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Case in point 1 - Aditya Birla’s methodology for scoring store success

Food and grocery

Factors for success

  • Extensive due diligence of catchment area

  • Scientific rigor in determining parameters/metrics for store success

One of the key and the most important decisions for any retail organisation is to set up quality stores at the right location and the right catchment. Aditya Birla Retail Ltd (ABRL) has a detailed process which ensures that extensive due diligence is completed for the opening of new stores. Every new store is scientifically measured on the following key parameters:

  • 1.

    Store location

  • 2.

    Store catchment

  • 3.

    Store financials

    • a.

      Pay back

    • b.

      Store Contribution in a specified time frame

The new store sign off process is rigorous and has various check points in the system. New store opening is an action that is not easily reversible and hence ABRL spends significant time and energy in ensuring that any new store that is opened is a high quality store that delivers the value proposition to its customers and contributes to the positive bottom-line of the organisation.

Inspite of the rigor and detailed due diligence in the opening of a new store, there would be a small percentage of stores that might not deliver the expected bottom line for the organisation. Hence, it is important to review the performance of the stores both from financial and non-financial parameters. ABRL maintains and reviews a monthly store scorecard that enables them to measure, on a scientific basis, the likelihood of success for outlets in the short and medium term. The store score card has the following parameters that are measured scientifically:

  • 1.

    Location/ catchment*

  • 2.

    Assortment

  • 3.

    Pricing

  • 4.

    Stock availability

  • 5.

    Communication

Stores with a rating of one or two on the five-point scale are closed unless there are special circumstances.

*Note: Catchment is defined as 1.5km for supermarkets and 5km for hypermarkets, which are the two formats that ABRL operates.

(Source: Primary research interview with Aditya Birla Retail)

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

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