Retail Overview - An Introduction


Published on

Contains a high level over view of various areas of Retail such as Merchandising, Supplychain, Store Operations

Published in: Retail, Business, Technology
  • Be the first to comment

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Retail Overview - An Introduction

  2. 2. Consumer Segmentation Consumers: Persons who consume products or services Customer segmentation: Retailers cannot target individual consumers, because the cost and complexity would be too high. Therefore, they cluster their consumer base into segments, where each segment has a high degree of commonality Consumer Types Impacts  Merchandise assortments and brands  Decor and ambience of the store  Service package offered 2 ANSHUMAN DUTTA
  3. 3. Types of Retailers ANSHUMAN DUTTA 3 Retailer Types Grocery Apparel White Goods Jewelry Furniture Hi-Tech
  4. 4. Media Formats  In store  Online  TV Shopping networks  Telephone  Print/ Catalog  Home selling Retail Formats Location  High street  Destination  Convenience store Size  Shopping Mall  Supermarket  Hypermarket Ownership  Private/Individual Owned  Public Owned/Listed  Franchisee Merchandise Range  Supermarket  Hypermarket  Specialty  Category Killer Merchandise Segment  Music (Performance)  Apparel/ Footwear  Drugs/ Pharmacies  Electronics Price  Discount  EDLP  Factory Outlet  Single Price Denomination Business Model  B2B  B2C 4ANSHUMAN DUTTA
  5. 5. Retail Dimensions Organizational Hierarchy 1. Chain 2. Division 3. Region 4. District 5. City 6. Cluster 7. Store Company USA West/ MH Los Angeles Westlake Village Thousand Oaks 10921 Why Hierarchy • Assign Responsibility • Targets • Analysis • Decision making • Promotions • Pricing/ Margins Merchandise Hierarchy 1. Division 2. Dept 3. Category 4. Sub Category 5. Brand 6. Style 7. Options 8. SKU Men’s Apparel Trousers Formal Khakis Reid and Taylor Flat Style Singles Pack LW FHS B 32 Time Hierarchy 1. Year 2. Qtr 3. Period 4. Week 5. Day 09-10 2st May 15 4 5 ANSHUMAN DUTTA
  6. 6. Retailing Processes 6 ANSHUMAN DUTTA
  7. 7. Value Chain of Retail ANSHUMAN DUTTA 7 Merchandising CORE NON-CORE Supply Chain Store Operations Finance Legal Marketing
  8. 8. Merchandising ANSHUMAN DUTTA 8 Range Planning Merchandise Financial Planning Order Planning Sourcing / Procurement Pricing Promotions Space Planning
  9. 9. Merchandise 9 Merchandise: Goods or services that may be sold or traded Properties SKU (Stock Keeping Unit) Roles: Buyer – Merchandiser - Allocators Colors, Sizes, Dimensions Pack Size – Unit Of Measurement Price: Cost and Retail Hierarchy (Dept – Sub Dept – Class – Sub Class) Vendor ANSHUMAN DUTTA
  10. 10. 10 Width / variety/ breadth of merchandise - The number of merchandise categories Major components of an assortment strategy Depth of merchandise - the number of items in a category (SKUs) Merchandising ANSHUMAN DUTTA
  11. 11. Merchandising ANSHUMAN DUTTA 11 Range Planning Where Store/ Store Cluster Level etc. ? When Season/ Month/ Week ? What Merchandise to Sell ? How The Quantity ? Range = Width * Depth
  12. 12. Merchandising ANSHUMAN DUTTA 12 Merchandise Financial Planning Assortment Planning Assortment planning is the process to determine what and how much should be carried in a merchandise category. Assortment plan is a trade-off between the breadth and depth of products that a retailer wishes to carry. Category Planning Category management is a process that involves managing product categories as business units and customizing them [on a store by store basis] to satisfy customer needs. Item Planning Item Planning lets you build plan by item, key item, or assortment—by vendor, class or item attribute—and across multiple sales channels. With Item Planning you can plan and forecast sales and inventory requirements in line with changes in demand to maximize margin potential for key items at every stage of the product lifecycle.
  13. 13. Merchandising ANSHUMAN DUTTA 13 Merchandise Order Planning Open to Buy Out of Season Planning In Season Planning • Open to buy is the dollar amount budgeted by a business for inventory purchases for a specific time period • Determines how much was spent and how much is left to spend
  14. 14. Merchandising ANSHUMAN DUTTA 14 Space Planning Micro space planning Deals with how an category assortment fits into an allocated shelf area Macro space planning Deals with space allocation at category level Planogram A diagram of fixtures and products that illustrates how and where retail products should be displayed, usually on a store shelf in order to increase customer purchases .
  15. 15. Merchandising Pricing is part of the marketing mix available to retailers Buying Cost ($100) Markup ($50, 50%) Markdown ($20, 13.33%) Regular Selling Price ($150)  Markup = MRP – Cost  Markdown = Old MRP – New MRP 15 Pricing/Promotion Management C Pricing Cost + Fixed Margin = Grocery Cost + Margin Based on Demand = Apparel Trade Promotions Management: (1) Brand Based, (2) Location Based, (3) Account Based ANSHUMAN DUTTA
  16. 16. Core merchandising: ANSHUMAN DUTTA 16 merchandising-must-sing-off-the-same-sheet-music/
  17. 17. Merchandise Supply Chain and Optimization: ANSHUMAN DUTTA 17 merchandising-must-sing-off-the-same-sheet-music/
  18. 18. POS in Retail • POS data is also not limited to retail and consumer facilities, as 3PLs, warehouses, and raw material manufacturers can collect this as well. • Naturally, there is direct value for – Implying on-shelf availability, – Determining re-order points, – Analyzing trends and seasonality to forecast demand ANSHUMAN DUTTA 18 Additional supply chain touch points that can be improved with POS data. These include: Designing key performance predictors (KPPs) Including POS data as part of the organization's Sales Inventory Operations Planning (SIOP) process Leveraging POS data with shipment data. Measuring the tradeoffs between forecasts and supply chain flexibility
  19. 19. Travel Merchandising ANSHUMAN DUTTA 19
  20. 20. Supply Chain Management 20 ANSHUMAN DUTTA
  21. 21. Retail Entities Main Entities • Manufacturers • Retailers • Customers 21 Others SCM partners • 3rd Party Logistics • Labor contractors • IT Vendors – (Applications, Infrastructure) • E Commerce • Advisories • Services – Repairs, Warranty • Advertising/ Marketing ANSHUMAN DUTTA
  22. 22. Supply Chain ANSHUMAN DUTTA 22
  23. 23. Supply Chain Management “Supply Chain Management is a set of approaches utilized to efficiently integrate suppliers, manufacturers, warehouses, and stores, so that the merchandise is produced and distributed in the right quantities, to the right locations, and at the right time, in order to minimize the system wide costs while satisfying the service requirements” The 3 key processes in the supply chain are: Inventory Management Warehouse Management Transportation Management Vendors Central DC 1 Central DC 2 Central DC 3 Local DC 1 Local DC 2 Logistics Partners Store 1 Store 1 Store 1 23 ANSHUMAN DUTTA
  24. 24. ANSHUMAN DUTTA 24
  25. 25. SCM key processes 25 The Supply Chain Management Program integrates topics from manufacturing operations, purchasing, transportation and physical distribution into a unified program. Key processes that make up the core of supply chain management are • Customer Relationship Management • Customer Service Management • Demand Management • Order Fulfillment • Manufacturing Flow Management • Procurement • Product Development and Commercialization • Returns ANSHUMAN DUTTA
  26. 26. Warehouse Management • Warehouse management aims to enhance inventory management by – Decreasing inventory levels – Improving order fulfillment – Reducing order cycle time 26 ANSHUMAN DUTTA
  27. 27. Warehouse Layout/ Movements & Activities 27 • Inbound Processes  Receiving  QA  Putaway • Outbound Processes  Order processing  Picking  Replenishment  Shipping ANSHUMAN DUTTA
  28. 28. Bullwhip Effect ANSHUMAN DUTTA 28 What is the bullwhip effect? The ripple effect of small changes in customer demand are magnified upstream through a supply chain all the way from the customer to the retailer to distributor to manufacturer. It is so named because of the resemblance to a bullwhip as the variability of demand increases sharply when you progress up the supply chain.
  29. 29. ANALYTICS IN SUPPLY CHAIN RISK MANAGEMENT ANSHUMAN DUTTA 29 Descriptive - what happened? Diagnostic - Why did it happen? Predictive - what will happen? Prescriptive - how to make it happen?
  30. 30. 15 Key Innovations in supply chain strategy Ford Assembly Line – Henry Ford installs the first moving assembly line of an entire automobile, the Model T, first produced in 1908 ANSHUMAN DUTTA 30 1913 Ocean Shipping Container: - Malcom McLean invented the standard steel shipping container first implemented in 1956 at the port of New Jersey 1950 Electronic Data Interchange (EDI) –Started when computer systems first had the capability to transfer data to other computer systems. Enables the exchange of electronic business documents. 1960 Material Resource Planning (MRP) – Josef Orlicky makes the first MRP system in Racine, Wisconsin. A year later, Gene Thomas from IBM invents the Bill of Materials Processor. For the first time, manufacturers could break down the BOM on a computer 1961 Universal Product Code (UPC) – a company called Logicon wrote a standard for something close to what became known as the Universal Product Code (UPC) to identify via a barcode a specific SKU. The first implementation of the UPC was in 1974 at a Marsh's supermarket in Troy, OH. 1970 Enterprise Resource Planning – In 1990, Gartner Group first employed the acronym ERP which came to represent a larger whole, reflecting the evolution of application integration beyond manufacturing. 1980 Dell Direct Orders – Michael Dell started his company in his dorm room shipping computers to customers. This developed into a unique model of make to order that provided custom configurations to customers and shipped to them 1984 FedEx Tracking System – After re-inventing the category of express parcel shipments, FedEx went a step further by developing a new computerized tracking system that provided near real-time information about package delivery. Outfitting drivers with small handheld computers for scanning pick-ups and deliveries, a shipment's status was available end to end. 1985 P&G's Continuous Replenishment: Order patterns were totally dependent on sales and retail buyer input until P&G bought a mainframe application from IBM for "continuous replenishment" re-wrote it for retail, and changed that entire value chain by driving orders based on DC withdrawals and sales data. 1987 Walmart Cross Docking – With rapid expansion in the number of Walmart stores, the company needed an effective communication system. They introduced the first cross docking system, which enabled them to track goods across all their DCs and stores. 1988 The Toyota Production System: Pioneered by Toyota's Taiichi Ohno and a few colleagues, TPS not only is the foundation for today's lean manufacturing and supply chain practices, but the concepts have penetrated virtually every area business 1990 Rise of the PC and Internet – this allowed the development of decision support systems for the supply chain on PCs as well as collaboration platforms for companies with their trading partners. 1990 HP Postponement – The ability to delay differentiation in product design can convey many advantages. HP was the first to use this approach delaying some of the localized decision for its DeskJet printers by customizing the printers at its local distribution centers rather than at its factories. 1994
  31. 31. 15 Key Innovations in Supply Chain Strategy • 1998 – Amazon Order & Delivery - Jeff Bezos left Wall Street to start Amazon and within four months, became extremely popular. Within a month of its website launch it had filled orders from 50 states and 45 other countries. carried only about 2,000 titles in its Seattle warehouse; however, usually no warehouse was needed because most orders were placed through wholesalers and publishers. ANSHUMAN DUTTA 31 • 2000s – RFID , Track and Trace – RFID was developed at the MIT Auto-ID Center. It is a code-carrying technology, and can be used in place of a barcode to enable non-line of sight-reading. Synonymous with track-and-trace solutions, and has a critical role to play in supply chains.
  32. 32. Supply Chain Myths ANSHUMAN DUTTA 32 1. Reduce costs at all cost: This strategy suggests that reducing cost is the most important objective, which is not always the case. Companies need to "balance cost with service, invest in flexibility to reduce risk, and deploy the appropriate IT infrastructure for long-term visibility and growth." 2. Invest in flexibility: "Identifying the right trade-off between risk-mitigation strategies and cost is an important challenge." Companies need to identify how to get flexibility either through process, system, or product design and where is right to invest. 3. Apply the same operations strategy across the board: You can't deploy one supply chain across multiple channels, customers and products. Each product may have different requirements and characteristics. Product characteristics have to be matched with supply chain strategies. David Simchi-Levi uses the example of Gap Inc. The company owns three separate brands: Gap, Banana Republic and Old Navy. Each of the brands has a different customer value proposition. Because of this, there is a need for multiple supply chains to fit each type of customer. 4. Deploy the latest and best Information Technology (IT): "IT investment has to be driven by business needs." The latest technology cannot drive a change in the business because the company wants to keep up with the latest trends. 5. Ignore IT because it is just another commodity: Don't ignore IT altogether. While previously we discussed (Myth #4) that all technology is not necessarily right for your business, sometimes when technology is combined with the right business processes for supply chain integration it can significantly improve performance. 6. Treat Corporate Social Responsibility(CSR) as charity: Many executives believe that CSR is a waste of money and time; however, in many situations "when CSR is aligned with business value, it generates a new stream of revenue or an innovative way to reduce costs." 7. Leave Operations to the functional areas: "Operations significantly affect the firm's revenue and profit goals precisely because of their ability to control costs, shorten response times, and improve customer service." All of senior management needs to be involved with defining goals in Operations.
  33. 33. Supply Chain Service ANSHUMAN DUTTA 33
  34. 34. Store Front 34 ANSHUMAN DUTTA
  35. 35. Store Operations • What all are needed for the store to run smooth • Understanding of the store characteristics • Practices to prevent and cut short losses due to various sources • Practices to best utilize all available resources in the store 35 ANSHUMAN DUTTA
  36. 36. Store Operations - LP • Merchandise • cash taken in from the sales of merchandise, the cash registers, • store fixtures • equipments required to sell merchandise, • building itself • people in the store: Associates, Managers, and Customers. 36 Shrinkage = Actual Physical Inventory – Book Value Research says the % of reasons for shrinkage • Employee theft, 46.8% • Shoplifting/ Customer Theft 31.6% • Administrative error, 14.4% • Vendor error 3.75% • Unknown error 2.86% Loss prevention is all about protecting the assets of the company and the store. ANSHUMAN DUTTA
  37. 37. 37 Why are Retailers use Multiple Channels customer store kiosk catalog Call center Web/E-mail mobile Customer wants to interact in different ways Each channel offers a unique set of benefits for Customers ANSHUMAN DUTTA
  38. 38. Why Multichannel Retailing 38 • Increasing Online sales • Increasing Internet usage • Consumers interest to enjoy channel benefits • Consumers expect more from retailers in terms of product information, convenience and customer service. ANSHUMAN DUTTA
  39. 39.  Merchandizing : — Out of Stock leading to loss of sales — Pilferage & shop-lifting — Managing consistent visual merchandizing — Workforce Management: — Time & Attendance management — Labor budgeting/scheduling — Recruitment & training — Staff productivity — Point of Sales : — Poor connectivity between store and host systems — No up-to-date information and customized promotions and services — Absence of synchronized view of the customer and inventory information  Supply Chain Analytics: — Visibility in SKU availability, Perfect order fulfillment, optimizing inventory holdings — Supplier performance measurement — Merchandise Analytics: — Optimize merchandise mix — Track promotion effectiveness — POS Analytics: — Understanding Demand Patterns — Measuring store ,category, SKU performance — Customer Analytics: — Understand most profitable customers and cost to serve them — Assortment planning and optimization  Low Inventory Turns : — Lack of accurate inventory information — Sporadic Demand of many items — Poor Supply Chain visibility  Demand Response — Lack of demand planning & forecasting processes — Very Price Sensitive Customers, volatile demand pattern  Total Landing Costs : — Some suppliers, multiple tiers of distribution — Lack of Transportation Management Systems — Lack of Distribution planning & scheduling mechanisms  Customer Experience & Loyalty: — Providing seamless Omni-channel experience — Personalized shopping assistance — Personalized promotions  Social Media engagement: — Brand crises management — Search Engine Optimization & Social Media Optimization  Multi-channel Fulfillment : — Supply Chain & logistics pressures — Smaller, customized package sizes lead to high transportation and labor costs In-store Challenges Analytics Challenges Supply Chain Challenges Omni Channel and Digital Media Challenges Challenges in Retail Industry
  40. 40. Thanks ANSHUMAN DUTTA 40