Business Case

1) Imagine you have to open your first Darkstore in your country

First of all I would choose a large city in my country probably the capital and locate my store
there. The size of the city plays an important role in accordance with number of potential
customers. I would start by creating application for selling the products, then I contact potential
suppliers and prepare the environment, install all needed fixed assets such as refrigerator and
other things to store the goods properly.

a) Defining the Assortment

After preparing store, then I would start thinking about what kind of products I want to sell. I
would try to conduct a research about several things:
1. What does the market offers to its customers? What are average selling prices?
2. What kind of demand do people have, what the buy?
3. Who is the supplier of the product?

Me with my team members would go to the different big supermarkets during different periods
of the day and write down or take a picture of list of products and prices supermarkets are selling
and observe what people buy most. In my country on the etiquette of the every product is
written name of supplier company. This process would continue at least one week. This research
will give me information about what does the market sell, what people buy most and who is the
supplier of certain product.
Next step would be creating list of categories and products I want to sell. Firstly I would choose
deep assortment strategy, then as business grow I will change it to mas-market assortment
strategy.

 Deep assortment – it focuses on a smaller number of categories but with a great product variety.
 Mas-market assortment – this approach is both wide and deep. It offers a vast range of product
categories and hundreds of product variations in each.

At the starting point of the business my aim would be to sell the assortment of products that
people consume almost every day, once in a week or in a month at least. Such products are food,
beverage and health care products. I will take into consideration selling complementary goods –
goods that are typically used together. (For example milk and cookies) This kind of approach will
stimulate cross-selling between different categories.
Firstly I will chose to sell top brands in every category and later, after several months if I get
more space for products, I will add rare and expensive brands also.
Prices of the products must be similar or less than supermarket prices. This must be the most
valuable way to get an attention from costumers.
After selecting assortment, I will make advertisement on different social platforms about my
store.
Selected assortment of categories:
Beverage
 Alcoholic drinks (beer, wine, whisky, vodka, gin, rum and etc.)
 Soft and energy drinks (Coca-Cola, Fanta, Pepsi, 7-up, Sprite, red bull and etc.)
 Juice and water
 Coffee and tea
Food
 Meat, poultry, eggs, fish and sea food (fresh and frozen)
 Fruits, vegetables, nuts and seeds (fresh and frozen)
 Canned food (fish, fruit, vegetables and etc.)
 Dairy products (milk, cheese, yogurt and etc.)
 Half-prepared food (frozen pizza, fish, meat, pasta noodles)
 Food ingredients (baking ingredients, dough flour and etc.)
 Animal food (food for dog cat and etc.)
 Chips
 Chocolate
Health care products
 Body and hair care (soup, shampoos, body gels, toothpaste, toothbrush, and etc.)
 Baby food and care
Later I would add pharmaceutical products and me store would be mix of supermarket and drag-store.

B - Define the Supplier strategy

After defining categories selecting products and I will try to contact the supplier companies. A
Lot of supplier I can find on the etiquette of the products. I will search contact information on
the internet and call them, arrange meeting with their representative and offer partnership.
The main thing during negotiations will be commercial terms. Payment methods: realization or
consignation. Also must be calculated retro bonuses and price reduction terms during purchase of
large quantities.
Supplier strategy
Direct suppliers can be importer and distribution companies. Partnership with them would be
preferable for my business because they can offer vast variety of different products with lower
price. For example in my country one of the main importer companies are “Diplomat Georgia”
and “GEPA”. They can offer me many different products and such approach would save time and
money.
In Georgia brand producer companies are such as “Coca-Cola Bottlers Georgia”, “EFES Georgia”,
“Barambo” and etc. I would contact them and offer to place their products at my store and sell on
my online platform.
I can also contact to a foreign brand companies and offer to be their exclusive representative in
my country.
The key element of my business must be lower price on products than supermarkets have and
additional benefit would be delivery fee.
2. Which categories would you prioritize and how many SKU’s would you have for the first 10
categories
The attached data included 200 different categories (level 4) that generated total sales 11 317 748
Euros. Level 5 included 65 different categories level 6 – 186 and Level 7 - 1606 SKU.
From these 200 categories (level 4) I would prioritize 10 categories which have highest revenue.
They have generated 3 389 541 Euros 29.95% of total sales.

N Level 4 Euros % of total

1 CHARCUTERIA 682 225 6,03%
2 CERVEZA 400 637 3,54%
3 LECHE LIQUIDA Y BEBIDAS VEGETALES 383 059 3,38%
4 BEBIDAS REFRESCANTES 358 224 3,17%
5 PLATOS PREPARADOS REFRIGERADOS 305 944 2,70%
6 AVE 303 957 2,69%
7 YOGURES 258 760 2,29%
8 CONSERVAS DE PESCADO 248 543 2,20%
9 VINOS 244 397 2,16%
10 CERDO 203 796 1,80%
Total 3 389 541 29,95%

Highest percent of total sales goes to “CHARCUTERIA” - 6.03% lowest to “CERDO”-1.80%.

Average Sales for each categories is 338 954 Euros.
Level 5 - These 10 categories included 65 different deeper categories. Highest sales was in
“LIBRESERVICIO” - 415 185 Euros and lowest in “PULPO” - 624 Euros.
Level 6 - These 10 categories included 186 different deeper categories. Highest sales was in
“LONCHEADOS” - 316 902 Euros and lowest in “C.RESTO” - 38 Euros.
Level 7 - These 10 categories included 370 SKU. One of the main thing is that out of 1606 SKU
370 generated 29.95% of sales.
3) Assessment performance of the store
Analyzing revenue, expenses and general profit or loss
I would start by analyzing revenue and expenses of the company. Since starting date I will
calculate total sales both in quantitative and monetary aspects. After getting revenue number
then I will calculate cost of goods sold and get gross profit. Then I will deduct all costs company
have, such as administration and communal expenses and depreciation of assets. This will allow
me to see whether company have profit or loss.
Analyzing revenue, category, deep category and SKU.
After seeing general financial result of the company I would go deeper and analyze sales by
categories. I would sort categories and see which one has generated more revenue and their
percentage of them in total sales. It is also important to calculate average profit margin for every
category. Then I will look deeper at categories. For example from category of alcoholic drinks I
would go and see which kind of alcohol are selling most wine, bear, whisky etc. and calculate
their portion in alcoholic drinks. Then I will go deeper and see which brand (SKU) are selling
most which has highest and lowest average margin and which generates highest or lowest
revenue. Then I will see which product has highest sales.
Such analytical procedures will give me the information about which product is selling and
performing well.
Analyzing inventory and turn over
After identifying which SKU selling well and which not then I will and analyze the inventory
turnover tasks. I will get information about starting quantities of products add reorders and
deduct sales and get final result. Then I will be able to see which product was reordered and how
many times. After estimating future sales by past numbers, I will analyze how long inventory
will be enogh and make reorders if needed in advance before stock is completely empty.
It is important to check expiration dates for every product and contact supplier if needed to
change.
I can also estimate how fast inventory are selling during certain period of time, bigger the ratio is
its better.
Inventory turnover ratio= cost of goods sold/average inventory

Products that are not selling well and solution

Lastly I will look at the products that are not selling well. The objective of this is to understand
why not they are selling well. I will think about what can be done to stimulate their sale. One
solution for them can be putting lower margin, Second solutions can be advertising such
products.

4. Main suppliers asking for a 10% reduction of prices because with the current volume he does not
have enough economy of scale. Please let us know which strategy and arguments you would use to
convince him of maintaining prices.
Firstly we should understand what economy of scale implies. When quantity of output grows,
average fixed costs and average variable costs per unit reduce. So when supplier wants to reduce
prices by 10% it indicates that they want to get attention of more consumers by lower price.
Such strategy will stimulate demand and selling of their products. Producing more means
reduction of their costs per unit.
Our aim is to keep the price at the existing level and find another solution for the company to
stimulate their sales somehow.
I would start conversation by explaining that they are important suppliers of our company. Then
I would try to convince them that reduction of their prices by 10% will not play a crucial role for
the customers to buy their products more often. Then I would offer that our company will help
them to stimulate sales by marketing activities such as making an advertisement on our social
platforms. This will be totally free for them and will have better effect than low pricing strategy.
I will explain that every customer who will open our application will see an advertisement about
their products and then their products will be on the first place of shopping list. This will play a
huge role during making decision for potential buyers and will increase sales of this company’s
products.
I think that such support from our company will change suppliers mind and will keep the price
unchanged.