Deciding location Chapter 7

Method of estimating demand

-Space–Sales Ratio Method -Proximal Area Method -Analogue Model -Reilly’s Law- Huff’s Gravity
Mode- multiple regression model

Chapter 8 Category management

Category definition at pantaloons
Winners Winner categories and items are the cash generators. They are highly profitable and
attract a large number of customers. These categories enjoy high share and grow faster

Morning Stars These are categories that contribute significantly to the retailer’s business. They
account for a high share of the retailer’s sales. However, the rate of growth has either stabilized or is
witnessing a decline.

Sleepers This category consists of products that do not move fast. It includes products that either
have low purchase frequencies or are not preferred by customers. These categories need to be
pushed. Attention needs to be paid to their shelf placement, promotion, and other tactical
measures.

Questionable These are categories that no longer fit with the store strategies and plans. These
may include categories that have been included in anticipation of some trend, occasion, or season.
The strategies developed for each of the categories are the bases for planning the tactical moves for
the categories. Category tactics are a set of store variables that the retailer uses to keep the store
and its offer relevant to its target customers. These variables are grouped into assortment, pricing,
display, and promotion tactics. The guiding principles for these tactics are derived from their
strategies, targets, and role for the chosen categories.A set of such tactics for a retailer is called a
tactogram.
Managing category

Assesing Gross Margin Return on Inventory (GMROI) .

GMROI = Gross margin percentage × Sales-to-stock ratio

or (Gross margin ÷ Net sales) × (Net sales ÷ Average inventory)

or Gross margin ÷ Average inventory

S ales-to-stock ratio = Net sales ÷ Average inventory at retail

or

S ales-to-stock ratio = Cost of goods sold ÷ Average inventory at cost

Gross Margin Return on Floor Space (GMROF) 

GMR OF = Gross margin ÷ Space provided

Gross Margin Return on Persons Employed (GMROP

GMR OP = Gross margin ÷ Persons employed

The benefits of category management are higher levels of consumer satisfaction and returns from a

more consumer-focused procurement, marketing, and merchandising programme. It leads to

increased revenues and profit. Through efficient business processes, it also reduces system and
marketing costs. Category management results in more customer- oriented product assortments,
better new product introductions, more efficient promotion program- mes, and effective shelf
placements. It brings greater cooperation and compatability among the retailers and their suppliers
through an integrated approach to managing the merchandise and the stores. A stor e needs to lay
out a detailed category management process. It starts by defining the category and assigning roles
to each of them in the light of the store’s positioning, objectives, and market requirements.

For each of the categories, it then draws out strategies for enhancing the returns as per the
0bjectives. These strategies lead to the tactics and the mix that the retailer would like to offer its
customers within each of the categories. The retailer then draws out a plan for assessing the
performance of its category in terms of economic parameters and consumer perception in

order to enhance store loyalty and patronage. It may also use tools such as the growth–share matrix
for assessing the performance and opportunities for each of the categories. I mplementation of
category management may require several hurdles to be crossed. The cost of achieving efficiencies
using ECR may outweigh the benefits. The full implementation of category management requires
retailer restructuring. It may not be easy to create partnerships with suppliers. Full and complete
information may not flow across the system. Sometimes, it may lead to over-concentration and,
hence, lack of variety in product offerings to customers. To curb this, several countries (such as
France) place small suppliers at an advantage, often decreeing by law that up to 10 per cent shelf
space be reserved for them. Otherwise, category management may help the category champions to
derive undue advantage due to their position

Pricing strategy chapter 14

Bases of pricing

 Demand-oriented Pricing
 Cost-oriented Pricing
R etail Price = Cost + Markup
Markup is generally expressed as a percentage of the retail price or cost. It can also be
expressed in value terms. Markup as a percentage of retail price is expressed as
M arkup on Retail Price = (Retail Price – Cost) ÷ Retail Price
= Markup ÷ Retail Price
 Markup as a percentage of cost is expressed as
Markup on Cost = (Retail Price – Cost) ÷ Cost = Markup ÷ Cost

Competition-oriented Pricing
High–Low Pricing
Flexible Pricing
Bundled pricing
Leader Pricing
Coupons and rebates
Private-label Pricing

Reference price