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Retailmanagement 120324014304-phpapp01

  1. 1. RetailManagement
  2. 2. ISB&M Retail ManagementRetailing encompasses the business activities involved in selling goods &services to consumers for their personal, family, or household use.It includes every sale to the final consumer – ranging from cars to apparel tomeals at restaurants to movie tickets.What is Retail Management?Key issues that retailer must resolve:How can we best serve our customer while earning a fair profit?How can we stand out in a highly competitive environment where customershave so many choices?How can we grow our business while retailing a core of loyal customers?
  3. 3. ISB&M Retail ManagementRetail Functions in DistributionA Typical Channel of DistributionManufacturer WholesalerRetailerFinalconsumerManufacturerBrand AManufacturerBrand BManufacturerBrand CManufacturerBrand DWholesalerWholesalerRetailerBrand AcustomersBrand BcustomersBrand CcustomersBrand DcustomersRetailers role in sorting process
  4. 4. ISB&M Retail ManagementRetailers often act as the contact between manufacturers, wholesalers, & customers.Retailers collect an assortment (variety) from various sources, buy in large quantity, &sell in small amount. This is sorting process.Retailers communicate with customers, wholesalers & manufacturers.Shoppers learn about the availability & characteristics of goods & services, storehours, sales etc., from retailers advt., sales people & displays.Manufacturers & wholesalers are informed by their retailers with regard to salesforecast, delivery delays, customer complaints, defective items, inventory turnover andso on..Many goods & services have been modified due to retailer feedback.For small suppliers, retailers provide assistance bytransporting, sorting, marketing, advertising, & pre-paying for the products.Retailers also complete transactions with customers i.e., having convenientlocations, filling order promptly & accurately, & processing credit purchase.Some retailers also provide customer services such as gifts wrapping, delivery, &installation.To be more appealing, many firms engage in multi-channel retailing i.e., multiple pointof contact like physical stores, websites, mail-order catalogs etc.Retail Functions in Distributioncontd..
  5. 5. ISB&M Retail ManagementBenefitsReach more customersReduce costsImprove cash flowIncrease sales more rapidlyFocus on area of expertiseRetail Functions in Distributioncontd..Manufacturers also do operate retailfacilities (besides selling atconventional retailers). In running theirstores, these firms compete the fullrange of retailing functions & competewith conventional retailers.
  6. 6. ISB&M Retail ManagementRetailers are part of distribution channel, so manufacturers (wholesalers) are concernedabout:Caliber of displaysCustomer serviceStore hoursRetailer‘s reliability as business partnersRetailers are also major customers of goods & services for resale, storefixtures, computers, management consulting ,& insurance.Retailer-Supplier RelationshipRetailers and supplier have different priorities on:Control over distribution channelProfit allocationNo. of competing retailers handling supplier‘s productsProduct displayPromotion supportPayment termsOperating flexibility
  7. 7. ISB&M Retail ManagementChannel RelationsExclusive DistributionSuppliers make agreements with one or a few retailers that designates them the only oneto carry certain brands/products in a specific geographic region.Both parties work together to maintain an image, assign self space, allot profits &costs, & advertise.This is the smoothest channel relationship.Retailer-Supplier Relationshipcontd..Intensive DistributionSuppliers sell through as many retailers as possible.This maximizes suppliers‘ sales & lets retailers offer many brands & product versions.Retailers may assign little self space to specific brands, set high price on them, & notadvertise them.This is most volatile channel relationship.Selective DistributionSuppliers sell through a moderate no. of retailers carrying some competing brands.This combines aspects of Exclusive & Intensive Distribution
  8. 8. ISB&M Retail ManagementThe average amount of a sales transaction for retailers is much less thanmanufacturers.This low amount creates the need to tightly control the cost associated with eachtransaction like sales personnel, credit verification, & bagging.To maximize the no. of customer the retailer has to emphasize more on ads & specialpromotions.Increase impulse sales by more aggressive selling.The Special Characteristics ofRetailingFinal consumers make many unplanned or impulse purchases.Large %age of consumers do not look at ads before shopping.They do not prepare shopping list.Make fully unplanned purchases.This indicates the value of in-store displays, attractive store layouts, & well organizedstores, catalogs, & website.Retailer‘s ability to forecast, budget, order merchandise, & sufficient personnel on theselling floor becomes difficult.
  9. 9. ISB&M Retail ManagementRetail customers usually visit a store, even though mail, phone, & web sales hasincreased.Most retail transactions happen in stores & will continue in future.Many people like to shop in person, want to touch, smell, and/or try on products.Many people to browse for unplanned purchases.They feel more comfortable talking a purchase home with them than waiting for adelivery.Desire privacy while at home.Retailers must work to attract shoppers to stores & consider such factors such as storelocation, transportation, store hours, proximity (nearness) of competitors, productselection, parking & ads.The Special Characteristics ofRetailing
  10. 10. ISB&M Retail ManagementRetail strategy is the overall plan guiding a retail firm. It influences the firm’s businessactivities & its response to market forces, such as competition & economy.Six steps in strategic planningDefine the type of business in terms of the goods or services & company‘s specificorientation.Set long-run & short-run objectives for sales & profit, market share, image etc.Determine the customer market to target on the basis of its characteristics (like gender& income level) & needs (like product & brand preferences).Devise an overall, long-run plan that gives general direction to the firms & its employees.Implement an integrated strategy that combines factors like storelocation, transportation, product variety, pricing, and advertising & display to achieveobjectives.Regularly evaluate performance & correct weaknesses or problems when observed.Importance of Retail Strategy
  11. 11. ISB&M Retail ManagementGrowth-oriented objectivesAppeal to prime marketDistinctive company imageFocusStrong customer service for its retail categoryMultiple points of contactEmployee relationsInnovationCommitment to technologyCommunity involvementConstantly monitoring performanceKey to success
  12. 12. ISB&M Retail ManagementCustomer orientation - The retailer determines the attributes & needs of its customers& endeavors (take action) to satisfy these needs.Coordinated effort - The retailers integrates all plans & activities to maximizeefficiency.Value-driven - The retailer offers good value to the customers, whether it be upscale(expensive) or discount i.e., ―appropriate pricing‖ for goods & customer service.Goal oriented - The retailer sets goal & uses its strategy to attain them.The Retailing ConceptCustomerorientationCoordinated effortValue- drivenGoal orientationRetailingconcept Retail Strategy
  13. 13. ISB&M Retail ManagementClassification of Retail InstitutionsOwnershipStore-based retailstrategy mixNonstore-basedretail strategy mix& nontraditionalretailing• Independent• Chain• Franchise• Leased department• Vertical marketing system• Consumer cooperative• Convenience store• Conventional supermarket• Food-based supermarket• Combination store• Box (limited line) store• Warehouse store• Specialty store• Variety store• Traditional department store• Full-line department store• Off-price chain• Factory outlet• Membership club• Flea (louse) market• Direct marketing• Direct selling• Vending machine• World wide web (WWW)
  14. 14. ISB&M Retail ManagementOwnership format serves a marketplace niche.Independent retailers capitalize on a very small targeted customer base & pleaseshoppers in a friendly, folksy (simple) way. Word-of mouth communication is important.These retailers should not try to serve too many customer & enter into price wars.Chain retailers benefit from widely known image, economies of scales (i.e. costadvantages that a business obtains due to expansion), & mass promotion possibilities.They should maintain their image chain wide & not be inflexible in adapting changes inthe marketplace.Franchisors have strong geographic coverage & motivation of the franchisees as owner-operators. They should not get bogged down in policy disputes with franchisees or chargeexcessive royalty fees.Leased departments enable store operators & outside parties to join forces & enhancethe shopping experience, while sharing expertise & expenses. They should not hurt theimage of the store or place too much pressure on the lessee to bring in store traffic.A vertically integrated channel gives a firm greater control over sources of supply, but itshould not provide consumers with too little choice of products or too few outlets.Cooperatives provide members with price savings. They should not expect too muchinvolvement by members or add facilities that raise costs too much.Retail Institution by Ownership
  15. 15. ISB&M Retail ManagementAn independent retailer owns one retail unit.Independent RetailerAdvantagesThere is flexibility in choosing retail formats, location, assortment (variety), prices, hours etc.,& devising strategy based on the target customers.Investment costs for leases, fixtures, workers, & merchandise can be brought down. There is noduplication of stock or personnel function. Responsibilities are clearly delineated (defined)within the store.Independents frequently act as specialist in a niche of the particular goods/services category.They are then more efficient & can lure (attract) shoppers interested in specialized retailers.Independents exert strong control over their strategies, & the owner-operator is typically onthe premises. Decision making is centralized & layers of management personnel are minimized.There are certain image attached to independents, particularly small ones, that chains cannotreadily capture.Independents can easily sustain consistency in their efforts because only one store is operated.Independents have ―Independence‖. No meetings, union, stockholders & labor unrest etc.Entrepreneurial drive.
  16. 16. ISB&M Retail ManagementIndependent RetailerDisadvantagesLess bargaining power with the suppliers as they buy less quantity.Cannot gain economies of scale (i.e. cost advantages that a business obtains due to expansion) inbuying & maintaining inventory. Transportation, ordering, & handling costs are high.Operations are labor intensive.They are limited to certain media for advt. because of financial constraints.Family-run independents is overdependence on the owner. It is difficult to keep it up &running.Limited time allotted to long-run planning, since owner is intimately involved in day-to dayoperations.
  17. 17. ISB&M Retail ManagementChain retailer operates multiple outlets (store units) under common ownership. Itusually involves in some level of centralized purchasing & decision making.Chain RetailerAdvantagesMany chains have bargaining power due to their purchase volume. They receive new itemswhen introduced, have orders promptly filled, get sales support, & obtain volume discounts.Chains achieve cost efficiencies when they buy directly from the manufacturers & in largevolumes, ship and store goods, & attend trade shows sponsored by the suppliers to learn aboutnew offerings. They can sometimes bypass wholesalers.Efficiency is gained by sharing warehouse facilities; purchasing standardized store fixtures;centralized buying & decision making etc. Headquarters have broad authority for personnelpolicies & for buying, pricing, & advt. decisions.Computerized ordering merchandise, inventory, forecasting, sales, & bookkeeping. This reducesoverall costs.Take advantage of variety of media from print to electronic.Detailed & clear responsibility for employees with available substitute incase any employee isretiring or quitting.Spend considerable time in strategic planning. Opportunity & threat are closely monitored.
  18. 18. ISB&M Retail ManagementChain RetailerDisadvantagesFlexibility may be limited. Consistent strategies on pricing, promotions, & product variety mustbe followed throughout all units which may be difficult to adapt to local diverse market.Investment is high due to infrastructure & store as multiple store has to be stocked.Managerial control is complex due to geographically dispersed branches.Limited independence to the personnel.
  19. 19. ISB&M Retail ManagementFranchising involves a contractual arrangement between a franchisor (amanufacturer, wholesaler, or service sponsor) & a retail franchisee, which allowsthe franchisee to conduct business under a established name & according to a givenpattern of business.The franchisee pays an initial fees & a monthly %age of the gross sales in exchangefor the rights to sell goods & services in an area.A franchisee operates autonomously in setting store hours, chooses a location, &determines facilities & displays.FranchisingThree structural arrangements dominate retail franchisingManufacturer-retailer – A manufacturer gives independent franchisees the right to sell goods &related services through licensing agreement. (Eg., Auto/truck dealers like GM, Petroleumproducts dealers like IOC).Wholesaler-retailerVoluntary - A wholesaler sets up a franchise system & grants franchises to individualretailer. (Eg., Auto accessories stores, Consumer electronics stores).Cooperative – A group of retailers sets up a franchise system & shares the ownership &operations of a wholesaling organization. (Eg., Food stores).Service sponsor-retailer – A service firm licenses individual retailers so they can offer specificservice packages to customers. (Eg., McDoland‘s).
  20. 20. ISB&M Retail ManagementAdvantages of FranchiseesThey own a retail enterprise with a relatively small capital.They acquire well-known names & goods/services lines.Standard operating procedures & management skills may be taught to them.Cooperative marketing efforts (like national advt.) are facilitated.They obtain exclusive selling rights for specified geographical territories.Their purchases may be less costly per unit due to the volume of the overall franchise.Franchising contd..Disadvantages of FranchiseesOversaturation could occur if too many franchisees are there in one geographical area.Due to overzealous selling by some franchisors, franchisees‘ income potential, requiredmanagerial ability, & investment may be incorrectly stated.They may be locked into contracts requiring purchases from franchisors or certain vendors.Cancellation clauses may give franchisors the right to void agreement if provisions are notsatisfied.In some industries, franchise agreements are of short duration.Royalties are often a %age of gross sales, regardless of franchisee profits.
  21. 21. ISB&M Retail ManagementAdvantages of FranchisorsA national & global presence is developed more quickly & with less franchisor investment.Franchisee qualification for ownership are set & enforced.Agreement require franchisees to abide by stringent operating rules set by franchisors.Money is obtained when goods are delivered rather than when goods are sold.Because franchisees are owners & not employees, they have greater initiative to work hard.Even after franchisees have paid for their outlets, franchisors receive royalties & may sellproducts to the individual proprietors.Franchising contd..Disadvantages of FranchisorsFranchisees harm the overall reputation if they do not adhere to company standards.Lack of uniformity among outlets adversely affects customer loyalty.Intra-franchise competition is not desirable.The resale value of individual units is injured if franchisees perform poorly.Ineffective franchised units directly injure franchisors‘ profitability.Franchisees, in greater number, are seeking to limit franchisors‘ rules & regulations.
  22. 22. ISB&M Retail ManagementA leased department is a department in a retail store – usually adepartment, discount, or specialty store – that is rented to outside party.The leased department proprietor is responsible for all aspects of its business &normally pays a %age of sales as rent.The store sets operating restrictions for the leased department to ensure overallconsistency & coordination.Leased DepartmentAdvantages (from the stores’ prespective)The market is enlarged by providing one-stop customer shopping.Personnel management, merchandise displays, & reordering items are undertaken by lessees.Regular store personnel do not have to be involved.Leased department operators pay for some expenses, thus reducing store costs.A %age of revenue is received regularly.Disadvantages (from the stores’ prespective)Leased department operating procedures may conflict with store procedures.Lessees may adversely affect the stores‘ image.Customers may blame problems on the store rather than on the lessees.
  23. 23. ISB&M Retail ManagementLeased DepartmentAdvantages for Leased department operatorsStores are known, have steady customers, & generate immediate sales for leased departments.Some costs are reduced through shared facilities like security equipment & display windows.Their image is enhanced by the relationships with popular stores.Disadvantages for Leased department operatorsThere may be inflexibility as to the store hours they must be open & the operating style.The goods / services lines are usually restricted.If they are successful, the store may raise rent or not renew leases when they expire.In-store locations may not generate the sales expected.
  24. 24. ISB&M Retail ManagementA vertical marketing system consists of all the levels of independently owned businesses along achannel of distribution.Vertical Marketing SystemType of channel Channel Functions OwnershipIndependent system• Manufacturers or retailers are small• Intensive distribution is sought• Customers are widely dispersed• Unit sales are high• Company resources are low• Channel members share costs & risk• Task specialization is desirableManufacturingWholesalingRetailingIndependent manufacturerIndependent wholesalerIndependent retailerPartially integrated system• Manufacturers & retailers are large• Selective or exclusive distribution• Unit sales are moderate• Company resources are high• Greater channel control is desired• Existing wholesalers are too expensive orunavailableManufacturingWholesalingRetailingTwo channel members own allfacilities & perform all functions.Fully integrated system• Firm has total control over its strategy• Direct customer contact• Exclusive offerings• System is costly & requires lot ofexpertiseManufacturingWholesalingRetailingAll production & distributionfunctions are performed by onechannel member.
  25. 25. ISB&M Retail ManagementA consumer cooperative is a retail firm owned by its customer members.A group of customers invests, elects officers, manages operations & share profits.They account for tiny piece of retail sales.Cooperatives are formed because they think they can do retailing function,traditional retailers are inadequate & prices are high.They have not grown because consumer initiative is required, expertise may belacking, expectations have frequently not been met, & boredom occurs.Consumer Cooperative
  26. 26. ISB&M Retail ManagementRetail Location Strategies &Decisions
  27. 27. ISB&M Retail ManagementThere are three most important aspects in Retailing – location, location& location.Locating the retail store in the right place was considered to beadequate for success.It is a important part of the retail strategy as it conveys a fair amountof image.It influences the merchandise mix & interior layout of the store.It is difficult to change the location once the store comes intoexistence.Change of location may result in loss of customer & employees.Why Location is Important?
  28. 28. ISB&M Retail ManagementThe choice of the location of the store depends on the target audience & kindof merchandise to be sold.Types of Retail LocationTypes:Freestanding/Isolated storeStore located along major traffic arteryNo competitive retailers aroundRents are usually lowAdvertising cost are highCustomers may not prefer to travel long distance to visit only one storePart of a business districtA business district (primary, secondary or neighborhood) is a place of commerce inthe cityRent is high; parking is cumbersomeIt has good accessibility in terms of transportCustomers are more
  29. 29. ISB&M Retail ManagementTypes of Retail Location contd..Types:Part of a shopping centreShopping centre - A group of retail & other commercial establishments that isplanned, developed, owned & managed as single propertyParking is availableBasic configuration – mall or strip centre with walkwayIdeally enclosed & climate control
  30. 30. ISB&M Retail ManagementSteps involved in choosing a retaillocation1. Identify the market in which to locate the store2. Evaluate the demand & supply within that market i.e., determine the market potential1. Demographic features of the population2. The characteristics of the households in the area3. Competition & compatibility4. Laws & regulations5. Trade area analysis3. Identify the most attractive sites1. Traffic2. Accessibility of the market3. The no. & types of stores in the area4. Amenities available5. To buy or to lease6. The product mix offered4. Select the best site available
  31. 31. ISB&M Retail ManagementThe Spread of Organized Retail inIndiaMumbaiDelhiKolkataPuneChandigarhHyderabadIndoreGurgaonNoidaJaipurBhopalBhubaneshwarNagpurUdaipurBangaloreChennai
  32. 32. ISB&M Retail ManagementRetail Merchandising
  33. 33. ISB&M Retail ManagementWhat is Merchandising?Merchandising is planning, buying & selling of merchandise (product).The American Marketing Association defined merchandising as ―the planning involved inmarketing the right merchandise at the right place at the right time in the right quantityat the right price‖.Merchandising can be termed as the analysis, planning, acquisition, handling & control ofthe merchandise investments of a retail operation.Factors affecting the merchandising functionMerchandisingfunctionSize oforganizationTypes of storesOrganizationstructureMerchandisingtobecarried
  34. 34. ISB&M Retail ManagementMerchandise PlanningMerchandise planning can be defined as the planning & control of the merchandiseinventory of the retail firm, in a manner which balances between the expectations of thetarget customers & the strategy of the firm.Implication of Merchandise PlanningMerchandisePlanningFinancePayments to suppliersProfitability measurementsStore OperationsSpace planningCommunication about newproducts & their featuresMarketingNewproductintroductionsDevelopingadvertisementsWarehouse&LogisticsDetailsofPurchaseOrderDetailsofallocations
  35. 35. ISB&M Retail ManagementMerchandise Planning ProcessStage I: Developing the Sales Forecast1. Reviewing past sales2. Analyzing the changes in the economic conditions3. Analyzing the changes in the sales potential4. Analyzing the changes in the marketing strategies & the competition5. Create the sales forecastStage II: Determining the Merchandise RequirementsPlanning in merchandising is at two levels:1. The creation of the Merchandise Budget (5 parts)2. The Assortment PlanMerchandiseBudgetSales PlanStocksupport planPlannedreductionPlannedPurchaseGrossMargins
  36. 36. ISB&M Retail ManagementMerchandise Planning ProcessStage II: Determining the Merchandise RequirementsPlanning in merchandising is at two levels:1. The creation of the Merchandise Budget (5 parts)2. The Assortment PlanCompany DepartmentMerchandiseClassificationMerchandiseCategoryMerchandiseSub CategoryStyle PricepointSKU (StockKeeping Unit)The Merchandise Hierarchy
  37. 37. ISB&M Retail ManagementMerchandise Planning ProcessSome key merchandising termsStaple/basic merchandising – products always in demand (basic necessities)Fashion merchandising – products has high demand for a relatively short period of timeSeasonal merchandising – seasonal productsFad merchandising – enjoy popularity for a limited period of time; generated high sales fora short timeStyle – unique shape or form of any product (taste in music)Assortment – variety of merchandise mixThe width/breadth of assortment – refers to the number of brandsThe depth of assortment – variety in one goods/services categoryPoints to be kept in mind while creating a plan -The merchandise budget should be prepared in advance of selling season.The language of the budget should be easy to understand.Merchandise budget must be planned for a short period – 6 months is the normal norm.Budget should be flexible.
  38. 38. ISB&M Retail ManagementKey Components of MerchandisePlanningPlanned sales – Planned sales are projected sales for a period that is planned.Month %age increase Planned sales (Rs)Feb 12% 35,000 X 12% + 35,000 = 39,200April 25% 43,750June 21% 42,350Example:Last year’s sale for the same period = 35,000Planned purchase – Planned purchases represent the merchandise that is to be purchasedduring any given period.Planned Purchase = Planned Sales + Planned Reductions + Planned EOM – Planned BOM
  39. 39. ISB&M Retail ManagementKey Components of MerchandisePlanningPlanned reduction – Markdowns (deductions in prices), employee discounts & inventoryshrinkage due to theft or pilferage come under planned reduction.Planned markup – After calculating the level of inventory that needs to be purchased, theretailer needs to determine the initial markup for the products.Markup in Rs. = Selling Price – Cost PriceMarkup % = Markup in Rs.Retail PriceGross Margin – Gross margin is the difference between the selling price & the cost of theproduct, less reductions from markdowns, shrinkage & employee discounts.Profit = Gross margin – operating expensesB.O.M (Beginning-of-month) & E.O.M (End-of-month) planned inventory levels –Four Methods of Inventory Planning:a. Stock-to-Sales MethodS/S Ratio = Stock in hand E.O.M (at retail value) = Value of inventorySales for the same month Actual salesPlanned BOM Inventory = Stock-sales ratio x Planned sales
  40. 40. ISB&M Retail ManagementKey Components of MerchandisePlanningThe Basic Stock Method – In this method, the buyer believes that he needs to carry acertain amount of inventory in the store at all times.Basic Stock = Average stock for the season – Average monthly sales for the seasonAverage monthly sales for the season = Total planned sales for the seasonNo. of months in the seasonAverage stock for the season = Total planned sales for the seasonEstimated inventory turnover rate for the seasonBeginning of the month (BOM) stock = Planned monthly sales + Basic StockThe Percentage Variation Method – This method of inventory calculation is used in casethe stock turnover typically exceeds six times a year.BOM Stock = Avg. stock for season * 1/2 * [1 + (Planned sales for the month / Avg.monthly sales)]The Week’s Supply Method – Retailers who need to maintain a control over theinventories on a weekly basis, may use this method.BOM Stock = Average weekly sales x No. of weeks to be stocked
  41. 41. ISB&M Retail ManagementMerchandise Planning ProcessStage III: Merchandise Control – The Open to BuyThe concept of Open to buy has two folds:1. depending on sales of the month & the reduction, the merchandise buying canbe adjusted.2. the planned relation between the stock & sales can be maintained.Open to buy ensures that the buyer –Limits overbuying & under buyingPrevents loss of sales due to unavailability of the required stockMaintain purchases within the budgeted limitsReduce markdowns i.e., reduction in price which may arise due to excessbuyingOpen-to-Buy = Planned EOM Stock – Projected EOM StockProjected EOM Stock = Actual BOM Stock + Actual Additions to stock + Actual onorder – Planned monthly sale – Planned reductions for themonth
  42. 42. ISB&M Retail ManagementMerchandise Planning ProcessStage IV: Assortment PlanningAssortment Planning involves determining the quantities of each product that willbe purchased to fit into the overall merchandise plan.Details of color, size, brand, materials etc. have to be specified.To create a balanced assortment merchandise for the customer.DepthBreadthProduct LineDepartment MenswearShirtsZodiacStyles Color ……Van HeusenLouisPhilippeArrowTrousers Accessories
  43. 43. ISB&M Retail ManagementMerchandise Planning ProcessStage IV: Assortment PlanningThe Range Plan:The aim of the range plan is to create a balanced range for each category of products thatthe retailer choose to offer.Range planning should take care of -The no. of items/options available to the customer should be sufficient at all times &should be such that it helps the customer make a choice.The overbuying & under buying is limited.Sufficient quantities of the product are available, so that all the stores can be serviced& the product is available at all the stores across various locations.The lower limit of the range width is often called aesthetic minimum
  44. 44. ISB&M Retail ManagementMerchandise Planning ProcessStage IV: Assortment PlanningThe Model Stock Plan:After determining the money available for buying, a decision needs to be taken on what tobuy? & in what quantity?Steps -1. Identify the attributes that the customer would consider while buying the product.2. Identify the number of levels under each attribute.3. Allocate the total units to the respective item category.The process of merchandise planning may be top down or bottom up.Top down planning occurs when the corporate objectives dictate the company’s financial objectivesin terms of sales, profit & working capital.In Bottom up planning, individual department managers work on the estimated sales projections
  45. 45. ISB&M Retail ManagementThe Model Stock PlanMen’s shirt100% (1000)Casual40% (400)Small25% (100)Medium40% (160)Full Sleeve30% (48)Half Sleeve70% (112)ButtonDown40% (45)White40% (18)Cotton25% (4)CottonBlend75% (14)Blue30% (14)Cream20% (9)Grey10% (4)Other60% (67)Large25% (100)Extra large10% (100)Dress10% (100)Formal20% (200)Sport30% (300)
  46. 46. ISB&M Retail ManagementBranding & Private Labels
  47. 47. ISB&M Retail ManagementBrandingBrandThe American Marketing Association defined a brand as “aname, term, design, symbol or a combination of them, intended to identify thegoods or services of one seller or group of sellers & to differentiate them fromthose of the competitors”.Branding existed from the time man felt the need to differentiate his products from thatbeing offered by others.Branding gradually became a guarantee of the source of the product & ultimately its useas a form of legal protection against copying grew.With the development of shops, shopkeepers hung pictures above their shops indicatingthe types of goods they sold.With industrial revolution mass production came into existence but the distance betweenthe manufacturers & customers increased.This eventually led to the evolution of the role of the brands as tools by which consumersidentified the products.
  48. 48. ISB&M Retail ManagementBuilding a Retail BrandKey questions for retail brands –Can the brand be identified with the lifestyles of its target customers?Is there a perceptible difference between the brand & the products offering by theretailer & other retailers?Can a story be woven around the brand?A retail brand is a combination of the company‘s heritage, the merchandise mix, thestore environment, the service strategy, the advertising & promotion.Successful retail branding starts with a clear definition of what retailers stand for – anidentification of what the customers associate it with, leading customers to think: “Thisbrand is a reflection of me.. This brand is meaningful to me..”The retailer needs to determine the specific value proposition for the end customers.Playing on emotional benefits can also be a branding exercise of the retailer.Retail branding does not sell a specific product. It is about customer service.
  49. 49. ISB&M Retail ManagementThe Retail Value ChainSuppliersThird PartyLogisticsRetailOperationsCustomerMgmt.CustomersSupport FunctionsSystems
  50. 50. ISB&M Retail ManagementPrivate LabelWhen the retailer decides to sell products or a line of merchandise which isowned, controlled, merchandised & sold by the retailer in his own store/chain of stores, heis said to be Selling Own Label / Brand or Private Label merchandise.A private label can be classified as:Store Brand – which carries the retailer‘s name, such as Westside, Food World, Big Bazaaretc.An Umbrella Brand – where a common brand name is used across multiple categories –example Splash (Lifestyle), Bare (Pantaloon) etc.Individual Brands – where specific brand names are created for specific market segmentsand/or categories.The Private Label Marketing Association defines store products as “all merchandise soldunder a retail store’s private label. That label can be stores name or a name createdexclusively by that store. In some cases, a store may belong to a wholesale buying groupthat owns labels, which are available to the members of the group. These whole-saleowned labels are referred to as controlled labels”
  51. 51. ISB&M Retail ManagementPrivate Label - EvolutionPrivate labels were traditionally defined as generic product offerings that competed withnational brands on the basis of value proposition.They were often seen as the lower priced alternative to the ―real‖ thing.Private label carried the stigma of inferior quality & therefore inspired less confidence.Generics, which were products distinguishable by their plain & basic packaging were thefirst type of private labels.With the increase in retail stores, the need to earn higher profit & the desire to servicethe gaps in consumer requirements gave rise to private labels, both in apparel & the food& grocery sector.Today, most of the large department stores have their own private labels which cater to aspecific audience.Private labels rely on in-store advertisements.In order to compete with national brands, private labels need to focus on quality.The average quality of one product compared to otherConsistency in quality over a period of timePrivate label goods become more successful where the no. of competing products islower.
  52. 52. ISB&M Retail ManagementWhy Private Label?Retailer can fill in the need gaps that may exist in the market place.Private label gives the retailer an advantage of offering the customer anotheroption.A private label allows the retailer to offer a unique product in the marketplace.Private label allows a retailer to earn a higher margin than other brands hechooses to retail because designing, merchandising, sourcing & distribution isdone by the retailer. Also, advertisement is in-store.Make orBuyPlacingthe order&Allocatingthe goodsMarketingIdentification ofthe needPerformanceMeasurementPrivate Label Creation Process
  53. 53. ISB&M Retail ManagementMerchandise Procurement / SourcingThe term sourcing means finding or seeking out products from differentplaces, manufacturers or suppliers.Method of Procuring Merchandise1. Identifying the sources of supplyCosts associated with global sourcing:Country of origin effects – Many a times, where the merchandise has beenmanufactured makes a difference in the final sale of the product.Foreign currency fluctuations – Effects the buying price of the products.Tariffs – Taxes placed by the govt. on imports.Foreign trade zones – These are special areas within the country that can beused forwarehousing, packaging, inspection, labeling, exhibition, assembly, fabricationetc., of imports, without becoming subject to the country‘s tariffs.Cost of carrying inventoryTransportation cost
  54. 54. ISB&M Retail ManagementMerchandise Procurement / Sourcing2. Contacting & Evaluating the sources of supplyContacting can be vendor initiated contact or retailer initiated contactPoints to be kept in mindThe target market for whom the merchandise is being purchased.The image of the retail organization & the fit between the product & theimage of the retail organization.The merchandise & the prices offered.Terms & service offered by the vendor.The vendor‘s reputation & reliability.3. Negotiating with the sources of supplyThe types of discounts that could be made available to the buyerTrade discountsChain discountsQuantity discountsSeasonal discountsCash discounts
  55. 55. ISB&M Retail ManagementMerchandise Procurement / Sourcing4. Establishing Vendor RelationsTo build & maintain strategic partnership with vendors, the buyer needs to build on:Mutual trustOpen communicationCommon goalsCredible commitments5. Analyzing Vendor PerformanceThe total orders placed on the vendor in a yearThe total returns to the vendor, the quality of the merchandiseThe initial markup on the productsThe markdowns (if any)Vendor‘s participation in various schemes & promotionsTransportation expenses if borne by the retailerCash discounts offered by the vendorThe sales performance of the merchandise
  56. 56. ISB&M Retail ManagementCategory Management- A Method of Merchandise Management
  57. 57. ISB&M Retail ManagementCategory ManagementCategory Management can be defined as “the distributor/supplier process of managingcategories as SBUs, producing enhanced business results by focusing on delivering customervalue”.A category is an assortment of items that a customer sees as reasonable substitutesof each other.A category management concept is a focus on a better understanding of consumerneeds as the basis for retailers‘ & suppliers‘ strategies, goal, & work processes.The need to reduce costs, control inventory levels & replenish (refill) stockefficiently led to the concept of Efficient Consumer Response (ECR).Category management provides renewed opportunities for meeting consumer needs& at the same time, for achieving competitive advantage as well as lower coststhrough greater work process efficiencies.
  58. 58. ISB&M Retail ManagementCategory Management contd..Category Management is now considered as the “new science of retailing”because -1. It involves a systematic process.2. It emphasizes decision-making based on complex analysis of consumerdata & market level syndicate data.3. It replaces the brand bias that stems from suppliers‘ interest & encouragesobjective view based on consumers‘ desires.Why Category Management?Consumer changesCompetitive pressuresEconomic & efficiency considerationsAdvances in IT
  59. 59. ISB&M Retail ManagementComponents Category ManagementStrategyBusiness ProcessPerformanceMeasurementOrganizationalCapabilitiesInformationTechnologyTradingPartnerRelationships
  60. 60. ISB&M Retail ManagementThe Category Management BusinessProcess
  61. 61. ISB&M Retail ManagementStep 1: Category DefinitionA distinct, manageable group of products/services that consumers perceive to beinterrelated/substitutable in meeting a consumer need.The category definition should be based on how the customer buys, & not on howthe retailer buy.This step decides the products that represent a category, sub-category & majorsegmentation.At this step, the retailer assigns products to the various categories based on factorssuch as consumer usage & packaging.The Category Management BusinessProcessStep 2: Category RoleIt determines the priority & importance of each category in the overall business.It serves the basis of resource allocation.Consumer-based category roles:Destination categories – Why you as a retailer?Preferred/routine categoryOccasional/seasonal categoryConvenience category – one-stop shop
  62. 62. ISB&M Retail ManagementStep 3: Category Assessment – Brain Harris’s Quadrant AnalysisThe Category Management BusinessProcessOpportunities- Harmonise product mix with market trends- Improve price image via low prices for keyproducts- Maximise shelf space at category level- Give promotional support to key itemsQuestionable- Limit product mix to core assortment & delistmarginal products- Look for price raises- Minimise self space at category level- Transfer logistical & operational work to thirdpartiesWinners- Continue current policies- Be alert to adaptation of new products- Minimise operational problems like “out ofstock”- Optimise margin mixSleepers- Identify key products within category- Delist slow movers & marginal products- Give quick movers more self space- Optimize margin mixMarketShareMarket Growth
  63. 63. ISB&M Retail ManagementStep 4: Category Performance MeasuresSalesProfitsMarket ShareInventory TurnoverChanges in the AssortmentConsumer TransactionThe Category Management BusinessProcessStep 5: Category StrategiesTypical category marketing strategies are:Traffic buildingTransaction buildingTurf defendingProfit generatingCash generatingExcitement creatingImage enhancing (Areas: Price, Service, Quality & Varity)
  64. 64. ISB&M Retail ManagementStep 6: Category TacticsCategory tactics work towards the determination of optimal categorypricing, promotion, assortment & self management/presentation of themerchandise.The Category Management BusinessProcessStep 7: Category Plan ImplementationWhat specific tasks needs to be done?When each task needs to be completed?Who will accomplish each task?Step 8: Category Review
  65. 65. ISB&M Retail ManagementRetail Marketing MixThe RetailMarketingMix
  66. 66. ISB&M Retail ManagementCustomerServicePeopleBrandAssociationsShoppingExperiencePricingPromotionPlace /LocationProduct /MerchandisefeaturesPresentationThe Retail Image FactorsRetailStoreImageThe Adidas Retail StoreCA, USA
  67. 67. ISB&M Retail ManagementThe Retail Communication MixRetailCommunicationMixSalesPromotionPublicRelationsDirectMarketingPersonalSellingAdvertising
  68. 68. ISB&M Retail ManagementRetail Selling ProcessAcquiring Product/Merchandise KnowledgeStudying the CustomerApproaching the CustomerPresenting the MerchandiseOvercoming ResistanceSuggestive SellingClosing the Sale
  69. 69. ISB&M Retail ManagementRetail Management Information System
  70. 70. ISB&M Retail ManagementEffect of a Single Customer TransactionCustomerTransactionMarketing &PromotionsInventoryManagementSales AnalysisCredit CardPaymentsCustomerDatabaseWarehouseRecordingMerchandise
  71. 71. ISB&M Retail ManagementEfficient Stocking of MerchandiseCollection of DataEfficiency in OperationsHelps CommunicationWhy IT in Retail?Factorsaffectingthe use ofITScale &scope ofoperationsThefinancialresourcesavailableThe natureofbusinessHRavailability
  72. 72. ISB&M Retail ManagementElectronic Data Interchange (EDI)Database Management, Data Warehousing, Data MiningRadio Frequency Identification (RFID)Transaction Processing System (TPS)Decision Support System (DSS)Enterprise Resource Planning (ERP)Intranet & InternetE-Commerce or E-Trailing……Application of IT
  73. 73. ISB&M Retail ManagementSCM in Retail
  74. 74. ISB&M Retail ManagementThe Basic Supply ChainFinance FlowSupplierRaw material packagingwarehouse ManufacturerManufacturer warehouseRetailer warehouseRetailerPhysicalFlow
  75. 75. ISB&M Retail ManagementFramework for Analyzing Issues in SCMCustomerServiceChannelDesignNetworkStrategyPolicies &ProceduresOrganization &ChangeManagementInformationSystemsFacilities &EquipmentWarehouseDesign &OperationsMaterialsManagementTransportationManagementSTRATEGICSTRUCTURALFUNCTIONALIMPLEMENTATION
  76. 76. ISB&M Retail ManagementServicing the Retail Customer
  77. 77. ISB&M Retail ManagementCustomer Service―Customer service is a task, other than proactive selling, that involvesinteractions with customers in person or by telecommunication, mail orautomated process. It is designed, performed & communicated with two goals inmind –Operational ProductionCustomer SatisfactionKill a Brand, Keep a Customer!Customer Service focuses on measurement of howwell a firm meets the established performancestandards that are viewed as important formeeting customer needs.Customer Satisfaction is how the customersmeasure externally the service performance of afirm.
  78. 78. ISB&M Retail ManagementCustomer Service – A USPRetail mix like Product, Price, Place, Promotion can be duplicated or copied bycompetitors – the total experience (image of the store, ambience, music,& levelof service offered) that the customer gets in the store stay unique.Identify the key customers & listen& respond to themDefine superior service & establish aservice strategySet standards & measureperformanceSelect, train & empower employeesto work for the customerRecognize & rewardaccomplishments
  79. 79. ISB&M Retail ManagementMeasuring Gaps in Service
  80. 80. ISB&M Retail ManagementCustomer Relationship Management (CRM)
  81. 81. ISB&M Retail ManagementHow CRM Benefits Retailer?Customer needs Retailer traditionallyprovidesCRM benefits customerby enablingProduct choice Range selection Tailored rangeAccess Channel choice Consistent experienceSupport Information Enhanced serviceIndividual treatment Customer service 1:1 relationshipValue Scale efficiencies Customer defined“value”
  82. 82. ISB&M Retail ManagementCustomer Segmentation in RetailLower Value SegmentGrow able SegmentMost Valued SegmentIn-store PoSAdvertisementMerchandisingTargeted DirectMailAdded valueservicesTailored, cross-learning basedrelationshipNo. ofcustomersValue percustomerLower valuesegmentGrow ableSegmentMost ValuableSegment
  83. 83. ISB&M Retail ManagementRetail Store Design & VisualMerchandising
  84. 84. ISB&M Retail ManagementRetail stores needs to be designed to be more competitive, the retailer first needs tocatch the customer‘s eye & then, to draw his attention away from other stores.The basic principles of store design require that the image being created in tune withthe merchandise, the advertising & the service offered by the store.Retail design is primarily a specialized practice of architecture and interior design,however it also incorporates elements of interior decoration, graphic design,ergonomics, and advertising.Retail Store DesignStoreImageStoreAtmosphereStore ThemeElements of the Store Environment
  85. 85. ISB&M Retail ManagementWhy Retail Store Design is Important?The store design & layout tells a customer what the store is all about.The creates the image of the retail store in the minds of the customer.This image is the starting point of all marketing efforts.It make the store simple to navigate.It creates the sense to belongingness, responsibility, security, & pleasure inshopping.
  86. 86. ISB&M Retail ManagementElements of Retail DesignStore DesignLocationParkingAccessBuildingArch.LocationFrontage &EntranceSafetyStoreThemeTargetCustomerMerchandiseMix
  87. 87. ISB&M Retail ManagementInterior Store DesignSpacePlanningLayoutAtmosphere& AestheticsSpace Planning helps determining:The location of various departments.The location of various products within thedepartment i.e., creating planograms.The pros/cons of specific location for impulseproducts, destination areas, seasonalproducts, products with specific merchandisingneeds, adjacent departments etc.The relationship of space to profitability.Atmosphere & AestheticsFixturesFlooring & CeilingLightingGraphics & SignageTheme graphicsCampaign graphicsPromotional graphics
  88. 88. ISB&M Retail ManagementFree-flow LayoutFixtures and merchandise are grouped into free-flowing patternson the sales floor.
  89. 89. ISB&M Retail ManagementGrid LayoutThe counters and fixtures are placed in long rows or ‗‗runs,‘‘usually at right angles, throughout the store.
  90. 90. ISB&M Retail ManagementRacetrack/Loop LayoutA major customer aisle begins at the entrance, loops through the store—usually in the shape of a circle, square, or rectangle—and then returns thecustomer to the front of the store.
  91. 91. ISB&M Retail ManagementSpine LayoutA single main aisle runs from the front to the back of thestore, transporting customers in both directions, and where on either sideof this spine, merchandise departments using either a free-flow or gridpattern branch off toward the back side walls.
  92. 92. ISB&M Retail ManagementVisual MerchandisingAn orderly, systematic, logical, & intelligent way of putting stock on the floor.
  93. 93. ISB&M Retail ManagementIt has several aspects & involves SKU planning, store windows & floordisplays, signs, space design, fixtures & hardware, props & mannequins.Creating the right atmosphere in the store & presenting the merchandise in the rightmanner is very important.Good visual merchandise means a selling space that is neat, easy-to-see, follow & shop.Visual Merchandising contd..MethodsofDisplayColordominancePresentationby priceCoordinatedpresentation
  94. 94. Thank you