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Retailers are optimising operations, streamlining the movement of goods, increasing efficiencies and assessing stores. Salient observations pertaining to supply chain and operations, based upon our primary research interviews, internal insights and secondary findings are given below.

Observation 1—Supply chain is critical for vision Efficient sourcing practices, managing inventory turns and overall supply chain management are important measures to improve profitability. The ability to measure and manage supply chain risks is essential to the success of any retail operation. Most of the retailers who were interviewed maintain one or few distribution centers which feed stores with stock. However, some retailers believe that their supply chain systems are not robust enough and often experience issues such as transport vehicles not moving between states, supplies not reaching on time, etc.

Observation 2—Third-party manufacturing facilities can improve production

processes Most retailers indicated that India’s poor infrastructure is a major hindrance for expansion. Retailers typically use third-party factories for production in which—

  • Retailers’ designers and technicians work with the third-party factories to create unique product lines.

  • Raw materials and key product components are supplied by retailers, after which the factories assemble and produce the finished product.

  • Retailers have installed software at factories that allow for transparent and systematic views into production schedules, delivery timelines, etc.

Observation 3—Enjoying a first-mover advantage Retailers indicate that while there is no guarantee on how long it will take for a store to perform, they continue to open stores in new or weak markets since they invest heavily on stores to improve performance. Opening stores in newer cities enables the retailer to enjoy a first-mover advantage and also benefit from signing agreements with developers at lower rental rates than those available in Tier I cities.

Retailers who embarked upon rapid roll-outs typically reviewed store performance, sales and profitability every six to eight months and shared some of the mixed lessons they have learned—

  • Early stores started to perform well once consumers became aware of the chain and started seeing stores being launched in other parts of the city, state and country.

  • Some stores underperformed because construction was not built in those localities resulting in less store traffic and sales.

Strategic Issues for Retail CEOs* : Perspectives on Operating in India’s Retail Sector

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