Retail Management

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By
Vivek Rastogi Retail Consultant

Retailing
Retailing is defined as the activities involved in the sale of goods and services to consumers for their personal, family, or household use.
Manufacturing Distribution Retailing

Retailing cont.
Retailing is the final step in the distribution of merchandise the last link in the Supply Chain No significant change in the product except breaking the bulk Value proposition a retailer offers to a consumer is easy availability of the desired product in the desired sizes at the desired times (at desired prices).

Typical Marketing Channels for Consumer Products

Retailing - Evolution

Trade and Retail Boom Mom and Pop stores Convenience Large Format Mail Order e-Commerce

Classification of Retailing

By Channel By Ownership By Assortment and Variety of Merchandise By Amount of Customer Service Limited Line Retailing

Other Types

Classification By Channel

Store Non Store

Mail Orders Catalogue Teleshopping e-tailing Call Centers Direct Selling

Classification of Retail Stores Classification By Ownership

Unaffiliated independents
( Medical Shops, Fruit seller)

Corporate retail chains

( Food world, Trent, Target, Best buy )

Cooperative chain
(Co-optex, Cooperative societies, Janata Bazaar)

SIS Franchise/Distributor systems

(McDonalds, Pizza hut)

Classification By Assortment and Variety of Merchandise

General-line Stores
Department Stores
(Shoppers Stop, Sears, JC Penney, Marshall Fields)

Supermarkets
(Royal Super Market, Cub Foods, Nilgiris)

Factory Retail Outlets

(Arrow, Nike, Sony)

Membership Warehouse Stores

(Sams Club, Costco)

Variety Stores
(F.W.Woolworths, Dollar Stores)

Classification By Amount of Customer

Service
Self-Service Retailers
(Vending Machines)

Limited Service Retailers

(JC Penney, Sears, Target)

Full Service Retailers

(Tanishq, Nalli Silks, Prada)

Classification Others

Other Types Combination Super stores Convenience Stores (7 Eleven) Hypermarkets (Star India, GIANT)

Discount Stores (Target, Walmart)

Limited-Line Retailing Specialty Stores (GAP,Music World, Kids Kemp)

Boutiques
Category Dominant Stores (Toys r US)

Types of Retailers
Retailers Use Different Retail Mixes -merchandise: variety (breadth) / assortment (depth) -services -store design, visual merchandising -location -pricing Infinite Variations Some combination of retail mixes satisfy the needs of significant segments and persist over time.

Types of Merchandise Retailers

Food Retailers
Mom and Pop Stores Convenience Stores Supermarkets Supercenters

General Merchandise Retailers

Department Stores Specialty Stores Discount Stores Category Specialists Off-Price Retailers Warehouse Clubs Value Retailers

Merchandise Offering
Variety (breadth of merchandise): wide vs. narrow - The number of merchandise categories

Assortment (depth of merchandise): deep vs. shallow -the number of items in a category (SKUs)

ALDI: Germans Wal-Mart

ALDI provides quality merchandise at low prices by reducing its assortment in order to control store operating expenses

ALDIs Strategy
4,100 stores in Germany and 6,600 worldwide, including 800 stores in 26 US states Cheap.. Only two brands of toilet paper and one brand of pickles

STRATEGY: Stores sell less products ALDI exclusive label High quality of products at cheaper prices
HOW? Strong control over quality and price Simplify shipping and handling Reduce labor costs by keeping limited store staff, etc.

Save-A-Lot
Save-A-Lots limited assortment format means that stores carry the most frequently purchased grocery items in the most popular size and variety The company carries high quality exclusive brands many produced by the same manufacturers of leading name brands and an assortment of nationally branded items.
Used by permission of Save-A-Lot

This allows Save-A-Lot to offer savings of up to 40% compared to conventional grocery stores without asking shoppers to sacrifice quality.

Overview of Retail Functions

Site Location Procurement

PLAN

Strategic Positioning

Financial Planning

Store Planning

STRATEGIC PROCESSES

BUY

MOVE

SELL

OPERATIONAL PROCESSES

SUPPORT PROCESSES

What will you PLAN for retailing?

Retail Operational Processes PLAN

Planning is a systematic approach, aimed at maximizing return on investment, through organizing business activities.

PLAN

BUY

MOVE

SELL

- Merchandise Plan - Distribution Plan - Space Plan - Sales & Profit plan - Promotions & Markdown Plan - Collaborative Plan

Major Plan Processes

Planning
Retailing Strategy

Merchandise Planning
Helps determine:
What to Buy ? What to Sell ?

Based on:
Past Experience Previous Sales History Current / Seasonal Market Trends

Retailers sales goals and location

Right Product, at the Right Place, at the Right Time

Planning
Distribution Planning
Distribution planning systems help in planning safety stock levels for items and their locations, plan replenishment frequency, schedule shipments and transportation planning

Space Planning
Space Availability Return on space (Sales in Rs./Sq.ft.) Creation of 3 Dimensional walk-through models Preview the look of a store

Assortment Planning
The Assortment Plan is based on the combination of different varieties of merchandise to match consumer needs

Range Planning
The Range plan is based on the range of items (the width and the depth of merchandise) the store plans to sell

Retail Operational Processes BUY

PLAN

BUY

MOVE

SELL

- Vendor management

- Open-To-Buy
- Consolidation - Purchasing - Replenishment - Pricing

Major Buy Processes

Buying
There are five major areas to consider:

Who buys?
What to buy? How much to buy?

From whom to buy?

Great locations, great looking stores and great sales staff arent worth much if the merchandise isnt right

Buying
Who Buys?:

One Individual

Specialists

Versus
What to Buy?:

Current trend
External Sources Sales History

Purchase Terms
Purchase Terms in Buying Net Ex Works F.O.B. (Free On Board) C.I.F. (Cost, Insurance and Freight) C.O.D. (Cash On Delivery) D.D.P. (Delivered Duty Paid)

Pricing
Discount Pricing
Discount is a reduction in price given to retailers by their suppliers Trade discounts Quantity discounts Seasonal discount

Invoice Discount
Cash discount

Clearance Pricing Promotional Pricing Competitive Pricing

Retail Operational Processes MOVE

PLAN

BUY MAKE

MOVE

SELL

- Receiving (Vendor Receipts & Returns)

- Repacking
- Shipping & Transportation - Cross-Docking - Physical Inventory Check - MIS

Major Move Processes

Layout of a Warehouse

Storage Racks
R E C E I V I N G
Pull Item

STORE

CARRIER

Flow Item (Cross Docking)

Pull Item

D E L I V E R Y
Returns

GUEST

Storage Racks

VENDOR

Typical Warehouse Operations

Warehouse Management
ReceivingUnloading and inspection of the material received from vendor with corresponding documentation. StoringPlacing the material at right place Updating inventory accounts Re-packing and shippingUnpacking the material from original cartons Packaging and re-packing as per the order list/allocation of individual store Loading on respective trucks.

Cross Docking
An operational technique for receiving, allocating, sorting and despatching product, while it remains on the dock of a Distribution Centre (DC) and therefore does not rely upon withdrawing stock from storage.

It is a receipt-through-to process through-to-operation and would be undertaken over a single shift.

Suppliers Distribution Centre A I N B O U N D Cross O U T B O U N D

Retail Outlets
A B C A B C A B C

Dock

Distribution Center Processing

Warehouse

Flow Lines

Shipping Wing
Interior View

Exterior View

Commonly Used Terminologies.

Pallet SCAC Sorter UCC-128 Letter of Credit (LOC)

Flow-Thru Merchandise
High Velocity Merchandise Reserve Merchandise

RF based tracking
Advance Shipment Notification On-Hand On-Withdrawal On-Order

Slotting or Profiling
Cycle Count Lights-Out Warehouse Honeycombing Shipping Manifest

Retail Operational Processes SELL

PLAN

BUY MAKE

MOVE

SELL

Store Operations

Visual Merchandising
Point-Of-Sale (POS) Sales Polling

Major SELL Processes

Inventory Updates
Customer Relationship Management

POINT OF SALE

Point of Sale Operations

Generate Receipts

Merchandise Sale / Billing

Discounts / Coupons

Credit Authorization

Customer Loyalty Programs

Merchandise Look-Up

Clientele / CRM

Merchandise Returns / Exchanges

Common Payment Types Pricing In Retail

Cash Check Credit Cards Gift Vouchers Gift Cards In-house cards

Coupons

Visual Merchandising

Display to be built around fast selling items

Display should be simple. No oversell

VM should be timely

VM should be built around a theme

Proper lighting sells the display Change the displays regularly

Merchandise Display & Signing

To drive impactful presentation of merchandise on the Selling floor, maximizing sales and differentiating the retailer from competitors.

The Merchandise Presentation Department works with marketing, merchandise planning and the fixturing departments to create unique, safe and profitable PLANOGRAMS for the stores.

Commonly Used Terminologies.

Register / Terminal Food Avenue Adjacency Butt Brush Decompression Zone

CRT
Scanner Card Reader

Cash Drawer
Store Back-office Tags Social, Ink, Liquor Front Lanes Shelf Labels

Strike Zone
Guest Pick-up Raincheck UPC / SKU / Barcode Sales Transaction

Retail Merchandise & Information Flow

CUSTOMER
Advertising & Promotion
P l a n s Sales Promotion Price Distribution

Merchandise Plan Store

Physical POS system Inventory Product (Merchandise) Scanners ERP

Customer Info Sales Info Product Info

BUYER

Information Flow Merchandise Flow

Distribution System
Transportation Warehousing Distribution Center

Orders

VENDOR

Initial Orders & Replenishments

Winning at Retail

Natural inflection point, failure to react will lead to downward spiral

Declining Sales

Destined to decline, strength can be weakness

Dalal street

Customer gives up

Too bigger competitor

EST Model for Retailing

Cheap-EST
Consistently Lowest prices on Products Either you are cheapest or you are not Cheap should not mean bad Value Value for money Purchasable below going Price or Real Value or charging a lower Price. You can not be cheapest if cost of running the business is higher than competitors
Buying smart Shipping inexpensively (Wal-mart) inventory control (e-bay) low cost store (Subhiksha)

EST Model for Retailing

Bigg-EST
Have the Largest Assortment of product in a specific Merchandise Category Not about store size Sweet Spot-Between too much & too little Merchandise (Incredible Store) Biggest should be Problem Solver & time saver (Home Solutions) An Increasing competition from E-commerce Great functionality search engine easy to use info rich Mass customization-take care of customer interest

EST Model for Retailing

Hott-EST
Having the right products just as customers begin to buy them in Volume Continually demonstrating that you are the place for latest fashion or newest Product Rarely caught with yesterdays style Regular change the look & layout to keep store fresh (ZARA in Spain)

Easy-EST
Solution oriented Service (Ex ICICI Bank) Takes care of employees (Sarvana Bhavan)

EST Model for Retailing

Quick-EST
Make the shopping trip as quick & efficient as possible
Time as key diffentiator -Working wives Convenient Location A lot of locations

Little Checkout time

Shopping process simple, fast, accurate Ex Mcdonalds, Pizza hut

The Wal*Mart Way

The Wal*Mart Way

Worlds largest retailer, Turnover $378 billion Wal-Mart is the largest private employer in the U.S.

Wal-Mart operates more than 6,500 stores in 15 countries. Wal-Mart serve more than 25 million customers around the globe every day.
Wal-Mart is the greatest retailer that ever was & we have to compete with them on regular basis. There has been no one that competes & thrives. Very few to compete & survive. Target CEO

The Wal*Mart Way 84 % Americans visit Wal-mart at least once in a year Wal-Mart saves an average American household around $200 every year. Wal-Mart employs 1.8 million associates worldwide, including 1.3 million in the United States. More than 240,000 of these are senior citizens, who are 55 years or older in age. Accounts for 20-25% revenue of major US manufacturing companies EDLP (Every day low prices)

Bharti 2015 Vs Wal-mart 2006

Bharti -2015 Sales- $ 5 billion Retail Space- 10 million sq ft

Wal-Mart-2006 Sales- $ 351 billion Retail Space- 488 million sq ft ,Added 39 million sq ft last year Employees- 1.8 million Store size- 1,87,000

Employees- 60,000 Store size- 1,00,000

Sq ft

Sq ft

Sams Retail Success Mantras

Commit to your business-sheer passion, love your work Share profit with all associates Motivate your partners-encourage competition Communicate everything possible to your partner Appreciate associates Celebrate success-find humor in failure Listen to everyone in your company Exceed customer expectation Control expenses Swim upstream

Super effective Supply chain

People think we got big by putting big stores in small towns. Really, we got big by replacing inventory with information. Sam Walton

Within 15 min of sale of an item, notification is sent to supplier Minute parameters like weather also considered for forecasting & replenishment Office in Unassuming town along with partners Negotiation for customer Cost sheet of Vendor 1 $ Vs 0.90 $ Private Labels -Better margins -Negotiation tool

Is Wal-Mart loved in US?? No !!!! Wal-mart destroys small businesses Dis-approval of companys foreign product sourcing Every day low cost- Closure of domestics industry Lack of union representation Sexual discrimination

Wal*Mart the inside story

Types of Private Label

Generic very promotional, very low margin Fast Value Fashion knockoff brands Zara and H &M Premium Store Brands Retailers own brand offers same or better quality at better price. The most profitable strategy in private label

Why Private Labels

Astitva
Consolidation of retailers Brands sell to same retailers and become a commodity Retailers need differentiation and better margin Declining retail prices (womens apparel prices dropped 2.4% 2007 vs. 06) Globalization of Production

Mystery of Low PL Prices

Imitate designer brands to reduce R&D costs

Source direct with factories to eliminate middlemen cost Buy in larger volume to receive lower cost

Source from low cost, duty and/or quota free countries: China, India, Bangladesh, Vietnam, Pakistan, South & Central America, Africa

Private Label Brands

Pantaloons : Urbana, John Miller, Bare Big Bazaar : Shoppers Stop : Lifestyle : More : Reliance : Wal-Mart - Faded Glory, George Target - Mossimo, Circo

Private Label Key Benefits

Highly competitive - same or better quality at better prices, Apparels average 37% less than national Brands Higher Gross Margins (est. 15 50 %

Higher selling price per square foot

Biggest threat to national brands

Brand Loyalty

Private Label Wave

Worldwide Private Label retail sales have passed US$1 trillion 2006 US apparel & shoes retail sales: $358.6 Billion 2006: 45% apparel sales were private label 2005: 39% apparel sales were private label 2002: 35% apparel sales were private label By 2010, private label merchandise expects to increase by 22% to 55% of total apparel sales

Private Label Trends

Combined effort, a win-win strategy American Living, Simply Vera, Isaac Mizrahi One time exclusive deal H & M, Target Blending in with Premium brands INC, Arizona Marriage with a celebrity name Sach, DreamLine, Sarah Jessica Parker, Hilary Duff

National Brand Counter Strategies

Develop unique products and stay ahead as a trend leader Create own stores Develop a compelling marketing strategy Increase brand loyalty Combine effort by offering exclusive lines. I.e, Simply Vera, American Living, Liz & Co Create one shot exclusive deliveries and SKUS Evaluate sourcing strategy and production cost Maintain net price (minimal promotions & discounts) Improve forecasting and turn around time

Future of Private Labels

Becoming national premium lifestyle brands: INC, Alfani, Arizona Branching out to create specialty chain business: George apparel stores, Wal-Mart, UK Increasing depth of multi dimensional merchandising product mix (Tony Hawk mens, boys, footwear and etc) Spin off PL brands (Aeropostale) Cannibalize weaker PL brands

Private Label Pros & Cons

PROS Exclusivity & differentiation Bring customer loyalty Better margin Better control in deliveries Brand equity Freedom in pricing strategy Increase bargaining power with both national brands and PL factories

CONS Inventory risk Higher R&D expense Higher marketing expense No markdown or return allowance from branded suppliers If product fails, will create negative image Quality control, complex production & import issues

What This Means for Brands

Change mind set and realize

that Private LabelsNational brands II. are competing brands Innovate and stay as market leaders to beat PL Stay focused on target audience Increase and market brand imagery to gain and maintain customer loyalty Partner with retailers to produce exclusive brands, SKUS, one-time offers or lines Price competitively and streamline expenses

should:

Classification of Retail Stores Category Management

Categories are managed strategically through category plans and strategic roles Each category is run like a "mini

business" (Business Unit) in its own right

Its own set of turnover and/or profitability targets and strategies Asset Returns measure performance and establish priorities Shift in relationship between retailer and supplier

Instead of the traditional adversarial

relationship, the relationship moves to one of collaboration, Exchange of information and data and joint business

Category Management
Category Management is a process that involves managing product categories as business units and customising them [on a store by store basis] to satisfy customer needs. (Nielsen) The strategic management of product groups through trade partnerships which aims to maximise sales and profit by satisfying consumer and shopper needs (Institute of Grocery Distribution)

Marketing strategy in which a full line of products (instead of the individual products or brands) is managed as a strategic business unit (SBU). (Business Dictionary)

Why Category Management?

Consumer Trends
Consumer demographics Typical Consumer taste & preferences

Competitive Pressure
New store formats New product introductions

Economic Considerations
Slow growth economy Companies pressured to improve financial performance

Industry Capability
Shared business goals -- Focus on Consumer---Shifting from internal optimization to maximizing consumer value Trading Partner Alliances

Category Management : Key Considerations

Suppliers to add value to Retailers business rather than their own

New promotions, New products, Revamped Plano gram, POS Advertising etc. has to be beneficial to the retailer and the shopper
Realization that only a finite amount of profit could be milked from price negotiations collaboration with the supplier meant that supplier's expertise about the market could be utilized workload in developing the category could be delegated to the supplier.

CATEGORY MANAGEMENT PROCESS

Category Definition Category Role

Category Review

Category Assessment Category Scorecard Category Strategies

Category Tactical Plans

Implementation Plan

Category Management Framework

CATEGORY DEFINITION CATEGORY ROLE CATEGORY ASSESSMENT What is your Business Unit? How can it be structured? How important is your category? What is your categorys main purpose and role? How will you increase category sales and margin? Who are your consumers? What do they need? Who are your competitors? What are they doing in the market? How is your category performing today? What do you want to create and achieve? Your sales & margin targets? What and how will this be reviewed?

CATEGORY REVIEW When are the progress reviews? What are the action plans as a result of the reviews?

CATEGORY GOAL SETTING

CATEGORY STRATEGY

What is your Demand & Supply strategy? What is the sourcing strategy for the Category? What support do you need to achieve targets?
How do you plan your product variety? Good, Better, Best How do you introduce new categories? What is the assortment plan? How do you improve sales and margins? How will you price? What promotions and markdowns do you need? How will the product be presented in the store? How will you ensure availability of stock? How do we make this happen? Lets form a team to achieve this

CATEGORY TACTICS

PLAN IMPLEMENTATION