An Introduction to

RETAIL Business Environment

By
Vivek Rastogi
Retail Consultant
What is Retailing?
 Retailing

Retailing is defined as “the activities involved in the sale of

goods and services to consumers for their personal, family, or
household use”.

Manufacturing Distribution Retailing

Retailing cont….

• Retailing is the final step in the distribution of merchandise -

the last link in the Supply Chain

• No significant change in the product except breaking the bulk

• Value proposition a retailer offers to a consumer is easy

availability of the desired product in the desired sizes at the
desired times (at desired prices).
Typical Marketing Channels for Consumer
Products
 Retailing - Evolution

• Trade and Retail Boom

• Mom and Pop stores

• Convenience

• Large Format

• Mail Order

• e-Commerce
 Classification of Retailing

 By Channel

 By Ownership

 By Assortment and Variety of Merchandise

 By Amount of Customer Service

 Limited Line Retailing

 Other Types
 Classification – By Channel

Store

Non Store
Mail Orders
Catalogue
Teleshopping
e-tailing
Call Centers
Direct Selling
Classification – By
Classification of Retail Ownership
Stores

 Unaffiliated independents
( Medical Shops, Fruit seller)

 Corporate retail chains

( Food world, Trent, Target, Best buy )

 Cooperative chain
(Co-optex, Cooperative societies, Janata Bazaar)

 SIS
Franchise/Distributor systems
(McDonald’s, Pizza hut)
Classification – By Assortment and Variety of
Merchandise
General-line Stores
 Department Stores
(Shoppers Stop, Sears, JC Penney, Marshall Field’s)
 Supermarkets
(Royal Super Market, Cub Foods, Nilgiris)
 Factory Retail Outlets
(Arrow, Nike, Sony)
 Membership Warehouse Stores
(Sam’s Club, Costco)
 Variety Stores
(F.W.Woolworths, Dollar Stores)
Classification – By Amount of Customer Service

 Self-Service Retailers
(Vending Machines)

 Limited Service Retailers

(JC Penney, Sears, Target)

 Full Service Retailers

(Tanishq, Nalli Silks, Prada)
 Classification – Others

Other Types
Combination Super stores
Convenience Stores (7 Eleven)
Hypermarkets (Star India, GIANT)
Discount Stores (Target, Walmart)

Limited-Line Retailing
Specialty Stores (GAP,Music World, Kids Kemp)
Boutiques
Category Dominant Stores (Toys ‘r’ US)
What happens in Retailing?
 Functions in Retailing

• Store Operations

• Merchandising

• Supply Chain

• Finance
 Overview of Retail Functions

Site Location
Procurement
Positioning

Financial
Strategic

Planning
Planning

Store
STRATEGIC
PROCESSES

OPERATIONAL
PLAN BUY MOVE SELL PROCESSES

SUPPORT
PROCESSES
What will you PLAN for retailing?
 Retail Operational Processes – PLAN

Planning is a systematic approach, aimed at maximizing return on

investment, through organizing business activities.

PLAN BUY MOVE SELL

- Merchandise Plan
- Distribution Plan Major
- Space Plan Plan Processes
- Sales & Profit plan
- Promotions & Markdown Plan
- Collaborative Plan
 Retail Operational Processes – BUY

PLAN BUY MOVE SELL

- Vendor management

- Open-To-Buy
Major
- Consolidation Buy Processes

- Purchasing
- Replenishment
- Pricing
 Buying

Who Buys?:

One Individual Specialists

Versus

What to Buy?:

• Current trend
• External Sources
• Sales History
 Purchase Terms

Purchase Terms in Buying

 Net
Ex Works
 F.O.B. (Free On Board)
 C.I.F. (Cost, Insurance and Freight)
 C.O.D. (Cash On Delivery)
D.D.P. (Delivered Duty Paid)
 Purchase Order Process

Create Order Approve Order Make Changes

Vendor Shipments Allocation & Distribution Receive

Archive
Retail Operational Processes – MOVE

BUY
PLAN
MAKE MOVE SELL

- Receiving (Vendor Receipts & Returns)

- Repacking
Major Move
- Shipping & Transportation Processes
- Cross-Docking
- Physical Inventory Check
- MIS
 Layout of a Warehouse

STORE
Storage Racks
R
Pull Item D
E
E
C
CARRIER
L
E GUEST
Flow Item I
I (Cross Docking) V
V
E
I
R
N
Y
G Pull Item
VENDOR
Storage Racks
Returns
 Typical Warehouse Operations
Warehouse Management
Receiving-

•Unloading and inspection of the material received from vendor with corresponding

documentation.

Storing-

•Placing the material at right place

•Updating inventory accounts

Re-packing and shipping-

•Unpacking the material from original cartons

•Packaging and re-packing as per the order list/allocation of individual store

•Loading on respective trucks.

 Cross Docking
An operational technique for receiving, allocating, sorting and
despatching product, while it remains on the dock of a Distribution Centre (DC)
and therefore does not rely upon withdrawing stock from storage.
It is a receipt-through-to process through-to-operation and would be undertaken
over a single shift.

Suppliers Retail Outlets

Distribution Centre A
A B
I O C
N Cross U
B T
B A
B O O B
U U C
N Dock
N
D D A
C B
C
Distribution Center Processing
 Commonly Used Terminologies….

 Pallet  SCAC

 Flow-Thru Merchandise  Sorter

 High Velocity Merchandise  UCC-128

 Reserve Merchandise  Letter of Credit (LOC)

 RF based tracking  Slotting or Profiling

 Advance Shipment Notification  Cycle Count

 On-Hand  Lights-Out Warehouse

 On-Withdrawal  Honeycombing

 On-Order  Shipping Manifest

 Retail Operational Processes – SELL

BUY
PLAN
MAKE
MOVE SELL

• Store Operations Major SELL

• Visual Merchandising Processes
• Point-Of-Sale (POS)
• Sales Polling
• Inventory Updates
• Customer Relationship Management
POINT OF SALE
 Point of Sale Operations

Merchandise Generate Discounts /

Sale / Billing Receipts Coupons

Customer
Credit Loyalty
Authorization Programs

Merchandise Merchandise
Clientele /
Look-Up Returns /
CRM
Exchanges
 Common
Pricing Payment Types
In Retail

 Cash

 Check

 Credit Cards

 Gift Vouchers

 Gift Cards

 In-house cards

 Coupons
 Reverse Logistics

It is the process of managing the flow of merchandise and information for returned
goods from the store to its final disposition. It can include

• Returning merchandise to the vendor

Update
• Selling merchandise as salvage Financials

• Scraping or destroying merchandise

Return to
• Donating merchandise to charity Vendor

Consolidate
Scan Scan
Returns
Merchandise Receipt
CUSTOMER

Salvage / Destroy/
STORE Donate
 Visual Merchandising

•Display to be built around fast selling items

• Display should be simple. No oversell

• VM should be timely

• VM should be built around a theme

• Proper lighting sells the display

• Change the displays regularly

 Merchandise Display & Signing

To drive impactful presentation of merchandise on the Selling floor,

maximizing sales and differentiating the retailer from competitors.

The Merchandise Presentation Department works with marketing,

merchandise planning and the fixturing departments to create
unique, safe and profitable PLANOGRAMS for the stores.
Merchandise Display & Signing

A planogram (POG) is a retailer's drawing

(blueprint) which visually communicates how
merchandise and props physically fit onto a
store fixture or window to allow for proper
visibility and price point options.
 Commonly Used Terminologies….

 Register / Terminal  Food Avenue

 CRT  Adjacency

 Scanner  Butt Brush

 Card Reader  Decompression Zone

 Cash Drawer  Strike Zone

 Store Back-office  Guest Pick-up

 Tags – Social, Ink, Liquor  Raincheck

 Front Lanes  UPC / SKU / Barcode

 Shelf Labels  Sales Transaction

 Retail Business Processes

• Demand Forecasting
PLAN • Merchandise Plan• Shipping and Transportation
• Assortment Plan • Freight Planning/Scheduling
• Merchandising • Transportation
• Purchasing• Warehouse Management
BUY
• Contracts/ deals• Receiving• Store Operations
• Vendor management Sales Analysis
• Repacking• CRM, eCRM
MOVE
• Allocations Inventory turnover
• Shipping • Sales Management
Vendor Analysis
• Replenishments• Trailer/Yard Management
• Promotions• Inventory Promotions
SELL Management
• Retail pricing • Allocation Customer Analysis
• Replenishment Optimization
• Reverse Logistics
ANALYZE
 Retail Merchandise & Information Flow
P Sales
l Promotion
Advertising a
CUSTOMER & Promotion n
Price
Distribution
s
Merchandise
Plan

Store
Physical POS system
Inventory Product Customer Info
(Merchandise) Scanners Sales Info BUYER Information
Flow
ERP
Product Info
Merchandise
Flow

Distribution System Orders

Transportation
Warehousing VENDOR
Initial Orders &
Distribution Center
Replenishments
Winning at Retail

Natural inflection
point, failure to
react will lead to Declining Sales
downward spiral

Destined to
decline, strength Dalal street
can be weakness

Customer gives Too bigger

up competitor
EST Model for Retailing

Cheap-EST
• Consistently Lowest prices on Products
• Either you are cheapest or you are not
• Cheap should not mean bad Value
• Value for money
• Purchasable below going Price or Real Value or charging a lower Price.
• You can not be cheapest if cost of running the business is
higher than competitors
– Buying smart
– Shipping inexpensively (Wal-mart)
– inventory control (e-bay)
– low cost store (Subhiksha)
EST Model for Retailing

Bigg-EST
• Have the Largest Assortment of product in a specific Merchandise Category
• Not about store size
• Sweet Spot-Between too much & too little Merchandise (Incredible Store)
• Biggest should be Problem Solver & time saver (Home Solutions)
• An Increasing competition from E-commerce

– Great functionality
– search engine
– easy to use
– info rich
– Mass customization-take care of customer interest
EST Model for Retailing

Hott-EST
– Having the right products just as customers begin to buy them in Volume
– Continually demonstrating that you are the place for latest fashion or newest Product
– Rarely caught with yesterday’s style
– Regular change the look & layout to keep store fresh (ZARA in Spain)

Easy-EST
–Solution oriented Service (Ex ICICI Bank)
–Takes care of employees (Sarvana Bhavan)
EST Model for Retailing

Quick-EST
•Make the shopping trip as quick & efficient as possible
•Time as key diffentiator -Working wives
•Convenient Location
•A lot of locations
•Little Checkout time
•Shopping process simple, fast, accurate
•Ex Mc’donalds, Pizza hut
The Wal*Mart Way
The Wal*Mart Way

• World’s largest retailer, Turnover

$418 billion
• Wal-Mart is the largest private
employer in the U.S.
• Wal-Mart operates more than
6,500 stores in 15 countries.
• Wal-Mart serve more than 25
million customers around the
globe every day.
“Wal-Mart is the greatest retailer that ever was & we have to compete with
them on regular basis. There has been no one that competes & thrives. Very
few to compete & survive.”
Target CEO
The Wal*Mart Way

• 84 % Americans visit Wal-mart at least

once in a year
• Wal-Mart saves an average American
household around $200 every year.
• Wal-Mart employs 1.8 million
associates worldwide, including 1.3
million in the United States.
• More than 240,000 of these are
senior citizens, who are 55 years or
older in age.
• Accounts for 20-25% revenue of major
US manufacturing companies
• EDLP (Every day low prices)
Bharti 2015 Vs Wal-mart 2006

Bharti -2015 Wal-Mart-2006

•Sales- $ 5 billion •Sales- $ 351 billion

•Retail Space- 10 •Retail Space- 488
million sq ft million sq ft ,Added 39
million sq ft last year

•Employees- 60,000 •Employees- 1.8 million

•Store size- 1,00,000 •Store size- 1,87,000

Sq ft Sq ft
Sam’s Retail Success Mantras

• Commit to your business-sheer

passion, love your work
• Share profit with all associates
• Motivate your partners-encourage
competition
• Communicate everything possible to
your partner
• Appreciate associates
• Celebrate success-find humor in
failure
• Listen to everyone in your company
• Exceed customer expectation
• Control expenses
• Swim upstream
 Super effective Supply chain
People think we got big by putting big stores in small towns. Really, we got big by replacing inventory with information.
Sam Walton

• Within 15 min of sale of an item,

notification is sent to supplier
• Minute parameters like weather
also considered for forecasting &
replenishment
• Office in Unassuming town along
with partners
• Negotiation for customer
• Cost sheet of Vendor
• 1 $ Vs 0.90 $
• Private Labels
-Better margins
-Negotiation tool
Is Wal-Mart loved in US??

No !!!!
• Wal-mart destroys small businesses
• Dis-approval of company’s foreign
product sourcing
• Every day low cost- Closure of
domestics industry
• Lack of union representation
• Sexual discrimination
What is Private Label?
Private Label Definition
 Types of Private Label

 Generic –very promotional,

very low margin


 Fast Value Fashion – knock-

off brands

Zara and H &M

 Premium Store Brands –

Retailer’s own brand offers
same or better quality at
better price. The most
profitable strategy in private
label

 Why Private Labels

• Astitva
• Consolidation of retailers
• Brands sell to same retailers
and become a commodity
• Retailers need differentiation
and better margin
• Declining retail prices (women’s
apparel prices dropped 2.4%
2007 vs. ‘06)
• Globalization of Production
 Mystery of Low PL Prices

 Imitate designer brands to

reduce R&D costs

 Source direct with factories to

eliminate middlemen cost

 Buy in larger volume to

receive lower cost

 Source from low cost, duty

and/or quota free countries:
China, India, Bangladesh,
Vietnam, Pakistan, South &
Central America, Africa
 Private Label Brands

 Pantaloon’s : Urbana, John Miller,

Bare
 Big Bazaar : 
 Shopper’s Stop : 
 Lifestyle : 
 More : 
 Reliance : 
 Wal-Mart - Faded Glory, George
 Target - Mossimo, Circo
 Private Label Key Benefits

Highly competitive - same or

better quality at better
prices, Apparels average 37%
less than national
Brands

Higher Gross Margins (est. 15 –

50 %

Higher selling price per square

foot

Biggest threat to national brands

Brand Loyalty
 Private Label Wave

• Worldwide Private Label retail sales

have passed US$1 trillion
• 2006 US apparel & shoes retail sales:
$358.6 Billion
• 2006: 45% apparel sales were private
label
• 2005: 39% apparel sales were private
label
• 2002: 35% apparel sales were private
label
• By 2010, private label merchandise
expects to increase by 22% to 55% of
total apparel sales
 Private Label Trends
• Combined effort, a win-win strategy

American Living, Simply Vera, Isaac
Mizrahi
• One time exclusive deal

H & M, Target
• Blending in with Premium brands –

INC, Arizona
• Marriage with a celebrity name

Sach,
DreamLine,
Sarah Jessica Parker,
Hilary Duff
 National Brand Counter Strategies

• Develop unique products and stay

ahead as a trend leader
• Create own stores
• Develop a compelling marketing
strategy
• Increase brand loyalty
• Combine effort by offering exclusive
lines. I.e, Simply Vera, American
Living, Liz & Co
• Create one shot exclusive deliveries
and SKUS
• Evaluate sourcing strategy and
production cost
• Maintain net price (minimal
promotions & discounts)
• Improve forecasting and turn around
time
 Future of Private Labels

• Becoming national premium

lifestyle brands: INC, Alfani, Arizona
• Branching out to create specialty
chain business: George apparel
stores, Wal-Mart, UK
• Increasing depth of multi
dimensional merchandising product
mix (Tony Hawk mens, boys,
footwear and etc)
• Spin off PL brands (Aeropostale)
• Cannibalize weaker PL brands
 Private Label Pros & Cons
PROS
• Exclusivity & differentiation
• Bring customer loyalty
• Better margin
• Better control in deliveries
• Brand equity
• Freedom in pricing strategy
• Increase bargaining power
with both national brands
and PL factories
CONS
• Inventory risk
• Higher R&D expense
• Higher marketing expense
• No markdown or return
allowance from branded
suppliers
• If product fails, will create
negative image
• Quality control, complex
production & import issues
 What This Means for Brands

 Change mind set and realize

that Private Labels are
II. National brands should:
competing brands
 Innovate and stay as market
leaders to beat PL
 Stay focused on target
audience
 Increase and market brand
imagery to gain and maintain
customer loyalty
 Partner with retailers to
produce exclusive brands,
SKUS, one-time offers or lines
 Price competitively and
streamline expenses