Consumer and Internet
Retail expansion for leading MT player
08 Apr 2020
Context
- Client Description: A leading retail player
- Opportunity: The client desired to identify key micro markets within a given city that should form a part of their retail expansion in that city over the next 3 years.
Specific objectives of the study included understanding:
- Growth of retail market as a whole and MT (Modern Trade) retail market in particular along with future trajectory for identification of total potential
- Revenue and profitability of leading retail chains in the city at a store level to draw comparisons with their stores in the same micro-market
- City-level P&L (Profit and Loss) for various players and what were the driving factors in its growth
- Key differences in retail experience – ambience, hygiene, etc. and pricing for its own stores and that of its key competitors
- Difference in customer behavior for various MT retail chains present in the city
Our Approach
The approach was divided into 4 sections:
1. Retail market potential and growth:- Extensive consumer research to understand monthly household spend on retail items (groceries, HPC, fresh products, apparels, etc) across income brackets
- Estimating growth by taking into account population growth, inflation, prosperity, etc.
- Triangulating MT growth by drawing comparisons with other markets in India
- Triangulating retail growth and prosperity growth in the city with parallels like growth in new car purchases, growth of QSR, etc.
2. Retail P&L benchmarking for leading MT players:- Availability & footfall study: Carried out week-long intensive research at 20+ MT stores to measure their daily footfall and bill values of customers shopping at those stores
- Extensive in-depth interviews with store employees and ex-employees (N = 20) to understand revenues, expenses and profitability and growth in the past years along with a number of new stores added
- In-depth interviews with city-focused retail experts (N = 5) to understand the profitability and growth of retail chains and store-level operations
3. Retail experience and price benchmarking for MT- Identified a list of variables to evaluate customer experience in a retail MT store including – service and service quality, assortment, parking availability, convenience, etc.
- Multiple stores in the select micro-markets were visited during peak and off-peak hours to understand the differences in experience
- Price benchmarking: A list of products across groceries, HPC & apparel were shortlisted and prices for common brands and SKUs were tracked across major retail stores in Pune
4. Micro market identification for retail expansion- The city was broken down into micro-markets based on wards divisions, population and common local identifications
- These micro-markets were evaluated on 3 key factors – population and affluence, commercial (properties added and rent prices) and opportunity – competitive intensity and key upcoming infrastructure
- Distance from existing stores was also taken into consideration to limit the scope of internal cannibalization
Key Insights / Outcomes
Client successfully understood customer behavior which helped identify key differences against its competition.
Client was able to benchmark its P&L with that of its competition which helped identify key cost items that needed to be focused on in the coming 2-3 years.
Praxis Value Delivered
- 6 micro-markets were identified for retail expansion in 2 phases. Phase 1 (next 3 years) had 3 and the remaining 3 were for Phase 2 expansion
- The client gained deep insights into the retail market size and future potential
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