Retail Operations

RETAIL & STORE OPERATIONS RETAIL MANAGEMENT WORKSHOP 29.12.12

What is Retail Operations Retail Operations involves managing the day-to-day functions of retail establishments . Retail Operations professionals manage retail establishments on a daily basis, and are responsible for maximizing store profits – For the regions and for the geographies

COMPONENTS OF RETAIL OPS STORE OPS BD  LOCATION  CAT / SUB CAT PLANNING MIS LOGISTICS ?

COMPONENTS OF STORE OPS ADMIN VM IT HR SECURITY MERCHANDISING MANTN. POS/CHECK OUT INV.SALES

TYPES OF STORES Mom & Pop Stores Dept. stores Discount Stores Speciality Stores Factiory outkets Super Markets Malls

LOCATION Location! Location! Location!

Tradeoff Between Locations There are relative advantages and disadvantages to consider with each location. Rent Traffic

Unplanned Retail Locations Freestanding Sites – location for individual store unconnected to other retailer Advantages:  Convenience  High traffic and visibility  Modest occupancy cost  Separation from competition  Few restrictions Disadvantages:  No foot traffic  No drawing power The McGraw-Hill Companies, Inc./Andrew Resek, photographer

Unplanned Retail Locations Merchandise Kiosks – small temporary selling stations located in walkways of enclosed malls, airports, train stations or office building lobbies. Kent Knudson/PhotoLink/Getty Images

City or Town LocationsGentrification is bringing population back to the cities. Advantage to Retailers: •Affluence returned •Young professionals •Returned empty-nesters •Incentives to move provided by cities •Jobs! •Low occupancy costs •High pedestrian traffic The McGraw-Hill Companies, Inc./Andrew Resek, photographer

Central Business District (CBD)Advantages  Draws people into areas during business hours  Hub for public transportation  Pedestrian traffic  ResidentsDisadvantages  High security required  Shoplifting  Parking is poor  Evenings and weekends are slow Spike Mafford/Getty Images

Main Streets vs. CBDs Occupancy costs lower than CBDs They don’t attract as many people There are not as many stores Smaller selections offered Not as much entertainment Some planners restrict store operations

Inner CityUnmet demand tops 25% in many inner city markets Inner city retailers achieve high sales volume, higher margins and higher profits Inner city customer wants branded merchandise

Shopping CentersShopping Center Management Controls:•Parking•Security•Parking lot lighting•Outdoor signage•Advertising•Special events for customers The McGraw-Hill Companies, Inc./Andrew Resek, photographer

Types of Shopping Centers Neighborhood and Community Centers (Strip Centers) Power Centers Enclosed Malls Lifestyle Centers Fashion Specialty Centers Outlet Centers

Neighborhood and Community Centers Managed as a unit Advantages The McGraw-Hill Companies, Inc./Andrew Resek, photographerConvenient locationsEasy parkingLow occupancy costs DisadvantagesLimited trade areaLack of entertainmentNo protection from weather Attached row of stores Onsite parking

Power Centers Shopping centers that consist primarily of collections of big-box retail stores such as discount stores , off-price stores warehouse clubs, and category specialists Open air set up Free-standing anchors Limited small specialty stores Many located near enclosed malls Low occupancy costs PhotoLink/Getty Images Convenient Modest vehicular and pedestrian traffic Convenient Modest vehicular and pedestrian traffic Large trade areas

Shopping Malls Regional shopping malls (less than 1 million square feet) Super regional malls (more than 1 million square feet) The South China Mall in Dongguan, China 7-19

Advantages and Disadvantages of ShoppingMalls Advantages: Many different types of stores Many different assortments available Attracts many shoppers Main Street for today’s shoppers Never worry about the weather Comfortable surrounding to shop Uniform hours of operation PhotoLink/Getty Images Disadvantages: Occupancy costs are high Tenants may not like mall management control of operations Competition can be intense

Challenge to Malls Time pressured society makes it impractical to wander malls Fashion apparel sold in malls experiencing limited growth Malls are getting old and rundown – unappealing to shop Anchor tenants are decreasing due to retail consolidation Strategies?  Make shopping more enjoyable (e.g., sofas, children’s playing areas)  Great food destination (fast food and full-service restaurants)  Tailor make its offering to cater to changing demographics (e.g., repositioning older shopping centers for Hispanic markets)  Mall renovation and redevelopment

Lifestyle Centers Photo provided by ICSC and used with permission of Aspen Grove Lifestyle Center Attractive to specialty retailers

Lifestyle Centers■ Usually located in affluent residential neighborhoods■ Includes 50K sq. ft. of upscale chain specialty stores■ Open-air configuration■ Design ambience and amenities■ Upscale stores■ Restaurants and often a cinema or other entertainment■ Small department store format may be there

Fashion Specialty Centers Upscale apparel shops Tourist areas/central business districts The McGraw-Hill Companies, Inc./Lars A. Niki, photographer Need not to be anchored Décor is elegant High occupancy costs Large trade area

Outlet CentersThese shopping centers contain mostly manufacturers and retail outlet stores Courtesy of Beall’s, Inc.

Theme/Festival Centers Located in places of historic interests or for tourists Anchored by restaurants and entertainment facilities

Larger, Multi-format Developments:Omnicenters Combines enclosed malls, lifestyle center, and power centers Larger developments are targeted  to generate more pedestrian traffic and longer shopping trips  To capture cross-shopping consumers

Mixed Use Developments (MXDs) Combine several different uses into one complex, including shopping centers, office tours, hotels, residential complexes, civic centers, and convention centers. Offer an all-inclusive environment so that consumers can work, live, and play in a proximal area

Other Location Opportunities Airports Resorts Store within a Store Temporary or pop-up stores

Alternative LocationsAirports Airports: Why wait with nothing to do? Rents are 20% higher than malls Sales/square ft are 3-4 times higher than malls Best airports are ones with many connecting flights Kim Steele/Getty Images

Alternative LocationsResorts Captive audience Well-to-do customer Customers have time to shop 7-31 Royalty-Free/CORBIS

Alternative LocationsStore within a Store Located within other, larger stores Examples:  Grocery store with service providers (coffee bars, banks, clinics, video outlets)  Sephora in JCPenney

Alternative LocationsHospitals Patients cannot leave Gifts are available 7-33 Royalty-Free/CORBIS

Matching Location to Retail StrategyThe selection of a location type must reinforce the retailer’s strategy be consistent with  the shopping behavior  size of the target market  The retailer’s position in its target market Department Stores  Regional Mall Specialty Apparel  Central Business District, Regional malls Category Specialists  Power Centers, Free Standing Grocery Stores  Strip Shopping Centers Drug Stores  Stand Alone

Shopping Behavior of Consumersin Retailer’s Target Market Factors affecting the location choice  Consumer Shopping Situations  Convenience shopping  Comparison shopping  Specialty shopping  Density of Target Market  Ex. Convenience stores in CBD; comparison shopping stores next to Wal-Mart  Uniqueness of Retailing Offering  Convenience of locations is less important  Ex. Bass Pro Shop

Convenience Shopping Minimize the customer’s effort to getthe product or service by locating store The McGraw-Hill Companies, Inc./Andrew Resek, photographerclose to where customers are located

Comparison ShoppingCustomers have agood idea of whattype of product theywant, but don’thave a strongpreference forbrand, model orretailer. Typical for furniture,Competing retailers locate appliances, apparel,Near one another consumer electronics, hand tools and cameras. Ryan McVay/Getty Images

Category SpecialistsOffer the benefits of comparison shoppingConsumers can see almost all brands and models in one storeDestination stores The McGraw-Hill Companies, Inc./Andrew Resek, photographer

Specialty ShoppingCustomers know what they wantDesigner labelsConvenient location matters less 7-39 The McGraw-Hill Companies, Inc./Andrew Resek, photographer

STORE OPS

STARTEGY FORMULATION Defining a primary task  Core Competency Assessing core competencies  What does the firm do better than anyone else? Positioning the firm  How will the firm compete?  Cost  Quality  Speed

OPS STRATEGY – WAL MART

OPS ROLE IN CORP. STRATEGY Operations provides support for a differentiated strategy Operations serves as a firm’s distinctive competence in executing similar strategies better than competitors

VISION AND STRATEGIC GOALS FORMAT IN STORE TARGET POSITIONING EFFICIENCY TYPE CUSTOMERMARKETING CATEGORY SERVICE MIX MIX LEVEL

Important Aspects of store operations CUSTOMER SERVICE  Leads to Loyalty ON SHELF AVAILABILITY  Revenue IN STORE PROCESSES  Reduce Costs STAFF PLANNING STAFF MOTIVATION

DAY TO DAY CHECKS

STORE MANAGER Responsibilities of a store manager may include:  Human Resources, specifically: recruiting, hiring, training and development, performance management, payroll, and schedule workplace scheduling  Store business operations, including managing profit and loss, facility management, safety and security, loss prevention (also called shrink), and banking  Product management, including ordering, receiving, price changes, handling damaged products, and returns  Team Development, facilitating staff learning and development  Problem solving, handling unusual circumstances

 Sales generation Safety and security Division of responsibility Hiring, training and development Visual merchandising and inventory control

P&L INCOME

P&L EXPENSES

CUSTOMER ENTRY Approach Parking  Valet Greeting Store Directory VM Signages Baggage Counter Walk In Entries

MERCHANDISE SELECTION Section Hygiene VM Product Ease of Selection

POS / CHECK OUT BILLING  Discount  Cash / Card  Tender  Checkpoint

 Checklists

Operations Contact initiated by an employee increases likelihood a shopper will buy something The most important factor in determining a shopper’s opinion of the service he receives is waiting time Adding sound, light and color to the register area can ease customers from the anxiety of the financial transaction

Customer Segments When shopping, men:  Move faster, spend less time looking  Look at price tags less often and can be more easily upgraded to a more expensive item  Get a thrill from the experience of paying  Hate asking for directions

Customer Segments When shopping, women:  Spend more money when shopping with other women  Are more demanding of the shopping environment Older shoppers:  Must have easy to read signs  See a lot more black, white and red, and a lot less of other colors  Need brightly lit stores

Customer Segments Children  If stores are not child friendly, parents will be deterred to enter  Make merchandise reachable  Childproof the store  Be able to divert the attention of a restless child  Design a good area for children Generation X  Are attracted to the specialty-store environment if the merchandise is up-to-date

RETAIL KPI Sales/Square Feet Sales/Employee Inv. Shrinkage/sales Average Transaction (sales/# of transactions) Items Per Ticket (total items sold/total transactions) Conversion Rate (total transactions/total traffic) Total Sales Sales compared to last year (or any other period) Wage Cost Average Sale per Customer/Transaction

RETAIL KPI Sales per Hour (for store or associate) – selling hours only: Sales per Hour (for store or associate) – total labor hours: Sales Per Hour Average Sale Inventory Turn Average Gross Margin Customers per day/week Items per customer

 Sales compared to last year (or any other period): Sales per Square Foot: Wage Cost: Average Sale per Customer/Transaction: Units per Customer/Transaction: Conversion rate: Sales per Hour (for store or associate) – selling hours only: Sales per Hour (for store or associate) – total labor hours: Time Spent in the Store:

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Retail Operations

by Abhinav Srivastava on Dec 30, 2012

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