Remembering Foodworld

Using Information Technology for Better Retail Chain Operations

This Kochi cashier-free store shows the future of Indian retail1 , was a title of one of the news
reports in the Times of India, Ahmedabad edition on Sep 10, 2018. The news item was about a
store named Watasale in Kochi (in Kerala, one of the southern states in India), that was a fully-
automated, cashier-free shop. The news item said,
This was inspired by Amazon Go stores in the US, where you can just pick up an item
and walk out with it, and the cost is debited from your e-wallet. No, the security
alarms won‟t go off. The 500sqft store that opened this week depends on artificial
intelligence, camera technology and sensors. A customer has to download the
Watasale app on his or her phone and register using an email id and phone number,
explains Subhash S, Watasale‟s CEO. The app provides a QR code that works as an
identifier as well as a „ticket‟ into the store. A customer has to scan the code and enter
the store. “A customer can walk in, pick products and leave. They don‟t have to scan
every product — just the QR code once at the entrance,” Subhash says. The app debits
the bill amount automatically from the customer‟s account or wallet. No cashier, no
scanning, and no waiting in line. The store ceiling and shelves are laced with
sophisticated sensors and closed-circuit cameras.

Nearly two decades had passed, since a team of Professors and students at IIMA had submitted a
report to the management of Foodworld, the then food retail chain of Spencers and Company, a
retail arm of RPG group, based in India. The report had recommendations on the design of MIS
to be implemented in Foodworld for monitoring and control of store performance as well as, to
the KPI for better performance of stores.

In the last two decades, multiple changes had taken place in market as well as, in the group and
organization. Spencer‟s & Company had sold-off Foodworld to Kishore Biyani-promoted Future
Retail for INR 407. 9 million in cash in May 2018. Future retail had many retail chain stores in
products such as lifestyle and clothing‟s, food, insurance, electronics, books etc. Out of these
Big-bazaar and Easyday club were focused on food retailing. Foodworld was expected to
strengthen the Easyday club chain.

Foodworld was probably the first pan-Indian company in organized food-retail business. Its
management wanted to give a self-service format store to the customer, where they had a choice.
Compared to 600 SKU carried by a local Kirana store on average. The turnover of Fooworld
was INR 210 million in 1996-97, INR 430 million in 1997-98. In 2016-17 the profits were INR

1
http://timesofindia.indiatimes.com/articleshow/65748053.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

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230 million2. After nearly two decades, Foodworld had revenue of INR 1190 million for the year
ended March 2018, down from INR 1300 million in 2017 and INR 1410 million in the year
2016before that. The net worth of the acquired business was INR 80 million. Foodworld had a
presence in cities such as Bangalore, Hyderabad, Chennai etc. with more than 50 stores.

Changes in India Food Retail since 1996:

In the last two decades, the retail market had changed significantly. Many new players had
emerged and a few of them had also closed their shops. Notable amongst them were Reliance
Retail (of Dhirubhai Ambani group), More (of AV Birla group), Big Bazaar (of Future Retail),
D-Mart (of Avenue Supermarkets) etc. Shubhiksha, a very popular food store that started in 1997
and reached 1600 stores of grocery and food items at its peak, closed down in 2009 3. Another
change taken place was the advent of online stores. Grofers and Big-basket were the leading
online players in India.

According to estimates in a NABARD report, 4 organized food retailing was valued at INR 154
billion in 2008-09 and was growing at nearly 150% rate.

Major Functions in Foodworld

The company was headed by President and CEO who looked after the strategy of the company,
and reporting to him was the Vice President (retail).

Foodworld had given the customers, many of whom were women, an opportunity to purchase in
a free and self-control environment, which was a liberating experience for many of them. These
women visited Foodworld stores to break monotony from daily chores at home. These ladies
went shopping in groups or with their families (rarely alone). While they were confident of the
prices offered by Foodworld as far as branded items were concerned, for vegetables and fruits
the still went to local vegetable vendor. They also patronized a local grocery retailer for
immediate and unplanned purchases. They made on average two visits per month, usually in the
first and the third week. Ten per cent of the shoppers were ad-hoc shoppers and frequented the
stores multiple times in a month. It desired to give value based on quantity and price to the
customers, a choice through merchandise that is both high in breadth (number of product lines)
and depth (variety in each product line). Margins could be improved only by reduction in
purchase cost and improved distribution.

Stores were the front of any retail chain and hence was the most important component in the
entire business. However, supply chain and merchandising were also very important. Non-
perishables were supplied to the store from warehouse, which was usually located in the same
city. Merchandising function involved decision on various SKU that was to be kept in the store
and selection of the vendors for the items. Any new store started making profits in the first year

2
https://www.moneycontrol.com/news/business/after-hypercity-kishore-biyanis-future-group-eyes-foodworld-
supermarkets-report-2487937.html
3
https://en.wikipedia.org/wiki/Subhiksha
4
http://rasci.in/downloads/2011/Organized_Agri_Food_Retailing_India_2011.pdf

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itself, however, it was only after the threshold number stores of 40, Foodworld started to make
overall profits.

Stores: Each Foodworld store was managed by a store manager. The store had bays in which
items were arranged based on a planogram, which was developed based on local requirements.
Store managers strictly followed the planogram. The theft was one of the major problems in
retail stores. Supply Chain: The store received supplies from the warehouse. Indents were raised
twice a week and items were supplied on the next day from a warehouse located in the same city.
Inventory was managed according to s, S model of inventory, in which, whenever inventory of
an item reached a certain minimum base level (s), sufficient order was placed to bring it up to a
certain maximum level (S). The minimum base quantity was 1.2 times the sale of the week with
the highest sale. Vendors were identified on regional basis and they supplied to the warehouse.
The responsibility of warehouse was to receive the bulk and to send the assorted items based on
indents from the stores, without keeping any inventory.

Merchandising: The 5000+ SKU in a store were categorized into 49 categories and 270 sub-
categories. Branded perishables were the most selling items and top 1000 items accounted for
70% of revenue. Various types of promotions schemes were run usually in association with the
manufacturers. However, at any point of time quite a few items were always made available on
discount in order to attract customers.

Distribution: Each state had a regional hub, which catered to 90-% of the requirement of stores in
that state (through respective warehouses). Supply were made twice a week and target was to
make the supplies on daily basis. Supplies were made the next day of receipt of indent.

Problems: Theft was a major problems in Foodworld Stores, reaching to the levels of 2% , far
above the industry benchmark of 0.5%. Stockouts were also very high, up to the levels of 20%.
Nearly 10% of stockouts were attributed to discontinuation of items.

Technology and Retail

In the last two decades, lot of technology introductions had taken place in industry, especially in
retail. There were talks of totally automated retail stores where employee‟s engagement would be
minimal; maybe only to refill the shelves. Some of the technologies were as follows.

RFID: The radio-frequency identification device tag or RFID (Radio Frequency Identification)
tag could be pasted on the item. With RFID sensors in the vicinity, the RFID tag could register
its presence. It could result in better management and tracking of inventory. It could also help in
order management. This would necessitate the use of the Universal Product Code (UPC) for
unique identification of SKUs. Many retail chains were trying to implement RFID system in
their operations. But, this required an inter-industry level effort rather than an initiative of one
company: whether manufacturer or retailer.

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Robotic Fulfillment Systems: Experiments were on to introduce robots in keeping items on
shelves with the use of robots. A very large automobile company and one very large online
company had implemented automated warehouses5 which resulted in reduced manpower.

Drones: Further there were talks of using Drones for delivery of products and
Blockchain in supply chain management.

Virtual shelves: Vendors will be able to see the shelves which will improve communications.

Customer Relationship Management: CRM software should help companies to manage

customers in a more efficient manner and increase their loyalty.

Smart point-of-sale (POS) terminals: This could give real-time offers to the customers when
they are making payments at the bill counters.

The future of Information Systems in Retail

The retail industry was facing a lot of competition, with the consolidation of retailers and
international players such as Ikea, Walmart etc. coming to India. In such a scenario what were
the likely changes that would take place in design of Management Information Systems? How
will the new MIS look like? Would the performance measures change? Were there best practices
in managing retail as far as MIS and operations were concerned? Or, should Foodworld go with
clean slate design of MIS?
Could the lessons from Foodworld be applied to other retail business such as electronic stores?
Banks? Pharmacies?

5
https://www.heromotocorp.com/en-in/annualreport/achieving-seamless-operations.php