8/14/2019 Tallmart's Business Case Study
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1. About Company
Tallmart is one of the largest non-food retailers in USA with
headquarters in San Francisco, California. It was established
in1990 and its first department store was launched in downtown San
Francisco. The department store focused on giving thecustomer the
latest in various product categories that it offered, at better
prices than other retailers. Customers immenselyliked the choice of
products offered by Tallmart, and the store became #1 in its
category in California by 1992. Based onthis, Tallmart replicated
the model by opening similar stores in other US cities and tasted
similar success. It became apublicly listed company in NYSE and
NASDAQ in 2005. It also created online shopping site and started
selling productsthrough this channel in 2008. The online shopping
site sends request to warehouse nearest to customer for
productdispatch and delivery.
1.1 Product Categories
Tallmart is involved in retailing of following categories of
products,a. Technology for Personal Uselaptops, PCs, mobile phones,
home theatre, TV, cameras, etc.b. Home and garden sofas, dining
tables and chairs, furnishings, modular kitchens, cooking
equipment, refrigerator,
washing machines, lawnmowers, gardening and landscaping tools,
etc.c. ClothingMens, Womens, Boys, Girls, Baby clothesd. Health and
BeautyPerfumes, deodorants, makeup kits, beard trimmers, skin care,
etc.e. Jewellery and WatchesLadies and Mensjewellery, watches,
cufflinks, etc.
1.2 Sales Channels
a. Retail storesi. FormatDepartment store
ii. Sizethe stores range from 5000 - 20000 sq.ft. areaiii.
Location - major cities/towns across USA
b. Online retailing
1.3 Company Data
a. FY2012i. No. of Stores500ii. No. of Employees50000iii. No. of
Warehouses50 (almost one for every state)
2. Vision & Objectives
2.1 Vision
Continuous innovation, cost optimization, and growth to better
serve and satisfy customers
2.2 Objectivesa. FY2013
i. Establish a unique positioning in the industryii. Profit
margin (based on PBT)20%iii. Keep sales intact i.e. no growth, no
decline
b. FY2020i. Annual SalesUSD 20 Billionii. Total stores across
USA - 1000 or moreiii. Profit margin (based on PBT)25%
3. Target 2013/2020 Strategy
Shift from conventional department store format to catalog-based
retailingin the new format, very few items aredisplayed in the
store; customers select products from catalogs available in the
store and fill an order form, based on whichitems are retrieved
from the attached storage area and sold to customer.
a. Reason for choosing above Strategyi. Profits impacted by
escalating fixed costs (real-estate, salaries) and variable costs
(utilities, inventory
maintenance, etc.)ii. Lack of differentiating factors/USPs
compared to other retailers in the categoryiii. Sales impacted by
price competition from other retailersiv. Catalog-based retailing
is a completely new concept in USA and hence expected to be a
USP
b. Expected Benefitsi. Reduce coststhrough reduced store space
and store staffii. Start more stores easilysince cost/maintenance
of new store is much lesser due to lesser space and staff
requirement
iii. Generate additional income by leasing out or selling
available space to other retailers/Companiesiv. Generate new
businessfrom existing and new customers who enjoy the catalog-based
retailing experiencev. Data analysisidentify fast selling items and
track customer buying patterns
c. Expected CostsMajor additional costs to be incurred are
expected to be as follows
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I. Technology for Personal Use25%II. Home and garden15%III.
Clothing15%IV. Health and Beauty25%V. Jewellery and Watches20%
c. Strategy ExecutionIn the first two months of FY13,
i. All 500 stores were renovated according to revised designii.
Marketing campaigns were launched informing about change in
retailing format through print, TV and online
channelsiii. Catalogs were created and put in the stores25
catalogs per storeiv. Employees were trained on new processesv.
Internal processes were revamped to suit the new retailing modelvi.
Warehouses were optimised based on stocking requirementsvii.
Additional store space leasing/sale was initiated
5. Issues with Strategy/Mid-Course Introspection
a. As a result of the retail boom, Tallmart faced rapidly
expanding product range in many core product areas and being
acatalog retailer, Tallmart had to ensure it stocked all the
products listed in the catalog throughout the season. This leadto
increasing inventory of unsold items. Inventory/Warehouse
Management was not optimized to handle this
b. Leasing/sale of additional retail space didn't happen as
planned, hence estimated income from this channel was
notgenerated
c. Customer footfall in the stores had reduced and overall
customer satisfaction levels went down. Reasons were foundto be as
follows,
i. They couldnt see the product and touch/feel it before
deciding to buy it. This took away from the overallbuying
experience
ii. Catalog format eliminated their interactions with salesmen
and hence the consultation processiii. They found it difficult to
access catalogs due to crowd/rush during weekendsiv. They found it
difficult to browse the catalog and find product of their choicev.
They found that most of the latest products were not available in
the catalogvi. Many times, they got the wrong product despite
quoting correct "product id", hence ended up wasting time at
the storevii. Negative word-of-mouth among existing customers
drove away potential new customers
d. Store employees were unhappy with the catalog format which
they felt alienated them from customers
e. Tallmart has implemented the new strategy and is at a stage
where they can't switch back to the old methods
6. Questions
a. Identify and elaborate on issues/gaps, if any, in
Tallmartstarget 2013/2020strategy? Provide relevant data/workings
where needed
b. Identify 3 different solutions to fix the above mentioned
issues, and do acost-benefit analysis to identify the best approach
to help Tallmart get back
on track to achieve the objectives/targets set for 2020. Provide
relevantdata/workings to substantiate the same
c. If you have the opportunity to define Tallmart's Target
2013/2020 Strategy,what will it be, keeping in mind the objectives
for 2013/2020 and companyperformance in fiscal year 2012? Elaborate
on the same and providerelevant data/workings to substantiate the
same
