Retail management

RETAIL MANAGEMENT
Choice Based Credit Course (CBCS)
Course Code: MGT160405
Prof. JOHN PRADEEP KUMAR
1Mr. John Pradeep Kumar, KJC

Syllabus
Unit 1: Introduction : Retailing; retailing management
decision process; types of retailers; types of ownership;
store based retailing; non store based retailing; services
retailing; functions of retailing; retail customers; ethnic
diversity; buying process; factors influencing decision
making; changing customer demography; customer
evaluation of service; GAPs model for improving retail
services quality.
Unit 2: Choosing a Store Location: Trading area
analysis, Site selection; store design and layout; the
store and its image; the external store; internal store;
display; visual merchandising and atmospherics.

Unit 3: Merchandising Management:
Organising buying process by
categories; setting merchandising;
assortment planning process; branding
strategies; meeting vendors;
maintaining strategic relationships with
vendors; store layout; space planning;
presentation techniques; allocating
merchandising to stores.

WHAT IS RETAIL ??

Unit 1: Introduction
 Which business considers every
individual as a customer?
 What is common between Wal-Mart,
Amazon and all the small Kirana stores
that dot your neighborhood?
 The answer is retailing, the last link in
the chain of production.
 It begins at the extractive stages, moves
through manufacturing, and ends in the
distribution of goods and services to the
final consumer.

Supply chain

C&F: carrying and forwarding agency; Modern formats – Big Bazaar, More, Malls, 8Mr. John Pradeep Kumar, KJC

Retailing
 The word ‘retail’ is derived from the
French word retaillier, meaning ‘to cut a
piece off’ or ‘to break bulk’.
 Retailing is the set of business activities
that adds value to the products and
services sold to consumers for their
personal or family use.
 Retailing is defined “as a conclusive set
of activities or steps used to sell a
product or a service to consumers for
their personal or family use”.

 Often people think of retailing only as
the sale of products in stores
 But retailing also involves the sale of
services such as overnight lodging in a
motel, a doctor’s exam, a haircut, a
DVD rental, or a home-delivered pizza.
 Not all retailing is done in stores.
 Example of nonstore retailing includes
Internet sales of books by Amazon
www.amazon.in , cloths by Myntra
www.myntra.com, Rail tickets by
www.irctc.co.in, etc.

Retailer
 A retailer is a business that sells
products and/or services to
consumers for their personal or family
use.
 Retailers are a key component in a
supply chain that links manufactures
to consumers.
 A supply chain is a set of firms that
make and deliver goods and services
to consumers.

Functions of Retailing
 Retailers play a significant role as a
conduit between manufacturers,
wholesalers, suppliers and consumers.
 In this context, they perform various
functions like sorting, breaking bulk,
holding stock, as a channel of
communication, storage, advertising and
certain additional services.

1. Sorting
 Manufacturers usually make one or a
variety of products and would like to sell
their entire inventory to a few buyers to
reduce costs.
 Final consumers, in contrast, prefer a large
variety of goods and services to choose
from and usually buy them in small
quantities.
 Retailers are able to balance the demands
of both sides, by collection an assortment
of goods from different sources, buying
them in sufficiently large quantities and
selling them to consumers in small units.
 The above process is referred to as the 14Mr. John Pradeep Kumar, KJC

Sorting
 Supermarkets in the US offer, on and
average, 15,000 different items from 500
companies.
 Customers are able to choose from a wide
range of designs, sizes and brands from
just one location.
 If each manufacturer had a separate store
for its own products, customers would have
to visit several stores to complete their
shopping.
 While all retailers offer an assortment
(Variety), they specialize in types of
assortment offered and the market to which
the offering is made. 15Mr. John Pradeep Kumar, KJC

Sorting
 Westside provides clothing and
accessories
 Nilgiris specializes in food and bakery
items
 Shoppers’ Stop targets the elite urban
class
 Pantaloons is targeted at the middle
class.

2. Breaking Bulk
 Breaking bulk is another function
performed by retailing.
 The word retailing is derived from the
French word retailer, meaning ‘to cut a
piece off’.
 To reduce transportation costs,
manufacturers and wholesalers typically
ship large cartons of the product, which
are then tailored by the retailers into
smaller quantities to meet individual
consumption needs.

3. Holding Stock
 Retailers also offer the service of holding
stock for the manufacturers.
 Retailers maintain an inventory that
allows for instant availability of the
product to the consumers.
 It helps to keep prices stable and
enables the manufacturer to regulate
production.
 Consumers can keep a small stock of
products at home as they know that this
can be replenished by the retailer and
can save on inventory carrying costs.

4. Additional Services
 Retailers ease the change in ownership
of merchandise by providing services
that make it convenient to buy and use
products.
 Providing product guarantees, after-
sales service and dealing with consumer
complaints are some of the services that
add value to the actual product at the
retailers’ end.
 Retailers also offer credit and hire-
purchase facilities to the customers to
enable them to buy a product now and 19Mr. John Pradeep Kumar, KJC

Additional Services cont…
 Retailers fill orders, promptly process,
deliver and install products.
 Salespeople are also employed by
retailers to answer queries and
provide additional information about
the displayed products.
 The display itself allows the consumer
to see and test products before actual
purchase.
 Retail essentially completes
transactions with customers.

5. Channel of Communication
 Retailers also act as the channel of
communication and information between
the wholesalers or suppliers and the
consumers.
 From advertisements, salespeople and
display, shoppers learn about the
characteristics and features of a product or
services offered.
 Manufacturers, in their turn, learn of sales
forecasts, delivery delays, and customer
complaints.
 The manufacturer can then modify 21Mr. John Pradeep Kumar, KJC

Transport and Advertising
Functions
 Small manufacturers can use retailers to
provide assistance with transport,
storage, advertising and pre-payment of
merchandise.
 This also works the other way round in
case the number of retailers is small.
 The number of functions performed by a
particular retailer has a direct relation to
the percentage and volume of sales
needed to cover both their costs and
profits. 22Mr. John Pradeep Kumar, KJC

Activities performed by Retailers
 Retailers provide convenient location, stock
and appropriate mix of merchandise in
suitable packages in accordance with the
needs of customers.
 The four major activities carried out by
retailers are:
1. Arrange for assortment of offerings
2. Breaking quantity
3. Holding stock
4. Extending services

1. Arrange for assortment of
offerings
 An assortment is a retailer’s selection of
merchandise.
 It includes both the depth and breadth of
products carried.
 Retailers have to select the combination of
assortments from various categories.
 The assortments must include substitutable
items of multiple brands and price points.
 They should be distinguished on account of
physical dimensions and attributes e.g., colour
or flavour.
 The small retailer takes assortment decision on
the basis of his experience; on the other hand
retailers from organized retailing depend on a
detailed study of past trends and future
projections. 24Mr. John Pradeep Kumar, KJC

Depth and Breadth of Product

 Retailers need to consider certain factors while
devising assortment plans for their stores:
1. Profitability associated with particular
merchandise mix, store image, layout and the
level of compatibility between the existing
merchandise.
2. For example, FoodWorld , a leading
food supermarket positioned as a one-stop
shopping centre, deals in multiple product
categories along with all possible variants of
brands, stock keeping units, and physical
attributes in order to meet the expectations of
their consumers and survive in the business.
3. Whereas, Subhiksha, a grocery
chain in south India has impressive
assortments of only the fast moving brands
rather than all available variants in the market.
4. Their assortment plan is governed by location,
size and store image of their stores. 26Mr. John Pradeep Kumar, KJC

2. Breaking Bulk
 Breaking bulk means physical repackaging of the
products by retailers in small unit sizes according to
customer’s convenience and stocking requirements.
(250 gms of ground nuts, dal, chilli powder, etc.)
 Normally, retailers receive large quantities of sacks
and cases of merchandise from suppliers to reduce
their transportation costs.
 In order to meet their customers’ requirements
retailers have to break or arrange the bulk into
convenient units.
 Even in the earlier days of generic and commodity-
based trading most of the retailers used to perform
this important function in the value chain.
 This function receives negligible attention from the
retailers now due the introduction of new product
categories, such as FMCG and ready-to-wear
apparel. 27Mr. John Pradeep Kumar, KJC

3. Holding Stock
 To ensure the regular availability of the offerings
retailers maintain appropriate levels of inventory.
 Consumers normally depend on the retailers directly
to replenish their stocks at home.
 Therefore, retailers, on periodic basis, maintain the
required levels of stock to meet the regular or
seasonal fluctuations in the demand.
 Retailers need to maintain equilibrium between the
range or variety carried and the sales which it gives
rise to.
 Retailers have to face the negative consequences of
holding unwanted levels of stock—for instance, too
little stock will hamper the sales volume, whereas,
too much stock will increase the retailer’s cost of
operation.
 Generally, in small towns of India most retailers have
arrangements with the nearby warehouses to stock
the goods. 28Mr. John Pradeep Kumar, KJC

 Retailers in the organized sector, to a
certain extent, are using effective
software packages for maintaining
adequate levels of inventory.
 At the same time, retailers avail of just-
in-time deliveries with the help of
efficient consumer response systems,
which reduces the burden of
maintaining high levels of stocks.

4. Extending Services
 The set of services extended by particular
retailers may be part of their core product
offerings or it may be ‘add on’ to their
product or service.
 Retailers offer credit, home delivery, after-
sales services and information regarding
new products to their customers, thereby
making the shopping experience convenient
and enjoyable.
 At the same time, they provide stocking
place, reach to the ultimate customers, and
information about the concerned target
segment to the suppliers.

 For example, Time Zone, the first organized
retail chain of wristwatches in India, started
by leading watch manufacturers Titan, set
up in all its stores, service centres with
proper equipment and trained manpower.
 This has not only diluted the relevance of
service providers in the unorganized sector
but has also enhanced the confidence of
the customers in the retail services
provided by the particular retail chain, as
after-sales service is considered to be an
integral ingredient of the watch purchase.

TYPES OF RETAILERS
32
RETAIL
FORMATS
STORE BASED
BASIS OF
OWNERSHIP
BASIS OF
MERCHANDISE
OFFERED
NON STORE
BASED
SERVICE
RETAIL
Mr. John Pradeep Kumar, KJC

STORE BASED RETAILING
 A tangible based retailing
channel.
 Primarily operate from a
physical brick and mortar
environment
 Customers buy products by
seeing their practical
explosure in stores.
Mr. John Pradeep Kumar, KJC 33

On the basis of Ownership
1) Individually owned and
operated
2) Corporate chains
3) Franchising
4) Leased department
5) Consumer co-operatives

1) Individually owned and operated:
 An independent retailer is one
who owns and operates only one
retail outlet.
 They essentially feature the
owner and proprietor and a few
other local hands or family
members working as assistants
in the shop.
 The biggest advantage available
to an independent retailer is to
have one to one rapport with
most of his customers.
 On the flip side the advantages
of economies of scale and the
bargaining power with the
suppliers are limited.Mr. John Pradeep Kumar, KJC 35

2) Corporate Retail Chain:
 Operating multiple retail units.
 Corporate chains can sell at lower
prices.
 Similarity in merchandise offered to
the consumers, ambience,
advertising and promotions.
 Wills Sports (ITC), Louis Phillippe,
Van Heusen (Madura Garment),
Arrow (Arvind Mills), etc.
 The biggest advantage this retailer
has is the bargaining power that he
can have with the suppliers.
 Cost effectiveness is also possible
in advertising and promotions.
 The ability to give attention to each
of the stores becomes fairly
restricted.

3) Franchising:
 A franchise is a
contractual agreement
between the franchiser
and the franchisee.
 A parent company
lends its name and
technology in return for
a fee or compensation.
 For instance,
McDonalds, Café
Coffee Day, etc., are a
well-known franchisor

4) Leased department:
 When a section of a
department in a retail
store is leased/ rented to
an outside party.
 They are termed as shop
in shops.
 It is a good method
available.
 Example: Perfumes,
cosmetics, etc.

5) Consumer cooperatives:
 Aims at providing essential commodities at
reasonable price.
 As a national policy, they are encouraged and
developed as a democratic institution owned,
managed and controlled by its members for
protection of the interest of the common
consumers.
 Consumers share in the store’s profits through
price reductions or dividends.
 Example: Sahakari Bhandar & Apna Bazaar
shops in Mumbai, Super Bazaar in Delhi, The
Central Govt. Employees consumer
cooperative society Ltd. Popoularly known as
Kendriya Bhandar.

On the basis of merchandise offered
1)SUPERMARKETS
2)HYPERMARKETS
3)CONVENIENT
STORES
4)DEPARTMENTAL
STORES
5) SPECIALITY
STORES

Super market
 A conventional
supermarket is a self
service food store offering
groceries, meat &
produce.
 For example : Haldiram
,reliance fresh etc.

Hyper market
 Derived from a French
word “hypermarche “.
 They are similar to one
stop shopping.
 E.g.. Big Bazaar

CONVENIENCE
STORES
 It provides a limited
variety & assortment of
merchandise.
 It enables consumers to
make purchase quickly.
 For example : Mc
Donald's, KFC etc.

DEPARTMENTAL
STORES
 It carries a broad variety
& deep assortment .
 organize their stores into
distinctly separate
department.
 For example : Pantaloons ,
Globus, MAX etc.

SPECIALITY STORES
 It concentrates on a limited
number of complementary
merchandise.
 Provide a high level of
service.
 For example : Archie's ,
Tanishq etc.

WHAT IS NON-STORE
RETAILING?
 Non-store retailing is a form of retailing
in which sales are made to consumers
without using physical stores.
 The non-store retailers are known by
medium they use to communicate with
their customers, such as direct
marketing, direct selling and vending
machines or e-tailing.

WHO ARE THE
CUSTOMERS?
 Non store retailing is patronized to
time conscious consumers and
consumers who can't easily go to
stores, or compulsive buyers.
 Most non-store retailers offer
consumers the convenience of buying
24 hours a day seven days a week
and delivery at location and time of
their choice.

NON-STORE RETAIL
INDUSTRY
 Non-store sales are now growing at a
higher rate than sales in retail stores.
 Non-store retailing now accounts for
more than 15% of all consumer
purchases, and it may account for
over 1/3 of all sales by the end of the
century.

Classification of Non-store
Retailing
NON-STORE
RETAILING
DIRECT SELLING
DIRECT MARKETING
DIRECT-RESPONSE MARKETING

DIRECT SELLING.
The marketing of products to
ultimate consumers through face-to-
face sales presentations at home or
in the workplace
 Party plans: Hosting groups to view a
product demonstration and encouraging
participants to purchase the products.
 Example: Eureka Forbes.

PROS AND CONS OF DIRECT
SELLING.
◦ Benefits
 Personal attention to customer.
 Convenience of time and place of
presentation.
◦ Limitations
 High costs make it the most expensive
form of selling.
 Negative consumer view of direct
selling.

Direct-response Marketing
•In direct-response marketing,
marketers use broadcast media to get
customers to contact them directly.
•It is direct-response marketing
because the communications from
the customer to the marketer are
direct, this differentiates it from simple
direct marketing in which the
communications from the marketer to
the customer are direct, but do not
allow for instant feedback.

DIRECT MARKETING.
 An interactive system of marketing
which uses one or more advertising
media to effect a measurable
response at any location, forming a
basis for creating and further
developing an ongoing relationship
between an organisation and its
customers.

REASONS FOR THE GROWTH IN
DIRECT
MARKETING.

The Range Of Direct Marketing
Techniques

DIRECT MAIL.
MATERIAL
DISTRIBUTED VIA
THE POSTAL
SERVICE TO A
RECIPIENT’S
HOME OR
BUSINESS TO
PROMOTE A

Direct Mail - The Advantages
• Targeting - for example using the post
code, targeted campaigns can be
developed using geographical /
demographical criteria.
• Personalisation - large numbers of
personalised mailings can be
undertaken regularly.
• Response rates can be high.
• Flexibility of creative scope.
• Can hold attention of reader/recipient.

DIRECT RESPONSE
ADVERTISING
STANDARD
BROADCAST AND
PRINT MEDIA
DESIGNED TO
GENERATE A DIRECT
RESPONSE.
EXAMPLE: AN ORDER
OR PERSONAL VISIT.

PRINCIPLES OF DIRECT
RESPONSE ADVERTISING.
• The focus should always be on what sells.
• Not always necessary to reinvent the wheel when
designing campaigns.
• Make the ‘offer’ the central theme of the designing
campaign.
• Long copy can sell if the reader is engaged.
• Select creativity that sells, not that which just looks
good.
• Always test and measure response.
• Select and retain media not on their ratings, but on
their ability to sell for you.
• Always ask for the order or for further action.Mr. John Pradeep Kumar, KJC 61

TELEMARKETING

METHOD OF DIRECT
MARKETING IN WHICH
A SALESPERSON SOLICITS
TO
PROSPECTIVE CUSTOMERS
TO
BUY PRODUCTS OR SERVICE
S, EITHER OVER THE PHONE
OR WEB
CONFERENCING APPOINTME
NT SCHEDULED DURING THE
CALL.

MAIL ORDER OR CATALOGUE
MARKETING.
Direct selling method in
which merchandise fro
m several vendors, or
several items from the
same vendor, are
presented
to prospective buyers vi
a mail or internet.

TELESHOPPING.
 In this form of direct marketing the
product is advertised on television,
details about the product features,
price and things like
guarantee/warranty are explained.
 Phone numbers are provided for each
city, where the buyer can call in a
place the order for the product. The
products are then home delivered.

E-mail Marketing

E-MAIL MARKETING.
E-mail marketing is a form
of direct marketing which
uses electronic mail as a
means of communicating
commercial or fundraising
messages to an audience.
In its broadest sense, every
e-mail sent to a potential or
current customer could be
considered e-mail
marketing.

WHY E-MAIL MARKETING?
•Cost Savings
•Quick Response Cycles
•Generates Revenues
•Popular Medium
•Effective Medium
•Results are Measurable
•Builds Customer
Relations

SOME OTHER FORMS OF
NON-STORE RETAILING
 It is a is a machine that
dispenses merchandise when a
customer deposits money,
validated by a currency
detector, sufficient to purchase
the desired item .
VENDING MACHINE.

SOME OTHER FORMS OF
NON-STORE RETAILING
THE INFORMATION KIOSK
It is the first kiosk platform for a variety of
functions offered on many kiosks in the
marketplace today. By the touch of a
finger users can gain access to product
information, company services, forms and
printouts for retail stores, schools,
churches, city government, tourist
locations and more.

SOME OTHER FORMS OF
NON-STORE RETAILING
AIRPORT RETAILING
In past, the leading airport
retailers were fast food outlets,
tiny gift stores, and
newspaper/magazine stands.
Today airports are a major mecca
of retailing. At virtually every large
airport, as well as at every
medium ones, there are full-blown
shopping areas.

ADVANTAGES OF NON STORE
RETAILING
 Its freedom from a physical retail
presence.
 The high fixed costs of operating retail
outlets are eliminated.
 The breadth of customer coverage is
considerably wider than is possible with
an individual retail location.
 Companies do not have to spend large
sums or dilute stock building new
locations, or acquiring them.
 This truly gives the non-store retailer a
global market from a cheap, centralized
location.

DISADVANTAGES OF NON
STORE RETAILING.
 There is also the fear of credit card
abuse and mail fraud, both related to
the sense of detachment that not
holding a prospective purchase brings.
 And since most of us do not have the
luxury of a pricey T1 Internet
connection, we must still deal with
painfully slow connections.

SERVICES RETAILING
 Retailers of service have been classified
by Lucas et al on the basis of the
following parameters:
1. By the degree of intangibility
2. By the recipient of the service
3. By the manner in which the service is
delivered

 Services unlike products are intangible
 However, the level of intangibility varies
from one service to another.
 Ex. Laundering of clothes, car rentals
offer a service, which is tangible.
 On other hand Life insurance,
Investments in securities are intangible in
nature.
 Providers of various services like
electricity, gas, and service contracts
which may be entered into for service of
consumer durables like maintenance of
water filters, computer systems, etc., also

 A key area within services retail is retail
banking.
 Retail banking refers to the dealing of
commercial banks with individual
customers.
 The retail banking products would include
fixed, current and savings accounts
 Mortgage, loans (personal, housing, auto,
and educational).
 Related ancillary service include credit
cards, debit cards, or depository service.
 New generation private sector banks have
leveraged their vast branch network and
outreach, public sector banks have
aggressively forayed to garner a large slice
of the retail pie. 76Mr. John Pradeep Kumar, KJC

SERVICE RETAILERS
1. Airlines
2. Automobile
maintenance and
repair
3. Automobile Rental
4. Banks
5. Health Care
6. Internet
access/Mobile
Network
1. Air India, Jet
Airways
2. Carnation
3. Hertz India, Eco
Rent A Car, Avis
India
4. HDFC Bank, ICICI
Bank, SBI,
5. Fortis, Apollo
6. Airtel, BSNL

Difference between service and
merchandise retailers
 Intangibility
 Simultaneous production and
consumption
 Perishability
 Inconsistency of the offering to
customers

1. Intangibility
 Services are generally intangible -- customers
cannot see, touch, or feel them.
 Services are performances or actions rather
than objects.
 Intangibility introduces a number of challenges
for services retailers.
 It is difficult for customers to evaluate services
before they buy them, or even after they buy and
consume them. Services retailers often use
tangible symbols to inform customers about the
quality of their services.
 Services retailers also have difficulty in
evaluating the quality of services they are
providing. To evaluate the quality of their
offering, services retailers place emphasis on
soliciting customer evaluations and complaints.

2. Simultaneous Production and
Consumption
 Service providers create and deliver the service as the
customer is consuming it. The simultaneity of
production and consumption creates some special
problems for services retailers.
 First, the customers are present when the service is
produced, may have an opportunity to see it produced,
and in some cases, may be part of the production
process.
 Other customers consuming the service at the same
time can affect the quality of the service provided.
 Finally, the services retailer often does not get a
second chance to satisfy the needs of their customers.
While customers can return damaged merchandise to
a store, customers that are dissatisfied with services
have limited recourse. Thus it is critical for services
retailers to get it right the first time.
 Because services are produced and consumed at the
same time, it is difficult to reduce costs through mass
production. 80Mr. John Pradeep Kumar, KJC

3. Perishability
 Because the creation and consumption of
services is inseparable, services are
perishable. They can't be saved, stored, or
resold. This is in contrast to merchandise,
which can be held in inventory until a
customer is ready to buy it.
 In addition, the demand for a service varies
considerably over time. Thus, services
retailers often have times when their
services are underutilized and other times
when they have to turn customers away
because they cannot accommodate them.
 Services retailers use a variety of programs
to match demand and supply. They also
attempt to make customer waiting time
more enjoyable. 81Mr. John Pradeep Kumar, KJC

4. Inconsistency
 Merchandise is often produced by
machines with very tight quality control.
Because services are performed by
people, no two services will be identical.
 Thus, an important challenge for service
retailers is providing consistently high-
quality services.

Retailing management decision
process
1. Understanding the World of Retailing:
 The first step in the retail management
decision process, is understanding the
world of retailing.
 Retail managers need to know the
environment in which they operate before
they can develop and implement effective
strategies.
 The critical environmental factors in the
world of retailing are (1) the macro
environment and
 (2) the micro environment. 86Mr. John Pradeep Kumar, KJC

 The impacts of the macro environment—
 including technological, social, and
ethical/legal/political factors—on retailing.
 The retailer’s microenvironment focuses
specifically on its competitors and
customers.
 Competitors: A retailer’s primary
competitors are other retailers that use the
same type of store.
 Thus, department stores compete against
other department stores, and supermarkets
compete with other supermarkets.
 This competition between the same type of
retailers is called intratype competition.

 When retailers offer merchandise not
typically associated with their type of
store, such as clothing in a drugstore, the
result is scrambled merchandising.
 Scrambled merchandising increases
intertype competition, or competition
between retailers that sell similar
merchandise using different types of
stores, such as discount and department
stores.
 The intensity of competition is greatest
among retailers located near one another
whose offerings are viewed as very
similar. 88Mr. John Pradeep Kumar, KJC

 Management’s view of competition also may differ
depending on the manager’s position within the
retail firm.
 For example, the manager of the Saks Fifth Avenue
women’s sportswear department in Bergen County,
New Jersey, views the other women’s sportswear
specialty stores in the Riverside Square mall as her
major competitors.
 But the Saks store manager views the
Bloomingdale’s store in a nearby mall as her
strongest competitor.
 The CEO of a retail chain, in contrast, views
competition from a much broader geographic
perspective.
 For example, Nordstrom might identify its strongest
competitor as Macy’s in the
 Northwest, Saks in northern California, and
Bloomingdale’s in northern Virginia.

Customers:
 The second factor in the microenvironment
is customers.
 Retailers must respond to broad
demographic and lifestyle trends in our
society, such as the growth in the senior
and minority segments of the U.S.
population or the importance of shopping
convenience to the increasing number of
two-income families.
 To develop and implement an effective
strategy, retailers must understand why
customers shop, how they select a store,
and how they select among that store’s
merchandise 90Mr. John Pradeep Kumar, KJC

Retailing management decision process
2. Developing a Retail Strategy:
 The next stages in the retail
management decision-making process,
formulating and implementing a retail
strategy, are based on an understanding
of the macro- and microenvironments.
 The retail strategy indicates how the
retailer plans to focus its resources to
accomplish its objectives.

 It identifies (1) the target market, or
markets, toward which the retailer will
direct its efforts;
 (2) the nature of the merchandise and
services the retailer will offer to satisfy
the needs of the target market; and
 (3) how the retailer will build a long-term
advantage over its competitors.

Strategic Decision Areas:
The key strategic decision areas for a firm
involve
the definition of its market,
financial status,
Retail location,
Site location
organizational and human resource
structure,
information systems, and supply chain
organization,
customer relationships management. 93Mr. John Pradeep Kumar, KJC

3. Implementing the Retail Strategy:
 To implement a retail strategy, retailers
develop a retail mix that satisfies the needs
of its target market better than that of its
competitors.
 The retail mix is a set of decisions retailers
make to satisfy customer needs and
influence their purchase decisions.
 Elements in the retail mix (Exhibit1–5)
include the types of merchandise and
services offered, merchandise pricing,
advertising and promotional programs,
store design, merchandise display,
assistance to customers provided by
salespeople, and convenience of the store’s
location.

Merchandise Management:
 Managing Merchandise Inventories
 Buying Merchandise
 Pricing
 Retail Communication Mix
Store Management
 Managing the Store
 Store Layout, Design, and Visual
Merchandising
 Customer Service

Retail Customers

Ethnic diversity is the
idea of having people
from different
backgrounds or of a
different ethnicity
working together for one
common cause. Ethnic
diversity is a great way
to learn about people of
different cultures and
how their cultures can
operate within one
Ethical diversity

 The impact of ethnic diversity is also
know as the impact of cultural change
in retailing.
 There are two types of impact:
 Positive impact
 Negative impact
Impact of ethnic diversity

Consumer demography consist-
 Age
 Gender
 Income distribution
 Trends
 Education
 Occupation/ employment status
 Lifestyle
 Martial status
It is also used in marketing, marketing research, opinion
research, political research and the study of consumer
behavior.
Changing Customer
Demography

 In 2010, half of the citizen are the age
group of 20-25 years.
 Over the last decade, the average
Indian spending has gone up from INR
5,745, in 92-93 to INR 16,457 in 2003-
04.
 It is expected to grow up by 12% per
annum.

 On the basis of past statics and data
we can say that,
 All these changes in demography and
life style have changed the
consumption pattern in India.
 It is a positive signal for a retailer.

Factors Influencing Decision
Making
 Range of merchandise
 Convenience of shopping
 Travel time
 Stage of the family life cycle
 Socio-economic factors

STAGES OF CONSUMER
DECISION PROCESS
 The Consumer decision-making
process

Stage 1: Identification of a need for
the product or service
 This arises when the consumer
becomes aware of his need of a
particular product or service.
 A customer may realise that he needs a
product when the current product that he
is using does not meet his expectations,
or he is about to exhaust the stock that
he has of a particular product or when
he sees a product or an advertisement
for the same and feels the need to
purchase the same.

Stage 2: Search For
Information
 This step involves gathering information on how
to solve the problem.
 This search may be internal (from memory), or
external (friends, family, published sources,
salespersons, internet, etc.).
 It depends on customer’s current information
levels and the perceived value of the additional
information.
 External search for information may be from a
marketing source (advertisements, packaging,
salespersons, sales promotions, POP’s, etc.)
 A non-marketing source (personal experience,
experiences of friends, consumer reports, etc.)

Stage 3: Evaluating
Alternatives
 This is the time when questions start
being asked.
 Is this really the right product for me do?
 Do I need a different product?
 If the answers are either “No it’s not right”
or “yes I need a different product” then
stage 2 may recommence.
 The stage 3 to 2 transition may happen
several times before stage 4 has been
reached.

 Once the customer has determined what
will satisfy their want or need they will
begin to seek out the best deal.
 This may be based on price, quality, or
other factors that are important to them.
 Customers read many reviews and
compare prices, ultimately choosing the
one that satisfies most of their
parameters.

Stage 4: Purchase Decision
 The customer has now decided based
on the knowledge gathered what to
purchase and where to purchase what
they desire.
 At this stage a customer has either
assessed all the facts and come to a
logical conclusion, made a decision
based on emotional
connections/experiences or succumbed
to advertising/marketing campaigns, or
most likely a combination of all of these 109Mr. John Pradeep Kumar, KJC

Stage 4: Purchase Decision
The key factors influencing consumer
behaviour are
 Personality
 Lifestyle
 Culture
 Social class
 Family and household influences.

Stage 5: Purchase evaluation
 Did the product deliver on the
promises of the marketing/advertising
campaigns?
 Did the product match or exceed
expectations?
 If a customer finds that the product
has matched or exceeded the
promises made and their own
expectations they will potentially
become a brand ambassador
influencing other potential customers.

Customer Service
 Customer service is the set of activities
and programs undertaken by retailers to
make the shopping experience more
rewarding for their customers.
 These activities increase the value
customers receive from the merchandise
and service they purchase.
 Some of these services are provided by
store and call center employees interacting
directly with customers, while others are
provided by the design of the retailer’s store
and/or Web site.

Customer Evaluation of Service
 Customers evaluate retail service and
compare their expectations with the
perceived service.
 If the services perceived fall below their
expectations, they become dissatisfied.
 This lead to boycott of that store and
searching for new store where the
perceived service meets and exceeds
their inherent expectations.

 So, when retailers attempt to differentiate
their offerings by developing a reputation
for outstanding customer service, they
need to consider both the perception of
the actual service offered and the
expectations of their customers.

Perceived Service
 Customers’ perception of a retailer’s
customer service is affected by the actual
service delivered.
 However, since services are intangible, it is
difficult for customers to evaluate the
service offered by retailers accurately.
 Five customer service characteristics that
affect perception of service quality are :
1. Assurance (Faith)
2. Reliability
3. Recognition (Empathy)
4. Sense of Responsiveness:
5. Tangibility

1. Assurance (Faith)
 It deals with the trust shown (presented) by a
retailer by way of offering guarantees,
warranties, exchange and return privileges.
2. Reliability
 Locating a reliable retailer has always been a
difficult task. Reliability stands for a retailer’s
ability to satisfy all written promises.
It includes:
(i) Accuracy of bills with regard to quality and
quantity ordered.
(ii) Meeting delivery commitments.
(iii) Offering discounts as and when promised.
(iv) No false advertisement (Bait Advertisement)

3. Recognition (Empathy):
 It is the retailer’s ability to recognize your
details like name, address, choices,
likings and disliking.
It includes:
(i) Offering personalized service like
remembering your choices, address and
other related details.
(ii) Acknowledgements of e-mails, letters,
suggestions and complaints.
(iii) Remembering by name

4. Sense of Responsiveness:
 It is the retailer’s ability to be responsive
towards customers’ queries, complaints,
doubts and communications.
It includes:
(i) Call back to customers as and when
required
(ii) Offering quick service
(iii) Attending complaints
(iv) Returning e-mails, SMS and other
modes of communications.

5. Tangibility:
 It is the retailer’s ability to establish a long-lasting
retail image (retail positioning) in customers’
minds.
It includes:
(i) Store layout and appearance
(ii) Uniform (dressing) of sales staff
(iii) Hygienic and suitable store environment
(iv) Welcome and assistance by store staff
(v) Air conditioning in the store
(vi) Store location and geographic coverage
(vii) Shopping experiences
(viii) Type and extent of personal assistance
(attention)
(ix) Merchandise quality, assortment, and

Role of Expectations:
 It is said that ‘customer expectations’ are
based on customer’s personal trails like
age, experience, knowledge, education
level, income level, standard of living and so
on.
 Expectations even vary from person to
person and store to store.
 For instance, one person’s primary criterion
to shop in a store is reasonable and
convenient parking facility but for another
person (an owner of luxury car), primary
criterion is availability of brands in a store
irrespective of parking and distance factor.

 How expectations vary from store to
store.
 Example: customers expect a specialty
store like artificial jewelry store/ kids’ toys
store/ electronic store to have
knowledgeable and impressive sales staff
to provide information, assistance and
variety as per their choice.
 On the other hand, when these same set
of customers visit a supermarket/hyper
store, they expect a store to provide
convenient parking, extended store
hours, wide merchandise assortment,
fresh and latest food items those are

 They don’t like the store to have store staff
who roam near them to ask ‘May I help you’
or ‘Madam, do you need any help’ etc. They
even don’t want to have any demonstration
about ‘how to use’, ‘safe to use’ and so on.
 Expectations vary from situation to
situation too.
 For Instance, a customer in a Jewelry store
where prices are affordable, expect the
store to give welcome, offer drinks and
personal attention while same person when
enters into a exceptionally high priced shop,
would like a store to ignore him.

 Further, a customer sometimes may be
satisfied with a store offering limited
services and dissatisfied with a store
offering excellent consumer services.
 For example, while visiting discount
stores and super markets, people
usually have low service expectations
but if some store besides self service
concept, offers assistance in selection
and serving things, that store becomes
favorite choice for the consumers like
McDonald’s and Haldiram’s food outlets
in various parts of the country.

 Department stores like Vishal Mega Mart,
Reliance Fresh, Six to Ten, Sabka Bazaar,
Spencer, Birla’s More, have more sales staff
compared to other retail formats to assist
customers and answer their queries.
 Despite the presence of large number of sales
staff, signs and display boards, if a consumer
like ‘you’ or ‘me’ don’t find a sales person while
locating a particular item, gets dissatisfied and
annoyed very soon.
 Customer expectations vary from country to
country.
 In India, shop keepers (businessmen) treat
customers as ‘God’ (Atithi Deyo Bhavah) and
are always eager to learn and adopt new ways
to provide excellent customer service.
 On the other hand in Germany retailers never
think of offering consumers services.

 They don’t accept debit/ credit cards.
 No home delivery and become rude to
customers who come near store’s closing
time.
 Japanese are even several steps ahead
when it comes to offering customer services.
 Like India, Japanese treat their customers
as ‘God’ and welcome when they come for
return/exchange merchandise.
 In United States of America retailers believe
that ‘customer is always right’.
 Even if the customer does not use the
products as per instructions, retailers take
the responsibility that they are responsible
for not telling how to use it properly. 125Mr. John Pradeep Kumar, KJC

GAPs model for improving
retail services quality
 The Gaps model that deals with
improvement of service quality was first
time introduced by Valerie Zenthaml and
the Center for Retailing Studies at the
Texas A & M University.
 This model basically provides a roadmap
to retailer about minimizing the gap
between customers’ expectations and
the perceived service (the service
offered by a retailer) or to close that gap,
if possible.

 Following are the four potential gaps
that must be understood and
acknowledged to improve quality of
service offered.
1.Knowledge Gap
2. Standard Gap
3. Delivery Gap
4. Communication Gap

1.Knowledge Gap:
 This gap arises because of the difference
between customer’s expectations and the
retailer’s perception towards customer’s
expectations.
 It simply means that the retailer is not aware
what actually customers expect from him.
 For example, in a departmental store, a retailer
tries his level best to provide personal attention
to each customer by appointing a number of
sales staff, who roam near the customers to
help them as and when required.
 But customers take this service in different way
and don’t prefer to visit such store considering
store staff wandering like police around them.

 Therefore, a retailer ‘facility for personal
attention’ becomes obstacle for the store
as well as the customers.
 Consequently, retailers must have
complete knowledge of customers’
expectation from a store.
 Acquaint of such knowledge becomes
simple if a retailer has some provision of
interacting with the customers on regular
basis.

 Some retailers even develop well-structured
programs for evaluating the service expectations
and perceptions of their customers.
 For this purpose, retailers use questionnaire
method that is filled up by the customers visiting
the store.
 The information received from the customers
through structured questionnaire is analyzed and
used for policy making or policy alterations.
 JC Penney (one of America’s leading retailer)
follow this practice as a part of it annual quality
process.
 In India, it has been observed that few retailers
conduct these types of surveys immediately after
the transaction is over.

 Questionnaire may include following
information such as:
(i) What did you like or dislike about the services
provided?
(ii) Of the services provided, what could be done
differently to improve service level?
(iii) What sort of assistance did you need that was
not available?
(iv) Would you like to suggest any services you
think a customer needs after our services to you?
(v) What are your views about services offered by
us?
(vi) When visiting or calling, were you connected
to someone in a timely manner?
(vii) Is our staff co-operative?
(viii) Is there any other comment to better serve
you?

 Besides questionnaire, customer panels
& interviews, social media, customer
research, suggestion box and complaint
box also form significant source of
information about the quality of service
offered.
 Retailers can facilitate communication
routes for floor staff upwards through the
organization, they also need to act
rapidly to implement improvements
suggested as the outcome of surveys,
research and communication.

2. Standard Gap:
 This gap arises because of the
difference between the retailer’s
perception of customers’ expectations
and the customer service standards it
sets.
 Besides understanding what customers
expect, retailers should develop some
service standards.
 It helps store staff understanding how
the top management and store
customers define and evaluate a quality 134Mr. John Pradeep Kumar, KJC

 Customer driven service quality standards are
different from the traditional performance standards
that most of the retailing firms establish to meet the
customers’ requirements.
 Here, standards are set to communicate to
customers’ expectations and preferences rather
than to store concerns such as increasing turnover.
 Standard gap exists in retail organizations for a
variety of reasons.
 Managers responsible for setting standards often
believe that customers’ expectations are irrational or
illogical.
 They may also think that the degree of variability
inherent in service confronts standardization and
therefore, setting standards only will not work.
 However, the quality of service offered by store staff
is significantly influenced by the standards against
which customers are evaluated and compensated.

 To close the standard gap, retailers besides
focusing on high service quality, they should
define and describe the role of each employee
involved in delivering service.
 Standards when set and communicated properly,
signal to store staff what management expects
from them, what are their priorities and which
type of performance behavior really counts.
 When service standards are lacking or when the
standards in place do not confront customers’
expectations. It leads to dissatisfaction.
 On the other hand, when standards reflect and
confront what customers’ expect, the quality of
service, customers receive is likely to be
enhanced.

Here are some tips for the retailers’ top
close standards gap:
1. Management should be committed to
achieve high levels of service quality.
2. Proper training should be given to all
concerned.
3. A proper reward system may enhance staff
and management commitment to implement,
meet or exceed the set standards.
4. Closing standards’ gap can be made easier
if new ways of dealing with various service
issues are explored.
5. Providing high service quality become easy
through the use of technology to standardize
processes.

3. Delivery Gap:
 This gap arises because of the
difference between the retailer’s service
standards and the actual service offered
to customers despite the existence of
guidelines for treating customers
correctly and performing services well.
 Developing standards and applying them
is not enough, standards must be
backed by appropriate resources
(people, products and technology) and
must be evaluated to award and
compensate who deserves, on the basis

 Therefore, even when standards are properly
defined and well implemented, if firm fails to
provide resources for them, performance will not
be up to the mark and definitely will increase
delivery gap.
 The delivery gap between standards set and
those delivered arises because of several
reasons like:
(i) Impractical standards
(ii) Lack of clarity in standards defined
(iii) Improper communication
(iv) Lack of motivation among floor staff
(v) Absence of regular monitoring of performance
analysis practices
(vi) Failure to match market demand and supply
(vii) Problems/conflicts with service intermediaries

In order to close or reduce the service gap and
deliver services that exceeds the set
standards, retailers can focus on the following
areas:
(i) Providing necessary knowledge and skills to
employees concerned
(ii) Explaining standards and staff roles so that
they possess and commit to quality
(iii) Regular monitoring and motivation of staff
(iv) Develop spirit of team work to deliver excellent
quality
(v) Appropriate selection and training to concerned
staff
(vi) Regular involvement of store staff in setting
and modification (if required later on) to get best
results. 140Mr. John Pradeep Kumar, KJC

4. Communication Gap:
 This arises because of gap between the actual
set of services offered to the customers and the
service communicated by the retailer to the
customers through their promotional program.
 In short, communication gap arises when
retailer’s promises don’t match the performance
resulting in adverse effect on the customer gap.
 Retailers throughout the globe usually raise the
expectations of customers through attractive
and bait advertisements. Getting convinced,
when customers visit the store and find service
quality short of standards, the actual experience
disappoint them.

Broken promises occur because of
several reasons:
(i) Unrealistic promising in advertising or
through other communication channels,
(ii) Lack of co-ordination between sales
promotion and store operations staff,
(iii) Differences exist between policies and
procedures of various store outlets resulting
in creating confusion among them, and
(iv) Sometimes the staff whose duty is to
promote the service does not understand the
realism of service delivery and is likely to
make overstated promises that cannot be
achieved.

 In order to remove or close the
communication gap, retailers first try to
understand the reasons that create
communication gap, once knowing the
reasons, retailers should overcome them
by developing a clear line of
communication between the parties
concerned (like intermediaries, promotion
and operations staff etc.)
 Any miscommunication between two
parties will lead to discrepancy between
actual and promised service. Hence the
management of a retail store should avoid
over-promising in personal selling,
advertising or any other way of
communication.

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