TEAM BLACK
CESIM ROUND 1 REPORT
CASE DESCRIPTION
Company: Retail Inc. (2 existing stores, potential for 1 new store)
Goal: Maximize profits
Existing Stores:
Store A:
o High traffic, affluent area
o Needs minimal investment.
o Customer base: mostly transient (75%)
Store B:
o Low traffic, working class area.
o Needs refurbishment.
o Potential for expansion
o Customer base: mostly residential (blue collar workers)
Potential New Store (Store C):
High-density area near railway station and major regional centre
Expected customer base: 60% residential, 40% transient.
Challenges:
Declining profits due to lack of investment in refurbishment and marketing
under previous management
Available Information:
Market research report on customer preferences for product categories
Next Steps:
Develop strategies for pricing, service, and product selection for each store
based on market research and customer demographics.
Decide whether to refurbish Store B and/or open Store C.
Implement strategies to increase sales and profitability.
SCENARIO:
Economic Climate:
The national economy is recovering slowly from a recession.
The recent holiday season was the worst for retailers in recent history.
Analysts predict a tough first quarter for the convenience store industry.
Industry Trends:
General demand is expected to drop 5-10% due to post-holiday tightening of
consumer spending.
"Dry January" will likely lead to a 5% decline in beverage sales.
Construction:
Construction costs are currently low due to the recession.
Renovation projects are not recommended as they can disrupt sales for up to
six weeks.
Transportation service providers are offering a 20% discount on emergency
stock orders (reduced from 20% of total order value to 16%).
SOLUTION OF STORE A
PRICING
Reasons behind decisions taken:
In confectionary, we set highest markup of 110% based
on the chart of different categories given in the case
study as it was under high response to discount.
Then according to response to discounts we set the mark
ups in different categories.
PROMOTION
In store A as it was already given in the case study that
not many investments are needed to be done in case of
advertisements. As it was already established.
That’s why we divided the expenses in 20: 80 for internal
and external advertisement respectively.
we gave biggest discounts in category of grocery
and beverages because these are necessary items
and customers do come to store for buying these, so
footfall increases.
We did not put any discount in fuel because it is
necessity item and customers will buy irrespective
of discounts.
We set high discounts according to the markups
given in the different categories.
LAYOUT
Since dairy and fresh products are necessary items hence
we put it in front, so that customers get delighted and not
frustrated.
And according to importance of each category, we
allotted spaces to different category.
OPERATIONS
We set 15 hours for opening store, because it was the
peak time for sales according to the case study.
We put 6 permanent sales persons because it was the
peak time and pressure on the store was more. And we
also estimated that if we reduce the manpower to save
our costs, it would not help us as due to increasing
footfall we needed bigger manpower.
We put less price on training per person to reduce our
costs.
ORDERING
We put lowest shrinkage in beverages and confectionary
because their shelf is good.
Since demand is higher in beverages, we ordered in
increased quantity to fulfil demand of customers.
Since shelf life is less for dairy and fresh products and
snacks and ice cream, so its shrinkage is 1.
INVESTMENT
We did not invest in opening store C.
Since we did not get good profit, we did not invest in
pumps.
SOLUTION OF STORE B
PRICING
According to the case study we set the prices , markups
and sales.
Since store B is not in a very good location, we took less
markups and also set low margins , so that we get the
footfall.
PROMOTION
In store B we did huge expenses in advertising to create
awareness about the store.
We divided the ratio of internal and external in 40: 60 so
that we can invest more for external and good amount in
internal advertisements also.
We provided attractive discounts in all the categories so
that footfall would get increased.
We put good discount in beverages category because
there population was consuming good quantity of drinks.
We put good discounts in grocery and general
merchandise because there was good household
population and less working population.
LAYOUT
We put dairy and fresh products in front because it is a
necessary item and customers do need it.
We put grocery in front also because there were many
households’ customers visiting the store.
OPERATION
We put 13 hours as it is same as it was already given.
We put only 2 persons , because sales was not that great
as footfall was less because of less awareness and our
margins were less.
ORDERING
We put shrinkage high in store B as there were less sales
in the area.
INVESTMENT
SOLUTION OF STORE C
We invested in store C because it is given in the case study
that at that time there was downfall and labour wages were
less and also we could invested in building and a new store so
that we can get profit in coming years.
