Retail Management

Retail Management
Retail management course contents:
1. Place of retailing in marketing mix 2. Trends in retailing 3. Retail economics 4. Retail merchandising and shop displays 5. Retail advertising and sales promotion 6. Managing people at work- recruitment and motivation 7. Communication and customer relation 8. Inventory control and financial management 9. Retail strategies
10. Retail marketing

11. Retail management information system use of new technology 12. Comparative retailing across the world
Retail Management
Social marketing
Rational of social issues on the Indian context Attitude formation and change Marketing and family planning Marketing of literacy and hospital management
Small savings and afforestation

Measurement of effectiveness of social marketing programme
Retail Management
Books for further reading
1.Retail marketing management- david gilbert
2.Retailing - dunn, lusch, grifith

3.Retail management - v v venugopal
4.Retail management levy and weizt

5.Retailing lucas, bush, gresham
Retail Management
Customers trying to get entry in big bazzar 26th jan 2006 Partial opening of FDI in retail activity Reliance entry into retail Future group turnover touching to 3 billions kishor biyani awarded as international retailer of the year NRF Raheja opened 1st hypercity in malad Aditya birla group announced retail forey Tata woolwoth entered into technical colboration Wal-mart and bharti enterprises tied up for franchising deal Fdi for cash and carry business thro direct route
Retail Management
Some facts
720 million indians joining consuming age by 2010 55% of population will be under 20 by 2015 32% rise in urbanisation by 2008 10% annual growth rate of retailing 2000
8% of indian population will be employed by retail industry

2nd to agriculture 7% of population is engaged in retailing ( A T Kearney)
Retail Management
10- no. of years RPG pioneered in retailing
4- no of stores country wide last week

200- stores now in operation ( spencers and music world) 3000- no. of stores expected by 2009 6000- cr. Revenue expected by 2009 5000- stores expected by year 2011
RPG on retailing
price as a positioning platform is a dangerous game. Each retailer will have to go to the customer with its own value proposition Mr. sumantra banarjee president and ceo rpg
Retail Management
Retail Management
Retail Management
Retail Management
Reference
The reference books recommended
Retailing Management Michael Levy & Barton A Weitz
The Art of Retailing
Retail Management
Retail Management
Overview
World of Retailing
Retailing Strategy
Merchandise Management
Store Management
Retail Management
Retail Management
The World of Retailing
Introduction Global Trends and Indian scenario Types of Retailers Multi-channel Retailing Customer Buying Behaviour
Overview
Retailing Strategy
Marketing Strategy and Retail Locations Site Selection Financial Strategy Human Resource Management Information Systems & Supply Chain Management Customer Relationship Management
Implementing the Retailing Strategy Merchandise Management

Planning Assortments Buying Systems Purchasing Merchandise Pricing Promotion Mix
Store Management & Operations

Managing Store Employees Controlling Costs Managing Merchandise Providing Customer Service
Retail Management
Retail Management
Overview
World of Retailing
Retailing Strategy
Store Management
Retail Management
World of Retailing
Preamble
At the outset, it is imperative to examine the background information and trends with regard to retail customers and competitors so as to understand retailing and develop and effectively implement a retail strategy.
We will study the functions various types of retailers perform and the variety of decisions they make, using multiple selling channels, to influence customer buying behaviour in a rapidly changing, highly competitive environment
Retail Management
World of Retailing
Overview
Introduction Global trends and Indian scenario Types of Retailers Multi-channel Retailing Customer Buying Behaviour
Retailing Strategy


Retail Management
Introduction
Definition and Scope
The word retail is derived from the French word retaillier

to cut a piece off
OR
to break bulk
Philip Kotler defines Retailing as
Retailing includes all the activities involved in selling goods or services directly to final consumers for their personal or non-business use.
A Retailer attempts to satisfy consumer needs by having the right merchandise, at the right price, at the right place, when the consumer wants it. A Retailer is, in fact, the final link in the distribution channel.
Retail Management
Introduction
Marketing Mix
The role of Retailing in the marketing mix is very significant
6 Ps of Retailing
Product Place Price People Presentation Promotion Customer 1
Manufacturer or Distributor
Retailer 1
Retailer 2
Customer 2
Customer 3
Channel Power is the extent to which retailers influence the marketers decisions on pricing, promotion and product strategy. Retailer is the one-point source of information (customer feedback)
Retail Management
Introduction
Functions
Retailers perform important functions that increase the value of the products and services
Providing Assortments specialized assortments offering. Most consumers, including children know where to buy different types of products Breaking Bulk Cost effective for manufacturers to transport. Easier for consumers to purchase in smaller, more manageable quantities. Holding Inventory Beneficial to consumers reduces consumers cost of storing products / limited storage space required. Providing Services Make it easier for consumers to buy and use products. Credit facility, Displays (see and test), Salespeople answer questions and provide additional information, Flexibility of buying anytime, Home delivery
Retail Management
Introduction
Retail Mix
The retail mix is a combination of factors retailers use to satisfy customer needs and influence their purchase decisions
Personal Selling Location
Services
Store design and display
Retail Strategy
Merchandise assortments
Pricing
Advertising & Promotion
Retail Management
Introduction Theories of change in Retail institutions

Cyclical Theories
Wheel of Retailing (price / service) Accordion Theory (assortment)
Theories of Change
Evolutionary Theories Dialectic (retailer) Natural Selection (customer) Gravity (market structure) Central Place (assortment)
Retail Management
Introduction WHEEL OF RETAILING THEORY
Theories of Change
A theory of retail institutional change that explains the phases through which some types of retailers pass or evolve.
New low-cost retailer enter
Vulnerable Phase
Entry Phase
Mature Retailer
Top heaviness Conservatism Declining ROI
Innovative Retailer
Low status Low price Minimal service Poor facilities Limited product offerings
Traditional Retailer

Trading-up Phase
Elaborate facilities Exotic services Higher rent locations Higher prices Extended product offerings
Forced to upgrade
Retail Management
Introduction RETAIL ACCORDION THEORY
Theories of Change
A theory of retail institutional change that suggests that retail institutions go from outlets with wide assortments to specialized narrow line store merchants and then back again to the more general wide assortment institution. It is also referred to as the general-specific-general theory.
Broad
Narrow Categories
Assortment
Many
Few
Retail Management
Introduction Retail strategic opportunities
Retail Strategies
New
Retail format development
Diversification
Unrelated Related
Retail Format
Existing
Market Penetration
Market Expansion
Existing
New
Target market segment
Retail Management
Introduction DIALECTIC PROCESS
Theories of Change
An evolutionary theory based on the premise that retail institutions evolve. The theory suggests that new retail formats emerge by adopting characteristics from other forms of retailers in much the same way that a child is the product of the pooled genes of two very different parents Thesis Specialty Store
High Margin Low turnover High price Full service Downtown location Plush facilities
Synthesis Category Killer

Average Margin Average turnover Modest price Limited service Suburban location Modest facilities
Anti Thesis Discount Store

Low Margin High turnover Low price Self-service Low rent location Spartan facilities
Retail Management
Introduction NATURAL SELECTION THEORY
Theories of Change
This theory follows Charles Darwins early thesis that organism evolve and change on the basis of survival of the fittest. In retailing, those best able to adapt to changes in customers, technology, competition and environment have the greatest chance of success.
GRAVITY THEORY
A theory about the structure of market areas. The model states that the volume of purchases by consumers and the frequency of trips to the outlets are a function of the size of the store and the distance between the store and the origin of the shopping trip
Retail Management
exercise
The exercise that follow help to place information in a practical context.
1. What is retailing? And what their functions ? Which retailer would fall in different categories ?
Retailer has developed thro cyclical changE The retailer has developed thro acordian change Retailer has developed thro dialectic process WHO: HOW:
WHO:
HOW:
WHO:
HOW:
Retail Management
Introduction
Trading Area
TRADE AREA is a geographic sector that contains potential customers for a

particular retailer or shopping centre.
PRIMARY ZONE is the geographic area which the store or shopping centre
derives 60-65% of its customers. This zone is usually 5-8 Kms. or less than a 10-minute drive from the site.
SECONDARY ZONE is the geographic area of secondary importance in

terms of customer sales generating about 20% of store sales. This zone is usually 8-12 Kms. or not more than 15-20 minutes drive from the site.
TERTIARY ZONE includes customers who occasionally shop at the store or

shopping centre. These customers lack adequate retail facilities closer to home. This zone typically extends 25 Kms. in major metros and 50 Kms. in smaller markets.
Retail Management
Introduction
Nature of Competition through the Retail Life Cycle
Retail Life Cycle
Number of Competitors
Innovation Very Few
Accelerated Development Moderate
Maturity Many Direct, Moderate Indirect
Decline Moderate Direct, Many Indirect
Retail Management
Introduction
Retail Life Cycle
Opportunities of growth and profit through the Retail Life Cycle
Growth / Profitability / Duration
Innovation Very Rapid Low Moderate 3-5 years
Accelerated Development Rapid High 8 years
Maturity Moderate Slow Moderate Indefinite
Decline Slow or Negative Very Low Indefinite
Retail Management
Introduction
Retail Life Cycle
Nature of investment and risk factors through the Retail Life Cycle
Investment / Growth / Risk Decisions
Innovation Minimum Investment High Risk
Accelerated Development High Investment to sustain Growth
Maturity Tightly controlled growth in untapped markets
Decline Marginal capital expenditure
Retail Management
Introduction
Management concerns through the Retail Life Cycle Central management Concerns
Retail Life Cycle
Innovation Refine Concept through adjustment & experiment
Accelerated Development Establish a preemptive market position
Maturity Excess capacity & over storing: prolong maturity & revise business concept
Decline Engaging in a run-out strategy
Retail Management
World of Retailing
Overview
Retailing Strategy


Retail Management
Global Trends and Indian Scenario
Retail Industry
Some of the most important changes in the Retail Industry

Growing Diversity of Retail Formats Greater choice available to the consumer. Competition is no longer limited to the traditional rivals. Increasing Industry Concentration While the number of different retail formats has grown, the number of competitors within each format is decreasing. A few national retailers dominate most formats. Globalization Some retailing concepts that are successful in their country of origin have developed a global presence.
Maturity of Domestic Markets Most large retailers have saturated their domestic markets.
Skills and Systems Global sourcing and sophisticated information and distribution systems make expansion easier to do. Trade Barriers Relaxation of trade barriers has made globalization viable.
Retail Management
Big Business
Retailing in developed countries is better organized and big business

Global retail business is worth a staggering US$ 6.6 trillion High percentage of organized retail sector 80% share in USA, 70% in Western Europe, 40% in Brazil and 35% in Korea / Taiwan Largest component of Service sector which accounts for a large share of GDP Offers huge employment opportunities 22 million employed in 2 million stores in USA Highly customer-centric approach Emphasizes on Innovation products, processes and services
Retail Management
New Formats
Some emerging trends in global retailing

New retail forms and combinations continually emerge bank branches in supermarkets, food stores at petrol pumps, coffee shops in bookstores Shorter lifespan for new formats rapidly copied and quickly lose novelty Increased non-store retailing mail, television, computers and telephone Competition is increasingly intertype different formats compete for the same customer Category Killers provide fierce competition fewer players in an industry Marketing channels are increasingly becoming professionally managed Technology is becoming critical as a competitive tool forecasting, inventory management, electronic fund transfer
Retailers with unique formats and strong brand positioning operating globally 40% of European retailers, 31% of Far Eastern and 18% of USA
Retail Management
Numbers
With total sales of US$ 6.6 trillion, retailing is the worlds largest private industry
ahead of Finance (US$ 5.1 trillion) and Engineering (US$ 3.2 trillion) over 50 retailing companies figure in the Fortune 500 25 of the Asian Top 200 firms are retailers Wal-Mart, has a turnover of US$ 140 billion, almost one-third of Indias GDP 10% of the worlds billionaires are retailers
and accounts for over 8% of GDP in western countries
Retail Management
Employment
Retailers are big employers

Boeing Motorola Phillip Morris McDonald's JC Penny GE K-Mart Sears Pepsico Wal-Mart
Source : Fortune 1994 (Thousands)
115 132 165 183 202 221 335 360 471 600
Retail Management
Global Trends and Indian Scenario Retailing affects every facet of life
Services 50%
Employment
Government 15%
Retail 17%
Manufacturing 18%
More than 20 million jobs

These figures are understated because many of the 20 million service jobs involve firms retailing services to consumers.
Retail Management
Sales Volume
Retail Sales
USA
Figs. in US$ billion
FRANCE UK CHINA INDIA 0 500 1000 1500 2000 2500
Share of Traditional and Organized Retail sectors

120 100 80 60 40 20 0
EUROPE
MALAYSIA Traditional
THAILAND Organized
INDIA
Retail Management
Evolution
First department store was founded in Paris in 1852 by Aristide Boucicaut and was named Bon Marche
One store one category Chain stores adopted the one-stop shopping concept To compete, smaller merchants were compelled to open self-service stores The supermarket revolution was sparked off in the 1920s By 1950, 40% Americans were buying from organized retail stores Pre-packaged, weighed and priced method was extended to groceries, meats, fruits and vegetables
Retail Management
Evolution
Organized retail formats worldwide has evolved in three phases

I. Supermarkets, department stores and Specialty stores retailers decide on the category and quality of products and services and differentiate from other retailers
II.
Discount Stores retailers carve a niche based on a product category and price. Competition intensifies as offerings become standardized and price becomes the USP
III. Hypermarkets competition peaks emphasizing on price and a wider product range. However, there is a lack of product depth and service components
Retail Management
Global Trends and Indian Scenario Most retailers today compete on
Competitive forces
Strategic location close to the customer

Adapting technology IT for logistics management to reduce costs Better negotiating power size does matter price, credit, low inventory, cash surplus Innovative marketing bait and switch attract through popular brands (low margins) and sell more profitable items
Greater value for money always looking for new ideas to provide greater levels of customer service
Retail Management
Role of Technology
Technology plays a major role in a retailers success or failure

Integrated systems and networking POS terminals integrated with back-office systems Electronic Data Interchange (EDI) computer-to-computer transmission of business information (inventory, order, payment etc.) between retailer and vendor reduced costs, saved time and minimized errors Bar coding a specific numerical code number is automatically transferred to black and white bar codes whose width and size identify each item code Electronic Article Surveillance security tags (electronic) that must be removed or deactivated at the check-out counter a beep will go off
Electronic shelf labels still in its infancy, directly connected to the computer change in price
Retail Management
Indian Scenario
Indias per capita retailing space is lowest in the world

Over 5 million retail outlets of various sizes and formats Almost 96% of these are less than 500 sq.ft. in size Per capita retail space of 2 sq.ft. (16 sq.ft. for USA) Largest number of outlets in the world 5.5 outlets per 1000 people
Retail Turnover
2-fold increase in total retail turnover 8-fold increase in organized retailing 2000
20,000
Organized Unorganized
2005
160,000
640,000
380,000
Figs. in Rs. Crores
Retail Management
Global Trends and Indian Scenario Structure of the Indian market

100%
29% 55% 1% 3% 75% 6%
Indian Scenario
80%
48%
60%
66%
40% 20%
48% 32% 35%
78%
Very Rich Consuming Class Climbers Aspirants Destitutes
33% 24% 17%
0% 1994-95 2000-01
Million Households
2005-06
Source : NCAER Research, Nov. 1997
Retail Management
Global Trends and Indian Scenario Segregation of income groups

1.7 0.2
Indian Scenario
Above 125 50 to 125 30 to 50 15 to 30 10 to 15 0

,000
3.4 0.9 3.9 1.4
16.3 6.2 14.0 19.0
Urban Rural
10
15
20
25
30
35
Million Individuals
Source : NCAER Research, Nov. 1997
Retail Management
Global Trends and Indian Scenario Consumers are spending more time on shopping
Market Research
OUTSIDE HOME Shopping for grocery items Shopping for non-grocery items Social get-together Eating out Movies and Theatre AT HOME Watching TV/Listening music Reading and studying Household work 87% 58% 50% 35% 11% 56% 14% 4%
No. of Hours
1.2 1.3 2.6 1.5 2.2 2.4 2.1 1.5
Source : KSA Retail Summit 2003
Retail Management
Global Trends and Indian Scenario The location of store and catchment area definition
4.05
5 KM 4 KM
Market Research
2.43
1 KM
2 KM
Grocery
3 KM
Cosmetics Apparel
2.54 1.5 2.74
Books Music
Jewelry
4.6
should match the distance customer is ready to travel

Source : KSA Retail Summit
Retail Management
Market Research
A typical share of wallet indicates that spends on grocery, books, music and eating out have increased
Dry Groceries Wet Groceries Personal Care Books and Music Eating out Movies / Theatres Gifting
1150 810 250 330 370 170 480
Source : KSA Retail Summit
Retail Management
Market Research
Annual spends on home products (consumer durables) has gone up
Savings / Investment Holidays / Vacations Consumer Durables (Audio/Video) Consumer Durables (Others) Apparel Home Textiles Home Improvement Furniture
4330 2690 5620 8490 2130 880 2920 3530
Retail Management
Global Trends and Indian Scenario Growth of retail outlets in India

4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0
1978 1978 1984 1984 1990 1990 1996 1996 2002 1999 2010
Growth
3.33 2.42 1.80 0.94
3.60
Figs. in Million
2.40
1.76
2.02
0.58
0.75
Urban Rural
Investments in organized retailing doubled Rs.20000 crores between 2001-012
from Rs.1000 to
Retail Management
Four-gear path
KSA Technopak suggests a four-gear path and places India in the second gear
Create Awareness Increase Customer Expectation Strengthen Backend management Consolidation
Retailers going global / M & A
Growth
Retailers strengthening backend system

Consumers demands organised formats New retail entrants driving growth
First Gear 1995 2000
Second Gear 2005
Third Gear 2010
Fourth Gear
Retail Management
Global Trends and Indian Scenario Key Indicators of each gear

First gear New retailers driving awareness High degree of fragmentation Real estate groups starting the retail chains Consumer expecting for value for money as core value Second gear Consumer driven Emergence of pure retailers Retailers getting multi-locational and multi-format Global retailers evincing interest in India
Four-gear path
Third Gear Category management Vendor partnership Stock turns Channel synchronisation Consumer acquisition Customer relation management Fourth Gear Aggressive roll-out Organised retail acquiring significant share Beginning of cross-border movement Mergers and Acquisition
Retail Management
Statistics
Some useful statistical data

Half of Indias one billion population is less than 30 years old
Indias urban population is only 30% of the total population 70,000 new FMCG outlets have opened in the last 2 years One-third of the retail outlets stock loose, unpacked provisions One of every five retailers offers credit facilities to consumers Cooking oil / vanaspati accounts for 1/3rd of rural spends on FMCG products 65% of the villagers watch TV More than half the tea is consumed in the rural households Over 18 lakh new households enter the shampoo market every month
Chemists deal in a wide range of FMCG products
Retail Management
Organized Retailing
Numerous factors have prevented organized retailing from taking off

High Real Estate Costs over-populated (demand supply gap) Obsolete Rental Laws landlords unwilling to rent out premises Lack of Finance Options retailing not even in the charter High Interest Costs as high as 20% Unplanned Cities extremely difficult to find suitable location Rampant Corruption unorganized retailer evades taxes High Electricity Costs air-conditioning, refrigeration and long operating hours Lack of Skilled Manpower no formal training institute Weak Consumer Laws redressal system is a time-consuming and frustrating affair delayed justice unscrupulous retailer gets away
Retail Management
Organized Retailing
Added to that, some common causes of retail failure

Lack of credible Retail Management Software single most crucial factor, enormous amount of data and transactions Lack of Data Integrity garbage in garbage out
Wrong selection of location best use of vacant commercial space

Lack of expertise retail is detail little know-how High overheads customer-intensive (manpower, running costs etc.)
Poor financial planning less working capital, no credit, high inventory holding costs etc.
Excessive shrinkage nightmare for first-timers Poor merchandise mix stocking understanding as per intuition, lack of
Retail Management
Organized Retailing
However, retailing is good for the economy with multiple benefits

Encourages Food Processing Industry 40% of agricultural produce gets wasted Employment opportunities jobs for all
Better quality products consumer confidence, competitive price etc.

Better social infrastructure price benefit passed to end consumer Enhanced foreign investment
Better showcase for exports attract overseas clients

Benefit to tourism increased tourist traffic Better realization of taxes fully transparent operating system
Retail Management
Organized Retailing
All said and done, retailing is the sunrise industry of India

Increasing number of nuclear families Increase in number of working women Greater work pressures Increased paucity of time Higher disposable income
Change in buying behaviour and lifestyles

Concept of Value for Money fast catching on Convenience a priority for Indian consumers
Retail Management
Global Trends and Indian Scenario Indian retail sector on the brink of a revolution
Revolution
Established players will reached saturation levels in Metros and shift focus to other Class I cities By 2010 ONWARDS, top retailers will operate at least three to four formats Balance of power will shift away from manufacturer to retailer Large retailer will dominate the market
Small players will continue to survive personal relations and proximity to homes
In the next 10 years nearly 1 million new jobs will be created in the organized retail sector
Retail Management
Key drivers
Some of the key drivers of Retailing in India

Consumer Pull with the liberalization of the consumer goods industry, initiated in the mid-80s, and accelerated through the 90s, it is the consumer who calls the shots today High-income segment do not shop themselves, low level of involvement and monthly grocery bill forms very small part Middle and lower income groups expenditure constitutes nearly 50% of monthly salary, high involvement in shopping, highly value conscious (looks for bargains). The right segment for supermarkets Rising Incomes
Over the past decade, high and middle-income population grown at 10% per annum.
Number of households earning above Rs.150,000 per annum is 30 million today and expected to grow to 80 million by 2010
Retail Management

Explosion of Media
Key drivers
Kick-started during the Gulf War, television has accelerated (225 million cable connections v/s 23 million telephone connections) About 180 channels being aired
Indian consumer exposed to affluent lifestyles

raised aspirations and expectations wants choice, value, service, experience and convenience
The Rural Market : Waking up Emerging as important consumption area one-third the demand for consumer durables and FMCG More and more marketers using village haat for brand promotions
Retail Management

Change in Consumer Behaviour
Key drivers
The urban women, today is literate and employed

Shift in family structure increase in number of nuclear units Higher disposable income (spending power)
Paucity of time one-stop shopping, speed / efficiency of service

Value for Money Pester power influence of children in buying decision Impulse purchase increased spends on entertainment, lifestyle
Emergence of Hubs of Retail activity Chennai, Bangalore and Hyderabad major hubs. Chennai 17% of food sales and 25-30% of consumer durables
Retail Management

Change in Scale of Operations
Key drivers
Subhiksha (50 stores) and Food World (41 stores) across Chennai, Bangalore and Hyderabad Elimination of links in the purchasing chain direct dealing with food processors HLL has dedicated a special team to deal with these emerging power retailers
Expansion of family-owned Businesses

Viveks (Rs.150 crores), Pantaloon (Rs.100 crores) and Nilgiris Stiff competition to the kirana store mistrust / shortchanging on quality, weight or promo freebies Entry of Corporate Sector Investments in retail Tatas, ITC, RPG, Piramals, Oil Companies
Retail Management
Global Trends and Indian Scenario Matrix of opportunities for retail in India
Need for customer to change
Industry Analysis
LOW
Dry grocery
READY-TO-GO Electronics
Pharmacy
Fast food
Men apparel
Furnishing Music / Books
Fresh grocery
Sports clothing
Fuel
Liquor
Women apparel
Toys
Photo WAIT & WATCH SHAPE / ADAPT Supply chain sophistication
HIGH
Retail Management
Global Trends and Indian Scenario Therefore, to conclude

Retailing in India has a very long haul ahead
Conclusion
Process of getting into newer forms of purchasing has been gradual Traditional buying habits
Relationship management by traditional retailers

No specific international format can be easily adapted and applied Right proposition only through the learning curve
Growth and development of organized retailing will be driven by

Low price economies of scale Consumer benefits
the power of the consumer as well as that of the retailer in the marketing channel will spearhead the growth of retailing in India
Retail Management
World of Retailing
Overview
Retailing Strategy


Retail Management
Types of Retailers
Format Classification
The most basic characteristics of a retailer is its retail mix
CUSTOMER SERVICE
LOCATION
STORE DESIGN & DISPLAY
RETAIL STRATEGY
MERCHANDISE TYPE & ASSORTMENTS
COMMUNICATION MIX
PRICING
with three elements of critical significance for classification
Retail Management
Types of Retailers
Retail Mix Elements
Patterns among retail mix elements

Price-Cost Trade-off between price and assortment and service Type of Merchandise category wise
Variety and Assortment Variety (breadth) is number of categories, whereas Assortment (depth) refers to number of SKUs under each category.
Customer Services another criteria for classification.
Cost of offering Breadth and Depth of Merchandise and Services greater depth leads to high inventory investment; service is costly
the critical retail decision remains the trade-off between costs and benefits of maintaining additional inventory or providing additional services
Retail Management
Types of Retailers
Retail Formats
In other words, a retail format is the type of retail mix adopted, which includes
The nature of merchandise and services offered The pricing policy adopted
The approach to advertising and promotions

The approach to store design and visual merchandising The choice of location preferred
The size of the store

Convenience store Discount stores Hypermarket Specialty store Superstore / Combination store Warehouse store Supermarkets Department store Shopping mall
Retail Management
Types of Retailers
Service Level
Retailers position themselves on the levels of service offered

Self-Service the cornerstone of all discount operations. Customers carry out their own locate compare select process to save money. Self-Selection Customers find their own goods, but can seek assistance from the salesperson. Limited Service Retailer stock more goods, and customers need more information and assistance. Full Service Salespersons are ready to assist in every phase of the locate compare select process. Higher priced retailing.
Broad
Shoppers Stop Big Bazaar
Breadth of product line
Planet M
Kirana Shop
Narrow
High
Value Added Low
Retail Management
Types of Retailers
Retail Formats
Popular Retail formats adopted the world over

Convenience Stores (1500 8000 sq.ft.)
modern version of mom-and-pop grocery / general store limited variety and assortment (various categories with only one / two popular brands in each category) half the items bought are consumed within half an hour of purchase convenient location, speedy check-out, higher prices than supermarkets non-urban stores sell fuels also Items low-cost, small size, regularly consumed and purchased frequently low inventory costs and labour cost maximizing profits
Specialty Stores (<18000 sq.ft.)

limited line stores very different range of services focus on niche segment large width and depth of the category offer better selection and sales expertise deep assortments, personalized service and intimate store atmosphere can offer much lower prices kill a category dominate a particular category use buying power to negotiate lower prices, excellent terms and assured supplies
Retail Management
Types of Retailers Conventional Supermarkets (30000 sq.ft.)

Retail Formats
self-service food stores with limited sales of non-food larger size are called superstores bulk purchases lower prices heavy promotions low advertising costs local attraction neat environment, fast check-out counters and organized layouts
Discount Stores (80000-150,000 sq.ft.)

Similar to a department store in many ways wide variety / less depth of merchandise lower quality and price range
limited service and discounted prices at low-cost Spartan location

target lower and middle income groups salespeople only when absolutely needed electronics, jewellery etc.
Retail Management
Types of Retailers

Retail Formats
Superstores or Combination Stores (130,000 250,000 sq.ft.)

larger supermarkets similar to discount stores except for larger variety of food products one-stop shop, self-service, warehouse-type, large parking area (outskirts) wide range of food (30-40%) and non-food (60-70%) predominantly dry groceries food - primary reason, non-food - impulse low priced food, higher margin non-food and also sell fuels
Department Stores
vast range of products in separate departments (widest variety) Like a collection of specialty stores under one roof high level of customer service typical lines furniture, appliances, consumer electronics, apparel, household linen and dry goods Run on principle of increased revenue through sales volumes
High operating costs
Retail Management
Types of Retailers Hypermarkets (150,000 300,000 sq.ft.)

Retail Formats
introduced in France after WW II combination of discount and superstores self-service, warehouse-type, large parking area food (60-70%) - predominantly fresh produce, non-food (30-40%) larger sized but lesser stocked than Superstores difficult to locate merchandise and long checkout queues
Warehouse Clubs (250,000 400,000 sq.ft.)

large stores in low-rent location, simple interiors, concrete floors wide aisles pallets picked and arranged by forklifts target individuals + wholesalers (30% of customer base / 70% of sales) annual fees for members offer limited assortment of food / general merchandise (50-50%) little service and low prices buy merchandise on special promotions from manufacturers
Retail Management
Types of Retailers Shopping Malls
Retail Formats
Not retail stores in the true sense, but large number of stores located in a common mall house different types of retailers few anchor stores that drive maximum footfalls attract other complementary (to anchor stores) promoters charge a fixed amount + percent of sales win-win situation for both promoter and retailer
Retail Management
Types of Retailers
Issues in General Merchandising
Drug Stores changing role from dispensing pills to providing health care assistance personalized service order via phone, monitoring frequency Off-price retailers purchase excess inventory at end of the season including seconds Closeout Retailers sell a broad but inconsistent assortment of general merchandise Outlet Stores owned by manufacturers - factory outlets Value Retailers general merchandise discount stores in lower-income urban or rural areas much smaller than traditional discount stores ( < 9000 sq.ft.) Dollar General merchandise for a dollar imply good value
Retail Management
Types of Retailers
Non-Store Retail Formats
Moving away from the brick-and-mortar store

Electronic Retailing e-tailing or internet retailing Catalog and Direct-Mail Retailing initially for the rural consumer (no access to store); today for all (enjoy the convenience) embracing a multi-channel strategy integrating Internet with Catalog operations attractive business opportunity relatively low start-up costs difficult for smaller catalog and direct-mail retailers to compete with large, well-established firms that have adopted a multi-channel strategy mailing and printing costs are high and increasing difficult to get consumers attention catalog processing time response to new trends slow
Retail Management
Types of Retailers
Direct Selling
salesperson contacts a customer, at home or work, demonstrates merchandise benefits, takes and delivers an order
costly proposition
largest sold categories home / family / personal care merchandise, services, wellness and leisure / educational 64% in the home, 9% in the workplace and 15% over the phone
83% of the salespersons work part-time (less than 30 hours a week)

Two special types Party Plan - salesperson encourages customers to act as hosts and invite friends or co-workers to a party. Hosts receive gifts or commission Multilevel Sales - people serve as master distributors, recruiting and training other distributors
Retail Management
Types of Retailers
Television Home Shopping customers watch a TV program demonstrating merchandise and then place orders by telephone $6 billion business in the US appeal primarily to lower-income consumers categories - inexpensive jewelry, apparel, cosmetics, exercise equipment Cable channels dedicated to TV shopping Infomercials TV programs, typically 30 minutes long, that mix entertainment with product demo and solicit orders by telephone Direct Response advertising ads. on TV or radio that describe products and provide an opportunity for consumers to order them Vending Machine Retailing merchandise or services stored in a machine and dispensed to customers when they deposit cash or swipe a credit card placed at convenient, high-traffic locations primarily contain snacks and drinks new video kiosk machines enable consumers to see merchandise in use electronic systems track inventory, cash transmit data to host computer
Retail Management
Types of Retailers
Services Retailing
Services retailers are defined as retailers for which the major aspect of their offerings is services versus merchandise
There are four major differences in the nature of the offering provided by services merchandise retailers
Intangibility see, touch and feel - difficult for consumer to evaluate performance and action rather than objects
use of tangible symbols to inform customers about the quality of service
Retail Management
Types of Retailers
Simultaneous Production and Consumption
Services Retailing
provider creates and delivers service as the customer is consuming it customer is present when the service is produced other customers consuming the service at the same time can affect the quality of the service provider does not get a second chance to satisfy the consumers needs hence, critical to get it right the first time
Inconsistency
no two services can be identical

expend considerable time and effort in selecting, training and motivating their service providers
Retail Management
Types of Retailers
Perishability services are perishable - cannot be saved, stored or resold
Services Retailing
match supply and demand - capacity constraints, huge investments, varying demand lower prices during lean period (excessive capacity) open for extended hours during peak seasons increase staffing during peak hours make customers waiting time more enjoyable and entertaining
Retail Management
Types of Retailers The major classification of retail ownership

Independent, Single-Store Establishments
Ownership
owner managed - management has direct contact with the customer

quick response, flexible to market changes and customer needs cannot negotiate lower prices for merchandise and advertising solely dependent on owner-managers capabilities of decision making
Corporate Retail Chains company operating multiple retail units under common ownership offer broader selection of merchandise at lower prices - scale economies excessive rules and procedures - slow decision making lack the local flavour - standardized merchandise or service
Retail Management
Types of Retailers
Franchising attempts to combine advantages of both formats
Ownership
contractual agreement between a franchiser and a franchisee that allows the franchisee to operate using the name and format developed and supported by the franchiser franchisee pays a lump sum plus a royalty operations in accordance with prescribed procedures franchiser provides assistance in locating and building the store, developing the products and services sold, management training and advertising consistency in delivery of product or service quality
Retail Management
Types of Retailers Therefore, to conclude
Summary
Different types of retailers compete with different retail mixes to sell merchandise and services to customers Retailers can be classified by the type of merchandise and services sold Better approach is to classify on the basis of their retail mix - merchandise variety and assortment, services, location, pricing and promotion decisions to attract customers Over time, traditional retailers (supermarkets, convenience, department, discount and specialty stores) have been joined by category specialists, superstores, hyper-markets, warehouse clubs, off-price retailers, catalog and direct-mailers. Substantial growth in services retailing The inherent differences between services and merchandise - services emphasize on store management while merchandise on inventory control issues Traditional retail formats have changed in response to these new retailers
Retail Management
World of Retailing
Overview
Retailing Strategy


Retail Management
Multi-channel Retailing
Retail Channels
We saw that retailers can be categorized by the channel they use to reach their customers, i.e store-based or non-store retailers
However, in reality, many retail firms use more than one channel They begin with one channel and later adopt another to attract more customers By using a combination of channels, retailers can exploit the unique benefits provided by each channel Channels can be used to complement each other
Retail Management
Key Customer Benefits
The unique benefits of store, catalog and the Internet
STORE
Browsing Touch and feel of the products Personal Service Cash payment Immediate gratification Entertainment and social interaction
CATALOG
Convenience Portability - easily accessible Safety Visual presentation
INTERNET
Convenience Safety Broad selection Detailed information Personalization Problem-solving information
Retail Management
Electronic Channel
Critical factors that would affect growth of the electronic channel shopping
Ease of trial
more and more people getting Internet access - at home, school or work Demographics of the Internet user reflects the general population Substantial usage by the young suggests a bright future However, few in this segment own credit cards Several shopping sites offer a way around this problem parent can establish an account for their children children select desired merchandise and put it in an electronic shopping cart shopping site takes care of the payment parents can check on their teens buying habits and balance Adults, over 50 years old, are the fastest-growing segment
Retail Management
Perceived Risks
Electronic Channel
security of credit card transactions - diminishing with sophisticated technologies to encrypt communication potential privacy violations (purchase history, personal information and search behaviour) - existing legislation is limited
Relative Advantages the interactive platform allows customers to prepare an individually tailored (to their needs) catalog - enabling in a more satisfying selection
and would largely depend on the degree to which retailers exploit the opportunity to provide a wide variety of personalized information
Retail Management
Electronic Channel
Types of merchandise that could be effectively sold

Products with important touch-and-feel attributes may not be successful Branding can overcome many of the uncertainties quality of merchandise consistency and
Products that require detailed information before buying decision is made would do well Gifting already represent a substantial portion of online sales Service retailers can provide the look-and-feel attributes very effectively online - travel planning
Retail Management
Electronic Channel
Will this lead to more price competition

Price competition, among stores, is largely reduced by geography Using the Internet, consumers can search for merchandise across the globe at low cost no physical distance limitations Shopping bots or search engines provide a list of all sites selling a product category Additional information on product quality might lead customer to pay more thus decreasing the importance of price
the classic criticality of location, location, location, in the world of electronic retailing would read information, information, information.
Retail Management
Electronic Channel
Which channel is the most profitable

Contrary to common belief, operating costs associated to an electronic channel may be more than the cost of operating a physical store
cost of design, maintain and refresh the website
attract customers to the site

get merchandise to homes small packages deal with the high level of returns
Retail Management
Electronic Channel
Resources needed to successfully operate an electronic channel

Well known Brand name and trustworthy Image reduces perceived risk Providing and managing assortments of complementary merchandise and services reduced shipping costs, channel ideally suited to make recommendations
Offering unique merchandise differentiate and reduce price competition

Private-label merchandise Branded variants or co-branded merchandise Prepackaged assortments Presenting merchandise and information electronically download time, ease of navigation stimulate purchase, multi-item purchase and repeat visits Efficient Fulfillment minimizing delivery costs
Retail Management
Electronic Channel
Will manufacturers use the electronic channel to sell

Disintermediation is difficult to execute manufacturer lacks some critical resources retailers are more efficient in dealing with customers experience in distributing merchandise providing complementary assortments providing broader array of products and services collecting and using customer information
manufacturers also risk losing the support of the retailer
Retail Management
Multi-channel Retailing Reasons for becoming a multi-channel retailer
Advantages
Expanding market presence strong brands in limited locations and with little distribution
Leveraging existing assets build awareness on in-store signs, shopping bags, bills, print and broadcast media. On the other hand, leverage stores to lower the cost of fulfilling orders and processing returned merchandise - store as delivery and return point
Overcoming limitations of existing format stores have limited merchandise display space and inconsistent execution. Catalog retailer can provide real-time information (with daily updates)
Retail Management
Multi-channel Retailing Reasons for becoming a multi-channel retailer
Advantages
Insights into Customer Shopping Behaviour collecting data as consumers navigate through a website is easy - how and why does he shop, reasons for satisfaction / dissatisfaction, whether he shops by brands, size, colour, price even complaints - quick, easy and less personal
Increasing Share of Wallet using the channel in synergy with other channels results in consumer making more purchases (with some amount of cannibalization). The electronic channel drives more purchases from the store, and the store drives more purchases from the website. Single-channel customer spends $100-200 per year Dual-channel customer spends $300-500 per year Tri-channel customer spends $800-1000 per year
Retail Management
Issues
To provide a seamless interface to a customer across multiple channels, retailers need to integrate their customer databases and systems used to support each channel. Further
Brand Image essential to project the same image across channels; should be one of the reasons for the customer visit itself Merchandise Assortment typically, customer expect to see everything in the store also on the website. A significant product overlap, across channels, reinforces the one-brand image in the customers mind. Some retailers have tailored the assortments sold on the website to only include products their customers are likely to buy over the Internet. Walmart.com discontinued offering low-price cosmetics because the shipping costs were greater than the value of the merchandise Pricing customers expect consistency (excluding shipping charges and taxes). Retailers need to adjust their pricing strategy due to competition in different channels. Barnes & Noble offer lower prices over its electronic channel to compete effectively against Amazon.com
Retail Management
Multi-channel Retailing To conclude
Summary
Traditional store-based / catalog retailers adding an electronic channel
Evolution of multi-channel retailing is driven by the increasing desire of customers to communicate with retailers anytime, anywhere, anyplace
Each of the channels offer unique benefits to customers Multiple channels help retailers to overcome the limitations of each channel Electronic sales depends on delivery costs, consumers urgency and degree of pre-purchase information available. Brand name alone can suffice Critical resources for successful selling - strong brand name and image, complementary merchandising, offering unique merchandise, customer information and efficient fulfillment Disintermediation by manufacturers is unlikely - lack of critical capabilities Providing a seamless interface across channels is the challenge for retailers
Retail Management
World of Retailing
Overview
Retailing Strategy


Retail Management
Customer Buying Behaviour
Introduction
The buying process unsatisfied need
begins
when
customer
recognize
an
Seeks information about how to satisfy the need Evaluates the alternative sources (store, catalog or Internet) and chooses one Evaluates merchandise offering Purchases and uses product Visits another retailer to get more information
Decides whether product satisfies the need
Eventually Purchases and uses product

Decides whether product satisfies the need
Retail Management
Buying Decisions
There are three types of customer decision-making processes

Extended Problem Solving
customer devotes considerable time and effort to analyze alternatives

when decision involves lot of risks and uncertainties (financial - expensive product, physical - health or safety and social - how others view him)
decision is to satisfy an important need

has little knowledge about product or service - consult friends, family or experts, visit several retailers
Retailer influences decision by providing necessary information and offering money-back guarantee
Retail Management

Limited Problem Solving
Buying Decisions
customer devotes moderate time and effort to analyze alternatives when risk is moderate - previous experience / relies on personal knowledge usually chooses a retailer he has shopped at before impulse buying is a limited problem solving situation retailers encourage impulse purchase - prominent displays to attract attention and stimulate a purchase decision - BEST BUY
Retailer attempt to reinforce this buying pattern when customer is buying from them. If elsewhere, retailers need to break this pattern by introducing new information or offering different merchandise or service
Retail Management

Habitual Decision Making process involving little or no conscious effort
Buying Decisions
decision not very important and involve familiar merchandise brand loyalty and store loyalty are habitual buying behaviours
Retailer attempt to increase store loyalty by selecting a convenient location, offering complete assortments and reducing the number of stock-outs, rewarding customers for frequent purchases and providing good customer service
Retail Management
The Buying Process
The stages in selecting a retailer and buying merchandise

Need Recognition triggers the buying process Functional or Rational needs are directly related to the product performance Psychological or Emotional needs are associated with the personal gratification customers get from shopping / purchasing / owning the product Many products satisfy both functional and psychological needs Conflicting needs lead to trade-offs between a customers many needs Cross-shopping is the pattern of buying both premium and low-priced merchandise, as perception of value varies across product categories
retailers look for methods of stimulating need recognition and attracting customers
Retail Management
The Buying Process
Information Search is used to gather information about retailers or products Amount of Information searched is dependent on the value customers feel they gain from searching versus the cost of searching Value of search is in how it improves the customers purchase decision Cost of search includes both time and money Factors that influence amount of information searched include nature and use of product under consideration characteristics of the individual customer number of competing brands and retail outlets time pressure under which purchase must be made
Sources of information : Internal (memory of names, images, past experience) and External (ads and other people)
retailers objective at the information search stage is to limit the customers search to its store or website, by using each element of the retailing mix
Retail Management
Evaluation of Alternatives
The multi-attribute attitude model is based on the notion that customers see a retailer or a product as a collection of attributes. The model is designed to predict a customers evaluation based on its performance on relevant attributes importance of those attributes to the customer Beliefs about Performance customer processes information on each retailer and forms an impression of the benefits the stores provide Importance Weights importance of the benefits for the customer Evaluating Stores customers overall evaluation = performance beliefs X importance weights
However, in reality, customers do not spend the time necessary to find the very best product. Once theyve found a product that satisfies their need, they stop searching
Retail Management
Customer Buying Behaviour Therefore, factors that affect a customers Buying Decision
P E R Beliefs About performance of retailers and products
Customer Buying Decision
Family
O
S
O N
C
Values
Importance Weights
Reference Groups
I A Culture L
Attitudes A L Evaluation of retailers and products
Retail Management
Implications
To attract customers, a retailer must do market research to collect data on Alternative stores that customers consider
Benefits considered while evaluating and choosing retailer

Customers ratings of each stores performance on the benefits The importance weights that customers attach to the benefits Getting into the consideration set customers set of alternatives Changing Performance beliefs Increase belief about own stores performance Decrease performance belief for competing stores in consideration set Increase customers importance weights Add a new benefit
Retail Management
Implications
To convert customers positive evaluation into purchases, a retailer must Avoid stock-out of popular merchandise all relevant SKUs
Not offer liberal return policies and refunds (if lower prices prevail)
Offer credit Provide convenience by having convenient check-out counters Reduce actual / perceived waiting time at check-out terminals
Satisfaction is a post-consumption evaluation on how well a store or product meets or exceeds customer expectations
Retail Management
Market Segmentation
A retail market segment is a group of customers whose needs are satisfied by the same retail mix because they have similar needs Criteria for Evaluating Market Segments Actionability definition of a segment must clearly indicate what the retailer should do to satisfy its needs. e.g. supermarket segmenting on demographics (say, income) Identifiability ability to identify the customers in the target segment. Permits the retailer to determine the segment size and with whom to communicate Accessibility ability to deliver the appropriate retail mix to the customers in the segment. Size should be large enough to support a unique retailing mix
Retail Management
Market Segmentation
No one approach is best for all retailers. Need to explore various factors that affect customer buying behaviour and determine which factors are most important Approaches for Segmenting Market Geographic group customers by where they live Demographic group customers on characteristics like age, gender, income and education Geodemographic birds of feather flock together Lifestyle refers to how people live, spend their time and money, their attitudes and opinions Buying Situation fill-in versus weekly shopping Benefit group customers seeking similar benefits same importance weights
Retail Management
Customer Buying Behaviour To conclude

To satisfy customer needs, retailer must understand
Summary
How customers make store choice and purchase decisions

Factors they consider while deciding Six stages in the buying process Need recognition information search evaluation of alternatives choice of alternatives purchase post purchase evaluations When decision is important and risky more time on information seeking When decision is less important little time in buying process habitual
Buying process is influenced by personal beliefs, attitudes, values and social environment (families, reference groups and culture)
Segmentation Geography, Demographics, lifestyles, usage, benefits sought.
Retail Management
Retailing Strategy
Overview
Introduction to the World of Retailing
Retailing Strategy
Store Management
Retail Management
Retailing Strategy
Preamble
This section examines the strategic decisions made by retailers, i.e. developing a retail market and location strategy; setting financial objectives; fleshing out an organization structure and human resource strategy; establishing systems to control the flow of information and merchandise and managing relationships with customers. These decisions are strategic rather than tactical because they involve committing significant resources to developing long-term advantages over competition in a target market segment
Retail Management
Retailing Strategy
Overview The World of Retailing
Introduction and Trends Types of Retailers Multi-channel Retailing Customer Buying Behaviour
Retailing Strategy
Implementing the Retailing Strategy

Retail Management
Marketing Strategy Strategy is a Greek word meaning the art of the general
Definition
A Retail Strategy is a statement that identifies

the retailers target market
the format the retailer plans to use to satisfy the target markets needs
bases on which the retailer plans to build SCA
Retail Management
Marketing Strategy
Sustainable Competitive Advantage
Opportunities for retailers to develop SCA

Customer Loyalty customer reluctant to patronize competitors
Developing clear and precise positioning strategies

Creating an emotional attachment with customers with loyalty programs Positioning design and implementation of a retail mix to create an image of the retailer in the customers mind relative to its competitors Loyalty Programs work hand-in-hand with the overall CRM program. Members of loyalty programs are identified when they buy because they use some type of loyalty card. This information is used by retailers to tailor their offerings to better meet needs of loyal customers. Location location, location and location critical factor in selection of store not easily duplicated
Retail Management
Marketing Strategy
Human Resource Management labour intensive business Knowledgeable and skilled employees committed to retailers objectives Recruiting and retaining great employees does not come easy Distribution and Information Systems Efficient operations what, when, in what quantity, at lower cost Lower prices or higher margins used for attracting competitors customers
Unique Merchandise private label brands (store brands) Products developed and marketed by a retailer and available only from that retailer
Retail Management
Marketing Strategy
Vendor Relations develop strong relations to gain exclusive rights to Sell merchandise in a region Obtain special terms of purchase not available to competitors Receive popular merchandise in short supply Customer Service Takes considerable time and effort to build a tradition and reputation for customer service
Multiple Sources of Advantage do not rely on one approach low cost McDonalds good value, excellent customer service, maintaining vendor relations, great locations
Retail Management
Marketing Strategy
Growth Strategies
Types of growth strategies that retailers may pursue

New Retail format development Diversification
Unrelated Related
Retail Format
Existing
Market Penetration
Market Expansion
Existing New Target market segment
Market Penetration Greatest Competitive Advantage involves directing efforts toward existing customer by using present retailing format including Cross Selling Attracting consumers who shop elsewhere, Induce current consumers to visit store more often or buy more on each visit
Retail Management
Marketing Strategy
Growth Strategies
Market Expansion Build on existing strengths in new market Employ the existing retail format in new markets geographic or segment Retail Format Development Builds on retailers reputation and success involves offering anew retail format to the same target market (multi channel) Diversification Least competitive advantage - risky Introduce a new retail format towards a new market segment Related the present retail format or target segment shares something in common with the new opportunity Unrelated lacks any commonality between the present business and the new business Vertical Integration diversification by retailers into whole-selling or manufacturing
Retail Management
Marketing Strategy
Key Success Factors
Characteristics of retailers successful in international growth opportunities

Globally SCA expansion opportunity is consistent with core bases of SCA
Adaptability recognize cultural differences and adapt their core strategy to the needs of the local market Everything the customer sees, we localize. Everything they dont see, we globalize Global Culture think globally. Encouraging rapid development of local management.
Deep Pockets requires long term commitment and considerable upfront planning
Retail Management
Marketing Strategy
Entry Strategies
Approaches retailers take when entering non-domestic markets

Direct Investment investing and owning Highest Investment Significant Risk Highest potential returns Complete control of operations Joint Venture pools resources with a local retailer Reduced Investment Reduced risk Local partners knowledge Loss of Control Strategic Alliance collaborative relationship between independent firms Franchising least investment lowest risk limited control over operations reduced potential profit risk of assisting in the creation of a local domestic competitor
Retail Management
Marketing Strategy
Strategic Planning Process
Steps undertaken to develop a strategic retail plan

1. Define the Business Mission 2. Conduct a Situation Audit 3. Identify strategic opportunities 4. Evaluate strategic alternatives 5. Establish objectives and allocate resources 6. Develop a retail mix to implement strategy 7. Evaluate performance and make adjustments
Retail Management
Marketing Strategy
Step 1 : Define the Business Mission

Mission Statement is a broad description of the retailers objective and the scope of activities it plans to undertake
What business are we in ? What should be our business in the future ? Who are our customers ? What are our capabilities ?
What do we want to accomplish ?
Retail Management
Marketing Strategy
Step 2 : Conduct a Situation Audit

Situation Audit is an analysis of the opportunities and threats in the retail environment and the strengths and weaknesses of the retail business relative to its competitors The elements in the situation analysis are
MARKET FORCES
COMPETITIVE ENVIRONMENTAL FACTORS FACTORS
ANALYSIS OF STRENGTHS / WEAKNESSES
Retail Management
Marketing Strategy
Market Factors Size of market, rate of growth, sales seasonality and business cycle. Competitive Factors Barriers to entry, bargaining power of vendors and competitive rivalry. Intense rivalry large number of competitors, slow growth rate, high fixed costs and lack of perceived differentiation (among players) Environmental Factors changes in Technology, Economic conditions, Regulatory and Social practices Strengths and Weaknesses Analysis Management capabilities, financial resources, locations, operations, merchandise, store management and customer loyalty The analysis indicates how well the business can seize opportunities and avoid harm from threats in the environment
Retail Management
Marketing Strategy
Step 3 : Identify Strategic Opportunities

Sell new categories to same customers Get into manufacturing
Retail Format
Sell same category using another channel
New
Retail format development
Diversification
Unrelated Related
Sell new category to new segment
Existing
Market Penetration
Market Expansion
Existing New Target market segment

Increase present store size, amount of merchandise Open additional store in same area Open store segment in new geographic
Sell to a new benefit segment
Retail Management
Marketing Strategy
Step 4 : Evaluate Strategic Opportunities

In evaluating strategic opportunities, the retailer needs to consider market attractiveness and his strengths or weaknesses. The greatest investments should be made in market opportunities where the retailer has a strong competitive position
Step 5 : Establish Specific Objectives and Allocate Resources

Specific objective or goal for each opportunity, against which progress can be measured. Specific objective performance sought (sales, profit, ROI) within time frame and level of investment needed
Retail Management
Marketing Strategy
Step 6 : Develop a Retail Mix to implement Strategy

Develop a Retail Mix for each opportunity in which investment will be made and to control and evaluate performance
Step 7 : Evaluate Performance and make adjustments

Review the implementation program
Retail Management
Marketing Strategy Types of locations available to retailers
Location and Retail Strategy
CBD Central Business District or traditional downtown business area in the city. Majority shop during business hours High level of pedestrian traffic (hub for public transportation) Declining cost of real estate, limited parking, lack of planning
Main Street CBD located in the traditional shopping area of smaller towns or a secondary business district in a suburb or within a larger city
Lower cost of real estate

Fewer people, fewer stores, smaller overall selection Fighting to maintain their traditional encroachment of large retailers. advantage over the
Retail Management
Marketing Strategy
Strip Shopping Centre shopping centres that usually have parking directly in front of the stores. Open canopies and not enclosed walkways connect the store fronts.
Convenient location and easy parking

Low rentals No protection from weather Lesser assortment and entertainment options Shopping malls shopping centres where customers park in outlaying areas and walk to the stores. Malls are enclosed with a climate-controlled walkway between two facing strip of stores
Large merchandise assortment available

Opportunity to combine shopping with food and entertainment One-stop shopping experience planned tenant mix Mall rentals are higher whereas competition is intense
Retail Management
Marketing Strategy
Freestanding retail location, with large space, and not connected to other retailers, although could be located adjacent to malls. Destination Points.
Greater visibility, lower rents and ample parking

No direct competition and ease of expansion Must offer something special primary destination point
Retail Management
Marketing Strategy
Relative advantage of the major retail locations

Location Issues Large size draws people to the area People living / working in the area provide source of customers Source of entertainment / recreation Protection against weather Security Long, uniform hours of operation Planned shopping area / balanced tenant mix Parking Occupancy cost (rentals) CBD Main Strip Street Centre Shopping Mall Freestanding
+ + ? ?
+ +
+ + + +
+ + + + + + ? -
+ + +
Pedestrian traffic
Strong competition
+
+
+
+
+
-
Retail Management
Marketing Strategy Location strategies of major retail formats
Location
Department Stores
Specialty Stores Category Specialists Grocery Stores Boutiques
CBD
CBD, Main Street and Shopping Malls Freestanding Strip Centre Main Street
Retail Management
Marketing Strategy Other retail location opportunities
Mixed-Use Developments (MXDs) combine several different uses in one complex, including shopping centres, office towers, hotels, residential apartments, civic centres and convention centres. Use space productively. Airports high pedestrian area with sales per square foot 3-4 times as high as a regular mall. Higher Costs (rentals and wages). Best selling products are gifts, necessities and easy-to-pack items. Resorts prime location opportunities with a captive audience of well-to-do customers with lots of time on hand. Art galleries and fashion retailers with high-end designers. Hospitals both patient and guest often have time to shop. Necessities are important for patients, gift-giving abound for guests. Restaurants serving healthy fare, health related stores (day spa). Store within a store department stores lease space to sellers of fine jewelry or furs. Grocery stores with service providers like banks, film processors and video outlets.
Retail Management
Retailing Strategy
Retailing Strategy

Retail Management
Human Resource Management
Competitive Advantage
Human resource management can be the basis of SCA

Labour costs account for a significant percentage of a retailers total expenses Customer experience determined by activities of employees major role in providing differentiation This potential advantage is difficult for competitors to replicate
Retail Management
Human Resource Management Objectives of HRM
Core Objective
Align the capabilities and behaviour of employees with the short-term and long-term goals of the retail firm
HRM performance measures

Employee Productivity = Retailers sales or profit
Number of employees Employee Turnover = 100 X No. of people in a set of positions during a year Number of positions
- 100
While productivity is a short-term measure, turnover reflects on the long-term performance of the store
Retail Management
Human Resource Management Downward Performance Spiral
Performance Spiral
FINANCIAL PERFORMANCE PROBLEMS

Low Profits High Costs
EMPLOYEES RESPONSE
Decreased motivation and effort Poor customer service Lower job satisfaction Greater turnover
RETAILERS RESPONSE
Layoffs Freeze on hiring, salary and promotion Reduced training More part-time employees and outsourcing
Retail Management
Human Resource Triad
The full potential of a retailers human resources is realized when the three elements of the human resource triad work together
1 3
Employees
HR Professionals knowledge of labour laws, HR policies

Line Managers bring the policies to life through their daily management of employees Employees feedback on policies, managing their own careers, defining their job function
Retail Management
Retail Issues
Special Human resource conditions facing retailers

Part time employees open long hours and on weekends; peak periods during lunch hours, at night. Complement with part-time workers. More difficult to manage less committed, more likely to quit Expense Control thin margins, so hire less experienced people results in high turnover, absenteeism, and poor performance. International HR issues challenging due to differences in culture, work values, labour laws
Retail Management
Organization Structure
Designing the Organization structure for Retail

The Organization structure identifies the activities to be performed by specific employees and determines the lines of authority and responsibility Once tasks to be done are identified, the retailer groups them into jobs to be assigned to specific individuals and determines the reporting relationships Specialization focus employees to develop expertise and increase productivity Responsibility and Authority productivity increases when employees have proper authority to effectively undertake the responsibilities assigned to them Reporting Relationships productivity can decrease when too many or too few employees report to a supervisor. Appropriate number ranges between 4 to 12, depending on the nature of tasks Matching Structure to Strategy target price sensitive customers competitive advantage of low cost minimize number of employees centralized decision making
Retail Management
Organization Structure
Varying Retail Organization structures

Single Store Retailer Owner-managers may be the entire organization. Hire employees, assign tasks and supervise. Little specialization as employee does wide range of activities Regional Department Store Relatively complex. Managers supervise units that are geographically distant. Traditionally family-owned and managed. Mazur Plan (1927) separating buying and store management tasks. CEO merchandising, planning and marketing, COO stores, human resources, distribution, information systems and finance Owner-Manager
Strategic Management
Accountant
Financial control
Merchandise Manager
Merchandise Management Advertising & Promotion
Store Manager
Store Management Human Resource Management Distribution
Retail Management
Structure Design
Retail Organization Design Issues

Centralized versus Decentralized The Decision authority rests with corporate and frontline respectively. Centralized format helps in reducing costs fewer decision makers, lower prices from suppliers, best people take decisions for entire organization, standardization increases efficiencies, economies of scale in advertising (national media) However, the centralized format finds it difficult to adapt to local market conditions, respond to local competition and labour markets. Information systems help in overcoming these disadvantages
Retail Management
Structure Design
Retail Organization Design Issues

Coordinating Merchandise and Store Management
Large retailers use four approaches to coordinate buying and selling

Improving appreciation for Store Environment prospective buyers gain appreciation (during training) for the activities performed in the store, the problem salespeople encounter, and needs of the customers. Making Store Visits make buyers visit stores and work with the departments they buy for. Wal-Marts CBWA (coaching by wandering around). Assigning employees to Coordinating roles people posted in the other department whose responsibility is to coordinate Involving Store Management in Buying decisions increase store employees involvement in the buying process.
Retail Management
Employee Motivation
Motivating Retail employees implementing its strategy
to
achieve
firms
goals
and
Policies and Supervision prepare written policies that indicate what employees should do, and have supervisors enforce these policies. But strict reliance on written policies reduces employee motivation and initiative makes jobs uninteresting and leads to red tape.
Incentives motivated to focus on profits, if bonus based on profitability. Two types 1) Commission compensation based on a fixed formula (2% of sales), 2) Bonus additional compensation awarded based on performance (stock options). Drawback ignore other activities, reduces commitment and company loyalty. Organization Culture set of (unwritten) values, traditions and customs that guide employee behaviour. Much stronger effect than policies and rewards (use your best judgment to do anything you can to provide service to our customers)
Retail Management
Employee Commitment
Some approaches to build mutual commitment

Developing Skills through selective hiring and training Selective Hiring recruit the right people Singapore Airlines (10% make the initial screen and 2% are hired). Borders Books and Music wants avid readers in its workforce Training investment tells employees that the firm considers them important. Empowering Employees process of sharing power and decisionmaking increases confidence and commitment levels, personal responsibility and accountability improved customer service Creating Partnering Relationships reducing status differences, promoting from within and enabling employees to balance their careers and families (Flextime or job sharing)
Retail Management
Current Trends
Some trends in human resource management

Managing Diversity activity designed to realize the benefits of a diverse workforce. Traditional approach blend in the melting pot, today salad bowl (each ingredient is distinct, has its own identity, and together improves combined taste) need to accept and value differences Diversity Training developing cultural awareness and building competencies through role playing better interpersonal skills, respect and treating people equal. Support Groups and Mentoring
Career Development and Promotions break the glass ceiling (invisible barrier that makes it difficult for minorities to be promoted beyond a certain level)
Retail Management

Legal and Regulatory Issues
Current Trends
Equal Employment Opportunity protect employees from unfair discrimination in the workplace Compensation same pay for doing equal work Labour Relations process for union formation, ways in which companies must deal with these unions Employee Safety & Health environment free from hazards Sexual Harassment creating a hostile work environment
Employee Privacy very limited but there should be no discrimination

Developing Policies HR is responsible for developing programs and policies to ensure that employees are aware of these restrictions and know how to deal with potential violations
Retail Management
Retailing Strategy
Retailing Strategy

Retail Management
IS & SCM
Definition
SCM is the integration of business processes from end user through original suppliers that provides products, services, and information that add value for customers
Retailers are the most important link in the supply chain connect customers with vendors They gauge customers wants and needs and work with other members of the supply chain wholesalers, manufacturers, transporters to fulfill them As a result of their position in the supply chain, retailers are in a unique position to collect purchase information customer by customer; transaction by transaction This information is shared with suppliers to plan production, promotions, deliveries, assortments and inventory levels
Retail Management
IS & SCM
Strategic Advantages
Strategic advantages gained through SCM

Improved Product Availability Customers face fewer stock-outs Customers get assortments of merchandise they want, and where they want it more SKUs
This results in greater sales, higher inventory turns and lower markdowns for retailers
Improved Return on Investments
Increased Net Sales providing better assortments

Increased Net Profit raising gross margin or lowering expenses Reduced Total Assets little backup inventory
Retail Management
IS & SCM
Information Flow
The flow of information is complex in a retail environment

Customer
2
1 3 5
Buyer / Planner
4
Stores
6
Vendor
Distributor
A purchase triggers a series of information messages in the system 1) The sales associate scans the UPC tag and a sales receipt is created 2) Purchase information (recorded in POS terminal) is sent to buyer, who plans additional purchases 3) An order is created and sent to vendor using EDI (Electronic Data Interchange) 4) The buyer negotiates shipping date and purchase terms with the vendor 5) Buyer communicates with distributor deliveries from vendor to store 6) Store manager communicates with distributor to coordinate deliveries and check inventory status
Retail Management
IS & SCM Data Warehousing

Information Flow
Purchase data collected at the point of sale goes into a huge database Coordinated and periodic data copied from various sources is used for analytical and informational processing Data is accessible on several dimensions Horizontal axis level of merchandise aggregation (SKU, vendor, category, department) Vertical axis level of the company (store, division, company) Third dimension point in time (day, season, year)
Analysts extract information to make marketing decisions
Data warehouses also contain detailed information about customers This is used to target promotions and group products together in stores
Retail Management
IS & SCM Electronic Data Interchange
Information Flow
Computer-to-computer exchange of business documents from retailer to vendor, and back
ASN (advanced shipping notice) is an electronic document received by the retailers computer from a supplier EDI data can be transmitted through
Proprietary EDI Systems primarily developed by large retailers
Intranets secure communication systems within one company Extranets a collaborative network that uses Internet technology to link businesses with their suppliers, customers or other businesses
Security
Authentication assure person at the other end is the real one Authorization assure person at the other end has the permission Integrity assure data is protected from unauthorized tampering
Retail Management
IS & SCM
Merchandise Flow
Logistics is that part of the supply chain process that plans, implements and controls the efficient, effective flow and storage of goods and related information from the point of origin to the point of consumption
Customer
Stores
3 2
Vendor
Distributor
Physical flow of merchandise 1) 2) 3) Merchandise flows from vendor to the distributor Merchandise then goes from the distributor to stores Alternatively, merchandise can also go from vendor directly to stores
Retail Management
IS & SCM
Merchandise Flow
Traditional Distribution Centre is a warehouse where merchandise is unloaded from trucks and placed on racks or shelves for storage. When merchandise is required by a store, items are picked from the racks and placed in a bin, moved to a staging area where it is consolidated and shipped Cross-docking Distribution Centre is one in which vendors ship merchandise prepackaged in the quantity required for each store. Since merchandise is ready for sale, it goes to a staging area rather than into storage. What type of retailers should use a distribution centre ? Retailers with wildly fluctuating demand for specific items CDs Stores that require frequent replenishment grocery stores
Stores that carry a large number of items and receive less than full-case consignments
Retailers with a large number of outlets that are geographically spread (within 150-200 Km of a distribution centre)
Retail Management
IS & SCM
QR Delivery Systems
There are only two groups of retail businesses today : the quick and the dead
Quick Response delivery systems are inventory management systems designed to reduce the retailers lead time for receiving merchandise data transfers electronically
increase product availability and lowers inventory investment

reduces logistics expenses cross-docking or direct store delivery improves customer service levels
Retail Management
IS & SCM
Outsourcing
Outsourcing logistical functions to third-party logistics companies

Transportation easier to contract full-truck loads, lower costs and time delays Warehousing to meet specific delivery time vendors store merchandise close to the retailer. Vendors typically use public warehouses (owned and operated by a third party) Freight Forwarders purchase transport services, consolidate small shipments and ship at lower rates. Take care of paperwork Integrated Third-Party Logistics Services one-stop shopping is very useful
Retail Management
Retailing Strategy
Retailing Strategy

Retail Management
CRM
Definition
Customer Loyalty is the objective of CRM

Customer Loyalty means that customers are committed to purchasing merchandise and services from the retailer and will resist the activities of competitors attempting to attract their patronage They have an emotional bond with the retailer beyond convenience, low prices, brands offered They feel such goodwill towards the retailer encourage their friends and family to buy from it Emotional connections develop when customers receive personal attention
Research indicates that it costs over six times to acquire new customers than existing customers and that small increases in Customer Retention leads to dramatic increases in profits (5% 20%)
Retail Management
CRM
The Process
Overview of the CRM process
Collecting Customer Data
LEARNING
Analyzing Customer Data and Identifying Target Customers
Implementing CRM Program
ACTION
Developing CRM Program
Retail Management
CRM
The Process
Collecting Customer Database ideally, the database should contain Transactions complete purchase history date, price paid, SKUs, on a promotion or not Customer contacts a record of interactions with the retailer Customer Preferences likes favourite colours, brands, fabrics, flavours (record each request made) Descriptive Information demographic and psychographic data Responses to marketing activities Household level data Identifying Information easy for catalog and internet shoppers. Identifying in-store transaction customers -
Asking customers for the identifying information Offering a frequent Shoppers Card Linking checking account number and third-party credit cards
Personal information must be fairly collected, should be purposeful and relevant to business and transferred only with his consent
Retail Management
CRM
The Process
Analyzing Customer Database and identifying target customers Data Mining technique used to identify patterns in data Market basket analysis focus on composition of basket of products purchased by a household in one visit placing store merchandise Identifying Market Segments groups of customers with similar needs, purchase, and responses to marketing activities Identifying Best Customers which customers to target Lifetime Customer Value expected contribution from the customer to the retailers profits over his entire relationship Customer Pyramid the 80-20 rule. However, 2 segments scheme, best and rest is insufficient
Least Profitable Customers Most Profitable Customers
Retail Management
CRM
The Customer Pyramid Platinum Segment top 25% LTV least price sensitive and value customer service Gold Segment next 25% LTV relatively price sensitive and not as loyal as platinum Iron Segment modest LTV and do not deserve much of the retailers attention Lead Segment demand lot of attention, do not buy much cost the retailer
Platinum
The Process
Gold
Iron
Lead
Decile Analysis breaks up customers into 10 deciles according to their LTV rather than quartiles. Gives top 10% customers. RFM (recency, frequency, monetary) Analysis Method of estimating the LTV of a customer using recency, frequency and monetary value of past purchases Customers who have made infrequent small purchases recently are considered as first-time customers
Retail Management
CRM
Developing CRM Program Customer Retention four common approaches
The Process
Frequent Shopper Program incentives to encourage repeat purchase. However, can be expensive and do not ensure increased spends Special Customer Services unusually high quality customer service to build and maintain the loyalty of platinum customers Personalization top LTV customers may have varying needs and require 1-to-1 retailing Community develop a sense of community among customers more reluctant to leave the family
Retail Management
CRM
Developing CRM Program Converting Good Customers into Best Customers
The Process
Customer alchemy increasing the sales made to good customers converting iron and gold into platinum cross selling, add-on selling Dealing with Unprofitable Customers Customers with negative LTV retailer actually loses money on every sale getting the lead out Offering less costly approaches for satisfying the needs of lead customers automated calls Charging the customers for the services they are abusing
Retail Management
CRM
Implementing CRM Program CRM requires more than
The Process
appointing a manager installing a computer system to manage and analyze database making speeches about the importance of customers
It requires close coordination of activities by different functions in a retailers set-up MIS needs to collect, analyze and make relevant information readily accessible Store operations and HRM needs to hire, train and motivate employees Marketers need to communicate with customers through impersonal channels (advertising, direct mail, promotions) Frontline service providers need to implement program
Retail Management
Site Selection
Overview
Retailing Strategy

Retail Management
Site Selection
Factors of Demand
Site selection is most definitely a strategic decision

Once a location is selected, must live with it for many years Even a wrong site in the right neighbourhood can be disastrous territory
Retail Management
Site Selection
Factors of Demand
Factors affecting demand for a trading area

Economies of Scale versus Cannibalization
Multiple location promotions and distribution economies Open new stores as long as marginal revenues are greater than marginal costs A store can do too much business under perform (overcrowded, poor service, stock management) Solution for under performance open another store in trade area Franchise operations protection of exclusive geographic territory
Retail Management
Site Selection
Demographic and Lifestyle characteristics
Factors of Demand
Prefer area of growing rather than declining population
Go into new strip shopping centre anticipating future demand

In mature neighbourhood with stable population Main Street location (relatively high household income) Depending on target segment lifestyle could be critical way people spend their money students like recent professionals Business Climate High level of employment leads to high purchasing power If growth not in diversified number of industries cyclical trends experience greater peaks and valleys due to over dependence
Retail Management
Site Selection
Competition
Factors of Demand
Saturated trade area good selection, good profits for competitors prefer going head-to-head with strongest competitor develop methods to compete successfully Under stored trade area few stores in area high market share Over stored trade area too many stores in area some reposition their proposition or else go out of business Span of Managerial Control Prefer being a regional player target needs of loyal customer base Management team has greater locus of control
Retail Management
Site Selection
Factors of Site Attractiveness
Factors that make a particular site attractive

Accessibility Macro analysis road pattern, road condition, and natural and artificial barriers in the primary trade area Micro analysis issues in the immediate vicinity of the site visibility, traffic flow, parking facilities, congestion, ingress / egress Locational advantage within a Centre Impulse items superior location (nearer)
Cumulative attraction cluster of similar and complementary retailing activities (appeal to similar target segments)
Retail Management
Site Selection
Demand estimates
Estimating demand for a new location

Trade area primary zone (60-65%), secondary zone (20%) and tertiary zone Destination Store acts like a magnet for customers, larger trade area Parasite Store one that does not create its own traffic, trade area determined by the dominant retailer in the area Sources of Information Customer spotting credit cards database Census Demographic data vendors ACORN (A Classification of Residential Neighbourhoods), market potential index, spending potential index Measuring competition
Retail Management
Site Selection
Demand estimates
Methods of Estimating demand

The Analog Approach similar store approach
Current trade area is determined by customer spotting technique

Based on the density of customers from the store, primary, secondary and tertiary zones are defined Characteristics of the current store are matched with the potential new stores location to determine the best site The best location for an Optical Store should contain many older professionals with high incomes.
Regression Analysis similar logic but uses statistics rather than judgment to predict potential
Retail Management
Financial Strategy
Retailing Strategy

Retail Management
Financial Strategy
Introduction
Financial decisions are an integral component in every aspect of a retailers strategy

Every retailer wants to be financially successful.
One important Corporate level financial performance measure is to achieve a high return on assets Return on Assets =
Net Profit Margin Kayani Bakery Tanishq 1% 10%
Net Profit X Asset Turnover

Asset Turnover 10 times 1 time Return on Assets 10% 10% Path TURNOVER PROFIT
2 different types of retailers could have exactly the same return on assets
financial tools help in establishing quantifiable performance objectives that retailers use for measuring and evaluating their performance
Retail Management
Financial Strategy
Introduction
Therefore, Return on Assets can be achieved through two different paths

The Profit path The Turnover path
Retail Management
Financial Strategy
The Profit Path
Information on a firms profit comes from the income statement, which is a summary of the financial performance over a period of time
Net Sales is the total money received by the retailer after all refunds have been paid to customers for returned merchandise Net Sales = Gross Sales Customer Returns Customer allowances Customer Returns is the value of merchandise that customers return due to damaged, not fit and so forth Customer allowance is the additional price reduction given to the customer
Gross Margin or Gross Profit is the total profit made on merchandise sales without considering the expenses associated with operating the store Gross Margin % = Gross Margin
Net Sales
Retail Management
Financial Strategy
The Profit Path
Expenses are the costs incurred in doing business to generate revenues. Selling Expenses = Sales staff salaries + commissions + benefits
General Expenses = Rent + Utilities + Miscellaneous expenses

Administrative Expenses = Salaries (all others) + Operations of buying office + Other administrative expenses
Net Profit is a measure of the firms overall performance Net Profit = Gross Margin Expenses Net Profit Margin = Net Profit Net Sales
Retail Management
Financial Strategy
The Turnover Path
Information on a firms turnover comes from its balance sheet ...

Assets = Liabilities + Owners Equity
Assets are income resources (such as inventory and store fixtures) owned or controlled by an enterprise as a result of past transactions or events
Liabilities are obligations (such as accounts or notes payable) to pay cash or other economic resources in return for past, current or future benefits
Owners Equity (investment in the business) is the difference between assets and liabilities. It represents the amount of assets belonging to the owners of the retail firm after all obligations have been met
Current Assets are those that can normally be converted to cash within a year Current Assets = Accounts Receivable + Merchandise Inventory + Cash + Other current assets
which is a summary of the financial position, of the firm, at a given point in time
Retail Management
Financial Strategy
The Turnover Path
Accounts Receivable are monies due to the retailer from selling merchandise on credit Merchandise Inventory is expressed at retail rather than at cost price Cash and Other Current Assets Cash = monies in hand + bank savings account + marketable securities Other Current Assets = Prepaid expenses + Supplies Fixed Assets are assets that require more than a year to convert to cash Fixed Assets = Building + Fixtures + Equipment + Long-term investments Fixed Assets = Asset Cost Depreciation Asset Turnover is an overall performance measure Asset Turnover = Net Sales Total Assets
Retail Management
Financial Strategy
The Turnover Path
Current Liabilities are debts that are expected to be paid in less than one year Accounts payable refers to the amount of money owed to vendors for merchandise inventory (bought on credit) Notes payable are the principal and interest the retailer owes to financial institutions (banks) that are due and payable within a year Accrued Liabilities include taxes, salaries, rent, utilities and other incurred obligations that are yet to be paid
Long Term Liabilities are debts that will be paid after one year Retained Earnings refers to the portion of owners equity that has accumulated over time through profits but has not been paid as dividends to owners
Retail Management
Financial Strategy
The Strategic Profit Model
The strategic profit model combines the two performance ratios

Combines the two performance ratios margin management and asset management Return on assets determines how much profit can be generated from the investment on assets ROA effective tool to evaluate the profitability of individual investments with similar risk Also, an effective predictor of business failures Return on Assets = Net profit margin X Asset Turnover = Net Profit X Net Sales
Net Sales
= Net Profit Total Assets
Total Assets
Return on Assets determines how much profit can be generated from the retailers investment in assets.
Retail Management
Financial Strategy
Activity Based Costing
ACTIVITY BASED COSTING is a financial management tool that provides a better understanding of costs and profitability.
DIRECT PRODUCT PROFIT + OVERHEAD + ADMN. EXP.
Retail Management
Financial Strategy
Performance Measures
Setting performance objectives are a critical part of the strategic planning process
the performance sought, including a numerical index to measure time frame within which the goal needs to be achieved
the resources needed to achieve the objective
Retail Management
Financial Strategy
Setting performance objectives entails a combination of
Top-down planning involves corporate office developing an overall retail strategy and assessing broad economic, competitive and consumer trends. Corporate performance objectives are set and broken down into specific objectives for each merchandise / store
Bottom-up planning involves buyers and store managers estimating what they can achieve. Their estimates are transmitted up the organization to the corporate planners. The differences, in both cases, are resolved through negotiations
Retail Management
Financial Strategy
Performance Measures used to evaluate retail operations vary depending on the level of the organization where the decision is made the resources the manager controls Store Managers would typically focus on sales per sq.ft. or employee cost
Types of Performance Measures Input measures assess the amount of resources or money used to achieve outputs.
Output measures assess the results of the investment decisions

Productivity measures (ratio of effectiveness of resource utilization output to input) determines the
Retail Management
Overview
Retailing Strategy
Store Management
Retail Management
Preamble
The section offers tactical solutions to the strategic issues raised earlier, and an in-depth discussion of the activities involved in the basic functions of merchandise management.
We examine how retailers develop profitable assortments and forecast sales; the buying systems used to make these decisions; how branding, pricing, sourcing and vendor management results in a competitive advantage; the relative advantages of various promotional vehicles and how they affect the consumer decision-making process
Retail Management Merchandise Management
Overview
Retailing Strategy

Retail Management Planning Assortments
Definition
Merchandise management is the process by which a retailer attempts to offer the right quantity of the right merchandise in the right place at the right time while meeting the companys financial goals
Thus, deciding what to buy and how much is a vital task for any retailer
Organize the Buying process by Categories
Set Merchandise Financial Objectives
Develop an Assortment Plan
Organizing the Buying Process
The process of trading off variety, assortment and backup stock is called Assortment Planning. An Assortment Plan is a list of merchandise that indicates in general terms what the retailer wants to carry in a particular merchandise category. The Category is an assortment of items that the customer sees as reasonable substitutes for each other Priced and promoted to appeal to a similar target segment
Different definition of a category shampoo and conditioners, paper towels (paper products or cleaning products category)
Category in terms of brands Category Management is the process of managing a retail business with the objective of maximizing the sales and profits of the category One person is ultimately responsible for the success or failure of a category Easier to manage to maximize profits ensuring assortment is represented by the Best combination of SKUs (sizes and brands) given the allocated space
Organizing the Buying Process
The Category Captain is the one favoured vendor who helps in managing a particular category forms an alliance to help gain consumer insight, satisfy customer needs and improve the performance and profit potential across the entire category The Buying Organization and Merchandise Classification Merchandise Group apparel (men, women, children ) Department apparel (men) Classification apparel (girls size 7-14) Categories apparel (sportswear) Stock Keeping Unit smallest unit available for keeping inventory control
Set Merchandise Objectives
Top Management looks at the overall merchandising strategy. They set the merchandising direction for the company by
Defining the Target market Establishing Performance goals Deciding which merchandise classifications deserve more or less emphasis
Buyers and merchandise planners, on the other hand, take a more micro approach. They study
Categories past performance Trends in the market
and try to project the assortments for their merchandise categories for the coming seasons
Putting Margin, Sales, and Turnover Together : GMROI Return on Assets = Net profit margin X Asset Turnover
At the Corporate level
= Net Profit
Net Sales
Net Sales
Total Assets
Net Profit
Total Assets
GMROI = Gross margin percentage X Sales-to-Stock Ratio
= Gross margin
At the Buyer level
Net Sales
Avg. Inventory
Gross Margin
Avg. Inventory
Net Sales
Measuring Inventory Turnover

Productivity of the Inventory how many sales rupees can be generated from a rupee invested
Inventory Turnover =
Net Sales Average Inventory
OR
Cost of goods sold Average Inventory at cost
Average Inventory is calculated by dividing the sum of inventories for each of the several months by the number of months
Advantages of High Inventory Turnover

Increased Sales Volume fresh merchandise available, more frequent customer visits, smaller orders more often, less inventory investments, low stock outs Less Risk of Obsolescence and Markdowns increased gross margins Improved Salesperson Morale excited over new merchandise, try harder to sell More Money for Market opportunities spot buying advantage of special price Decreased Operating Expenses lower inventory carrying costs Increased Asset Turnover inventory is a current asset, affects Return on Assets
Disadvantages of Too High an Inventory Turnover

Lowered Sales Volume less inventory, lesser SKUs, lost sales lost customer Increased Cost of Goods sold loses quantity discounts and transportation economies of scale Increased Operating Expenses cost of merchandise lead time, invoicing cost, receiving cost
Sales Forecasting is an integral part of merchandising plan

The Category Life Cycle is divided into four stages introduction, growth, maturity and decline
Introduction
Growth
Maturity
Decline
Knowing where a category, or a specific item within a category, is in its life cycle is important in forecasting sales.
Variations on the Category Life Cycle

A Fad is a merchandise category that generates a lot of sales for a relatively short time often less than a season. Fads are illogical and unpredictable and primarily the providence of children and teenagers A Fashion is a category of merchandise that typically lasts several seasons, and sales can vary dramatically from one season to the next. The duration of a fashion can vary (double-breasted suits for men several years, see-through track shoes a season or two) A Staple or Basic Merchandise is in continuous demand over an extended period of time. Even certain brands of basic merchandise ultimately go into decline A Seasonal merchandise is inventory whose sales fluctuate dramatically according to the time of the year
Developing a Sales Forecast

Sources of Information for category-level forecasts Previous Sales Volume identify real trends and isolate real change in demand Published Sources economic trends in geographic area
Customer Information focus groups, in-depth interviews, direct feedback, maintain a want book (out-of-stock merchandise)
Shop Competition need to observe competition (make visits / purchases) Vendor and Resident Buying Office excellent sources of market information
Assortment Planning
Merchandise decisions are constrained by the amount of money and space available
Variety breadth of merchandise
Assortment depth of merchandise, number of SKUs within a category Product Availability service level or level of support, percentage of demand for a particular SKU that is satisfied Trade-offs between Variety, Assortment and Product Availability Variety is the most important in defining the retailer in the customers eyes Target segment towards which a retailer plans to commit resources Nature of retail offering that the retailer plans to use to satisfy the target markets needs Bases upon which retailer attempts to build SCA
Assortment Planning
Determining Variety and Assortment

Profitability of Merchandise Mix constraint of money and space
Corporate Strategy and Positioning toward the Assortment decision whether to grow or shrink a particular category
Physical characteristics of the Store and Layout of the Internet Site space to devote to a category Balance between Too Much versus Too Little Assortment enough to satisfy customer needs, but not too much so as to confuse and turn them off
Complementary Merchandise while adding to assortment, must consider whether it complements other merchandise
Assortment Planning
Determining Product Availability

600 400
Order Cycle Stock
Inventory Investment
500
Units Available
300
400 300 200 100
200
Backup Stock
100
80
90
100
Product Availability (%)
Weeks
Cycle or Base Stock inventory from replenishment Backup or Safety or Buffer Stock cushion for the cycle stock Calculate safety stock for each SKU (based on demand / lead-time) Backup stock and overall inventory depends on product availability Higher fluctuation in demand / lead time results in greater backup stock
Assortment Plan
An Assortment Plan describes in general terms what should be carried in a particular merchandise category
Historical precedence is the starting point sales, GMROI and turnover from previous season Adjustments made based on expectations in coming season
Retail Management Buying Systems
Overview
Retailing Strategy

Definition
Selling generates revenue, but buying right generates profit

Two distinct types of buying systems
For merchandise that follows a predictable order-receipt-order cycle
Staple Merchandise Buying Systems
Fashion Merchandise Buying Systems
Open-to-buy systems
Allocate Merchandise to Stores
Analyze Merchandise Performance
Staple Merchandise
Staple Merchandise buying systems contain a number of program modules that show how much to order and when
Monitoring and measuring average current demand for items at the SKU level Forecasting future SKU demand with allowances made for seasonal variations and changes in trend Developing ordering decision rules for optimum restocking
The Inventory Management Report

Basic stock list (each SKU with inventory position) Inventory Turnover
Product Availability
Backup stock Forecast Order Point
Order Quantity
Fashion Merchandise
Merchandise Budget Plan specifies how much money is to be spent each month to support sales, does not indicate assortment or quantities
Monthly Sales % Distribution to Season and Monthly Sales Monthly Reductions % Distribution to Season and Monthly Reductions BOM (Beginning-of-Month) Stock-to-Sales Ratio and BOM Stock Calculate Sales-to-Stock Ratio
GMROI = Gross Margin % X Sales-to-Stock Ratio
Convert Sales-to-Stock Ratio to Inventory Turnover

Inventory Turnover = Sales-to-Stock Ratio X (100% - Gross Margin %)
Calculate Average Stock-to-Sales Ratio

Average Stock-to-Sales Ratio = 6 months / Inventory Turnover
Calculate Monthly Stock-to-Sales Ratio EOM (End-of-Month) Stock Monthly Additions to Stock Evaluating the Merchandise Budget Plan
Open-to-Buy
The Open-to-Buy system keeps track of merchandise flows while they occur, recording how much is spent each month and how much is left to be spent
Open-to-Buy for the Past Periods
Projected EOM stock = EOM actual Open-to-Buy = 0
Open-to-Buy for the Current Period

Projected EOM stock = Actual BOM stock + Monthly additions actual + On Order Sales Plan Monthly reductions plan Open-to-Buy plan = EOM stock planned Projected EOM stock
Allocation decisions go beyond simple historical sales data

Chain stores traditionally classify their stores as A, B or C stores, based on their potential sales volume Core Assortment is carried by every store irrespective of size or sales potential maintain image
Merchandise Performance
Typically, there are three merchandise performance
procedures
adopted
to
analyze
ABC Analysis rank-orders merchandise by some performance measure to determine which items should never be out of stock, which can be allowed to be out of stock occasionally, and which should be deleted from stock selection
Contribution Margin = Net Sales Cost of goods sold Other variable expenses
Sell-Through Analysis is a comparison between actual and planned sales to determine whether early markdowns are required or whether more merchandise is needed to satisfy demand Multi-attribute Method uses a weighted average score (importance of various issues) for each vendor Develop list of issues to consider in the decision Importance weights for each issue Make judgment about each individual performance on each issue Combine performance and importance scores Determine overall rating
Retail Management Purchasing Merchandise
Overview
Retailing Strategy

Branding Strategies
Buyers have lots of branding choices

Manufacturers or National brands Help store image Increase traffic flow customer pull Contribute in sales / promotional expenses Lower realized gross margins Increase store loyalty limited availability Decrease store loyalty readily available, no differentiation with competition
Licensed brands special type of national brand licensor & licensee

Private-label or Store brands products developed by retailers
Branding Strategies
Private-label or Store brands products developed by retailers Exclusivity boosts store loyalty
Enhances store image (high quality and fashionable brand)

Draws customers to the store Good deal less expensive than national brands Lesser restrictions on display, promotion or price More control on manufacturing, quality control and distribution Greater gross margins Hidden expenses merchandise design creating customer awareness staff training unsold goods cannot be returned
Private Labels
Private label brands fall in four broad categories

Bargain Brands, also called Generic or House Brands, target pricesensitive segments by offering no-frills offerings at a discount price. They are unadvertised and found in drug, grocery and discount stores Premium Brands offer consumers a private label at a comparable manufacturer-brand quality, with modest price savings. They compete directly with national brands, attempting to match or exceed the product quality standard of prototypical manufacturer brands in its category, without an intention to duplicate Copycat Brands imitates the manufacturer-brand in appearance and packaging, is perceived of lower quality, and offered at lower prices. They attempt to confuse the customer Parallel Brands closely imitate the packaging and product attributes of leading manufacturer brands, but with a clear invitation to compare. They seek to benefit from the brand equity of national brands but leave little doubt in the mind of the customer. Priced lower, they are perceived to provide better value for money
International Sourcing
Sourcing has a significant association with branding

Certain merchandise are strongly associated with specific countries, and used as a signal of quality
Costs associated with global sourcing

Country-of-Origin effects : option to buy from developing country or those known for premium quality. Technology (in a country) impacts prices Foreign exchange fluctuations : frequent changes in currency of the exporting firm may increase or reduce the cost of merchandise. Euro !!! Tariffs : import tariffs are used to shield domestic manufacturers from foreign competition. WTO will continue to push for tariff reductions Free Trade Zones : to reduce impact of tariffs Inventory Carrying costs : longer lead time and larger inventories Transportation costs : could have significant impact on landed price
Managerial issues associated with global sourcing

Quality Control : harder to maintain and measure quality standards
Building Strategic Partnerships : typically harder to build
Negotiations
Negotiation requires intensive planning

Knowledge is Power : more you know of the vendor, better strategy Consider History : past experience Assess where things are today : to reduce impact of tariffs Set goals : direction Know vendors goals and constraints
Face to face negotiation

Separate people from the problem Insist on objective criteria Invent options for mutual gain Let them do the talking those who break the silence first, LOSE Know how far to go Dont burn bridges Dont assume leads to misunderstandings
Strategic Relationships with Vendors
Strategic relationship is a win-win situation increased pie size

Mutual Trust belief that the partner is honest information sharing potential long-term gains are worth the additional risks and short-term setbacks Open Communication buyers and vendors need to understand whats driving each others business
Common Goals shared goals give incentive to pool strengths to exploit potential opportunities. Also, further strengthen and sustain the relationship
Credible Commitments tangible investments to improve the suppliers products or services
Strategic Relationships with Vendors
Strategic partnerships tend to go through a series of phases characterized by increasing levels of commitment
Awareness no transaction has taken place reputation and image of the vendor plays an important role Exploration buyers and vendors begin to explore potential benefits and costs Expansion begin to work on joint promotional programs, and amount of merchandise sold increases Commitment make significant investments and develop a long-term perspective
Retail Management Pricing
Retailing Strategy

Pricing Strategies
Two strategies to pricing

Everyday Low Pricing also called Everyday Same Pricing strategy offers retail prices at a level somewhere between regular non-sale price and deep-discount sale price. Low Price guarantee policy offers the lowest possible price in the local market (refund the difference)
High / Low Pricing strategy offers prices above the competitions EDLP, but use advertising to promote frequent sales
Pricing Strategies
The relative benefits of the pricing decisions

EDLP Reduced price wars Reduced advertising Reduced stock-outs and improved inventory management High / Low Pricing Appeals to multiple segments Sales create excitement Sales move merchandise Emphasis is on quality
Approaches for setting Prices

Cost oriented method cost + fixed percentage Demand oriented method based on what consumers expect or are willing to pay Competition oriented method based on competitors prices
Pricing Strategies
The pricing adjustments

Markdowns are reductions in initial retail price, because lower prices induces price-sensitive customers to buy more. Reductions are given either to get rid of (clearance) or to generate sales (promotional) Coupons offer a discount on the price of specific items to attract the pricesensitive segment Rebates a portion of the purchase price returned to the buyer Price Bundling a practice of offering two or more different products or services for sale at one price Multiple Unit Pricing lower total price increases sales 3 for the price of 2 Variable or Zone Pricing charging different prices in different stores, markets or zones
Pricing Strategies
These pricing adjustments effect sales volumes

Leader Pricing certain items are priced lower prices than normal to increase customers traffic flow . These products are called Loss Leaders. Price Lining retailers offer a limited number of predetermined price points within a classification Odd Pricing practice of using a price that ends in an odd number, typically a nine. Began as a method of reducing losses due to employee theft odd price, salesman had to go to register to get change and record the sales.
Retail Management Communication Mix
Overview
Planning Assortments Buying Systems Purchasing Merchandise Pricing Communication Mix
Retailing Strategy

Brand and Loyalty
A brand is a distinguishing name or a symbol that identifies the product or service and differentiates it from the offerings of the competitor Value of Brand Image
Brands provide value to both customers and retailers Brands convey information on nature of shopping experience the retailers mix; build confidence in decision making and enhance level of satisfaction The value that brand image offers retailers is referred to as brand equity
Building Brand Equity

Create a high level of Brand Awareness Develop favourable Associations with the brand name Consistently reinforce the image of the brand
Brand and Loyalty
Brand Awareness
The ability of a potential customer to recognize or recall the brand name Aided recall
Top-of-mind awareness
Brand Associations
Anything linked to or connected with the brand name in a consumers memory Brand Image is a set of associations that are usually organized around some meaningful theme
Consistent Reinforcement
Develop an integrated marketing communication program all elements convey consistent message Important not to confuse customer with varying messages
Methods of Communication
Advertising Sales promotion Paid Store atmosphere Website
Personal selling E-mail
Publicity Unpaid
Word of Mouth
Impersonal
Personal
Methods of Communication
Strengths and weaknesses

Control
Paid Impersonal Mass media advertising Direct Mail Sales Promotion High Highest High Lowest High Low Lowest Low Modest Modest Modest
Flexibility Credibility
Cost
Store Atmosphere
Website Paid Personal Personal selling E-mail
High
High Modest Highest Low Low
Low
Modest Highest High Low Low Low Low Low High High
Modest
Modest Highest Low Low Lowest
Unpaid Impersonal
Publicity Unpaid Personal Word of Mouth
Communication Program
The steps in developing and implementing a retail communication program Setting Objectives
To provide direction for people implementing the program To provide a basis for evaluating its effectiveness
Communication Objectives are specific goals related to the communication mixs effect on the customers decision-making process Objectives must be clearly stated in quantitative terms Target audience needs to be defined
retail
Degree of change expected needs to be stated

Time period over which the change is expected should be defined
Communication Program
Differences in vendors and retailers objectives could lead to conflicts such as

Long-term v/s short-term goals
Product v/s Location Geographic coverage choice of media Breadth of merchandise offered
Setting the Communication Budget Marginal Analysis is based on the economic principle that firms should increase communication expenditures so long as each additional rupee spent generates more than a rupee of additional contribution.
Communication Budget
Some other methods that retailers use

Objective-and-task method determines the budget required to undertake specific tasks for accomplishing communication objectives Rule-of-thumb method uses past sales and communication activity to determine the present budget Affordable method = Forecasted Sales Expenses Desired Profits communication does not stimulate sales; only cost to business Percent-of-Sales method = % of Forecasted % used in the past is still appropriate; same % as competitor?? Sales
Competitive Parity method = Communication share equals Market share if all adopted this method, market shares would remain same
Communication Budget
Allocation of the Promotional Budget

High-assay principle again uses principles of marginal analysis highest allocation to areas that yield greatest returns
Retailers need to consider

The realized margin from the promotion Cost of the additional inventory carried due to buying more than the normal amount The potential increase in sales from the promoted merchandise The potential loss suffered when customers switch to the promoted merchandise from more profitable private-label brands The additional sales made to customers attracted to the store by the promotion
Communication Media
Choosing the most effective media

Newspaper distributed in well-defined local market (effective targeting), message at short notice, convey detailed information, short life, low developing cost, high delivery cost, wasted exposure Magazines national retailers, image building (high reproduction quality), longer lead time (difficult to co-ordinate timing) Direct Mail very effective (personalized), costly, junked
Television national players, used for image advertising, high production and telecast cost
Radio target specific segments, low developing and broadcasting costs, low attention levels of the listener
Internet banner ads for awareness (not cost effective), website for information (excellent vehicle), e-mails to target messages.
Outdoor Billboards awareness and limited information to a narrow audience, used for reminding customers Yellow Pages long life, used by those interested in information / purchase
Communication Media
Factors in selecting media

Coverage number of potential customers in the retailers target market that could be exposed to an ad in a given medium Reach is the actual number of customers in the target market exposed to an advertising medium. Cumulative Reach (sequence of ads.) Cost CPM (Cost per thousand) measure is used to compare media. CPM equals Cost of Ad divided by Reach. Misleading if comparing different types of media (say TV and Print) Impact is an ads effect on the audience
Communication Media
Effectiveness on Communication Objectives

Communication Task
Newspaper Mags Direct Mail TV Radio Website E-mail Outdoor
Getting attention Identifying name
Low Med High Low
Med High Low Med
Med Low High High
Med Low
Low Low
Low Low Low Highest
High Med High Low
Med High Low Low
Announcing events
Demonstrating merchandise Providing information Changing attitudes Building brand image
High Med High Low
Low
High Low
High
Med Med
High
High High
Low
Low
Highest
High High
Med
Low Low
Lowest
Low Low
High Med High Low
Communication Media
Factors in selecting media

Frequency number of times a potential customer is exposed to an ad
Timing an ad should appear on or precede the purchase date
Retail Management Store Management
Overview
Retailing Strategy
Store Management
Retail Management Store Management
Preamble
We finally come to the implementation issues associated with store management, including managing store employees and controlling costs, presenting merchandise and providing customer service.
Retailers are increasing their emphasis on differentiating their offering from competitive offerings based on the experience that customers have in the stores the service they get from the store employees and quality of the shopping environment
Retail Management Managing Store Employees
Overview
Retailing Strategy
Roles & Responsibilities
The Store Manager is responsible for implementing the retailers human resource strategy
Recruiting and selecting store employees Improving their skills through socialization and training Motivating them to perform at higher levels Evaluating and rewarding them
Recruiting & Selecting
The first step in the employee management process is recruiting and selecting, and entails
Job Analysis identifies the essential activities and is used to determine the qualifications of potential employees. Managers can obtain the information needed for a job analysis by observing the characteristics of exceptional performers. Job Description is a guideline for recruiting, selecting, training and evaluating employees. It includes the activities the employee needs to perform and the performance expectations expressed in quantitative terms. Locating Prospective Employees some suggestions Look beyond the retail industry Use your employees as talent scouts Provide incentives for employee referrals Use your storefront creatively Use the Internet
Screening Applicants to interview the screening process matches the applicants qualifications with the job description. Application Form enables the manager to screen and also provides information for interviewing the applicant. References are a good way to verify the information given on the application form. In order to reduce the positive bias reference can be asked to rank the applicant relative to others in the same position. Testing intelligence, ability, personality and interest tests can provide insights about potential employees. However, tests must be scientifically and legally valid, non-discriminating and assess only job-related factors. Use of lie detectors is prohibited. Realistic Job Preview turnover is reduced when the applicants understand both the attractive and unattractive aspects of the job. A realistic preview typically screens out 15% of the applicants (likely to quit within 3 months if hired)
Selecting Applicants post screening, the selection process involves a personal interview. Preparation for the Interview objective is to gather relevant information. The most widely used technique is to ask candidates how they handled actual situations (requiring skills outlined in the job description). Each topic area covered in the interview starts with a broad question and followed by a series of more specific questions.
Managing the Interview some suggestions Encourage long responses Avoid asking questions that have multiple parts Avoid asking leading questions Be an active listener
Socializing & Training
After hiring, the next step in developing effective employees is introducing them to the firm
Socialization is the set of steps taken to transform new employees into effective, committed members of the firm. The objectives are to develop a longterm relationship, increase productivity and reduce turnover costs. A key factor in socializing new employees is to create a training and work environment that articulates the retailers culture and strategy Walk the Talk.
Orientation Programs some suggestions

Avoid information overload and one-way communication Learn best when information is parceled out in small doses Relate magic moments for better understanding Training Store Employees both structured and on-the-job learning Structured taught the basic skills and knowledge needed On-the-job assigned a job, given responsibilities and coached by supervisors
Motivating & Managing
Effective leadership and appropriate motivation are critical to achieving performance goals
Leadership is the process by which one person attempts to influence another to accomplish goals. Leaders engage in Task Performance and Group Maintenance behaviours.
Autocratic leaders make all decisions on their own and then announce them to employees.
Democratic leaders base their decisions on information and opinions they seek from employees.
Transformational leaders get people to transcend their personal needs for the sake of the group or organization. They generate excitement and revitalize employees through the personality, self-confidence, clear vision and communication skills. They delegate challenging work to subordinates, have free and open communication and provide personal mentoring to develop subordinates.
Motivating & Managing
Motivating employees to perform up to their potential is the managers most important and frustrating task
Managers should know that performance improves when employees feel that their efforts will enable them to achieve the set goals theyll receive rewards they value on achieving their goals
Store morale effects employee motivation. Some suggestions for building morale Have meetings prior to store opening. Pass on information and seek opinions and suggestions from employees
Educate employees on the firms finances, set achievable goals, and celebrate success
Print stickers to tell customers that this sandwich was wrapped by Sanjay Give all employees a business card with the company mission printed behind
Evaluating & Providing Feedback
The objective of the evaluation process is to identify

High Performers reward / promote (assign greater responsibility)
Poor Performers develop plans to increase productivity

Immediate superior should evaluate Formal evaluation annually or semiannually
Supplemented by frequent informal evaluations

Feedback from evaluation is the most effective method for improving employee skills / performance Evaluation is meaningful if Employees know what is required of them What level of performance is expected What is the evaluated performance What needs to be done to bridge the gap
Managers can make evaluation errors

Haloing first forming an overall opinion and then allowing that to influence the rating of each performance parameter Undue influence by Recency and Contrast Underemphasize on external factors (merchandise in the department or competitors actions)
Employees receive two types of rewards

Extrinsic as performance drivers vary from employee to employee, ideally one should be allowed to choose his reward from a basket Intrinsic job enrichment motivation comes from learning how to do the job better
Compensation aims to attract and retain good employees, motivate them to meet firms objectives and reward them for their effort
Straight Salary Compensation fixed amount for each hour of work Easy for employee to understand; store to administer Flexibility of assigning different activities (salesman to stocking)
Does not improve productivity in the short run (fixed amount)

Becomes a fixed cost (even when sales decline) Incentive Compensation Plan rewards on basis of productivity
Straight Commission
Fixed salary plus Commission Commission on sales over quota
Retail Management Controlling Costs
Overview
Retailing Strategy
Implementing the Retailing Strategy Merchandise Management Store Management & Operations
Responsibilities
The responsibilities of a Store Manager

Managing Store Employees
Recruiting and selecting employees job analysis, job description, interviewing and selecting
Socializing and training new employees orientation and on-the-job training Motivating employees leadership and maintaining morale Evaluating and providing constructive feedback Compensating and rewarding store employee
Controlling Costs
Labour scheduling Store maintenance Energy management Reducing Inventory loss
Responsibilities
Apart from managing store employees, the Store Manager is responsible to control costs
Labour scheduling determining the number of employees assigned to each area of the store difficult due to fluctuations Store maintenance activities involved in managing the exterior and interior physical facilities Energy management managing the expenses on lighting, heating / cooling Reducing Inventory loss employee theft, shoplifting, mistakes and inaccurate records and vendor errors A recent survey attributes
Employee Theft
Shoplifting Mistakes Vendor errors
- 46%
- 31% - 17% 6%
Responsibilities
Losses due to shoplifting can be reduced

Store Design reducing height of fixtures, open sight lines to entrance and exit, dressing room entrance / exit Employee Training to be aware, visible and alert Security Measures CCTVs, non-operating TV, Electronic articles (POS scanner)
Retail Management Managing Merchandise
Overview
Retailing Strategy
Store Design
Objectives of a good store design

The store design should be consistent with Image and Strategy target segment, their needs positively influence consumer behaviour consider costs versus value be flexible ability to physically move store components and modify individual components recognize the needs of the disabled
Store Design
Store layout should

entice customers to move around buy more than planned
facilitate ease of locating merchandise (supermarket)

emphasize on exploration rather than ease of finding (department store)
Types of designs
Grid layout long gondolas and aisles in a repetitive pattern
Racetrack or Loop layout a major aisle for customer traffic, with access to stores multiple entrances Free-form or Boutique layout relaxed environment, feel at home
Location of Departments
Need to consider demand-generating factors and interrelations

Relative location advantage best location near the entry-level floor. Men are less avid shopper, so menswear near entry
Impulse products front of the store, near cash counter Demand / Destination areas specialty goods located off the beaten path Seasonal needs need to be flexible to change positioning Physical characteristics of merchandise furniture Adjacent departments cluster complementary products
Presentation Techniques
Considerations while displaying merchandise

Manner consistent with stores image
Nature of the product jeans in stacks, skirts to be hung

Packaging dictates how product is displayed Products profit potential influences display decisions Mont Blanc
Some common display techniques

Idea-oriented presentation complementary purchase clustering encourages multiple
Style / Item presentation items by size
Colour presentation
Price Lining discussed earlier Vertical merchandising using walls and high gondolas
Atmospherics
Atmospherics is the design of an environment via subtle elements that complement other aspects
Visual communication signs, minimum copy Lighting highlight merchandise Colour Music
Scent
Retail Management Providing Customer Service
Overview
Retailing Strategy
Service Strategies
Customization approach tailored to meet each customers personal need, specialty stores help in decision making process Standardization established rules and procedures Cost of customer service is the critical factor in deciding
Customer evaluation of service quality

Role of expectations knowledge and experiences Perceived service reliability, assurance (trust), tangibility, empathy, responsiveness
Gap Model
Four factors affect the Gap Model

Knowledge Gap between customer expectation and retailers perception Standards Gap between retailers expectations and standards it sets perception of customers
Delivery Gap between retailers service standards and actual service Communication Gap between actual service provided and service promised
Service Recovery
Steps in effective service recovery

Listening to Customers can become emotional, chance to get their complaints off the chest Providing a fair solution
Resolving problems quickly clear instructions, speak customers language

Retail Management

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Retail Management

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Retail Management

Retail management course contents:

10. Retail marketing

Small savings and afforestation

Books for further reading

1.Retail marketing management- david gilbert

2.Retailing - dunn, lusch, grifith

4.Retail management levy and weizt

8% of indian population will be employed by retail industry

10- no. of years RPG pioneered in retailing

4- no of stores country wide last week

The reference books recommended

Retailing Management Michael Levy & Barton A Weitz

The Art of Retailing

Implementing the Retailing Strategy Merchandise Management

Store Management & Operations

The World of Retailing

Implementing the Retailing Strategy Merchandise Management

Store Management & Operations

Definition and Scope

The word retail is derived from the French word retaillier

Philip Kotler defines Retailing as

The role of Retailing in the marketing mix is very significant

Store design and display

Introduction Theories of change in Retail institutions

Introduction WHEEL OF RETAILING THEORY

Introduction RETAIL ACCORDION THEORY

Introduction Retail strategic opportunities

Retail format development

Target market segment

Introduction DIALECTIC PROCESS

Synthesis Category Killer

Anti Thesis Discount Store

Introduction NATURAL SELECTION THEORY

TRADE AREA is a geographic sector that contains potential customers for a

SECONDARY ZONE is the geographic area of secondary importance in

TERTIARY ZONE includes customers who occasionally shop at the store or

Retail Life Cycle

Innovation Very Few

Accelerated Development Moderate

Maturity Many Direct, Moderate Indirect

Decline Moderate Direct, Many Indirect

Retail Life Cycle

Opportunities of growth and profit through the Retail Life Cycle

Growth / Profitability / Duration

Innovation Very Rapid Low Moderate 3-5 years

Accelerated Development Rapid High 8 years

Maturity Moderate Slow Moderate Indefinite

Decline Slow or Negative Very Low Indefinite

Retail Life Cycle

Investment / Growth / Risk Decisions

Innovation Minimum Investment High Risk

Accelerated Development High Investment to sustain Growth

Maturity Tightly controlled growth in untapped markets

Decline Marginal capital expenditure

Retail Life Cycle

Innovation Refine Concept through adjustment & experiment

Accelerated Development Establish a preemptive market position

Decline Engaging in a run-out strategy

Implementing the Retailing Strategy Merchandise Management

Store Management & Operations

Global Trends and Indian Scenario

Some of the most important changes in the Retail Industry