5 - Retail Management

7/28/2019 5 - Retail Management

1/45


2/45

Retailing involves a direct interface with thecustomer & the coordination of the businessactivities right from the concept or designstage of the product or offering, to itsdelivery & post delivery service to thecustomer

It implies first hand transaction with thecustomer


3/45


4/45

Consumer Pull (liberalization & consumer callingthe shots)

Rising Incomes

Explosion of Media

Change in Consumer Behavior (increased literacyrates, convenience, all under one roof)

Rural Market

Entry of the Corporate Sector

Technological Impact (inventory management,customer data base, toll free helplines;teleshopping & net shopping)


5/45

Retailing aimed @ actual or ultimateconsumer

Retailing involves selling for personalconsumption

Wholesaler does not sell to an actualconsumer

Retailers or Institutional buyers buys fromwholesaler

Not for personal consumption


6/45

Margin is defined as the % of mark-up atwhich the inventory in the store is sold.

Turnover is defined as the number of timesthe average inventory is sold in a year.

Retailer must be strong in at least one of

these parameters, to be successful. Depends on the nature of the products/items

handled.


7/45

Low Margin-LowTurnover

High Margin-HighTurnover

Low Margin -HighTurnover

High Margin-LowTurnover

LowTurnover

HighMargin

LowMargin

HighTurnover


8/45

Low Margin -High Turnover Assumes price is the most important

determinant Stores price their products below the market Price emphasis in all the market

communication Low quality of service Customers BUY rather than store SELLING Stock a wide variety of fast moving items Eg: Big Bazaar, Food Bazaar


9/45

High Margin -Low Turnover Assumes service, distinctive merchandise &

sales approach are the most importantfactors

Products priced above the markets Emphasizing of merchandise strength in all

communication Stores located in the best areas Sales happen on the basis of expertise of

salesman & reputation of the outlet Eg: Ritu Kumar fashion boutique


10/45

High Margin-High Turnover Stock a narrow line of items, which turn over

rapidly Most of the cases concentrated on a

particular product Category Charge high prices due to premium

positioning of store Expertise of salesman high Charge high prices due to lack of volume Eg: Shoppers Stop, Croma, E-zone,

Hometown, Pantaloons


11/45

Low Margin-Low Turnover Forced to maintain low price due to

competition

Do not sell a high volume may be because ofpoor location, or incompetent management

Candidate for bankruptcy

Total disaster

Eg: (May be a Local Corner Store)


12/45

Retail Planning andManagement Model

Competitive Environment:Behavior of Consumers, Competition and Channel Members

Mission Goals andObjectives

SWOT

StrengthsWeaknessesOpportunitiesThreats

Strategic Planning

Social and Legal Environment:Socioeconomic Environment, State of Technology, Legal System, Ethical Behavior


13/45


14/45

3 generic retail strategies.A. Operational Excellence

B. Product Differentiation

C. Customer Intimacy


15/45

A. Operational Excellence Operating processes well defined Customer satisfaction in a cost effective manner Ensuring a quick delivery process

B. Product Differentiation Product Innovation Unique characteristics of merchandise Eg: high price designer wear store

C. Customer Intimacy

Stickiness with the store Repeat customer visit Eg: Shoppers stop running loyalty prog; The Big Sale @

Shoppers is 3 days prior for privileged customers


16/45

Market Penetrationselling more in currentcustomer markets without changingproducts; adding new stores in currentmarket areas; improve advertising; pricing;

store presentation Market Development

Product Development (Eg: MNC fast food

joints customizing to Indian needs) Diversification


17/45

Choosing a store location Sourcing & Buying

Merchandising/ Visual Merchandising

Sales promotion Store positioning & building the store as a

brand

Achieving Efficiencies


18/45

A. Choosing a store location Attractiveness

Convenience

Proximity

Depends on the Margin-Turnover framework

B. Sourcing & Buying

Buying in bulk, thus making good margins

Passing benefits to the customers Eg: Big bazaar running prog Sabse saste 4 din

& Shubh Mahurat


19/45

C. Merchandising/ Visual Merchandising Ability to decide which items will go on shelves Should be best suited to grab customer

attention Art of suggestive selling by display &

presentation Communication of features & benefits of the

merchandise besides the in store promotion

D.

Sales promotion Essentially through media Best offers to customers


20/45

E. Store positioning & building the store as abrand

High value-high price positioning

Discounted store positioning

Value pricing positioning

Lifestyle store positioning

F. Achieving Efficienciesmargin turnover,investment productivity, employeeproductivity etc.


21/45

HIGH MEDIUM LOW

HIGH 1) PremiumStrategy

2)High valuestrategy

3) Super valueStrategy (loss-leader)

MEDIUM 4)OverchargingStrategy

5) MediumValue Strategy 6) Good valuestrategy

LOW 7) Rip Offstrategy

8) FalseeconomyStrategy

9) EconomyStrategy

QUA

LITY

PRICE


22/45

Central business

location (High Street

Location)

Advantages Disadvantages

An unplanned shopping

area around thegeographic point where all

public transportation

systems converge; it is

usually in the center of the

city and often where the

city originated historically.

Easy access to public

transportation.

Wide product

assortment.

Variety in images,

prices, and services.

Proximity tocommercial activities.

Array of retail stores in

small sizes

Inadequate and

usually expensive

parking.

Older stores.

High rents and taxes.

Traffic and delivery

congestion.

LO 2


23/45

Freestanding

retailer

Advantages Disadvantages

Locates along

major traffic

arteries and does

not have any

adjacent retailers to

share traffic.

Eg: Initial

development of

Pheonix mills/

Strategy also

followed by

Shoppers Stop

Lack of direct

competition

Lower rents

Freedom in operations

and hours

Facilities that can be

adapted to individual

needs Inexpensive parking

Lack of drawing power from

complementary stores

Difficulties in attracting

customers for the initial visit

Higher advertising and

promotional costs

Operating costs cannot be shared

with othersStores may have to be built rather

than rented

May not be a commercial retail

area at all

LO 2


24/45

Advantages of shopping centers Disadvantages of shopping centres

Heavy traffic resulting from the

wide range of product offerings

Cooperative planning and sharing

of common costsAccess to highways and available

parking

Lower crime rate

Clean and neat environment

Inflexible store hours

Medium to High rental costl

Potentially too much competition and

much of the traffic is not interested in aparticular product offering

LO 2


25/45


26/45

The following 6 elements meets physical &emotional needs of the customer

1. Employee type & density

2. Merchandise type & density

3. Fixture type

4. Sound type

5. Odour type

6. Visual Factors


27/45


28/45

SKU (lowest level of a merchandise unit) Division: Apparels/ Supermarkets/ Electronics

Dept: Mens/ Ladies/ Kids wear

Category: Shirts/ Trousers Sub category: Full sleeves/ half sleeves

Brand: Arrow/ Van heusen/ Zodiac

Options: size-40,42,44, 46

colorblack, white, bluepriceRs 650, 750, 1000


29/45


30/45

Markup= percentage of margin calculated onthe cost added to arrive at maximum retailprice

Markup%=(diff between mrp & cost/cost) x

100

P)Mark up% for a dress that costs Rs. 200 &

retails for 400?? S) {[400-200]/200 }x 100= 100%


31/45

Mark Down is the amount reduced on mrp to arrive atnew retail price Markdown%=(diff between old & new mrp)/old mrp)

x100

P) Mark down for the dress whose original MRP is Rs.400 & new MRP is Rs. 200?? S) {[400-200]/400} x 100 =50% Markdowns are done when Product sale is low

Season draws to a close Product line needs to be cleared from the shelves Product has a manufacturing defect


32/45

GMROI-total margin earned by averageinventory held during the period

GMROI=[Margins(Turnover @ mrp-cost ofgoods sold)/Avg inventory holding]x100

P) GMROI for a store if its margin earned is 30lakhs & inventory held during the month is

2cr?? S) (30 lakhs/ 2cr)x 100 = 15%


33/45

Product Offerings Place

Price-Mrp, Promotional pricing, Loss leaderpricing, Odd pricing, Price bundling, Edlp,Premium Pricing, Price skimming,

Promotions & Events

People

Presentation


34/45

Point Of Sales (POS) advertising Sales promotion

Publicity

Personal selling


35/45

Point Of Sales (POS) advertising POS materials like posters, banners displayed

Activities like display contests, shelf on hire

Very cost effective Eg: 5x reward points for Amex cardholders

: Provogue & Zodiac points in ShoppersStop promoting their brands


36/45

Sales promotion Done with special communications & display

Media advertising

Used to attract immediate customer attention

Can involve price-offs

Promotion may also be for a new product lineor a new category to hit the store

Eg: sale ads in newspapersshubh mahurat (in Big Bazaar)


37/45

Publicity Non paid advertising mileage

Specialized PR firms

Write ups in media about the stores latestarrivals or sales promotions

New launches get great deal of publicity viaPR firms


38/45

Personal selling Well trained sales personnel communicate the

value proposition & brand value ofstore/products

Helps in cross selling & up selling tocustomers

More personalized selling observed in a high

end store


39/45

Principle objective of SCM-satisfy thecustomer at the right time with right productat right cost all the time

Challenges

Huge SKUs

Seasonal variation of product lines

Changing consumer demands

SCM comprises of Vendor Management, EDI,Warehouse Management & Goods ReceivedNote (GRN)


40/45

A. Vendor Management Involves selecting right vendors giving right

quality of merchandise, adhering deadlines Delivery in right quantity Helps eliminating backlogs in delivery Vendors directly managing a retail organization

is an effective solution

B. Electronic Data Interchange (EDI)

Establishes efficient information flow on stockmovement Vendors get to know of sales & inventories

instantaneously


41/45

C. Warehouse Management Receiving the ordered stocks Checking for right quality, quantity & price Transporting the merchandise Sending returned merchandise back to the

vendors for refining

D. Goods Received Note (GRN) Is prepared when merchandise is received from

vendors/ suppliers after checking Leads to authorization of payments to vendor

by the accounts department


42/45

1. Connect with the customer2. Probe needs subtly

3. Presenting merchandise

4. Handling objections & Indecision

5. Recognize buying signals

6. Trial close (up selling, cross selling &suggestive selling)

7. Close the sale


43/45


44/45

1)Marketing Management--V S Ramaswamy &S Namakumari

2) Retail Management--Gibson G Vedamani]


45/45

Documents

5 - Retail Management