The recency effects on this incentive model is very strong, both for performers and the motivated teams as the new target is only 30 days ahead
Assessment centres are organised twice a year to ensure that growth is provided to star employees and top performers, who have potential to grow to the next level
The birth of Croma came forth in late 2006 through a desire to seal a long business alliance with two collaborators - the chairman of Tata Group and the chairman of Woolworths Tata group wanting to strengthen their bond. The Tata group had a strong existing relationship with Woolworths Limited of Australia (the largest retail chain in Australia and New Zealand) as TCS was a key provider of IT services to Woolworths.
A detailed market study and concrete research after studying the Indian consumer established that electronics retailing was a great opportunity segment as there was no significant national player in this segment. This sector had a vast unfulfilled potential. The two parent companies set about structuring the details of the partnership. It was decided that Woolworths would be the wholesale partner for the business where as Infiniti retail limited would handle the retailing side of the business.
To give shape to this dream and make it a reality a ten-member team was formed under the leadership of Ajit Joshi to carry out this venture from an idea to reality. Ajit came in with a lot of experience in the service industry with successful stints in the hospitality space as well as in retail arena under his belt. With a clear vision of building a best in class retail chain that would excel in all aspects of consumer engagement, the team quickly got down to the task of setting this company into motion.
Croma today boasts of currently 32 stores spread across 8 cities and growing. It has created formidable brand value and all within only two and half years of existence. While a number of retailers are struggling for survival and others are on the verge of either closure or merger or being sold off because of economic meltdown, Croma today has set industry benchmarks in terms of footfalls, sales per square feet, average bill value and conversions.
Consumer proposition based on a strong consumer insight
Croma realized early on that it had to enter the market with a differentiated offering and format from the current players to meet the latent needs of the consumers in order to be really successful in this market.
An analysis of the market showed the market was then populated with price focused local players and that there was limited endeavor to understand and meet all the needs of the consumer. There was no one player which offered a one stop shop for technology and consumer products, with offerings across brands, price points, product range to suit the varying needs of customers as well as serving diverse customers from different strata of society. The existing formats did not offer trial rooms for testing highly sophisticated gadgets with product display and trained staff to assist and provide support and actual demonstration of the use of the product.
The team at Croma went about creating a unique experience in electronics retailing; and this requirement necessitated a unique approach, both on the customer-visible front and on the inside working of the organization.
Uniqueness in Format and Products: The New Retail Experience
Croma stands out from the milieu as a truly costumer focused brand for the nearly 1.3 lac consumers who visit a Croma store every week. Croma’s commitment is that costumers will get the latest products, widest range of products and sound advice if they go to Croma for their electronics need.
Croma store format was design to satisfy the need of the customers. The central concept in the Croma store is provide wide display of items, allow the “touch and feel” experience for customers and ensure that trained staff are always there to help customers to make their right choice. Since the product range offers varies from sub Rs 100 price point to Rs 4 lac price point with products ranging from simple ones to highly complex electronic products, customer service is key. Croma was also the first to develop a strong line-up of Croma branded products in its stores.
Uniqueness in Service: “We Help You Buy” Philosophy
Technology products shopping is an involved process given the wide variety of brands, products, features and jargon that were there in this process. What adds to the complexity is the fact that not all consumers are technically inclined.
Therefore, Croma came in with a strong intent to help consumers in this buying process. This is aptly expressed in the brand’s tagline- “We help you buy”.
This philosophy is closely aligned to the way employees are recruited, inducted, trained, assessed and rewarded making Croma the highest average selling price retailer for most high-end brands. While other retailers are able to sell in the lower and middle range, Croma’s philosophy of ‘we help you buy’ attracts and creates the comfort for buyers to choose high end product ranges.
Managing & Rewarding Talent
Croma’s agility in recruitment:
The recruitment process that Croma follows for new stores has saved the company lacs in spending on advertisement and recruitment consultants. This process also allows ‘just-in-time’ recruitment and ensures that the company does not overstaff. Before any store opens (around 2 months before the opening date), the preparation work starts in the new stores. This is the time where Croma advertises simultaneously to future customers and potential candidates the openings of the new store. A walk-in interview occurs 45 days before the scheduled time of opening and the store gets more than 80% of the personnel required from this simple and economic source of candidates.
Career Management through Assessment Centres:
Assessment centres are organized twice a year. This is key to ensure that growth is provided to star employees and top performers, who have potential to grow to the next level. This ensures meritocracy and also keeps associates performance focused.
Creating the right incentive – getting the desired behavior:
Croma’s performance-oriented culture and responsible approach are the foundations of its success. The company encourages its young and vibrant workforce to focus on achievement through collaboration and innovation.
The execution of this vision comes from a simple and yet effective compensation structure for the store teams. On monthly basis, divisions are given targets based on units sold. That incentivises and reinforces the value of ‘we help you buy’, as employees are not incentivized to sell any particular brand or in any particular price range but they are incentivised based on units sold. The target set is a team target and the achievement of this target will mean payment of incentives for the complete team; similarly failing to achieve this monthly target means that nobody from that team gets incentive. This model seems to work very well as the ratio of stores achieving their targets is between 60 to 80 % in any given month.
This rewarding mechanism also highlights the low performers very quickly as teams will want very single individual to contribute equally to maintain internal equity.
The targets are set monthly, performance is also reviewed monthly and payouts for the month are done in the next month salary. The recency effects on this incentive model is very strong, both for performers and the motivated teams as the new target is only 30 days ahead.
Engaging every employee to productivity:
Communication is a key area for Croma. All employees understand their job description, what is expected from them (following a Balance Score Card System for goal setting) and the linkage between performance and reward happens. The relationship with the management and the teams is very strong and direct creating the right environment for engagement and performance. With the theme ‘Our People are our Power’, Croma aims to inspire a high degree of employee engagement which enables its team to achieve new levels of efficiency and production. Croma’s organizational productivity is measured not in terms of employee satisfaction but by employee engagement.
New stores induction:
PUCCA or product understanding and RSS - Retail Selling Skills are key modules that help improve customer service in associates. Before a new store opens, a specialized team travels to the new location to coach the new team. This knowledge transfer happens before the store opens and also ‘on the job’ for the first few days of operations of that new store. Additionally, structured training at the time of recruitment ensures that only knowledgeable and trained people are driving the company - both in the support office and crucially, on the shop floor where employees engage with the consumer. Croma also has a planned refresher training periodically to ensure that everyone is abreast with the latest in both soft and hard skills. Croma consistently looks at strengthening the behavioural aspects in our associates through structured inputs provided at regular interval.
Challenges and Opportunities Ahead:
The target of Croma is to expand to 100 stores by 2011. It has a challenge of remaining differentiated and offering the consumers more benefits of shopping there versus any other retailer. The current economic slowdown has provided an opportunity for consolidation and creation of efficiencies. Croma has not reduced the number of openings planned this year due to the economic situation, and the month on month sales have continue to increase regardless of the economic situation.
With many awards for a young brand (most admired retailer of the year award in 2008 at the Images Retail Forum and many partners and vendors awards), the focus for Croma this year is to look at creating internal efficiencies, introducing and consolidation new merchandise categories and look for replicating the unique store format in different locations.
Creating internal efficiencies:
his last year, Croma has embarked on a strict benchmarking exercise to take their internal cost to a minimum while maintaining the quality of service and delivery. This exercise has translated differently in different areas of the business. Store Managers are requested to look at all the cost under their control and create efficiencies in maintenance, running, inventory and logistics of the store. In the corporate offices, the cost control has translated in tighter budgets especially for travel. Finally, Croma is looking at investing in technology and systems to maximize productivity in logistics and inventory management.
Maintaining company philosophy across outlets and locations:
As its workforce expands, it has the challenge of ensuring that the company philosophy is deeply ingrained in its larger employee set and that every person in its fold is focused on ‘helping consumers buy’. This will involve significant inputs in the training process and the organization is gearing up to meet this challenge. With increased geographical presence, the company’s workforce will also become more heterogeneous in its composition and it will be challenge to assimilate all these cultural streams into the company culture.
To exploit economies of scale, Croma is planning to grow focusing on existing cities instead of new cities. This year Croma is also growing the Zip-Store concept. Two years ago, one the first Zip-Store was opened in the Mumbai airport, the investment in a high cost rental was seen as an opportunity for brand building and awareness. But, Croma soon realized that travelers were also buying high priced cameras, blackberries, phones and even laptops. The Zip-Store in Delhi was opened this June and has already attracted many flyers waiting in the New Delhi airport lounge.