Retail Cumulative Assessment of Performance (CAP) Score
Professional Services Training & Consulting
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Using A CAP Score As a Diagnostic Tool
OBJECTIVEZENeSYS CAP Score benchmarks peer group of companies to arrive at a relative positioning in four key functional areas. By analyzing its relative position, a firm can diagnose set new directions for improvement. Since the CAP score will be created every quarter, a firm can monitor its score to evaluate the effectiveness of its strategic improvement initiatives.
CAP SCORE
• Four functional areas of measurement are: • Financial Strength• Consumer Acceptance• Online Presence • Operational Efficiency
• The peer groups of companies being benchmarked are WAL-MART, TARGET, MACY’S INC., J.C.PENNEY COMPANY INC., KOHL’S CORPORATION and NORDSTROM INC.
BENEFITS OF CAP SCORE
• Key messages for sales force to become more competition aware • Devise customized marketing campaigns • Create customized initiative to improve Online Presence and Branding
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4 Step approach to measure Retail Cumulative Assessment of Performance (CAP) Score
1. Identified four components for CAP:a. Financial Strengthb. Consumer Acceptance & Selling Capabilityc. Online Presenced. Operational Efficiency
2. Developed indicative ratios/indices for each from public data
3. Developed the indices for Competitiors (peer firms of CLIENT)
4. Derived a cumulative score
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CAP - Financial Strength Component
INDICES INCLUDED1. Stock Performance:
I. Market Capitalization, II. Stock Price, III. P/E Ratio
2. Financial Performance: I. Current Ratio, II. Quick ratio III. Interest coverage ratio.
EXPECTED TAKE AWAYFinancial performance helps in summarizing the overall positioning and sets the tone to understand how CLIENT fairs against its competitors.
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Financial Strength (1/2) – Stock Performance
Indices Assigned Weights
CLIENT Rank
Weighted Parameter
F1 - Market Capitalization 1/6 5 .833
F2 - Stock Price 1/6 4 .66
F3 - P/E Ration 1/6 5 .833
InferenceStock performance has provided clear indication of CLIENT’ current standing vis-à-vis its peers. This lays ground for further
detailed analysis in subsequent components.
SEARS Walmart Costco Target Kohl
-40
-20
0
20
40
60
80
100
120Stock Price & P/E Ratio
Stock Price
P/E Ratio
SEARS Walmart Costco Target Kohl0
50
100
150
200
250
Market Capitalization (Bn USD)
Market Cap
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Financial Strength (2/2) – Financial Performance
IndicesAssigned Weights
CLIENT Rank
Weighted Parameter
F4- Current Ratio 1/6 3 .5
F5 - Quick Ratio 1/6 5 .833
F6 - Interest Coverage ratio 1/6 5 .833
InferenceFinancial performance has provided clear indication of current CLIENT standing against the peers. Lays ground for further
detailed analysis in subsequent components.
SEARS Wal-Mart Costco Target Kohl
-10
-5
0
5
10
15
20
25
30
35
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
Consumer Confidence Correlation with Revenue Growth
Interest Coverage RationCurrent RatioQuick Ratio
Gro
wth
Ra
te (
%)
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Financial Strength– Component Ranking
Indices Assigned Weights
CLIENT Rank
Weighted Parameter
F1 - Market Capitalization 1/6 5 .833
F2 - Stock Price 1/6 4 .66
F3 - P/E Ration 1/6 5 .833
F4- Current Ratio 1/6 3 .5
F5 - Quick Ratio 1/6 5 .833
F6 - Interest Coverage ratio 1/6 5 .833
Inference• No clear Leader as far as financial strength is concerned
Component Rank for CLIENT – 4.5
Ideal Ranking – 1
Best Performer Ranking (COSTCO) – 2.33
Indicative
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CAP - Consumer Acceptance & Selling Capability Component
INDICES INCLUDED1. Market Ranking – Reflecting the Offline sales market share
2. US Consumer Confidence Correlation Index: How much better or worse has any firm performed w.r.t. the Consumer Confidence Index
3. US Retail Sales Correlation Index: How much better or worse has any firm performed w.r.t. the US retail sale growth
4. Total Number of stores
5. Customer Sentiment Index
EXPECTED TAKE AWAYGauge the consumer point of view and understand how CLIENT perform on the elemental Component i.e. Attracting
consumers and resulting into successful sales
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Consumer Acceptance & Sales Capability (1/5) – Market Rank
IndicesAssigned Weights
CLIENT Rank
Weighted Rank
C1 – Market Rank 1/6 3 .5
Inference• Offline retail performance of CLIENT should be a strong focus area for CLIENT marketing team.
Dummy Data
FirmRevenue *
(Bn USD)Rank (Year
2012)
CLIENT 40 3
Wal-Mart 150 1
Peer 2 30 4
Peer 3 45 2
Peer 4 25 5
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Consumer Acceptance & Sales Capability (2/5) – Consumer Confidence Correlation Index
Indices Assigned Weights
CLIENT Rank
Weighted Rank
C2 – Consumer Confidence Correlation 1/6 2 .33
Inference• Wal-Mart has consistently beaten the consumer confidence index
• CLIENT witnessed exceptional season during Quarter 2.
Dummy Data
March'12 June'12 Sept'12 Dec'120
1
2
3
4
5
6
7
Consumer Confidence Correlation with Revenue Growth
Consumer Con-fidence Index
SEARS
Walmart
Peer 2
Gro
wth
Ra
te (
%)
Firm Delta (Q1)
Delta Q2
Delta Q3
Delta Q4
Total Delta
CLIENT -2 +2 -1.5 -1.5 -3
Wal-Mart +.5 +3.5 +.5 -2.5 +11
Peer 2 -2.5 +.5 -1.5 -3.5 -7
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Consumer Acceptance & Sales Capability (3/5) – US Retail Sale Correlation Index
Indices Assigned Weights
CLIENT Rank
Weighted Rank
C3 – US Retail Sale Correlation Index 1/6 2 .33
Inference• Wal-Mart has consistently beaten the consumer confidence index
• CLIENT witnessed below market performance in last two quarters
Dummy Data
March'12 June'12 Sept'12 Dec'120
1
2
3
4
5
6
7
US Retail Index Correlation with Revenue Growth
US Retail Sale Growth
SEARS
Walmart
Peer 2
Gro
wth
Ra
te (
%)
Firm Delta (Q1)
Delta Q2
Delta Q3
Delta Q4
Total Delta
CLIENT 0 +2 -1.5 -1.5 -1
Wal-Mart +.5 +3.5 +.5 -2.5 +11
Peer 2 -2.5 +.5 -1.5 -3.5 -7
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Consumer Acceptance & Sales Capability (4/5) – No. of Stores & Revenue Per Store
Indices Assigned Weights
CLIENT Rank
Weighted Rank
C4 – No. of Stores 1/6 2 .33
C5 – Revenue Per Store 1/6 5 .83
InferenceCLIENT Scores high on overall market reach, but the revenue per store is the lowest amongst peers. This calls for due
diligence for each Store’s business case.
Dummy Data
Firm No of Stores
Rank Revenue Per Store (Mn USD)
Rank
CLIENT 2000 2 10 5
Wal-Mart 4400 1 100 1
Peer 2 400 4 25 4
Peer 3 1700 3 30 3
Peer 4 40 5 31 2
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Consumer Acceptance & Sales Capability (5/5) – Consumer Sentiments
IndicesAssigned Weights
CLIENT Rank
Weighted Parameter
C6- Consumer Sentiment 1/6 1 .166
Inference• CLIENT Clearly enjoys net positive consumer sentiment
• Can be leveraged for both online and offline sales
• Will be interesting to understand the demographical break up of this index
SEARS Wal-Mart Peer 2 Peer 3 Peer 4
-10
0
10
20
30
40
50
60
Net Sentiment Score
Positive Sentiment
Negative Sentiment
Net Sentiment Score
Gro
wth
Ra
te (
%)
FirmNet Sentiment
Score (%)Rank
CLIENT 6 1
Wal-Mart 5 2
Peer 2 -4 4
Peer 3 0 3
Peer 4 -5 5
Dummy Data
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Consumer Acceptance & Sales Capability– Component Ranking
Indices Assigned Weights
CLIENT Rank
Weighted Parameter
C1 – Market Rank 1/6 3 .5
C2 – Consumer Confidence Correlation 1/6 2 .33
C3 – US Retail Sale Correlation Index 1/6 2 .33
C4 – No. of Stores 1/6 2 .33
C5 – Revenue Per Store 1/6 5 .83
C6- Consumer Sentiment 1/6 1 .166
Inference• CLIENT scores high on consumer sentiment.
• Revenue per store index has been key dampener for CLIENT in this Component.
Component Rank for CLIENT – 2.5
Ideal Ranking – 1
Best Performer Ranking (Wal-Mart)– 1.3
Worst Performer Ranking (Peer 4) – 4.8
Indicative
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CAP - Online Presence Component
INDICES INCLUDED
1. Online Market Share
2. Website Acceptance: Analysis of CLIENT business via online channel with competitors on parameters such as : CLIENTch Traffic rank, Reach, Page views, Reputation.
3. Social media popularity index: A percentage share of the internet influence of CLIENT with respect to top 6 department stores on Social media Sites such as Facebook, Twitter and Google trends
4. CLIENTch Intensity Index : Measures how often a firms’ name has been used while CLIENTching any product. Indicates a brand recall/association amongst the consumers.
EXPECTED TAKE AWAYUnderstand how CLIENT is positioned to adopt the next phase of retail i.e.. Online Retail and E-Commerce
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Online Presence (1/4) – Online Market Share
Inference
• CLIENT clearly lags behind when it comes to commercial activity on CLIENT website. Subsequent analysis may throw in better comprehension.
Dummy Data
Indices Assigned Weights
CLIENT Rank
Weighted Rank
O1 – Online Market Share 1/6 4 .667
Firm Market Share Rank
Walmart.com 14 1
Target.com 4.1 2
Kohls.com 3.6 3
CLIENT.com 2.5 4
Macy’2 2 5
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Online Presence (2/4) – Website Acceptance
Indices Assigned Weights
CLIENT Rank
Weighted Rank
O2 – Page View/User 1/6 2 .33
O3 – Bounce Rate 1/6 3 .5
O4 – Time on Site 1/6 2 .33
Inference• CLIENT can definitely leverage comfortable website acceptance level.
• Makes a string case for increased web based product sales and marketing, especially given that currently the online market share for CLIENT is low (People do visit CLIENT often, but it doesn't reflect in online sales). Probably online efficiency will throw in better light on this.
Dummy Data
SEARS Wal-Mart Peer 2 Peer 3 Peer 40
1
2
3
4
5
6
7
8
0%
10%
20%
30%
40%
50%
60%
Page View & Bounce Rate
Page View/User
Bounce Rate
Pa
ge
Vie
w (
No
.)
SEARS Wal-Mart Peer 2 Peer 3 Peer 40
1
2
3
4
5
6
7
8
Time Spent on Website
Time Spent (Mins)
Tim
e S
pe
nt
(Min
s)
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Online Presence (3/4) – Social Media Popularity
IndicesAssigned Weights
CLIENT Rank
Weighted Rank
O5 – Social Media Popularity 1/6 3 .5
Inference• Except Wal-Mart, all the peers are still very nascent when it comes to establishing presence in Social media. A white
space opportunity for CLIENT, especially given their relatively better position in Google CLIENTch trends.
Dummy Data
SEARS Wal-Mart Peer 2 Peer 3 Peer 40%
5%
10%
15%
20%
25%
30%
35%
40%
Social Media & CLIENTch Trend Share
Google Trends
Sh
are
in
So
cia
l M
ed
ia (
%)
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Online Presence (4/4) – CLIENTch Intensity Index
Indices Assigned Weights
CLIENT Rank
Weighted Rank
O6 – CLIENTch Intensity Index 1/6 3 .5
Inference• Product association for Kitchen equipment and home appliances is high for CLIENT
• Clear need to re-position itself as an exercise equipment and garden equipment retailer as well
Dummy Data
Home Appliance Kitchen Appliance Exercise Equipment
Garden Equipment0
10
20
30
40
50
60
SEARS
Wal-Mart
Peer 2
Peer 3
Peer 4
CL
IEN
Tc
h I
nte
ns
ity
In
de
x
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Online Presence– Component Ranking
IndicesAssigned Weights
CLIENT Rank
Weighted Parameter
O1 – Online Market Share 1/6 5 .833
O2 – Page View/User 1/6 2 .33
O3 – Bounce Rate 1/6 3 .5
O4 – Time on Site 1/6 2 .33
O5 – Social Media Popularity 1/6 3 .5
O6 – CLIENTch Intensity Index 1/6 3 .5
Inference• Wal-mart has clear monopoly when it comes to Online presence
• CLIENT lags behind Wal-Mart but has a clear lead over other peers. It must leverage this position.
Component Rank for CLIENT – 3
Ideal Ranking – 1
Best Performer Ranking (Wal-Mart)– 1.01
Worst Performer Ranking (Peer 2) – 4.8
Indicative
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CAP - Operational Efficiency Component
INDICES INCLUDED
1. Retail Floor Space Utilization: Average revenue per Square feet area
2. Manpower Utilization: Average revenue per employee
3. Inventory Management: This index includes Inventory Turnover ratio and inventory Day Sales
4. Online efficiency: Average load time, CLIENTch engine reference, speed, success rate
EXPECTED TAKE AWAYIdentify key operational improvement areas and understand industry benchmarks.
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Operational Efficiency (1/3) – Retail Floor Space Utilization & Manpower Utilization
Inference• Clear transformational opportunity for CLIENT in terms of improving employee and floor space utilization
Dummy Data
SEARS Wal-Mart Peer 2 Peer 3 Peer 40
100
200
300
400
500
600
Retail Floor Utilization
Re
ve
nu
e/S
qu
are
fe
et(
$/s
qft
)
SEARS Wal-Mart Peer 2 Peer 3 Peer 40
50
100
150
200
250
300
350
Employee Utilization
Re
ve
nu
e/
Em
plo
ye
e
(00
0$
/sq
ft)
Indices Assigned Weights
CLIENT Rank
Weighted Rank
E1 – Retail Floor Utilization 1/6 4 .66
E2 – Employee Utilization 1/6 4 .66
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Operational Efficiency (2/3) – Inventory Management
Inference• CLIENT has a low Inventory day sales and thus is managing inventory better. CLIENT should keep this ratio to the lowest
as possible and maintain it.
• CLIENT is not able to sell as regularly as Walmart or Peer 3 and has a Low Inventory Turnover. This may be due to inaccurate forecast of demand or poor sales. CLIENT has to improve inventory turnover.
Dummy Data
SEARS Wal-Mart Peer 2 Peer 3 Peer 40
2
4
6
8
10
12
14
00.0050.010.0150.020.0250.030.035
Inventory Management
Inventory Turnover Ratio (%)
Inventory Day Sales
Indices Assigned Weights
CLIENT Rank
Weighted Rank
E3 – Inventory Turnover Ratio 1/6 4 .66
E4 – Inventory Day Sales 1/6 1 .166
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Operational Efficiency (3/3) – Online Efficiency
Inference• Response Time of CLIENT is also well above the peers.
• These could be due to the design of the CLIENT website which needs to be looked into.
• However, CLIENT website has a success rate of 99.9%, which is well above the “Top Retailer Index” of 99.5%.
Dummy Data
Indices Assigned Weights
CLIENT Rank
Weighted Rank
E5 – Response Time 1/6 5 .833
E6 – Success rate 1/6 2 .33
SEARS Wal-Mart Peer 2 Peer 3 Peer 40
0.5
1
1.5
2
2.5
3
3.5
4
92.0%
93.0%
94.0%
95.0%
96.0%
97.0%
98.0%
99.0%
100.0%
101.0%
Online Efficiency
Response Time
Success Rate
Re
sp
on
se
Tim
e (
Se
c)
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Online Presence– Component Ranking
Indices Assigned Weights
CLIENT Rank
Weighted Parameter
E1 – Retail Floor Utilization 1/6 4 .66
E2 – Employee Utilization 1/6 4 .66
E3 – Inventory Turnover Ratio 1/6 4 .66
E4 – Inventory Day Sales 1/6 1 .166
E5 – Response Time 1/6 5 .833
E6 – Success rate 1/6 2 .33
Inference• Clearly the weakest link in CLIENT’ CAP score. Opportunity for Transformational initiatives.
Component Rank for CLIENT – 3.3
Ideal Ranking – 1
Best Performer Ranking (Peer 2)– 2
Worst Performer Ranking (Peer 3) – 3.9
Indicative
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Cumulative Assessment of Performance Score
Inference• CLIENT does enjoy relatively comfortable consumer acceptance. However, lower operational efficiency and online presence
may dampen the leverage.
Financial Strength (25%)
Component Rank – 4.5
Online Presence (25%)
Component Rank – 3
Operational Excellence (25%)
Component Rank- 3.3
Consumer Acceptance & Selling Capability (25%)
Component Rank – 2.5
Value in brackets indicate weightages of each Component to calculate CAP Score
CLIENT CAP Score = 3.4
Industry Best Performer CAP Score = 1.9
Indicative
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Thank You!!!
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