is very careful in its sourcing practices. They buy products on consignment basis from the weavers from in and around the town. Where it previously used only a few suppliers, it has now widened its purchasing network and buys sarees from different places like Bangalore, Arani, Dharmavaram, Selam and Thanjavour. Kumaran himself does the sourcing from the cheapest suppliers, bypassing all the intermediaries.
Mustafa mainly employs local people and weavers. The silk weavers of Kanchi settled more than 400 years ago and have given it an enviable reputation as the producer of the best silk sarees in the country.
Kanchipuram has thousands of handloom and skilled weavers that make its silk sarees one of the best in the entire world. About 75% of the city’s population is associated with the handloom industry in some way or the other. About 75% of Kanchipuram’s population is dependent on the silk saree industry, either directly or indirectly.
The market for South Indian silk sarees, popularly known in North India as ‘Kanchipuram silk’ irrespective of the place of production — Arni, Bhuvanagiri Thanjavur or elsewhere — is growing briskly. Conjeevaram is the English name of the ancient Kanchipuram. Like all ancient cities, this city was the capital of the early Cholas dating back to 2nd century BC and a Pallava capital between the 6th and 8th century.
Kanchi Silks communication efforts are limited because of the brand name. It leverages the city name and believes on the word-of-mouth concept and the past customer referrals. Although it does buy airtime on local TV (mainly Tamil speaking) and advertises in the local newspapers, it believes positive word-of-mouth communication is a more effective means of promotion.
The Indian women apparel market has undergone a transformational phase over the past few years — growing number of working women, changing fashion trends, rising level of information and media exposure, and entry of large number of brands have given the industry a new dimension.
The highly lucrative market was estimated at more than Rs.37, 000 crore in 2007. The market, in the past five years, posted a growth rate of good 14%. And with the growing presence of organized retail and rapidly spreading mall culture, the industry is all set to grow further in future, according to “Women Wear Market Forecast to 2010”.
Founder Kumaran has now expanded his store operations in different parts of the country. He started his outlet in Hyderabad in late 90s. Kanchi Silks has its own website www (dot)kanchisilks(dot)com that is meant to replace its catalogs. The website receives order for almost 5-8 sarees in day worth of Rs.30, 000 with the orders coming mainly from across the world especially from countries like Singapore, Malyasia, Sri Lanka and the United States.
Today, they also get order from different states like Maharashtra, Kerala, UP, MP, and the North East. Online store uses the technology that allows for the user’s name and address as well as critically sensitive information such as the credit card number. But on an average he sells very limited sarees through internet. Also it is difficult to deliver the products across the country because different states will have different taxing procedures.
However, the US slowdown has resulted in low values of NRI purchases, although the volume has grown. They usually come down on business and won’t mind spending a huge amount on silk sarees because they earn in dollars. But because of the job loss there and uncertainty about the future there has been a five per cent dip in NRI purchases.
Kumar laments the unavoidable loss in excellence as zari is today made from copper, which is electroplated with silver and given a gold coating. In commercial terms, this is called ‘tested zari’. The gaudy shine is produced by treating the zari chemically and the ‘gold’ borders become lack-lustre within five years. He says, “To those who look at the price we give tested zari and the ones who are particular about quality we give them pure zari”. The price of zari has also doubled tremendously in recent years.
The maximum length possible on a traditional loom is an 18-yard wrap, which means that no more than three silk sarees can exactly look alike. In the new millennium, as the ‘Kanchipuram’ silk route traverses continents, hundreds of sarees designed for standardized tastes, are produced on the power looms.
The silk production turned competitive with the emergence of new silk houses in Tamil Nadu. Today, perhaps Kanchi silk are better known than Kanchi cottons. Kumaran, now a days also owns power looms to cater into cotton sarees business, which aims to target office going women.
2. Case Study on Shreejii:
It was 9.00 pm and standing in front of the store Ajay saw the busy Ghatkopar MG Road still filled with commuters as his employees rolled the shutters of his store down. Ajay is the third generation businessman of Shreeji Opticians and Contact Lens Clinic.
He slid back in memory and remembered his father and grandfather who ran the showroom. It was the same store of about 350 sq. ft. which they managed with a handful of employees. They did business much better than he could manage today. Shreeji was established in 1972 as the first AC Opticians showroom in Ghatkopar, but in the recent years it remains forgotten.
Walking back home Ajay started thinking — he had a good variety of frames, lenses and sunglasses and they also started contact lens dispensing from mid-90’s. He had four salesmen out of which three were there with the store for more than seven years now. He also had one optometrist for eye testing of the customers, which was offered as a free service.
But despite this, Shreeji lost in the competition. Ghatkopar had about 23 standalone opticians; most of them had mushroomed in the last decade. Of late he was more disturbed with the entry of a major player — Gangar Eye Nation with a huge footprint of about 2,000 sq.ft. that was about 12 mins walking distance from his store. He had also got the news that Titan Eye Plus was eyeing Ghatkopar and was looking out for a suitable store location there.
He reached home, sat down on his study table, and started analyzing his sales for the past 10 years. Earlier the store had bigger profit margins with an average footfall of 20-25 people per day with a good conversion rate. Shreeji used to deal in local brands like Sillotti, and frames procured usually from wholesale players like Alankar Opticians.
Lenses were procured from Central Optics, Ghag etc. But now, times were changing. Today the profit margins were reduced because of competition from national players and high operating cost. Interestingly the store footfall has gone up to 75-90 per day and most of the customers are youngsters who prefer to use branded frames like Optimed, Swaroski, cK and Steppers. In lenses Essilor, Kodak, Nikon, is what customers demand for. Today, Shreeji has the conversion rate of 20%.
Ajay also found some of the interesting facts of the competitors in the vicinity like most of the stores deal with the branded products but only a few of them have better walk-in and conversion rates.
Ajay was skeptical from dispensing branded products as brands did not offer the kind of margin. Ajay could manage from the locally sourced products. But he missed out on the fact that brands could charge a premium for the same product that otherwise would have been considered as a rip off.
Players like Gangar sold only branded products like Prada, Gucci etc. while Titan dealing with the products under its own Brand Eye+ stores sold frames under the Titan brand as well as the Eye+ and Dash brands (the Dash brand targets children). The stores also deal with frames and sunglasses from a large number of international fashion brands like Elle, Vogue, Versace, Dior, Steppers, Hugo Boss, Armani, Levis, Esprit, Oxydo, Tommy Hilfiger, Dolce & Gabbana, Calvin Klein, Silhouette, Swarovski, Dunhill and Mont Blanc etc.
In early 2007, the prescription eyewear market in India was estimated to be worth between Rs. 18-20 billion with around 30 million pieces (frames with glasses) being sold every year. The organized eyewear market is still at an infant stage. This segment however, was largely dominated by the unorganized sector, which accounted for 95% of the prescription eyewear business. India has an estimated Rs. 1, 500 crore eyewear market and that is poised to grow between 15 to 20 per cent annually.
TITAN EYE, Kodak, Luxottica Group, Eye was from Odysseys, Vision Express from Reliance Retail and major international players will change the way eyewear industry operates in the country. They aim to introduce the concepts of branding, right pricing and value for money, which is non-existent now.
3. Case Study on Dosa Plaza:
Mr. Ganapathy smiles and says it was an accidental business. He basically hails from a small village called Naglapuram from Tamil Nadu. He came to Mumbai in 1990 in search of livelihood with a great ambition and dream along with his basic educational background. He passed out of 10th standard and migrated to Mumbai with the help of his friend.
He applied for a job at different places but was denied a job for not having a good education background or knowing English. Then he worked in a bakery at Bandra making pav vada and pavs are the favourite dish of Mumbaikars. Mr. Ganapathy worked at many small places and restaurants. He was not satisfied with his job and shifted his base to new Mumbai.
He started a career with a restaurant in Vashi called Prem Sagar as a service boy. Later, his passion for cooking led to a business opportunity when he started selling dosas.
Growth:
Having seen a dosa stall on the roadside in sector 12 at Vashi along with his brother, he decided to start a business in dosa. He was running a business almost for five years in the same area and offered as many as 15 varieties of dosas. During this period he created a customer base and learned new varieties of dosas.
Along with his dosa outlet he tried his luck by investing in a Chinese restaurant in which he incurred a loss. But he tried Chinese cuisine in his dosas which worked very well. He got passionate and invented variety of dosas in Chinese style like American chopsuey, schezwan dosa, paneer chilly, spring roll dosa etc. By the year end, Dosa Plaza had fashioned 20-25 original varieties of dosas.
During this time he learnt about the computers and the use of internet from a friend. He had a vision to make dosa an international cuisine. Late in the evening, he used to browse the internet to broaden his skills and convert his vision into a reality. He made his dosas popular by serving them complimentary to his customers. The tremendous response that he received from his customers inspired him to fashion many more original one-of-their-kind recipes.
Dosa Plaza had already made its presence felt in the hearts of the food lovers. By 1998, Dosa Plaza had 104 delicious varieties of dosas in its list. He started his first shop at the Vashi Railway station. He earned a good name and credibility through the Vashi store. The response to his dosas kept growing, so he stayed on for a whole year. He bought his vegetables from APMC Vashi market at a wholesale price every morning and made basic recipes at home with his brother.
Branding:
Dosa plaza came to his mind as both the words have “AA” in the end which make it sound better and Plaza means open corner space and his new outlet was also in an open corner. Dosa Plaza is affixed with Prem Sagar as he worked in Prem Sagar. Before which, he never got such an opportunity to work.
Earlier he was always instructed by his employer to work in a kitchen. It was the Prem Sagar restaurant which gave him an opportunity to interact with customers and showcase his talent. According to Mr. Ganapathy, the market is kaleidoscopic. When he started, customers used to come because of the owner’s name and the personal relationship. Gradually customers shifted to food taste. Brand had a major role in customer preferences. Now customers come for brand. Service, location and ambience play an important role on a customer’s mind.
Competition:
Dosa Plaza doesn’t have any big competition as everybody operates in their own way. The major organized player has also entered into this business with a strong financial support and brand name. Dosa Diner is the first restaurant in Mumbai to transform traditional Udipi food into non-vegetarian fare.
This attempt is to capture the mid-market family dining segment. The restaurant effectively mixes bright colors and ethnic materials to produce a warm ambience. The restaurant offers various types of dosas with choice of fillings ranging from prawns, lamb and chicken to mushrooms and cottage cheese.
Dr. Dosa had a clear cision for his success. He’s been interested in food — preparing it, serving it and seeing people enjoy it. Though never formally trained in the dosa preparation, he learned to cook. He did R&D in dosa and created more varieties. Now 27 dosas are trademarked and the number is still increasing. He opted to spend his time learning how to prepare dosas for his family, customers and always found the experience tremendously satisfying. Even today he hasn’t lost his enthusiasm for well-prepared food.
Mr. Ganapathy learnt business in Mumbai. His personality shows a great impact of family tradition, values and ethics. He firmly believes in himself and believes in moving ahead at every stage of life. He does not believe in looking back. Past experience as employee of many small restaurants helped him to understand the business in a broader perspective.
He personally believes dosa is a purely vegetarian food and doesn’t believe adding non-vegetarian varieties in his menu. Instead of that he brought different veg concepts in his menu and added more varieties. He is the first person in India who offered idly with Manchurian at a premium price.
Future Expansion:
Presently Dosa Plaza has 35 outlets spread across in nine different states in India. Mr. Ganapathy is not targeting all shopping malls but only a few quality malls. Prime target is highways. He is planning to launch 6-8 outlets in Chennai in the next one year.
Two new restaurant formats, “Mumbai Spices” and “Chop king” have been introduced. Food trial is on for these restaurants. He is also planning to open kiosks opposite to the railway stations in Mumbai and the plan is to have centralized kitchen in Mumbai, which will be the supplier so as to optimize the entire process.
For the international operations he already had a strategic tie-up with landmark group which is one of the leading retail groups in the world. He started his first outlet in Sharjah international airport in the New Zealand outlet.
This outlet in New Zealand is the first Dosa outlet. Prior to this, there wasn’t any vegetarian outlet of this scale in close proximity. Foreigners and NRIs come from 100 km range. Mr. Ganapathy believes that customers come to his outlet as the rates are reasonable. He is also planning to enter into Canada and US market soon.
Mode of Operation:
Dosa Plaza operates on three business models i.e. company owned, joint venture and franchise. At an initial stage the stores were expanded by the method of franchising. At the growth stage, few of the stores did not perform well. The store which was there is Ghatkopar was closed because of the franchisees.
It’s difficult to control over the franchisees which is the major drawback of this particular model. Ganapathy prefers joint venture rather than having franchise outlets especially in overseas operations as joint ventures allow more control over the business.
4. Case Study on Multiplexes:
“There’s no business like show business”.
The above truism comes to life when we consider the amount of turnover churned by the multiplexes that have mushroomed up in the past decade. Predominantly single-screen theaters ruled the roost when it came to movie theaters but with changing times the era of multiplexes was ushered in with cinema halls being converted into the ultimate weekend getaway for the thronging millions.
With around 11,500 active screens, India is under screened. China, which produces far lesser films than India has 65,000 screens while the US has 36,000. India’s screen density stands low at 12 screens per million populations. There is a need of at least 20,000 screens as against the current 11,500. This gives multiplex operators enough room to grow as the traditional single-screen theatres do not have the financial wherewithal nor do they enjoy tax incentives.
Over the last few years, multiplexes have emerged as a trend in urban India. Multiplexes are essentially cinemas with three or more screens. They provide a quality viewing experience and are generally located around shopping malls to increase footfalls in these malls.
Each screen in a multiplex has a small seating capacity in the range of 150-300 seats as compared to single screen cinemas which have capacities in the range of 800-1,200 seats.
The multiplexes are ensuring everyone is taken care of as movie theatres have been amalgamated with retail outlets, shopping malls, bowling alleys and food courts etc. The multiplex players are bending over each other to cater to the needs of the customer and make it a family experience.
This is only the icing on the multiplex owner’s cake and this icing only gets thicker with time as millions of revenue is on stake with the loyal customers coming to get a good deal. The heavyweights in this arena are PVR cinemas, Big Cinemas (owner ADAG group), Inox and Fun Cinemas.
1. BIG Movies:
In June 2005, the Anil Dhirubhai Ambani Group (ADAG) acquired majority of the shares of the cinema screening business of the Manmohan Shetty owned Adlabs. The phenomenal growth story of 20 screens in 2005 to 186 screens today with a seating capacity of 71,000 followed this acquisition.
The success mantras driving the story are — expansion, scale-up and acquisition. The jump to Rs.365 crores in 2007 was termed as a three-fold growth which jumped again to about Rs.520 crores in 2008.
ADAG bought nearly 200 cinema houses pan America in cities as New York and Chicago and 51 theatres in Malaysia and six in Mauritius, which increased their presence overseas. Moreover they have focused on acquiring and renovating old movie houses in tier II and tier III cities.
Thus you would find a big cinema presence in cities like Lucknow, Hyderabad and Ghaziabad. Big Cinemas has opted for organic and inorganic growth strategy and if we look at the turnovers, this seems to be paying off.
According to the Adlabs spokesperson, they have 70 movies in the pipeline. The acquisition of N.D. studios in Karjat raised many eyebrows as they seem to be going into risky ventures in an over-zealous attempt to aim for the stars. They also plan to launch 52 satellite channels and are targeting the TV audience.
One of the most innovative concepts brought in is the d-technology which would entail production, distribution and screening of the movies via digital cables. This technology reduces the risk of piracy and also makes it much simpler for cutting costs.
Reliance Adlabs is one of the firms that are planning a double-digit number of screens in one of its megaplexes. The firm is investing Rs.30 crore on what will be India’s largest megaplex. It will have 15-16 screens, including an IMAX 3D-digital screen, food and beverage lounges, special screens for kids and sports screens.
Adlabs is also opening a nine-screen multiplex at Ghatkopar and PVR is coming up with eight screens. Adlabs has tied up with Kingfisher airlines where if you travel by airlines, you accumulate points on which you can get a free ticket in Adlabs after you have reached a specific number of points.
2. PVR:
It is one of the leading multiplex chains in India with 101 screens under operation in 14 cities at present. PVR has been successful in building a lifestyle entertainment brand because of its focus on customer service and quality of experience.
The company has been able to establish itself as one of the premier entertainment destinations, which has resulted in the highest occupancies, footfalls and spend per head as compared to all of the other multiplex operators.
It attracted 18 million patrons with an occupancy ratio of 41% in FY08, both the highest numbers among all the multiplex players. Today, it contributes 10% plus to the total domestic box office collections in the country, showing a clear dominance.
3. Inox:
It has shown impressive operational performance, delivering a 65% CAGR in top line in the past five years. The company has shown remarkable pace of expansion in the last 3-4 years with commendable speed and quality of execution.
Inox has more than 50% of its screenings the tier I and II cities, which has rewarded the company very well in the past. It plans to add more than 100 screens in the coming two years, 70% of which will come up in select tier I and II cities. They believe that the move will create value for the company as these locations are comparable to metros level.
Inox has ramped up its presence to 84 screens in 24 locations at present. While registering a strong capacity growth in the past four years, the company has also been very successful in building a strong entertainment brand for its cinemas. Operating in an industry marked by execution delays, both the speed and the quality of expansion are commendable considering that the promoters didn’t have prior exposure to the exhibition industry.
4. Shringar Films Pvt. Ltd.:
It was founded in 1975, with the distribution of Bollywood films as the company’s core area of operation. Operating the chain of Fame cinemas, the company gave Mumbai its first five-screen multiplex and its first IMAX theatre. Today it has a total of 30 screens in seven complexes. By 2009 the chain aimed to targets a sprawling presence with approximately 52,000 seats.
Risks and Concerns Related to Multiplexes:
Multiplexes thrive on rising footfalls which in turn depend on the better supply of films from producers. Hence, any disruption on the supply side will definitely have a negative impact on a multiplex players’ growth. Movies compete for customer attention with other forms of entertainment viz. DVDs, TV, cricket, festivals etc. An increased acceptability of these avenues will divert footfalls away from the multiplexes.
However, there is enough room for all to exist and grow simultaneously. A case in point is the US, where almost all forms of entertainment are present and have been well received by the consumers. Even then, footfall growth hasn’t halted over there.
Moreover, there might be possible synergies among these formats which might benefit multiplexes, e.g. showing of IPL matches on cinema screens. Supply of quality real estate has been a problem in the past for multiplex players. Mall delays due to various reasons will hurt expansion plans of the companies.
Entertainment tax in India is among the highest in the world leading to a much higher occupancy levels required for breakeven of multiplexes. Even though state governments have announced tax free windows for these players, uncertainty looms over the viability of multiplexes after the window expires. The level entertainment tax should come down in the future; otherwise any increase will be passed on to the consumer to a large extent like it is being done at present.
The whole footfall growth story depends on rising prosperity in the country leading to higher discretionary consumer spends. If the economic environment starts worsening for a prolonged period, it will affect patronage levels, negatively pulling down top line growths. Hopefully there is enough space for more multiplex projects given the quantum of demand and lack of supply in the sector.
Preliminary analysis suggests that at national level and considering only the urban population demand in the age group of 15-60 years, 662 multiplexes with three screens per property i.e. 2,000 screens can operate at 35% capacity. All of the multiplex players combined are operating only 500 screens at present.