Store Operations

Store Operations
This book is a part of the course by Jaipur National University, Jaipur.

This book contains the course content for Store Operations.
JNU, Jaipur
First Edition 2013
The content in the book is copyright of JNU. All rights reserved.

No part of the content may in any form or by any electronic, mechanical, photocopying, recording, or any other
means be reproduced, stored in a retrieval system or be broadcast or transmitted without the prior permission of
the publisher.
JNU makes reasonable endeavours to ensure content is current and accurate. JNU reserves the right to alter the
content whenever the need arises, and to vary it at any time without prior notice.
Index
I. Content....................................................................... II
II. List of Figures......................................................... VII
III. List of Tables........................................................VIII
IV. Abbreviations..........................................................IX
V. Case Study.............................................................. 132
VI. Bibliography.......................................................... 137
VII. Self Assessment Answers................................... 140
Book at a Glance
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Contents
Chapter I........................................................................................................................................................ 1
Introduction to Store Operations................................................................................................................ 1
Aim................................................................................................................................................................. 1
Objectives....................................................................................................................................................... 1
Learning outcome........................................................................................................................................... 1
1.1 Introduction............................................................................................................................................... 2
1.2 Origination of Stores................................................................................................................................. 2
1.3 Store Operations........................................................................................................................................ 3
1.3.1 Major Responsibilities of a Store Manager.............................................................................. 3
1.3.2 Assisting Major Retailers.......................................................................................................... 5
1.3.3 Logical Activity Flow of Store Operations............................................................................... 5
1.4 Store Operations Management System [Soms]........................................................................................ 6
1.5 Microsoft Dynamics Retail Management System (RMS)........................................................................ 7
1.6 Retail Store in India.................................................................................................................................. 9
1.6.1 Curtain Raiser to WIPRO Retail............................................................................................. 10
1.6.2 Big Bazaar: The Brand Building Challenge........................................................................... 10
1.7 Strategy behind the Store Design.............................................................................................................11
1.7.1 Store Space: Case Study of Store Hanger............................................................................... 12
1.7.2 Fraschetti: Automates Warehouse to Improve Operations...................................................... 13
1.8 Introduction to Store Operations Solutions ........................................................................................... 14
1.8.1 Task Manager.......................................................................................................................... 14
1.8.2 Workforce Manager................................................................................................................ 14
1.8.3 Time and Attendance.............................................................................................................. 15
1.8.4 Store Walk............................................................................................................................... 15
Summary...................................................................................................................................................... 16
References.................................................................................................................................................... 16
Recommended Reading.............................................................................................................................. 17
Self Assessment............................................................................................................................................ 18
Chapter II.................................................................................................................................................... 20
Managing Customers.................................................................................................................................. 20
Aim............................................................................................................................................................... 20
Objectives..................................................................................................................................................... 20
Learning outcome......................................................................................................................................... 20
2.1 Introduction............................................................................................................................................. 21
2.2 Definition of a Retail Customer.............................................................................................................. 21
2.3 Types of Customers................................................................................................................................. 21
2.3.1 Loyal Customers..................................................................................................................... 22
2.3.2 Discount Customers................................................................................................................ 23
2.3.3 Impulse Customers................................................................................................................. 23
2.3.4 Need-Based Customers........................................................................................................... 24
2.3.5 Wandering Customers............................................................................................................. 24
2.4 Customer Segmentation.......................................................................................................................... 25
2.5 Commonly used Bases of Customer Segmentation................................................................................ 25
2.5.1 Demographic Segmentation.................................................................................................... 25
2.5.2 Psychographics Segmentation................................................................................................ 27
2.5.3 Geographic Segmentation....................................................................................................... 27
2.6 Customer Information Management....................................................................................................... 27
2.6.1 Loyalty Programs.................................................................................................................... 27
2.7 Customer Service Principles................................................................................................................... 28
2.7.1 Services Offered by Retailers................................................................................................. 28
2.7.2 Strategic Advantage through Customer Service..................................................................... 29
2.7.3 Cost of Good Customer Service............................................................................................. 29
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2.7.4 Customers Evaluation of Service Quality............................................................................... 29
2.7.5 Service Recovery.................................................................................................................... 30
Summary...................................................................................................................................................... 32
References.................................................................................................................................................... 32
Self Assessment............................................................................................................................................ 34
Chapter III................................................................................................................................................... 36
Managing Manpower.................................................................................................................................. 36
Aim............................................................................................................................................................... 36
Objectives..................................................................................................................................................... 36
3.1 Introduction............................................................................................................................................. 37
3.2 Managing Human Resource.................................................................................................................... 37
3.3 Organisational Structure of a Retail Firm............................................................................................... 39
3.3.1 Meaning of Organisational Structure...................................................................................... 39
3.3.2 Steps in Developing Organisational Structure........................................................................ 39
3.3.3 Retail Organisational Structure............................................................................................... 40
3.4 Manpower Planning................................................................................................................................ 41
3.5 Job Description....................................................................................................................................... 43
3.6 Recruitment............................................................................................................................................. 44
3.6.1 Values of Recruitment............................................................................................................. 44
3.6.2 Process of Recruitment Managing Manpower........................................................................ 44
3.7 Sourcing For Employees......................................................................................................................... 45
3.7.1 Internal Sources...................................................................................................................... 45
3.7.2 External Sources..................................................................................................................... 45
3.8 Careers in Retailing................................................................................................................................. 46
3.9 Management in Retail Store.................................................................................................................... 46
3.9.1 Support Functions................................................................................................................... 47
3.9.2 Merchandise Management...................................................................................................... 47
3.9.3 Project / Store Design............................................................................................................. 48
3.9.4 Training of Employees............................................................................................................ 48
3.10 Motivation: A Key to Employee Performance...................................................................................... 49
Summary...................................................................................................................................................... 52
References.................................................................................................................................................... 52
Recommended Readings............................................................................................................................ 53
Self Assessment............................................................................................................................................ 54
Chapter IV .................................................................................................................................................. 56
Managing Merchandise.............................................................................................................................. 56
Aim............................................................................................................................................................... 56
Objectives..................................................................................................................................................... 56
4.1 Introduction............................................................................................................................................. 57
4.2 Merchandise Management...................................................................................................................... 57
4.3 Supply Chain........................................................................................................................................... 57
4.3.1 Managing Supply Chain......................................................................................................... 57
4.3.2 Warehousing Facility.............................................................................................................. 59
4.4 Managing Merchandise Costs................................................................................................................. 59
4.5 Managing Merchandise Quality.............................................................................................................. 60
4.6 Merchandise Display and Store Capacity............................................................................................... 60
4.6.1 Basic Formats of Merchandise Display.................................................................................. 60
4.6.2 Keys to Successful Merchandise Display............................................................................... 61
4.6.3 Important Tips on Merchandise Display................................................................................. 61
4.7 Shrinkage & Loss Prevention................................................................................................................. 62
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4.7.1 Shrinkage................................................................................................................................ 62
4.7.2 Loss Prevention....................................................................................................................... 62
4.8 Retail Margin Analysis........................................................................................................................... 63
4.8.1 Inventory Turnover................................................................................................................. 63
4.8.2 GMROI................................................................................................................................... 64
4.8.3 Break-even Point..................................................................................................................... 64
4.8.4 Retail Math Formulas............................................................................................................. 64
4.8.5 Measuring Retail Performance and Productivity.................................................................... 65
4.9 Open-to-Buy Planning: Controlling your Inventory............................................................................... 66
4.9.1 Store Level Stock Planning..................................................................................................... 66
4.9.2 Avoiding Mismanagement of Merchandise............................................................................ 66
4.10 Keywords.............................................................................................................................................. 67
Summary...................................................................................................................................................... 68
References.................................................................................................................................................... 68
Self Assessment............................................................................................................................................ 70
Chapter V ................................................................................................................................................... 72
Introduction to Stores................................................................................................................................. 72
Aim............................................................................................................................................................... 72
Objectives..................................................................................................................................................... 72
5.1 Introduction............................................................................................................................................. 73
5.2 Basic Functions of Stores Houses........................................................................................................... 73
5.2.1 Size of Stores.......................................................................................................................... 73
5.2.2 Site Selection ......................................................................................................................... 74
5.2.3 Construction............................................................................................................................ 74
5.2.4 Fire Precautions...................................................................................................................... 78
5.2.5 Security................................................................................................................................... 79
5.2.6 Safety / Health........................................................................................................................ 79
5.3 Classification of Store............................................................................................................................. 79
5.3.1 Varieties of Stores................................................................................................................... 80
5.3.2 Central or Main Store............................................................................................................. 82
5.4 Location of Stores................................................................................................................................... 82
5.4.1 Location of Main Stores......................................................................................................... 82
5.4.2 Stockyards and its Location.................................................................................................... 83
5.5 Layout of Store....................................................................................................................................... 84
5.5.1 Stock Location Alternatives.................................................................................................... 85
5.5.2 Practical Problems in Location of Stock................................................................................. 85
5.6 Materials At Risk in Storage................................................................................................................... 86
5.6.1 Conditions Affecting Life of Goods....................................................................................... 86
5.6.2 Store for Special Type of Materials........................................................................................ 86
5.6.3 Storage of Explosives............................................................................................................. 87
5.6.4 Storage of Chemicals.............................................................................................................. 87
5.7 Store Efficiency...................................................................................................................................... 88
Summary...................................................................................................................................................... 89
References.................................................................................................................................................... 89
Self Assessment............................................................................................................................................ 91
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Chapter VI................................................................................................................................................... 93
Managing Space.......................................................................................................................................... 93
Aim............................................................................................................................................................... 93
Objectives..................................................................................................................................................... 93
6.1 Introduction............................................................................................................................................. 94
6.2 Skill of Managing Space......................................................................................................................... 95
6.2.1 Store Design............................................................................................................................ 95
6.2.2 Shelf Location and Space....................................................................................................... 95
6.2.3 Visibility and Sales Promotion............................................................................................... 95
6.2.4 Competition among Brands.................................................................................................... 96
6.2.5 Screening of Products............................................................................................................. 96
6.3 Space Planning Concept......................................................................................................................... 96
6.3.1 Objectives of Space Planning................................................................................................. 96
6.3.2 The Process............................................................................................................................. 97
6.4 Optimising Space Availability................................................................................................................ 98
6.4.1 Clusters based on Similar Demand Trends............................................................................. 98
6.4.2 Accurate and Efficient Assortment Management................................................................... 98
6.4.3 Creating Floor Plans that Increase Store Productivity............................................................ 98
6.4.4 Efficiently Develop Planograms for Improved Space Management...................................... 98
6.5 Return on Space...................................................................................................................................... 98
6.6 Maintenance of Space............................................................................................................................. 99
6.6.1 The Challenges of Space Management................................................................................... 99
6.6.2 Maximise the Profitability of your Space............................................................................... 99
6.6.3 Key Features of a Space Management Software.................................................................... 99
6.6.4 Adherence of Space Plan...................................................................................................... 100
6.6.5 Avoid Mismanagement of Space Managing Space............................................................... 100
6.6.6 Cleanliness of Place.............................................................................................................. 101
Summary.................................................................................................................................................... 102
References.................................................................................................................................................. 102
Recommended Reading............................................................................................................................ 103
Self Assessment.......................................................................................................................................... 104
Chapter VII............................................................................................................................................... 106

Managing Capital Assets.......................................................................................................................... 106
Aim............................................................................................................................................................. 106
Objectives................................................................................................................................................... 106
Learning outcome....................................................................................................................................... 106
7.1 Introduction........................................................................................................................................... 107
7.2 Classification of Assets......................................................................................................................... 107
7.2.1 Fixed Assets.......................................................................................................................... 108
7.2.2 Semi-fixed Assets................................................................................................................. 108
7.2.3 Movable Assets..................................................................................................................... 108
7.2.4 IT Assets............................................................................................................................... 108
7.3 Asset Grouping Based on Purpose of Usage..........................................................................................110
7.3.1 Creating Facility and Convenience for the Customers..........................................................110
7.3.2 Creating Right Ambience for the Store as per Store Positioning and Product Strategies.....110
7.3.3 For Stock Storage and Security Purpose................................................................................110
7.4 Asset Utilisation.....................................................................................................................................111
7.5 Return on Assets....................................................................................................................................114
7.6 Depreciation on Assets...........................................................................................................................115
Summary.....................................................................................................................................................116
References...................................................................................................................................................116
Recommended Reading.............................................................................................................................116
Self Assessment...........................................................................................................................................117
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Chapter VIII...............................................................................................................................................119
Standard Operating Procedure (SOP) and Transaction Matrix...........................................................119
Aim..............................................................................................................................................................119
Objectives....................................................................................................................................................119
Learning outcome........................................................................................................................................119
8.1 Introduction........................................................................................................................................... 120
8.2 The SOP Process................................................................................................................................... 120
8.2.1 SOP Preparation.................................................................................................................... 120
8.2.2 Review and Approval............................................................................................................ 120
8.2.3 Frequency of Revisions and Reviews................................................................................... 120
8.3 SOP Documentation.............................................................................................................................. 121
8.3.1 Objective of SOP.................................................................................................................. 121
8.4 Process at the Alteration Counter.......................................................................................................... 121
8.4.1 Process at the Tailor’s Desk.................................................................................................. 121
8.4.2 Process at the Alteration Counter.......................................................................................... 121
8.4.3 Daily Audit by Inventory Department.................................................................................. 122
8.5 Alteration Request Slip......................................................................................................................... 122
8.5.1 Annexure – I.......................................................................................................................... 122
8.6 Understanding Retail Business Drivers................................................................................................ 123
8.8 Influencing Factors............................................................................................................................... 124
8.9 Average Transaction Size...................................................................................................................... 125
8.10 Influencing Factors for Achieving Higher Ticket Size....................................................................... 125
8.10.1 Upgradation to Higher Priced Items................................................................................... 126
8.10.2 Requirement of Management Action . ............................................................................... 126
8.10.3 Items per Ticket.................................................................................................................. 126
8.10.4 The Influencing Factors...................................................................................................... 126
8.11 Measuring Performance...................................................................................................................... 126
8.12 The Final Word on Achieving Best Result on Sales........................................................................... 127
Summary.................................................................................................................................................... 128
References.................................................................................................................................................. 128
Recommended Reading............................................................................................................................ 129
Self Assessment.......................................................................................................................................... 130
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List of Figures
Fig. 1.1 Visual merchandise in stores............................................................................................................. 2
Fig. 1.2 Skill-set thoughts............................................................................................................................... 4
Fig. 1.3 The store performance improvement continuum............................................................................... 5
Fig. 1.4 Major responsibilities of a store manager in a store operation.......................................................... 6
Fig. 1.5 Retail management systems for store operations.............................................................................. 7
Fig. 2.1 Classification of customers.............................................................................................................. 22
Fig. 2.2 Customer loyalty cycle.................................................................................................................... 23
Fig. 2.3 Need of customers........................................................................................................................... 24
Fig. 2.4 Bases of segmentation..................................................................................................................... 25
Fig. 3.1 Managing human resource............................................................................................................... 37
Fig. 3.2 Utilisation of manpower management............................................................................................. 38
Fig. 3.3 Productivity of employee................................................................................................................. 38
Fig. 3.4 Steps in manpower planning............................................................................................................ 41
Fig. 3.5 Job analysis...................................................................................................................................... 42
Fig. 3.6 Performance standard...................................................................................................................... 42
Fig. 3.7 Recruitment cycle............................................................................................................................ 44
Fig. 3.8 Two type of incentives..................................................................................................................... 49
Fig. 3.9 Clarity of goals in the form of SMART........................................................................................... 51
Fig. 7.1 Classification of assets................................................................................................................... 107
Fig. 7.2 Lighting system in store.................................................................................................................112
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List of Tables
Table 2.1 Age distribution of the consumers................................................................................................ 26
Table 3.1 Job description of a retail salesperson........................................................................................... 43
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Abbreviations
B2B - Business to Business
CRM - Customer Relation Management
ROI - Return on Investment
POS - Point of Sale
RMS - Retail Management System
CSV - Comma Separated Value
EDC - Electronic Data Capture
PDA - Personal Digital Assistant
ERP - Enterprise Resource Planning
TCO - Total Cost of Ownership
RFID - Radio Frequency Identification
SOMS - Store Operation Management System
DIY - Do it Yourself
BPL - Below Poverty Line
APL - Above Poverty Line
GMROI - Gross Margin Return on Inventory Investment
OTB - Open to Buy
GM - Gross Margin
VM - Visual Merchandising
SOP - Standard Operating Procedure
SOPD - Standard Operations Process Document
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Chapter I
Introduction to Store Operations
Aim
The aim of this chapter is to:
• introduce the origination of stores
• elucidate the visual merchandise in stores
• explain the various store operations
Objectives
The objectives of this chapter are to:
• explain the logical activity flow of store operations
• describe the store operations management system
• elucidate various retail stores in India
Learning outcome
At the end of this chapter, you will be able to:
• understand the strategy behind store design
• identify retail management system for store operations
• know various store operations solution
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Store Operations
1.1 Introduction
Retailing is a ‘technology-intensive’ industry. Successful retailers work closely with their vendors to predict consumer
demand, shorten lead times, reduce inventory holding and thereby, save on cost. Wal-Mart had pioneered the concept
of building a competitive advantage through distribution and information systems in the retailing industry. Society
is changing and the evolution of the Internet in recent years is causing unprecedented changes in consumption
patterns. The virtual world is getting bigger, and in coming years it is going to add a feather in the cap as far as
retail industry in concerned.
1.2 Origination of Stores

In our present consumer-oriented culture, people do not shop simply to acquire items they need, but also to gratify
their wants. From the 1860s to the start of the Edwardian period, the western countries witnessed the development
and growth of department stores, which in turn had a major impact on gender relations. Today, it is the large purpose-
built structures like Selfridges (opened in 1909) that capture the modern imagination and yet these ‘cathedrals of
consumption’ were far less controversial as a consumer space by the early 1900s than they had been in the previous
30 years.
Fig. 1.1 Visual merchandise in stores

(Source: http://hubpages.com/hub/A-History-of-Visual-Merchandising-in-Retail-Stores)
It was during this period that many historians, such as Erika Rappaport and Judith Walkowitz, have charted the rise of
London’s main shopping areas and their role as a space of female conspicuous consumption. They have constructed
their arguments by examining masculine criticisms (although they also explore a number of early feminist attacks)
surrounding the female shopper.
The augment of the department store or grand emporium in the 19th century brought more changes in store design
and visual displays. The early department stores continued with the idea of displaying merchandise in complex and
luxurious setting. A retail store is a retail establishment, which gratify an extensive variety of the consumer’s personal
and residential product needs; and at the identical time offering the consumer an alternative of manifold merchandise
lines, at changeable price points, in all product categories. Retail stores more often than not sell products including
attire, furniture, home appliances, electronics, and furthermore select other lines of products such as paint, hardware,
toiletries, cosmetics, photographic equipment, jewellery, toys, and sporting goods. Definite department stores are
more hush-hush as discount stores. Discount stores frequently have central customer checkout areas, by and large
in the front area of the store. Department stores are more often than not ingredient of a retail chain of many stores
positioned around a country or several countries.
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1.3 Store Operations
Retailers drop millions of rupees per year due to contradictory store-level implementation of their corporate approach.
The cost bang of inconsistent execution is between 2-5 percent of annual sales. Un-coordinated corporate planning
result in uncertainty and precedence divergence in the store. Lack of two-way response prevents constant development.
Store managers are filled to capacity with communication and left to prioritise tasks on their own.
Field managers swamped by a glut of out-of-date MIS reports fight fires reactively as an alternative of providing
leadership. Labour schedules are out of footstep with genuine workload necessities. Even though tasks are completed
corporate struggles to authenticate acquiescence. Store operations enable retailers to make certain dependable
implementation of their corporate strategy by all stores and pull through the sales they would have otherwise lost.
Store operations comprise task manager (for closed-loop task management), Workforce Manager (for forecasting
and preparation labour based on sales forecasts, corporate initiatives, and employee skills and work predilection),
Time and Attendance (for time entry, labour tracking, and time costing functionality), KPI Activator (for real time,
KPI-driven alerts with the ability to assign corrective rejoinder based on best practices), and Store Walk (for ensuring
consistency from enhanced store walks and audits). Store Operations solutions facilitate retailers to boost efficiency,
augment sales, and comprehend rapid ROI. Store Operations has again and again implemented its solutions in 21
weeks or less, across numerous store formats at some of the world’s largest retailers.
The primary attitude at the rear the science of shopping is the simplest one. Public have confident similarities and
tendencies, which the retail environment must receive into account. Store operations are concerned with maximising
the efficacy of the retailer’s use of resources on a day to day basis. Retail store operation is about converting resources
into sales and profits. Store operation aims at maximising profits by providing a satisfactory experience and effective
service to customers by making optimal use of people, space and merchandise. Store operation is about executing
the strategies and policies of the retail business at the store level on a day to day basis. Store operations could be
seen from four perspectives namely: Product, Customers, Sales, and Place. Let us throw some more light on these
four important ingredients in this whole episode of ‘SO’:
• The ‘Product’ perspective will include type of merchandise, merchandise planning, merchandise display, and
so on.
• The ‘Customer’ perspective will include customer service, customer relationship, and customer satisfaction.
• The ‘Sales’ perspective includes selling process, sales promotions, pricing and discounting policies, and so
on.
• The ‘Place’ perspective will include location, managing space, fixtures and layout design, meeting statutory
requirements of the place and so on.
These four terms has a great linkage with one-another. After the development of a product, how it is going to serve
the customers matter a lot that is its sales and place from where the product disseminate. Most part of operations at
a store level can only be accomplished by detailed planning. Planning of store operations translates into managing
customers, manpower, merchandise, space, fixtures, promotions, statutory licensing and permissions from government
agencies, taxes, and so on. The other dimension of retail operation is about managing exceptions. This involves
things like managing the store during tough weather conditions, providing medical help as first aid to customers
who might get un-well in the store, fire-fighting plans and so on. Let us look at the major responsibilities of a store
manager, which are given below, in order to understand briefly what store operations would involve.
1.3.1 Major Responsibilities of a Store Manager

• Achieve sales targets as provided by the central office.
• Provide effective service to customers by providing proper attention and taking care of their needs.
• Right type of manpower so as to provide satisfactory service to customers.
• Suitable training on an on-going basis to manpower operating in the store.
• Proper merchandise is stocked and managed as per policy of the store.
• Merchandise is displayed suitably by making use of right fixtures and space.
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Store Operations
• Store lay-out and display is maintained as per the design provided by the central office.
• Fixed and semi-fixed assets, as well as current assets are maintained and managed well for achieving proper
utilisation and returns.
• Store operational expenses are managed well in order to achieve a profitable operation.
• All statutory licensing requirements are fully met.
• File regular tax returns in totality as per government rules.
• Describe the organisation structure of the Store Operations function and who should be responsible for what.
Retail store operation impression is one of the most noteworthy constituent of integrated planning. Although the
retail environment is a critical constituent of brand communications, many in-store marketing opportunities lack
thorough psychoanalysis in key areas such as fulfilment, media value, brand equity metrics, sales lift and by and
large ROI.
Having a winning vision and approach for the retail business are significant but not adequate to tip the odds entirely
in favour of success. Retail works with retailers to illuminate and operationalise the strategies they have to appreciate
their expansion objectives.
Consumer habits survey commissioned by Store Perform Technologies and afterward, conducted by Harris Interactive
found that the retailers spotlight on creating a constantly optimistic shopping understanding across all of their stores
can reap the benefits of customer loyalty. A retailer’s successful effecting of critical in store operations and initiatives
is more important to creating customer trustworthiness than providing discounts and promotions.
Retail works with retailers in all channels who are facing a multiplicity of equipped challenges. The endeavour of the
retailers is to enhance the process improvements, which resulted in increased sales and reduced operating expenses
for the clients. The team has decades of experience assisting major retailers in all aspects of store operations. The
skill-set includes following thoughts.
Labor Management
Operational Procedural Do
and Scheduling
Assessment Cumentation
Solutions
Conversion Rate Customer Service

Chain Wide Rollout
Assessment and Measurement and
Programs
Improvement Improvement
Implementation of
Workload/ Task
Customised Best
Balancing
Practices
Functional Analytics/Metrics/
Schedules Benchmarking
Fig. 1.2 Skill-set thoughts
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1.3.2 Assisting Major Retailers
Retail’s experts in store operations can provide assistance with respect to store vision and strategy, organisation,
operating metrics, coordination with upstream activities, service environment and functional operation.
The Store Performance Improvement Continuum
Labour
Operational Best Management Customer
Practices and Service
Effectiveness Scheduling Excellence
System
The Right People Providing an

Doing The Right “Interpersonal”
Streamlined and Things at The Environment that Invites
Organised Execution Right Time Visitation and Sales
Typical
Typical Retail Improvement Best in Class
Performer Range
Fig. 1.3 The store performance improvement continuum

(Source: http://www.retailforward.com)
1.3.3 Logical Activity Flow of Store Operations

Logical Activity flow is a kind of activity that links with one another and facilitate the store manager in finding out
the responsibilities allocated to his/her downline. Let us understand the diagram detailing the logical flow of all the
activities involved with store operations to get a broader view of the matter. From the following chart, one gets a
fair idea about the kind of activities that are involved in store operations.
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Store Operations
, Helping
Customer with Product Display
Attending Product and Visual
Location and Customer Customer Selection Merchandising
Store Layout Entry
Planning
Store Training
Maintenance Ambience Sales Team , Pos Software
and Repairs Maintenance
Customer Customer Billing

Relationship Data Process Sales Data
Management
To do Regular
Replenishments Analysis of
Sales Trends
Preparation of
To Maintain
To do Regular Merchandising
Stock
Stock Take Plan
Fig. 1.4 Major responsibilities of a store manager in a store operation
1.4 Store Operations Management System [Soms]

Store Operations Management System gives retail organisation the type of information tools that retail blockbusters
use, such as customer purchase histories, e-receipts, personalised marketing, even B2B, e-commerce and CRM/
ERP connectivity.
The aim of the store operation management system is to know accurately what sold best in every department, group
and season make a decision what to buy or mark down. Track ROI from your ads, mailings, promotions, sales and
discounts.
Thus, it is observed that a store operation management system accomplish store operations, in employing a
communication equipment. In the store, connected with at slightest one store workstation by way of a first line
inside the store and connected with a server by a second line outside the store. The communication apparatus judges
the operation type of each operation request sent from the store terminal and, when the operation form is a primary
operation, processes the operation appeal and, when the operation type is a second operation, transmits the operation
request to the server so that the server processes the operation task. Thus, has laid the groundwork for streaming
store administration and achieving greater accuracy in ordering and help one to cut costs and create more potential
for new services.
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Microsoft Dynamics Microsoft Dynamics
Retail Management Systems Retail Management Systems
Store Operations Head Quarters
HEAD QUARTERS
Fig. 1.5 Retail management systems for store operations

(Source: http://www.nitrosell.com/solutions)
From the above figure, it has been observed that the key feature is conversion to broad band. By recording the store-
operation manual on the server at head office, for example, we can make available the latest version electronically
for consultation at any time, paper lessly. It also helps in acknowledging electronic and other cashless payment
formats, and being easy to use and fast. Thus, it helps position new store staff better for their duties.
1.5 Microsoft Dynamics Retail Management System (RMS)

Drive retail growth with a flexible, connected solution
Microsoft Dynamics Retail Management System (RMS) offers small and mid-market retailers a complete point
of sale (POS) solution that can be adapted to meet unique retail requirements. This powerful software package
automates POS processes and store operations, provides centralised control for multi-store retailers, and integrates
with Microsoft Office system programs, Microsoft Dynamics GP, and other popular applications. Microsoft Dynamics
RMS is built on a proven Microsoft platform that adapts to meet unique and changing retail needs.
Set up and use easily

Minimise disruptions with a retail management solution designed for rapid installation and ease of use. The intuitive
interface in Store Operations makes training cashiers easier. Work with expert Microsoft Certified Partners to quickly
set up and tailor
Microsoft Dynamics RMS to meet your specific retail management needs. Enable employees to learn POS procedures
in minutes with built-in wizards and an intuitive user interface.
Customise data fields to track information you want to see about customers, inventory, and suppliers. Keep costs down
now and into the future with support for existing computers and OPOS (OLE for POS)-compatible peripherals.
Automate inventory and purchasing management

Store Operations Manager provides several easy-to-use tools to create, track, and manage your inventory.
Track and manage inventory using any stock and sales method and inventory types that include standard, serialised,
kit, assembly, matrix, lot matrix, voucher, non-inventory, and weighed.
Manage complex, multidimensional inventory requirements with easy-to-use matrix forms.
Track item movement and supplier histories, quickly generate purchase orders, and add items on the fly.
Export purchase orders to Microsoft Office Excel and Microsoft Office Word for easy customisation and viewing
in a matrix grid format.
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Store Operations
Streamline transaction processing

• Respond quickly to customer needs with efficient, personalised service.
• Whether your customers pay with cash, check, or credit, Store Operations makes sales transactions fast and
easy.
• Work with a customisable POS screen that offers immediate access to prices, availability, and stock location.
• Access customer histories at the POS; handle multiple tenders and partial payments at checkout; and quickly
create and process returns, back orders, sales quotes, work orders, and layaways.
• Expedite checkouts, target customer preferences to offer up-sells and cross-sells, and implement automatic
discounts for frequent shoppers.
• Eliminate credit card terminals and dedicated phone lines for card transaction processing.
• Help reduce shrinkage, false returns, credit card fraud, and unauthorised discounts with 31 levels of user security
features.
Improve marketing efforts

Target your marketing efforts based on accurate customer data, including preferences and detailed purchase
histories.
• Easily set up discounts, promotions, and sales to increase customer satisfaction.
• Work with flexible pricing structures to offer special pricing to your best customers.
• Send targeted mailings with offers and promotions to selected customers.
• Display up-sells so that associates can mention them.
• Collaborate with suppliers to advertise products, promotions, new items, or upcoming events to customers in
line with a secondary net display.
Analyse data with flexible reporting options

Access, analyse, and share current, detailed data across your entire business including multiple store locations—with
a wide range of flexible reports.
• Manager is a convenient, central location for creating and managing reports.
• Preview, search, and print daily sales reports and journals by register, batch, and receipt number, as well as close
cashier shifts quickly and accurately.
• Identify sales trends in every department or category, evaluate operations and financials, track results from sales
and ad campaigns, and set and monitor business policies across stores.
• Export report information directly into Office Excel, XML, Comma Separated
• Value (CSV) files or your email application.
Integrate with other solutions

• Help eliminate duplicate data entry, connect business information and processes, and protect your existing
software investments.
• Connect retail and financial management across a multi-store network with integration to Microsoft Dynamics
GP.
• Work with familiar Microsoft Office system applications such as Excel and Word for data analysis and
communications.
• Use Electronic Data Capture (EDC) and integrate with leading credit card services to reduce fraud and human
error.
• Manage accounts receivable in Microsoft Dynamics Retail Management System Store Operations, then trade
summary POS data with popular accounting software such as Intuit QuickBooks (U.S. version).
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• Work with independent software vendors to enhance existing functionality. You can also add new features,
functionality, and applications, including vertical solutions, accounting and enterprise resource planning (ERP)
integration, ecommerce solutions, personal digital assistant (PDA) and mobile/wireless stations, and additional
integration to EDC and credit card services.
Scale to meet business growth

• Work with a scalable, flexible platform that helps you adapt efficiently to mid-market business requirements
and drive a lower total cost of ownership (TCO).
• Retailers can deploy and manage Microsoft Dynamics RMS chain-wide, giving them the visibility and control
the need to compete in a highly competitive retail environment.
• Retailers can help drive more value from their existing investments and keep the same retail management
software and systems as their business grows into multiple stores and retail channels. As they add customers
and products to the system, flexible Microsoft SQL Server database technologies can store and manage virtually
unlimited amounts of information.
• Data generated at stores across the retail chain can be integrated with merchandising systems, warehouse systems,
and other back-office enterprise systems or portals, including Microsoft Office SharePoint Server.
• An extensive catalogue of Microsoft Certified Partner add-on solutions—including ecommerce, mobility,
business intelligence, merchandising, and others—further enhance the investment value of a solution that can
be tailored to suit demanding retail needs.
1.6 Retail Store in India

The Indian retail sector is on the cusp of a change, a very big change. This change is going to affect thousands of
retail store owners, small and big traders and Indian consumers alike.
The enlargement of retailers depends principally on their collection of environmental markets and chance of new
stores. Retail chains that discover the most excellent match between the positioning of the stores and uniqueness of
the local market are the most contemporary ways to accomplish something. From a consumer viewpoint, convenient
locations and product assortment drive store would be an utmost alternative to bridge this gap.
The retail sector keeps reinventing itself as it moves with the times and matches ever increasing customer demands
for efficient services and best prices. This has raised substantial challenges for the retail merchandising business
as one can endeavour to accomplish cost optimisation with the best processes in place as far as India is concerned.
Leveraging decades of experience in this sector, Wipro Retail unit provides focused solutions for this retail sector
in particular and helps one to achieve strategic business targets in a competitive market.
The in-depth retail knowledge provides one the insight and project execution skill to offer customised solutions in
the e-business, CRM, SCM, Technology Infrastructure, ERP, Data Warehousing, Stores Operations Management,
Retail Shrink Management, Retail Merchandising and Business Intelligence space. The offerings cover various
segments of the retail sector like grocery, specialty, pharmacy and convenience retailing. In the below mentioned
head we will throw light on a Wipro retail case study, which emphasise how the industry specialists and customers
through the Centres of Excellence in supply chain efficiency, retail merchandizing and pricing, RFID, pharmacy in
retail, in-store solutions and data analytics execute a process. Retailing is one of the pillars of the economy in India
and accounts for 13% of GDP.
The retail industry is divided into organised and unorganised sectors. Over 12 million outlets operate in the country
and only 4% of them being larger than 500 sq ft (46 m2) in size. Organised retailing refers to trading activities
undertaken by licensed retailers, that is, those who are registered for sales tax, income tax, and so on. These include
the corporate-backed hypermarkets and retail chains, and also the privately owned large retail businesses. On the
other hand, unorganised retailing, refers to the traditional formats of low-cost retailing, for example, the local kirana
shops, owner managed general stores, paan/beedi shops, convenience stores, hand cart and payment vendors, and
so on. In India, a shopkeeper of such kind of shops is usually known as a dukandar.
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1.6.1 Curtain Raiser to WIPRO Retail

Wipro Retail is a division within Wipro with both dedication and passion for retail. Our unsurpassed depth of
knowledge stems from the acquisition of Enabler in 2006, a company founded originally by retailers for retailers.
Deep retail knowledge gives us a unique insight into the key business levers and the ways that process and technology
can be blended to improve commercial performance. We are proud to work with a high number of the world’s leading
international retailers, amongst them; Morrisons, Supervalu, Tesco, Ahold, Sonae, DeSpar, Carrefour and Walmart.
Wipro Retail’s expertise and customer base spans across all retail industries (Grocery, Fashion, DIY, Department
Stores and Wholesale) and projects extend from PCI DSS to large ERP implementations. We have many long standing
relationships as our core proposition requires us to focus on customer satisfaction and value creation. Therefore,
Wipro Retail invests strongly in the establishment of long-term relationships with customers, allowing a deeper
understanding of the business, the joint deployment of the best solutions and increasing value over time.
Wipro Retail helps on to understand where the business is going and the challenges that are faced to lead organisational
transformations to the next level. We have the delivery expertise to partner retailers in making a sustainable difference
with proven experience and commitment to customer excellence, as key driving factors. Wipro Retail is an Oracle
Retail Tier 1 Partner, which deals in store operation management system (SOMS) already discussed in an elaborative
manner at point 1.4 of this unit, has enjoyed a long standing relationship that jointly leverages the power of the
Oracle Retail suite to provide end-to-end business and IT solutions for global retailers. Wipro Retail is the most
successful integrator of Oracle Retail solutions and boasts prime reseller status in many territories.
1.6.2 Big Bazaar: The Brand Building Challenge

The Big Bazaar brand name is in its growth stage. Pantaloon group faced various small and large scales troubles in
the introductory stage of the brand. Present years are the high growth in retail sphere as market has high potential to
sustain growth. The sales are increasing, more and more firms are coming to markets, foreign players are entering
into retail sector and finally presence of organised retail is increasing in retail sector.
Factors that shaped Big Bazaar during its life cycle:
Influence of Sarvana Stores located in Theyagraya Nagar, Chennai

Many people think that Big Bazaar was inspired by Wall Mart but the truth is that Kishore Biyani (KB) and his
team members are neither inspired by US ways of doing retailing nor they have been to US much. The credit for
foundation and inspiration goes to Saravana Store, a family –run 25 years old store, whose philosophy was – low
margin, high turnover. In that store, food, groceries, clothes everything had a separate section. It had around 120
people just to manage crowd. The single shop was doing business of more than 200 crore per year. This shop was
the template for Big Bazaar.
Observing customer regularly store operations

Regular customer feedback is also an influential factor for the success of Big Bazaar. The Big Bazaar has a separate
team that looks for customer’s purchasing pattern and how they like or dislike products, how they approach to
particular products. For example, unlike other stores where the most expensive and catchy item is placed at the front
display, Big Bazaar places the “Value for Money Item” at check out point.
Imbibed entrepreneurial spirit in organisation

Decision making power is given to every level of employee at Big Bazaar. KB has given risk-taking power, which
led to entrepreneurial spirits into every employee. Everybody in big Bazaar operates with speed and confidence
when it comes to decision making.
Building on core values

Core values of Indians, valuing and nurturing relationships and simplicity shaped the brand. Kishore Biyani always
believes in long term relationships, with customers, suppliers and employees. Once thinking about offering gifts
to employees close to Diwali, KB suggested giving them wall paints to keep their house clean. The paint is used in
Indian culture to keep house clean and brings freshness. The motive behind was to keep everything clean and bring
freshness in organisation.
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Strategic decisions taken to build the Big Bazaar brand
The strategic decisions that lead to building of Big Bazaar were as follows:
Real estate game
For a retailer, location is one of the most important things. According to KB, real estate cost should be less than 5
% of total sales of store in order to provide maximum benefits to customer. The strategic decisions to secure spaces
before other retailers join in have resulted in cost-saving. Also, it has created early presence in market.
Nurturing relationships
KB follows strategy to develop trust and nurture relationships with suppliers. This trust led to strategically correct
decisions most of the time. Whoever works with Future Group, either leaves in initial deals or continues forever.
Use of technology, scenario planning and story-telling Big Bazaar planning and design used advance technologies
like scenario planning and storytelling. These techniques were mainly used for store-design layout, store-location
selection. The strategy to use user focused, prototype-based development tool made the brand adapt to the fast
changing external environment.
Design Management
Design-led thinking helped Big Bazaar to achieve ‘customer-first’ objective and ultimately lead to better financial
performance. Big Bazaar strategy to focus on design led to creation of Idiom, an independent design and consultancy
firm, based in Bangalore. They are one of the few organisations in India having economist, ethnographers and
sociologists working across various teams as a part of Design management team. Back-end operations, supply
chain Harvard Business School just did a case study on Pantaloons’ supply chain and it says that Pantaloons’ is
the most cost-effective supply chain in the world. India may not have a modern supply chain but it definitely has a
cost-effective one. Retailers have made use of the existing supply chain.
1.7 Strategy behind the Store Design

There are certain bodily and anatomical factors and limitations, which are widespread to all the people shopping in
the store. Whilst there are numerous differences in shoppers based on tastes, preferences gender, age, income, and
so on there are a large number of similarities, which should be reflected in the design of the store. When you regard
as some basic facts there are some things which require to be memorised in the design of the retail outlet. Most of
the customers will have two hands and when they are standing usually, these hands will be situated just about 36
inches off the floor. This means that if you merchandise products below that height, your customers are going to
have to bend over. If they bend over, is there sufficient room for people to pass without knocking them? The strategy
rather pedagogy behind the store design talks up to some extent about these issues.
Do you use shopping baskets in your store? Where do you store them? Are they in stacks around the store or are
they located just in one place near the entrance. A good tactic to increase sales is to get the sales staffs to carry some
baskets and give one to many customers that has two items in their hands. Immediately, this will free up one hand
so that they can add more merchandise to the basket. Tactics like this increase the rupee value of each transaction
and there is no cost. The longer you can keep your customer in the store, the more they will buy. The quicker your
customers walk, the less they will purchase. If the store encourages a leisurely pace, the customers will see the
merchandise and the signs clearly. This will also contribute to purchasing more.
If the customer is walking through the complete store and considering a wide variety of merchandise, a substantial
amount of time is required. In some stores, buyers have been timed in spending four or five as much time as non-
buyers. If you can acquire your shoppers to shop longer, then your average business will also increase, on the other
hand, you have to be acquainted with how long your customers spend shopping in your store for you can design
strategies to augment it. The science of shopping shows quite obviously that store design and profitability are linked
very intimately. If your store has a good design, you will be more into moneymaking.
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1.7.1 Store Space: Case Study of Store Hanger

Retailers that give away hangers whether imprinted or not should consider storage space. Hangers can be purchased
in bulk to reduce costs and to avoid running out. Keep in mind that hanger boxes are usually on the large side and
may take up a lot of space in the stockroom. As sales clerks remove items from hangers, these recycled hangers
should also have a neat and organised space at the checkout counter.
Hangers are a critical part of any clothing display. Using the proper types of hangers will not only protect and
preserve the merchandise, but it will also help your customers find what they are looking for much faster. Hangers
for clothing and fashion accessories are available in a variety of styles, materials and sizes. Standard adult hangers
are usually around 17 inches wide, while children’s hangers are only 12 to 14 inches. Speciality hangers for pants
and skirts are available in 14 inches.
Economical plastic, durable metal and classic wood hangers may all be suitable to use in a retail environment. Before
choosing clothes hangers to use in your store, learn about the more popular types of hangers.
Plastic Hangers: Commercial plastic hangers are generally available in white, black or clear plastic. The quality
will run from lightweight, almost flimsy, plastic to the super heavyweight unbreakable hangers. Plastic hangers
work well as an all-purpose hanger. These are generally used for shirts, blouses, and dresses.
Wire Hangers: Metal, or wire, hangers will also vary in quality. The most inexpensive, lightweight metal clothes
hangers are the type you may receive with your dry cleaning. Heavier metal hangers won’t bend or sag and are
great for stores with a more contemporary look as wire can rust. Some wire clothing hangers are coated in coloured
vinyl to protect fabric.
Wooden Hangers: Classic wood hangers are available in a natural finish with chrome hardware or the higher end
teak wood with brass hardware. Wood hanger styles include coat hangers with or without wooden bars, hangers
with metal rods or lock bars on a spring to prevent pants from sliding.
Tubular Hangers: All-purpose tubular moulded hangers are the type also available to consumers and found in many
homes. They come in a large variety of colours. Using coloured hangers may increase sales appeal.
Padded Hangers: Not only does a cloth covered hanger protect delicate garments, the padded hanger is usually
covered with satin and therefore, a pretty way to display lingerie or other clothing. The padding helps to prevent
slipping and assists in preserving the shape of the garment.
Specialty Hangers: Retailers have many choices in hanger styles for unusual garments or non-typical situations.
Notched hangers are perfect for items with straps. Skirt/slacks hangers have metal or plastic clips on a metal rod
which prevent sliding. Another type of specialty hanger is the salesman’s hanger. These strong, chrome hangers
feature a space-saving style and are ideal for trade-shows or salespeople transporting garments.
Hanger Accessories: Hanger markers, cardboard tubes and other hanger accessories help retailers keep their
merchandise neat and tidy while creating an appealing display. Instead of purchasing different types of specialty
hangers, piggyback connectors can be used on most any hanger to allow two garments to be displayed together.
Soft plastic clips can attach easily to most hangers with notched tops. Also, foam hanger covers or strips can be
placed on most any plastic or wooden hanger to prevent items from slipping. Before buying commercial hangers
for a retail store, consider the following factors:
• Garment Type: The most important factor when choosing a hanger is to determine the type of garment to be
displayed. Of the many types of hangers available to retailers, each has its own particular function. For example,
the higher cost and thickness of wood would make it impractical to choose wooden hangers for displaying tee
shirts.
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• Store Atmosphere: Hangers should match, or at least blend, with a store’s decor. Take into consideration the
look and feel of the store when choosing hangers. Upscale boutiques may want to avoid lightweight plastic
hangers, while teak wood hangers may look out of place in a discount store.
• To give or not to give: Some retailers write their marketing plans to include custom printed hangers. Occasionally,
a retailer may even receive clothing from the manufacturer already on hangers. All of these hangers are generally
passed on to the customer and are considered a standard cost of doing business. On the other hand, more expensive
and higher quality hangers are generally reused as long as they remain in good condition.
• Storage Space: Retailers that give away hangers, whether imprinted or not, should consider storage space.
Hangers can be purchased in bulk to reduce costs and to avoid running out. Keep in mind that hanger boxes are
usually on the large side and may take up a lot of space in the stockroom. As sales clerks remove items from
hangers, these recycled hangers should also have a neat and organised space at the checkout counter.
1.7.2 Fraschetti: Automates Warehouse to Improve Operations

Fraschetti, a leading Italian hardware and household item retailer, purchases from more than 500 suppliers and
restocks approximately 2,500 sales points throughout Italy, often with exclusive products purchased in Europe or
the Far East and distributed under its own logo. Due to the size of the sector and the numerous product categories
within, the distributor has a prominent role in the exclusive distribution of big name brands. “To work efficiently
with traditional shops you have to be service oriented,” Giorgio Fraschetti, Vice President of sales, said. “We
have a network of 44 single-brand representatives connecting with the company at least once a day. Our program
involves deliveries at least twice a week over the whole area and once a week in the more inaccessible areas. In
some ‘privileged’ areas like Rome and Naples and the entire Latium coast, deliveries arrive every day. An order
received by noon today is filled by tomorrow.”
The widespread nature of the deliveries means Fraschetti manages an enormous number of orders and invoices each
day. Working closely with Intermec partner Incas, Fraschetti now uses Intermec’s 2455 vehicle mount computers in
place of traditional paper-based means of shipping and receiving to ensure the right products and correct amount are
delivered to the appropriate retail locations. The logistics involved in managing this many orders can be daunting.
Consider a large number of deliveries that each include an extremely complex assortment of goods of different
amounts, example, 10 pulleys, nine tubes, 11 boxes of nails, six bags of earth, four pipes and so on. The inventory
management and distribution process could be staggering. The use of Intermec’s 2455 vehicle mount computers
has enabled the Italian retailer to easily move nearly 12,000 items per day without error.
Improving inventory management

Delivery is guaranteed by Fraschetti; therefore 85 percent of the daily work involves orders received the same
day. To make it easier to locate and track items, goods are now checked upon receipt using Intermec 2415 wireless
handheld computers. The Intermec 2415 confirms quantities and makes note of any discrepancies in the delivery.
The content of the supplier’s shipping note is then loaded into a computer with the production of load units and
instructions for the formatting of the goods. After an item is formatted, it is assigned a bar code label. The bar code
label is identified by the Intermec 2455 vehicle mount computer. The goods are then handled as indicated by the
computer. The Intermec 2455 shows where to position goods in accordance with a specially designed logic as well
as the items’ destination. After the positioning of the goods, all handling, movement and checking is done using
the Intermec 2455.
Since using Intermec, the improvement in warehouse operations has been dramatic. The entire warehouse area
is now mapped allowing Fraschetti to track all of its items at all times. A considerable increase in the number of
operations performed and a steep fall in the number of errors occurred has contributed to the organisation’s increased
profitability. In the future, Fraschetti plans to implement an automation system for its other very important operations,
such as the optimisation of loads and the automatic weighing of larger packages.
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About Fraschetti
The company’s history began in 1870 when Francesco Fraschetti opened a small ironmongery in Ceprano and by
doing so paved the way for what was to become one of Italy’s leading household and DIY (do it yourself) item
marketing companies. The ownership of the company has always remained in the family and after periods of strong
growth and others of consolidation; it is now in its fourth generation. The company today operates across the center
and south of Italy providing a very high level of service and annual sales totalling around 35 million Euros. In the
last few years, the sector has moved on with the advent of the new DIY chains of shops, but the traditional sales
point, the old-fashioned hardware store, still accounts for the largest percentage of business.
About Incas
Based in Italy, from its foundation, the aim of the Incas group has been to find innovative methods for industrial
process automation and control. Today, this aim is fully realised within a modern, efficient and innovative company.
A marked specialisation in the two areas constitutes its core business, logistics and production monitoring, has
made it possible to develop skills that translate into powerful strengths: the ability to propose flexible and efficient
solutions supported by an extensive knowledge of system integration. Guarantee of reliability and providing support
over time.
1.8 Introduction to Store Operations Solutions

Store operations solutions is a sophisticated technology and database tools, which provide a retail organisation a
pathway. There are four ways by which the store operations solutions will be explained:
• Task Manager
• Workforce Manager
• Time and Attendance
• Store walk
For leaner convenience we are explaining these terminologies in a more elaborative manner.
1.8.1 Task Manager

Boost sales and cut costs by turning corporate retail strategy into store-level action with closed-loop task
management.
Task Manager gives retailers active control of every store, giving upper management the ability to turn strategy into
action, and the benefits of higher sales and improved performance.
This powerful solution streamlines store execution with one comprehensible channel of communication that focuses
stores on their objectives and provides real-time feedback and visibility of task compliance to field and corporate
managers. In short, it facilitates good tasks while eliminating bad tasks.
It gives store managers, field managers, and corporate the ability to clearly plan and communicate objectives across the
enterprise, optimise productivity throughout a variety of regions, and return the primary focus to their customers.
Whether it’s introducing a new line of merchandise, running promotions, or conducting product recalls, heads-up
management drives your chain’s ability to turn a healthy profit and continue to grow. Task manager gives your
managers exactly the information they need, without being overloaded, so that they can get out of the back room
more and into the store where they can make a difference.
1.8.2 Workforce Manager

Workforce Manager gives retailers complete control over budgeting, forecasting, and scheduling store labour, ensuring
efficient operations, on-time task execution, and consistent levels of customer service. The result stores generate
more sales while using labour rupees more effectively, leading to increased profitability and growth. Even better,
Workforce Manager’s power and complexity stay behind the scenes while managers and employees use simple,
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web-based forms that eliminate the frustration and drudgery of paper-based scheduling. The solution generates
optimised schedules that are in compliance with labour laws, union rules, and work policies while respecting employee
preferences, availabilities, and proficiency. Integration with Time and Attendance allows real-time monitoring of
key labour metrics and exceptions to ensure compliance.
To Workforce Manager, scheduling is not just about filling shifts for the day, it’s about matching skills and availability
to the actual tasks in and around the store. Powered by unique algorithms, Workforce Manager takes into account
all store activities—routine, sales-driven, corporate-directed, even vendor deliveries—and incorporates them into
labour forecasts that yield optimal labour schedules. It’s also the only labour scheduling.
Store Operations-I system is to fully leverage the ad hoc activities that account for more than 30 percent of work
in most retail stores.
1.8.3 Time and Attendance

It provides full-featured time entry, labour tracking, and time costing functionality. Time and Attendance provides
a wide range of features for managers and employees to track labour and stay in compliance with laws and rules. It
supports multiple time clock options, including clocks with the latest technologies such as fingerprint biometrics.
The Time and Attendance module for time entry, labour tracking, and time costing provides retailers with the
following capabilities to maximise productivity and compliance:
1.8.4 Store Walk

Lock in operational gains by fool-proofing store walks and audits throughout the chain. With Store Walk, retailers
have the tools to monitor and improve store operations and ensure compliance in a much more cost-effective and
timely manner. Once the customer reports that by using Store Walk, they are able to cut the district managers’
perstore audit times from multiple days to a matter of hours. Imagine the boost in productivity when applied to
every store in your retail chain.
Store Walk uses focused sets of questions, created and controlled by retail management, that are used to focus district
and regional managers’ attention on the parts of their stores that deserve the most attention. But Store Walk goes
beyond being an incredibly effective checklist. Problem areas that show up in the exception based system can be
used to automatically trigger tasks that fix issues using best practices as a model.With Store Walk, every visit and
walkthrough mean the start of major improvements to your retail business.
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Store Operations
Summary
• Retailing is a ‘technology-intensive’ industry.
• The augment of the department store or grand emporium in the 19th century brought more changes in store
design and visual displays.
• Retailers drop millions of rupees per year due to contradictory store-level implementation of their corporate
approach.
• Store managers are filled to capacity with communication and left to prioritise tasks on their own. Store Operations
enable retailers to make certain dependable implementation of their corporate strategy by all stores and pull
through the sales they would have otherwise lost.
• Store Operations solutions facilitate retailers to boost efficiency, augment sales, and comprehend rapid ROI.
• Retail store operation is about converting resources into sales and profits. Store operation aims at maximising
profits by providing a satisfactory experience and effective service to customers by making optimal use of
people, space and merchandise.
• Retail Store Operation impression is one of the most noteworthy constituent of integrated planning.
• Logical Activity flow is a kind of activity that links with one another and facilitate the store manager in finding
out the responsibilities allocated to his/her downline.
• Store Operations Management System gives retail organisation the type of information tools that retail
blockbusters use, such as customer purchase histories, e-receipts, personalised marketing, even B2B, e-commerce
and CRM/ERP connectivity.
• The enlargement of retailers depends principally on their collection of environmental markets and chance of
new stores.
• Retail chains that discover the most excellent match between the positioning of the stores and uniqueness of
the local market are the most contemporary ways to accomplish something.
• The retail sector keeps reinventing itself as it moves with the times and matches ever increasing customer
demands for efficient services and best prices.
• There are certain bodily and anatomical factors and limitations, which are widespread to all the people shopping
in the store.
• Hangers are a critical part of any clothing display.
• Hanger markers, cardboard tubes and other hanger accessories help retailers keep their merchandise neat and
tidy while creating an appealing display.
• Store operations solutions is a sophisticated technology and database tools, which provide a retail organisation
a pathway.
References
• Hub Pages. A History of Visual Merchandising in Retail Store [Online] Available at: <http://sarahmarie1.hubpages.
com/hub/A-History-of-Visual-Merchandising-in-Retail-Stores> [Accessed 17 February 2012].
• Microsoft Business Solutions. Retail Management Systems [Online] Available at: <http://www.digitalretailer.
com/RMSdemo/UIc.html> [Accessed 17 February 2012].
• Gilbert, D., 2002. Retail Marketing Management. FT Prentice Hall.
• Davies, B. & Ward, P., 2002. Managing Retail Consumption. John Wiley and Sons Ltd.
• Dynamicsrms. Microsoft Dynamics RMS - National Retail Federation [Video online] Available at: < http://
www.youtube.com/watch?v=-KGnnGUg5e4 > [Accessed 17 February 2012].
• Snehashar. Big Bazaar [Video online] Available at: < http://www.youtube.com/watch?v=0lMUGC_1MGU >
[Accessed 17 February 2012].
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Recommended Reading
• Barry, B., Evans, J.R. and Mathur, M., 2011. Retail Management: A Strategic Approach, Pearson Education.
• Krafft, Manfred; Mantrala, and Murali K., 2006. Retailing in the 21st century: current and future trends. New
York: Springer.
• Lamba, A.J., 2003. The Art of Retailing. Tata McGraw Hill, New Delhi.
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Self Assessment
1. Since when did the western countries witnessed the development of departmental stores?
a. 1850’s
b. 1860’s
c. 1960’s
d. 1950’s
2. A __________ is a retail establishment, which gratify an extensive variety of the consumer’s personal and
residential product need.
a. consumer store
b. retail store
c. warehouse
d. merchandise
3. ____________ managers are filled to capacity with communication and left to prioritise tasks on their own.
a. Store
b. Task
c. General
d. Deputy
4. Match the following:

A. It include customer service, customer relationship, and customer
1. Product
satisfaction.
B. It include location, managing space, fixtures and layout design,
2. Customer
meeting statutory requirements of the place.
C. It include type of merchandise, merchandise planning,
3. Sales
merchandise display.
D. It includes selling process, sales promotions, pricing and
4. Place
discounting policies.
a. 1-a; 2-c; 3-d; 4-a
b. 1-d; 2-a; 3-c; 4-c
c. 1-a; 2-b; 3-c; 4-d
d. 1-c; 2-a; 3-d; 4-b
5. Which of the following is an activity that links with one another and facilitate the store manager in finding out
the responsibilities allocated to his/her down line?
a. Store operation
b. Planning of store
c. Logical activity flow
d. Management system
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6. Which of the following statements is false?
a. Retail store operation impression is one of the most noteworthy constituent of integrated planning.
b. Having a winning vision and approach for the retail business are significant but not adequate to tip the odds
entirely in favour of success.
c. Retail works with retailers in all channels who are facing a multiplicity of equipped challenges.
d. Having a winning vision and approach for the retail business are not significant but adequate to tip the odds
entirely in favour of success.
7. _____________ offers small and mid-market retailers a complete point of sale (POS) solution that can be adapted
to meet unique retail requirements.
a. RMS
b. Soms
c. S.O
d. CSV
8. Which of the following is not an application of Microsoft Dynamics Retail Management System?
a. Drive retail growth with a flexible, connected solution
b. Improve merchandising efforts
c. Set up and use easily
d. Automate inventory and purchasing management
9. Which of the following is not one of the factors that shaped Big bazaar retail store?
a. Observing customer regularly Store Operations
b. Imbibed entrepreneurial spirit in organisation
c. Building on core values
d. Hand cart and payment vendors
10. Which of the following is one of the most important factors when choosing a hanger?
a. Garment type
b. Store Atmosphere
c. Accessories
d. Storage space
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Chapter II
Managing Customers
Aim
• introduce the importance of customers in retail business
• elucidate retail customers
• explain the types of customers
Objectives
• explain loyal customers
• describe customer segmentation
• elucidate the needs of customers
Learning outcome
• understand the kind of segmentation
• identify various loyalty programs
• understand the characteristics of customer loyalty
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2.1 Introduction
A successful retail organisation comprehends its market, its customers and the implication of strategic locality in
a more systematic manner, so that the competition in the retail industry can be easily tackled. Such organisations
need the most important micromarketing tools to examine where to put new stores, set up customer profiles, and
establish finest marketing practices in order to attract new customers.
In retailing, the customer is the reason for the existence of the retailer. People who make the purchase are the ones
who drive the business. A success of a retailer will depend on how well she/he identifies and understands her/his
customers. All retailing efforts should be directed at the individuals who will inevitably purchase the product or
services offered by the retailer. A retailer needs to research their customers; about how they are and how do they
make their purchases?
Retailers use a number of methods to identify their consumer base. The behaviors exhibited by the customer
when they shop for goods or services will tell a great deal about them.Is your retail store customer-centric? What
does being customer-centric even signify? Most area of expertise stores would articulate that they are focused on
customers, and would summit out that without customers their store would not survive. This is true. Simply being
there in the market, opening the store in a locality, stocking products and employing staff is not the similar as being
customer-centric.
Being customer-centric means that the whole thing you accomplish from the products that you bear, to the surroundings
that you lay them in, and the staff that you have to provide those customers is centered on and about customers and
their experience in the store. There is a huge dissimilarity between merely serving a customer and centering the
whole thing you do on the customer’s specific needs and fulfillment.
2.2 Definition of a Retail Customer

Before we venture in to defining a retail customer it is essential to comprehend the difference between the terms
‘customer’ and ‘consumer’. Many use both the terms inter changeably, and may cause confusion in the minds of the
students of retail management. The term ‘Customer’ is used for a person who buys the product from a manufacturer
or trader or retailer, but may or may not be the actual user of the product. The customer in turn may sell or gift or
use the product bought by him/her.
When a customer uses the product purchased by him/her then he or she becomes a consumer. Thus, a person who
had purchased the product is called “customer” and the person who actually used or consumed is called “consumer”.
For an example, a person purchased a shirt and gifted it to his son on his birthday. Here, the person who purchased
the shirt is the customer and the son who used the shirt is the consumer.
2.3 Types of Customers

In the present day, retail customers call the shots. They demand lower prices, better quality, a broader selection,
instant service, and round-the-clock access. If customers aren’t quickly satisfied, they change retailers as easily as
they change clothes.
In the retail industry, it seems as though we are constantly faced with the issue of trying to find new customers. Most
of us are obsessed with making sure our advertising, displays, and pricing all “scream out” to attract new customers.
This focus on pursuing new customers is certainly prudent and necessary, at the same time; it can wind up hurting
us. Therefore, our focus really should be on the 20 percent of our clients who currently are our best customers.
In retail, this idea of focusing on the best current customers should be seen as an ongoing opportunity. To better
understand the rationale behind this theory and to face the challenge, we need to break down shoppers into five
main types:
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Discount
Customers
Loyal Impulse
Customers Customers
Wandering Need-Based
Customers Customers
Fig. 2.1 Classification of customers
From figure 2.1 the learner can understand that the retail customers can be classified into five categories. Now, let
us discuss in detail about those entire retail customer in a one-to-one basis.
2.3.1 Loyal Customers

These are customers who visit the store often. They normally represent no more than 20% of our customer base,
but can make up for more than 50% of the sales. Naturally, we need to be communicating with these customers on
a regular basis by telephone, mail, email, and so on. These people are the ones who can and should influence our
buying and merchandising decisions. Nothing will make loyal customers feel better than soliciting their inputs and
showing them how much as a retailer you value it. Many a times, the more you do for them, the more they will
recommend you to others. Hence, loyal customers should form an important basis of a retail selling strategy.
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Shifting
Loyalty
Loyal Hardcore
Switchers
Customer Loyal
Soft-core
Loyalty
Fig. 2.2 Customer loyalty cycle
Philip Kotler, again, defines four patterns of behavior of loyal customers as below:
• Hardcore Loyal: Who buys the brand all the time
• Soft-core Loyal: Loyal to two or three brands
• Shifting Loyalty: Moving from one brand to another
• Switchers: With no loyalty (possibly ‘deal-prone’, constantly looking for bargains or ‘vanity prone’, looking
for something different)
Nothing will make a loyal customer feel better than soliciting their patronage and showing them how much you
value it. Many times, the more you do for them, the more they will recommend you to others.
2.3.2 Discount Customers

These customers are also called “Bargain Hunters’. They shop in the stores especially when there is a sale on.
Their buying decisions are based on the size of the markdowns (discount). This category of customers ensure better
inventory over turn and, as a result, it is a key contributor to cash flow. This group of customers, however, can often
wind up costing you money because they are more inclined to return product.
2.3.3 Impulse Customers

These customers do not plan their purchases. They are mainly window shoppers. They do not have plans to buy a
particular item at the top of their “To Do” list, but come into the store on a whim. They will purchase what seems
good at the time.
Visual merchandising in store and the window acts as a silent salesman for these customers. Clearly, this is the
segment of our clientele that we all like to serve. There is nothing more exciting than assisting an Impulse shopper
and having them respond favorably to our recommendations. We need to target our displays towards this group
because they will provide us with a significant amount of customer insight and knowledge.
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2.3.4 Need-Based Customers

These are customer who plans what they have to purchase. They have a specific intention to buy a particular type
of item. They do not spend too much time in the store. They do not normally do impulse purchases. People in this
category are driven by a specific need. When they enter the store, they will look to see if they can have that need
filled quickly. If not, they will leave right away.
Is your customer
your competitor?
Fig. 2.3 Need of customers

(Source: http://repossibility.com/wp-content/uploads/2009/12/New-Customer-Centricity-header-pic.png)
They buy for a variety of reasons such as a specific occasion, a specific need, or an absolute price point. As difficult
as it can be to satisfy these people, they can also become loyal customers, if they are well taken care of. Salespeople
may not find them to be a lot of fun to serve, but, in the end, they can often represent your greatest source of long-
term growth. It is important to remember that Need-Based customers can easily be lost to Internet sales or a different
retailer. To overcome this threat, positive personal interaction is required, usually from one of your top salespeople.
If they are treated to a level of service not available from the web or another retail location, there is a very strong
chance of making them loyal customers. For this reason, Need-Based customers offer the greatest long-term potential,
surpassing even the Impulse segment.
2.3.5 Wandering Customers

They have no specific need or desire in mind when they come into the store. They like to spend time in the store
but they seldom buy. For many stores, this is the largest segment in terms of traffic, while, at the same time, they
make up the smallest percentage of sales. There is not a whole lot you can do about this group because the number
of Wanderers you have is driven more by your store location than anything else. Although they may not represent
a large percentage of your immediate sales, they are a real voice for you in the community. Many Wanderers shop
merely for the interaction and experience it provides them. Shopping is no different to them than it is for another
person to go to the gym on a regular basis. Since they are merely looking for interaction, they are also very likely
to communicate to others the experience they had in the store. Therefore, although wandering customers cannot be
ignored, the time spent with them needs to be minimised.
Thus, using this considerate to help out turn Discount, Impulse, Need-Based, and even Wandering Customers into
Loyal ones will facilitate in nurture the retail business. Simultaneously, ensuring that our Loyal Customers have an
optimistic understanding each time they go into our store will only provide to augment our bottom-line profits.
Since a retailer is serious about growing his business, he needs to focus his effort on the loyal customers, and
merchandise the store to leverage the impulse shoppers. The other three types of customers do represent a segment
of the business, but emphasising too much on them means misdirecting the resources.
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2.4 Customer Segmentation
As per the Center for Business Planning of a Business Resource Software, Inc “The purpose for segmenting a market
is to allow your marketing/sales program to focus on the subset of prospects that are “most likely” to purchase your
offering. If done properly, this will help to insure the highest return for your marketing/sales expenditures.” Thus,
keeping in mind the above thought Market segmentation is a perception in economics and marketing. A market
segment is a detachment of a market made up of people or organisations sharing one or more characteristics that
source them to insist related product and/or services based on qualities of those products such as price or task.
A retail market segment is a group of customers whose needs are satisfied by the same retail mix because they have
similar needs and go through similar buying process. Retail market can be segmented in different ways, customers
can be grouped on the basis of the fact that they live in the same locality, have similar incomes, similar age and
education. Retailers use various data depending, which is best suited for their business.
2.5 Commonly used Bases of Customer Segmentation

Market segmenting is dividing the market into groups of individual markets with comparable wants or needs. A
retailer segments the market into dissimilar groups who have diverse needs, wants, behavior or who might want
diverse products & services. The most frequently used bases of segmentation are mentioned below:
Demographic
Segmentation
Geographic Psychographics
Segmentation Segmentation
Fig. 2.4 Bases of segmentation
After going through the above figure, it is clear that segmentation with the help of these three bases is noteworthy.
We will elaborately explain these three in a more in depth manner.
2.5.1 Demographic Segmentation

Demographic characteristics are measurable statistics about any given population. These variables are used by the
retailer to segment the market and select a target segment for business.
Demographic characteristics include data on the following:

• Population size
• Number of households in give area
• Income levels
• Levels of education
• Gender
• Age distribution
• Occupation
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• Marital Status
• Height/Weight/Sizes
• Color/Region /Caste
Many supermarkets segment market use demographics such as age, gender, marital status to develop their retail
mix. Retailers can also use demographic data in selecting the appropriate location in which to operate.
Income Groups: People in different income brackets demand different types of products or services. The population
can be classified based on the income like Upper Class, Upper Middle Class, Middle Class, Lower Middle Class and
Lower Class. Lower class can further be classified as Below Poverty Line (BPL) and Above Poverty Line (APL),
and so on.
Many retailers use income classification to understand the consumer spending habits. Lower-income consumers, for
instance, are more likely to eat at home, than less likely to buy luxury items and tends to be more practical in their
purchase than other income groups. Middle income consumers are generally educated and spend more on vacation
and meals outside the home than lower income people do. Like lower income people, middle class consumers tend
to search for higher- quality merchandise at lower price. People in the upper-income category are more likely to
buy luxury items, spend on travel, eat outside the home, be highly educated and own big houses.
Using the data on income, a retailer can identify where the customers are located and can select the locality for his
store. Alternatively, an existing retailer can change the product mix in his store to serve the majority of the more
profitable customers in his locality.
Age Groups: Age distribution of the consumers is also another important data, which a retailer requires. Normally,
the buying pattern of a group of persons in same age profile will be similar. The study of age groups and how they
behave in the consumer market is called generational marketing. The data on age can be categorised in the following
seven life stages:
Marital
Age Profession Family
status
4-14 years School Goers
15-23 years College Goers
23-28 years Working Singles
29-33 years Working Married No children

Working
34-50 years Working With Dependent Children
Married
Working
50- 60 years Working With independent Children
Married
60 above Retired
Table 2.1 Age distribution of the consumers
The next time you go shopping or watch a television commercial, observe how various retailers target their marketing
towards the different generations. For instance, the strategy in selling to seniors is to depict them as active and
attractive.
Think of all the commercials of products that feature healthy and energetic senior urging the consumer to buy the
product to enrich their lives.
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Retailers dealing with readymade garments, shoes, bicycle, Life Insurance, and so on use age wise segmentation
to market their products. All of the demographic data mentioned above can be turned into useful information for
the retailer.
2.5.2 Psychographics Segmentation

Psychographics simply refer to lifestyle analysis. Psychographic data provides insight into “what consumers do”
over a period of days, weeks, or even years. These data may include information on activities, interest, opinion and
lifestyle information. A consumer’s lifestyle often gives the retailer more accurate and detailed information on the
purchasing pattern of that consumer. Psychographics will study the following areas:
In India, careful study of the psychographics is a must for the retailer before a product launch or to decide the
products mix at a store. Having same standard product lines across the country may result in poor selling at many
outlets. Sometimes, even within the same city, sales of a product may vary from one outlet to the other outlet. A
retailer has to be in constant touch with the customers’ base to understand them better.
2.5.3 Geographic Segmentation

Geographic information deals with the physical location of the customer. Various retailers divide the retail market into
separate geographic areas. The areas may consist of a state, a region, or a few small blocks in a neighborhood. The
principle seeing that buyers in same geographic area behave similarly, geographic segmentation is use to decide the
market mix. Customers typically shop in outlets located close to their homes or offices, at the same time individual
retailer usually focus on the customer segment reasonably close to the outlet. For example, a maker of a very high
end luxury car will like to have his/her showroom in a posh locality of the city where most of his customers (rich
people) are located.
Even within the country, stores belonging to the same retailer must adjust to the unique needs of their customers
in different regions. Hotel chains serve spicier foods in Andhra Pradesh, more coconut based recipes in Kerala and
chettinad preparations in Tamil Nadu.
2.6 Customer Information Management

Customer information management is the practice of systematically collecting information about individual customers
and making it available to staff within a company to better inform the decisions they make regarding interactions
with that customer.
One of the main objectives of a retailer is to deliver consistent value and quality to the customer. Understanding
consumer need and their buying behavior is the first step towards providing the consumer with the kind of product
and service that he/she needs and demands. In order to create products and services, which are suited to the needs
of a changing consumer, a retailer needs to do research on buying habits, items purchased or not purchased and
so on. While it is possible to get this information through market research conducted by agencies, it is not always
possible to approach the customer besides the data is not always specific to a retailer. Hence, retailers use various
methods and programs for obtaining this information.
Retailers have realised the importance of repeat purchases by the customers. Therefore, they devised innovative
ways to retain the customers.
2.6.1 Loyalty Programs

One such method is by way of loyalty program. Sophisticated data mining techniques are available to helps companies
study buying patterns, consumer preferences and trends. This is really a useful tool to get business and for managing
inventory and supply chain.
Large retailers spend millions on tools and technology to gather more information about their customers. This
information is then used to design, develop and package products and solutions tailored to meet customer’s needs.
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Super markets discovered that people generally buy milk, eggs, bread and butter together. Therefore, they generally
stock these products close together so that a customer who picks up a carton of milk will subconsciously be encouraged
to pick up eggs, bread and possibly butter.
Data warehouses help in studying customer patterns, buying trends and behavior and provide a tremendous amount
of information to marketing managers and planners. In retail categories where products and services are at par,
customers’ relationship and therefore, loyalty programs play the role of differentiator. The blend of recognition and
reward offered through a loyalty program can encourage customers to be part of the program. When customers opt
for a permission-based loyalty program, they will be more willing to share identified.
The best way to coordinate marketing objectives across channels is by building a knowledge base of customer
behaviors and preferences. A well-conceived and executed loyalty program can be the key to turning shoppers into
profitable customers. A good customer loyalty program needs to possess the following characteristics.
• Visibility: A loyalty program must be highly visible, regardless of the channel. The retailer web site can show
special offers for program members, a catalogue can feature the program prominently and shoppers should be
asked if they would like to join. Cross promotional material should be present and easily available.
• Simplicity: To succeed, a loyalty program should be easy to use in all channels, minimise the fine prints.
• Value: The balance of reward and recognition must establish value in the customers mind and motivate
incremental purchase. Program rewards should be credited regardless of where the customer prefers to shop.
• Trust: Keep the promise made by the loyalty program. If the program promise is for a personalised and highly
valued service, don’t shower the customer with meaningless offers that obviously are available to everyone, or
don’t keep exclusive product previews as all are getting the same benefits.
2.7 Customer Service Principles

Customer service is a set of activities and programs undertaken by the retailer to make the shopping experience
more rewarding for their customers. These activities increase the value customers receive from the merchandise
and service they purchase. All employee of the retail firm and all elements of the retailing mix provide service that
increases the value of the merchandise. For example, an employee in the warehouse contributes to customer service
by making sure the merchandise is in stock. The employee responsible for store location and design contribute by
increasing the customer’s convenience in getting to the store and finding merchandise in the store.
2.7.1 Services Offered by Retailers

Some of the services offered by retailers are as under:
• Acceptance of credit cards extended store hours
• Alteration of merchandise
• Locate and identify merchandise
• Free home delivery
• Gift wrapping
• Salespersons in assisting the customers
• Shopping carts
• Play area for kids
• Warranties Rest room
• Parking
• Demonstration of merchandise
The above list is not exhaustive. There are many more innovative services a retailer can offer. But the most important
indicator of quality service is not only the number of services offered, but also how they are delivered by the
employee of the store.
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2.7.2 Strategic Advantage through Customer Service
Top retailers in the world differentiate their retail offering. Build customer loyalty and develops sustainable
competitive advantage by providing excellent customer service.Good service keeps customers returning to a retailer
and generates positive word-of mouth publicity, which attracts new customers.
Customisation and standardisation are the two approaches that retailers use to develop as sustainable customer
service advantage.
Customisation Approach
Customisation approach relies on the quality of interaction between a sales associate and the customer. This
approach encourages service providers to tailor the service to meet each customer’s personal need. This approach
is generally seen in high end apparels and accessories retailers. Here, you will see sales associates assisting the
customer individually.
The customised approach typically results in most customers receiving superior service. But the service might
be inconsistent because service delivery depends on the judgment and capabilities of the service provider. Some
service providers are better than others, and even the best service provider can have a bad day. In addition, providing
customised service is costly, since it requires better trained service providers.
Standardisation Approach
This approach is based on standardising key touch points of service delivery and ensuring that these guidelines are
followed strictly. Rules and procedures are set for customer. Through standardisation, customers receive the same
service in the store time after time. For example, at McDonald’s restaurants across the globe the customer receives
the same food and service. The food may not be exactly what the customer wants, but it’s consistent and served in
a timely manner at a low cost.
Store design and layout also play an important role in the standardisation approach. In most of the situations the
customer do not need the assistant of a sales person. They know what they want to buy and their objective is to find
it in the store quickly. In this situation, the retailer offers good service by providing a layout and signage that enables
customers to locate the merchandise easily, by having the relevant information in display, and by minimising the
time required to make a purchase including the billing.
2.7.3 Cost of Good Customer Service

Providing high-quality service, particularly customised service, can be very costly. Many organisations have learned
it the hard way after incurring heavy losses. It is necessary to understand the cost benefit analysis of providing
exceptionally good service. If managed well, good customer service can also help reduce cost and increase profits.
A study estimates that it costs 5 to 15 times more to acquire a new customer than to generate repeat business from a
present customer. Thus, it costs the retailer much less to keep its existing customers satisfied and sell more merchandise
to them compared with the cost of selling to people who are not buying from the business now. Retailers need to
consider the costs and benefit of customer services policies. Many retailers in western countries are reconsidering
their “no questions asked” return policy. Many retailers who were returning cash for returning are now giving store
credits.
2.7.4 Customers Evaluation of Service Quality

When customers evaluate the quality of retail service, they compare their perceptions of the service they received
with their expectations. Customers are satisfied when the perceived service meets or exceeds their expectations.
They are dissatisfied when they feel the service is below their expectations:
Customer Expectations
Customer’s expectations are based on a customer’s knowledge and experiences. Expectations vary depending on
the type of store.
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Customers expect a super market to provide convenient parking, to be opened from early morning to late evening,
to have a wide variety of fresh and packaged foods that can be located easily and to offer fast checkout at cash
counter. At the supermarket, customers normally do not expect to have a store employee standing in the aisle to offer
information about groceries or how to prepare meals. On the other hand, when the same customer goes to a specialty
store, they expect the store to have knowledgeable salespeople who can provide information and assistance. Similarly,
the service expectation of a customer from a road side tea stall is different to when he is visiting a star hotel.
Since expectations aren’t the same for all retailers, a customer may be satisfied with low levels of actual service in
one store and dissatisfied with high service levels in another store. Customers have low service expectation for self
service retailers like discount stores and supermarkets. Wal-Mart provides a unusual\ service for a discount store;
an employee stands at the entrance of each store, greets customers and answer questions. Because this service is
unexpected in a discount store, customers evaluate Wal-Mart’s service positively, even though the actual service
level of service is far below that provided by another specialty store.
Departmental stores have many more salespersons available to answer questions and provide information than Wal-
Mart does. But customer service expectations are also higher for departmental stores. If a department store customer
can’t locate a salesperson quickly for assistance, they are dissatisfied.
Perceived Service:
Customers base their evaluations of store service on their perceptions. While these perceptions are affected by the
actual service provided, service due to its intangibility is often hard to evaluate. Customers evaluate service quality
based on five service characteristics such as reliability, assurance, tangibility, empathy and responsiveness. Some
cues that the customers use to assess these service characteristics are shown in figure as under;
2.7.5 Service Recovery

Customer service delivery is inherently inconsistent, so service failures are bound to happen. Therefore, costumer
complaint is bound to happen in retail. Retailers should focus on the positive opportunities such customer complaints
generate. Service problems and complaints are excellent source of information about the retailer’s merchandise
and service.
Service problems enable a retailer to demonstrate his commitment to provide high quality customer service. By
encouraging complaints and handling problems, a retailer has an opportunity to strengthen its relationship with its
customers.
Most retailers have standard policies for handling customer complaints. If a correctable problem is identified, such
as defective merchandise, retailers may either offer to replace the merchandise or give a credit towards future
purchases or give cash refund. In many cases, the problem can be heard to identify whether it is uncorrectable or a
result of customer’s unusual expectations. In such cases, service recovery might be more difficulty. Retailers follow
this step for effective service recovery:
Listen to the Customer

Customers can become very emotional over their real or imaginary problems with the retailer. Often this emotional
reaction can be reduced by simply giving customers a chance to get their complaints of their chests. Store employees
should allow the customer to share their complaints.
• Accuracy of billing meeting promised delivery dates
• Guarantees and warranties, return policy
• Appearance of the store, salespeople
• Personalised service and communications, recognition by name
• Understand customers’ needs
• Prompt service, queries, calls and e-mails are answer quickly
• Interact with enthusiasm.
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Reliability Assurance
Tangibility Empathy Responsiveness without interruptions. Interruptions can further irritate customer. Store managers
should be empathetic towards a complaining customer and should be happy to receive the complaint. Employees
should receive carefully to determine what the customer perceives to be a fair solution to his complaint.
Providing a Fair Solution

When handling a complaint, the store employee must focus on how they can win the customer back, not simply
how they can solve the problem. Favorable impression arises when customers feel they have been treated fairly.
Customers typically prefer tangible rather than intangible resolution to their complaints. If tangible solution is not
possible, the best alternative is to let the customer feel that their complaint will have an effect in future. This can be
done by taking notes in front of the customer or writing to the customer about actions taken to prevent reoccurrence
of similar problems in the future. It is important that solution to the complaint is perceived as fair by the customer.
As solution is be win-win for the customers and the retailer discontent with the procedure used to handle a complaint
can overshadow the benefit of a positive outcome.
Resolve the Problems Quickly

Customer satisfaction is affected by the time it takes to get an issue resolved. The faster the issue is resolved, the
better.
Retailers can minimise the time to resolve complaints by reducing the number of people the customer must come in
contact with. As a general rule, store employee who deal with customer should be made as self-sufficient as possible
to handle the problem. Customer is more satisfied when the first person they contact can resolve a problem. When
customers are referred to several different employees, they waste a lot of time repeating their story and also the
chance of conflicting responses by store employees increases.
Effective service recovery significantly increases customer satisfaction, and produces positive word of mouth
publicity to the retailer.
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Summary
• A customer, also called client, buyer, or purchaser, is more often than not used to denote to a present or potential
buyer or user of the products of an individual or organisation, called the supplier, seller, or vendor.
• When the goods and services are bought and sold to end users, it is expressed as retail. Despite the fact that
retail may also be a small or mass buyer.
• Customer loyalty describes the tendency of a customer to choose one business or product over another for a
particular need.
• Loyal customers represent no more than 20 percent of our customer base, but make up more than 50 percent
of our sales.
• Discount Customers shop our stores frequently, but make their decisions based on the size of our markdowns.
• Impulse customers do not have buying a particular item at the top of their “To Do” list, but come into the store
on a whim.
• Need-Based Customers have a specific intention to buy a particular type of item.
• Wandering Customers have no specific need or desire in mind when they come into the store. Rather, they want
a sense of experience and/or community.
• Brand loyalty, in marketing, consists of a consumer’s undertake to repurchase or else carry on using the brand
and can be demonstrated by frequent buying of a product or service or other constructive behaviors such as
word of mouth encouragement.
• Customisation approach relies on the quality of interaction between a sales associate and the customer.
• The customised approach typically results in most customers receiving superior service. But the service might
be inconsistent because service delivery depends on the judgment and capabilities of the service provider.
• Standardised approach is based on standardising key touch points of service delivery and ensuring that these
guidelines are followed strictly.
• Store design and layout also play an important role in the standardisation approach.
• Providing high-quality service, particularly customised service, can be very costly.
• Retailers need to consider the costs and benefit of customer services policies. Many retailers in western countries
are reconsidering their “no questions asked” return policy.
• When customers evaluate the quality of retail service, they compare their perceptions of the service they received
with their expectations.
• Customers expect a super market to provide convenient parking, to be opened from early morning to late evening,
to have a wide variety of fresh and packaged foods that can be located easily and to offer fast checkout at cash
counter.
• Departmental stores have many more salespersons available to answer questions and provide information than
Wal-Mart does.
• Customers base their evaluations of store service on their perceptions.
References
• Diamond, J. and Pintel, G., 2008. Retail Buying. Peaseson Education.
• Gupta, S., 2005. Managing Customers as Investments. Wharton School Publishing.
• Infopark. Online Marketing: Managing Customer Relations [Online] Available at: <www.infopark.com/1818008/
crm-online-marketing> [Accessed 21 February 2012].
• Learn Marketing. Managing Customer Services Online [Online] Available at: < www.learnmarketing.net/
managingcustomerservicesonline.htm > [Accessed 21 February 2012].
• GHMconnect. Four Types of Customers [Video online] Available at: <http://www.youtube.com/watch?v=h2__
s10x9jkm> [Accessed 21 February 2012].
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• edmanley2. Customer Service Lecture 1 [Video online] Available at: < http://www.youtube.com/watch?v=AkDvT-
r66zk> [Accessed 21 February 2012].
Recommended Reading
• Wedel, M. and Kamakura, W.A., 2000. Market Segmentation: Conceptual and Methodological Foundations.
Amsterdam Kluwer.
• McDonald, Malcolm and D., 2004. Market Segmentation: How to do it, how to profit from it. Butterworth-
Heinemann.
• Sullivan, M., Adcock, D., 2002. Retail Marketing. Thomson Learning.
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Self Assessment
1. Loyal________ undergo better than soliciting their input and showing them how much you value it.
a. retailer
b. vendor
c. customer
d. manufacturer
2. ___________customers are driven by a specific need.

a. Impulse
b. Need based
c. Loyal
d. Discount
3. Which of the following statement is true?

a. In retail, the idea of focusing on the best current customers should be seen as an on-going opportunity.
b. Wandering Customers have specific need or desire in mind.
c. Need based customers are mainly window shoppers.
d. Loyalty is not verified by the actions of the customer.
4. Geographic information deals with the ________location of the customer.

a. physical
b. virtual
c. technical
d. generic
5. Which of the following is not one of the characteristics of customer loyalty?

a. Visibility
b. Simplicity
c. Value
d. Quantity
6. Which of the following types of customers is also called as discount customers?

a. Impulse
b. Need based
c. Loyal
d. Discount
7. Match the following:

1. Hardcore loyal A. moving from one brand to another
2. Soft core loyal B. no loyalty without any brand
3. Shifting loyalty C. who buy the brand all the time
4. Switchers D. loyal to two or three brands
a. 1-a; 2-d; 3-b; 4-d
b. 1-c; 2-d; 3-a; 4-b
c. 1-a; 2-c; 3-d; 4-b
d. 1-a; 2-b; 3-c; 4-d
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8. When a customer uses the product purchased by him/her then he or she becomes a ___________.
a. consumer
b. retailer
c. loyal customer
d. need based customer
9. For which of the following customers does visual merchandising act like silent customers?
a. Need based
b. Impulse
c. Discount
d. Loyalty
10. _______________ have no specific need or desire in mind when they come into the store.
a. Wandering customers
b. Need based customers
c. Discount customers
d. Impulse customers
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Chapter III
Managing Manpower
Aim
• introduce the concept of managing manpower
• elucidate the process of managing human resource
• explain the organisational structure of a retail firm
Objectives
• explain the steps in developing organisational structure
• describe the job analysis
• elucidate the manpower planning
Learning outcome
• understand the recruitment process
• identify the process of recruitment managing power
• know the management in retail store
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3.1 Introduction
To remain workable the organisation needs to be effectively staffed with the best qualified persons in each position.
We have gone through in the previous unit about the comprehensive view of managing customers with a flavour of
retailing. In this unit, we are going to talk about a manpower management, which further led to managing customer
in a better manner. As we have observed that retail had a great inclination towards the labour, in this chapter, retail is
a labour intensive industry; a human resource of the organisation is a critical factor in the success of the retailer.
Human resource management is very important in retailing because employees play a major role in performing
critical business functions. Retailers rely on people to perform the basic retailing activities such as buying, displaying
merchandise, and providing service to the customer. This chapter will deal with the major areas of managing human
resource like recruitment, selecting, training, supervising, evaluation and compensating sales associates.
3.2 Managing Human Resource

The process whereby individuals or persons are put to take measurement in the energetic running the task in an
organisation is called human resource management.
Hiring
Recruiting
Compensation
human
resources
planning
Benefits training
Evaluation
Fig. 3.1 Managing human resource

(Source:http://watermarked.cutcaster.com/901210127-HR-managing-human-resources-business-plan.jpg)
To find the outlay & ability of the person and assigned the right job. Managing human resource plays a noteworthy
role in a successful retail business. A well managed human resource will give a retailer advantage over his
competitors.
Since retail is a labour intensive industry, labour cost accounts for a significant percentage of a retailer’s total
expenses. Effective management of employee can produce a cost advantage for the retailer. The experience most
customers have with a retailer is determined by activities of employee who select the merchandise, display the stock
on the shelves, and provide service on the floor. An employee thus, can greatly influence the customer’s perception
about the store. The differentiation and retailer makes with his efficient employees cannot be duplicated by other
retailers.
For example, every department store knows that Nordstrom’s employee provides outstanding customer service;
however they are not able to develop the same customer oriented culture for their firm.
The manpower management is the actual utilisation of man in the detection of a particular goal or purpose, whereby
such individual does not get lost away from the focal point or said goal. Thus, in a layman language manpower
management is the capability of a personage to synchronise with the sub-ordinates and employees, which in turn
reflects the affluence of the company or firm or organisation.
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Fig. 3.2 Utilisation of manpower management
The objective of human resource management is to align the capabilities and behaviours of employees with the
short-term and long- term goals of the retail firm.
Productivity of an employee is an indicator of the performance of human resource management. Productivity can
be the retailer’s sales or profit divided by the number of employees.
Fig. 3.3 Productivity of employee

(Source:http://www.google.co.in/imgres?hl=en&biw=1366&bih=667&tbm=isch&tbnid=
w0ZZ4p4z4Z7kCM:&imgrefurl)
This relationship can be calculated for a specific period and monthly or quarterly and monitored for improving
employee productivity, which can be improved by increasing the sales generated by employee or by reducing the
number of employee, or both.
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While employee productivity is directly related to the retailer’s short-term profits, employee attitudes such as job
satisfaction and commitment have important effects on customer satisfaction and subsequent long term performance
of the retailer. A failure to consider both long and short term objectives can result in the mismanagement of human
resource and a result is bigger loss to the retailer.
3.3 Organisational Structure of a Retail Firm

3.3.1 Meaning of Organisational Structure
An organisational structure is a principally hierarchical perception of subordination of entities that work together and
add to serve one universal aim. Organisations are a variation of clustered entities. An organisation can be prearranged
in numerous diverse ways and styles, depending on their objectives and aim. The Organisational structure identifies
the activities to be performed by specific employees and determined the line of authority and responsibility in the
firm. An efficient organisational structure shall smooth the progress of working relationships between a variety of
entities in the organisation and may progress the working competence within the organisational units
In the present scenario organisational structure had a paradigm shift from vertical structure to horizontal one. There
are certain steps, which can facilitate an organisational structure. We will take into consideration gradually.
3.3.2 Steps in Developing Organisational Structure

The first step in developing organisational structure is to establish the task that must be performed in a retail firm
These tasks performed at the retail firm are divided into four broad categories:
Tasks performed under strategic management are:

• Develop a retail strategy
• Identify the target market
• Determine the retail format
• Design organisational structure
• Select store location
Tasks performed under merchandising management are:

• Buy merchandise
• Locate vendors,
• Evaluate Vendors
• Negotiate with Vendors
• Control merchandise inventory
• Develop merchandise budget plans
• Review open-to-buy stock positions
• Price Merchandise
• Discounts
The tasks performed by store management are:

• Recruit, hire, train store personnel
• Plan work schedule
• Evaluate performance
• Maintain store facility
• Locate and display merchandise
• Provide services like gift wrapping
• Handle customer complaints
• Prevent inventory shrinkage
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The tasks performed by operations management are:

• Promote the firm, its merchandise and services
• Plan communication programs and budget
• Select media
• Manage public relations
• Strategic Merchandising Operations Store
• Management
• Manage human resource
• Develop policies
• Plan career paths
• Distribute merchandise
• Locate warehouses
• Receive merchandise
• Mark and label merchandise
• Store merchandise, Sending merchandise to store
• Return merchandise to vendor
• Establish financial control
• Provide timely information on financial performance
• Forecast sales, cash flow, profits.
Once the tasks have been identified, the retailer groups them into jobs to be assigned to specific individuals and
determines the reporting relationships. Rather than performing the entire task mentioned above, individual employees
are typically responsible for only one or two tasks. Care should be taken that employee is not burdened by too many
tasks, at the same time to few task will lead to boredom.
Productivity increases when employees have the proper amount of authority to effectively undertake the responsibility
assigned to them. Example, buyers who are responsible for the profitability of a merchandise category need to have
the authority to make decision that will enable them to fulfil this responsibility. They should have the authority to
select and price the merchandise for their category and determine how the merchandise is displayed and sold.After
assigning tasks to employees, the final step is to determine the reporting relationship. Productivity can decrease
when too few or too many employee report to a supervisor. The number of subordinates is greater when they perform
simple standardise tasks, when they are well trained and competent, and they perform tasks at the same location as
the supervisor.
3.3.3 Retail Organisational Structure

Retail organisation structure differs according to the type of retailer and the size of the firm. A retailer with a single
store will have a completely different structure that a national chain. Owner-manager of a single store may be the
entire organisation. As sales grow, the owner-manager hires employees. Coordinating and controlling employees
in a small store is easier. The owner-manager simply assigns task to each employee and watches to see that these
tasks are performed properly. Each employee must perform a wide range of activities, and the owner manager is
responsible for all management tasks.
As sales increases, specialisation in management may occur when the owner manager hires additional management
employees. The owner manager continues to perform strategic management tasks. The store manager may be
responsible for administrative task associated with receiving and shipping merchandise and managing employees.
In contract to the management of a single store, retail chain management is very complex. Managers must
supervise units that are geographically distant from each other. In most large retail firms, the two senior executives,
typically called the CEO and COO, work closely together in managing the firm. One is primarily responsible for
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the merchandise and marketing activities of the firm and the other is responsible for the stores, human resource,
distribution, information systems and finance divisions.
Key activities like merchandise, planning, marketing, finance, visual merchandising and human resources are
managed from the corporate headquarters.
3.4 Manpower Planning

Manpower planning is the first step towards manpower management. It refers to the process of using available assets
for the implementation of the business plans. It also involves the process of coordinating and controlling various
activities in the organisation. An effective manpower planning requires a careful assessment of the future needs of
the organisation. It involves the development of strategies to match the requirement of employees and availability
of positions at a regional as well as a national level. Those in charge of manpower planning need to have a foresight
about the business plans. They need to plan the activities for achieving business growth.
They are required to estimate the business needs of the organisation and plan for the resources needed to realise
the business goals.
The steps in manpower planning are:

• Design job description and the job requirement
• Predict manpower plans
• Find adequate sources of recruitment
• Give boost to youngsters by appointment
• Best motivation for internal promotion
• Look after the expected losses due to retirement, transfer and other issues
• See for replacement due to accident, death, dismissals and promotion
Preparing
to
Recruit
Workforce
Planning
Developing Attracting
and Staff
Retaining
Staff
Recruiting
and
Selecting
Staff
Fig. 3.4 Steps in manpower planning

(Source: https://encrypted-tbn2.google.com/images?q=tbn:ANd9GcSZn6fQXPXVZISpBjFeW-
3phrfx7q9mfCaYG_SPowjVDoSpbeaF)
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Job Analysis
Job Analysis is a procedure to recognise and establish in facet the particular job duties and requirements and the
comparative significance of these duties for a given job. Job Analysis is a method where judgments are prepared
about data composed on a job.
Functional
Demands
Pre
Training Employment
Programs Screening
Job
Analysis
Chs
Safe Works
Consultation
Method
Compliance
Hazard
Identification
Fig. 3.5 Job analysis

(Source: https://encrypted-tbn3.google.com/images?q=tbn:ANd9GcTsKYqaSX5zmaTvQZl31gCIy9y_so-_
m7P8jHGTGbRFETsyASk6FA)
The Job Analysis identifies essential activities and is used to determine the qualifications of potential employees.
PERFORMANCE
MINIMUM SCORE
level I: Level II: Level III:

unsatisfactory Satisfactory Advanced
academic Academic Academic
performance Performance Performance
Fig. 3.6 Performance standard

(Source:https://encrypted-tbn0.google.com/
images?q=tbn:ANd9GcTdziMPkzBOt__3AHD3pxZzXydyIOQSJ9RaET7P94DlXXueo7xZ7g)
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The main purpose of conducting job analysis is to prepare job description and job specification, which in turn helps
to hire the right quality of workforce into the organisation. For example, retail salespersons responsibility may vary
from company to company and from department to department within the store. A salesperson selling perfumes
on the floor needs to be aggressive in selling, whereas salesperson selling expensive jewellery needs to have good
product knowledge to answer customer’s queries. Managers can obtain the information needed for a job analysis by
observing employees presently doing the job and determining the characteristics of exceptional employees.
3.5 Job Description

A job description is a list of the general tasks, or functions, and responsibilities of a position. Typically, it also
includes to whom the position reports, specifications such as the qualifications needed by the person in the job,
salary range for the position, and so on. A job description is usually developed by conducting a job analysis, which
includes examining the tasks and sequences of tasks necessary to perform the job. The analysis looks at the areas
of knowledge and skills needed by the job. The objective of a job description is to have a clear outline of duties and
responsibilities to make the screening process as direct and focused as possible
Here is a Job Description of a Retail Salesperson.
Position Customer Service Representative

Grade R3
Department Apparels - Men’s
Location Mumbai, India
To maximise sales through exceptional customer service and to work towards

Overview
customer delight and not just customer satisfaction
Table 3.1 Job description of a retail salesperson
Job Responsibilities
• Answer all customer queries and maintaining excellent customer service standards.
• Follow-Up for products sent for repairs or replacements with the sales and service team of the suppliers.
• Responsible for calling up customers to inform about special promotions or offers.
• Ensure housekeeping standards within the customer service counter as per company’s standards.
• Ensure leaflets, tags, CRM forms and so on. They are in sufficient numbers.
• Proactively promoting all value services available at the store level.
• Maintain a database of customers to initiate cross selling activities.
• Responsible for printing and replacing price tags, feature cards and so on, for all displayed products.
• Responsible for cash, credit cards, gift vouchers and so on.
• Process orders for delivery and installation to customer premises and follow- up with the logistics department
for executing the job in time.
• Handle customer complaints, warranty issues, after sales service and so on coordinate with suppliers for getting
the product repaired in the least possible time.
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3.6 Recruitment
Recruitment is the process of attracting prospective employees and stimulating them for applying job in an
organisation. As per the Wikipedia “Recruitment refers to the process of attracting, screening, and selecting qualified
people for a job at an organisation or firm. For some components of the recruitment process, mid- and large-size
organisations often retain professional recruiters or outsource some of the process to recruitment agencies.” Thus,
recruitment refers to the process of finding right people for the right job or function, more often than not undertake
by recruiters. It also may be undertake by an employment group or a member of staff at the business or organisation
looking for recruits. The need for recruitment may arise from any of the following:
3.6.1 Values of Recruitment

Most retailers like good corporate citizens follow some basic principles / values when recruiting personnel.The
retailer’s equal opportunities policy seeks to develop positive practice to promote equality of opportunity in
employment. Most retailers aim to attract and appoint the best candidates for the employment regardless of their
gender, race, colour, marital status, age, social background, ethnicity or sexuality.
All candidature proceedings are strictly confidential. Human Resources Department & Interview panel members
shall treat all the proceedings of interviews, information on applicants and all their deliberations as strictly
confidential.
The needs arise from changes in organisation and retirement policy. When a new store is planned to be opened the
manpower requirement for various positions can be estimated and hence, this is planned recruitment. Anticipated
needs are those movements in personnel, which an organisation can predict by studying trends in internal and external
environment. If a competitor opens a store close to yours and is paying higher wages you can anticipate that a certain
number of staff will leave your store. Resignation, deaths, accidents, illness give rise to unexpected needs
3.6.2 Process of Recruitment Managing Manpower

The cycle of recruitment is summarised in the figure below:
review what
New trustee
went well, needs
recruited
changing
Recruitment cycle
advertise for make

new trustee suggested
changes
Fig. 3.7 Recruitment cycle

(Source:https://encrypted-tbn0.google.com/images?q=tbn:ANd9GcTnkbnQkHdh2NZGti4Jjk4w04mlR_
oYysd9eYFhJHy0Ff4VDY3)
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3.7 Sourcing For Employees
The sourcing for employee is going to play a very important role. Sources for potential candidates can be both
Internal and External.
3.7.1 Internal Sources

Internal sources are from within the organisation such as:
Stage 1: Manpower, Planning
Stage 2: Recruitment, Requisition
Stage 3: Sourcing of Candidates, Reference Check
Stage 4: Selection, Decisions
Stage 5: Offer
Stage 6: Selection of candidates
Stage 7: Joining &Induction
Recruitment Cycle
Transfer: Transfer from one location to another suitable candidates are promoted internally to take up the
vacancy.
Promotion Internal Job Opportunity: The vacancy is advertised internally within the organisation that interested
candidates can apply for the same.
3.7.2 External Sources

In the External Sources candidates are taking into consideration the following subheads:
• Press Advertisement: Advertisement in suitable news papers is one of the major means of attracting candidates
for various positions. Even though this is an expensive method, it yields better results in attracting suitable
candidates.
• Educational Institutes: Many retailers have tie-ups with educational institutes for potential candidate. Placement
interviews are conducted at the end of an academic team to select suitable candidates.
• Placement Agencies: Retails employ services of placement agencies to source for candidates, with they cannot
source on its own. These placement agency supply manpower in large numbers, especially for entry level
positions. The placement agencies charge a fee, for their services. The fee is usually a percentage of the salary
of the candidates/position sourced.
• Employment exchange: Candidates from the employment exchange in sourced for entry level positions like
sales persons, when the requirement is huge.
• Labour Contractors: Contractors supply unskilled manpower for retailers. Retailers use an unskilled labour
in their housekeeping department.
• Employee Referral: Most retailers have an employee referral policy. Employee referral policy compensates
an employee monitory if he recommended a good candidate. Usually monitory benefit is paid to the employee
after the referred and selected candidates completes six month in the organisation.
Retailers’ uses a combination of sources to fulfil their staffing requirements. Various factors in the job markets influence
the demand and supply of manpower. The retailer’s internal factors like recruitment policy, human resources planning,
size of the firm, and cost of the recruitment and growth and expansion plans affect his recruitment strategy.
External factors like manpower supply and demand, labour market, image/goodwill of the retailer, political/social/
legal environment, unemployment rate, and competitor’s activity also affects the retailer’s recruitment plans and
staff cost.
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3.8 Careers in Retailing

Deciding a career is not for all time effortless, particularly for community who isn’t sure accurately what they want
to accomplish. On the other hand, for anybody who enjoys interacting regularly with the community, often times
showing off the latest products or fashions, retail may be presently the respond.
The speedy increase of the retail sector and its profound infiltration in a variety of parts of the country within a
tremendously little span of time has now been termed as the retail revolution by India media. In order to furnish to
the manpower needs of the retail business different retail management courses are being launched by several business
schools in India. As the sector is booming in India, a career in retail sector undertakes good wages and increase
prospective for the motivated youngsters. Retail management is associated with retailing business of departmental
stores and shopping malls. There is a gigantic demand for the retail management professionals to route all merchandise
shipments, to accomplish store sales and prosperity, administration of stores as well as communication with the
clients to gratify them.
Retailing offers a variety of career paths such as buying, store management, sales promotion and advertising,
personnel, operations/ distribution, loss prevention and finance. Retail offers almost immediate accountability for
talented people so they can reach key management position within a decade. The primary entry-level opportunities
for a retailing career are in the area of buying and store management.
Buying positions are more number- oriented, while store management positions are more people oriented. Retailers
typically want all of their staff to understand their customers and their merchandise.
As per the www.indiaedu.com “An estimated growth rate in retail sector in India has been about 30-40% with
establishment of more than 200 shopping malls. It is estimated that the retail sector will create over 13 million jobs
throughout the country by 2012. More than 60% of these jobs will be available in the rural areas.”
According to USA, today there has been a decline in the number of young people willing to consider retail as a
career. This leaves a virtual gold mine of opportunities for everyone else. In fact, the National Retail Federation
(NRF) indicated that the average annual salary for a retail manager is approximately $42,000, though at larger
department or chain stores it can skyrocket to $200,000 and more.. Therefore, most managerial staff begins their
careers in store management or buying.
3.9 Management in Retail Store

A retail store is usually managed by a store manager of a business manager. Successful store manager must have
an ability to lead and motivate employees. He/ She also need to be sensitive to the customers need, making sure
that merchandise is available and neatly displayed. Store management involves all the discipline necessary to run a
successful business; sales planning and goal setting, overall store image and merchandise presentation, budgets and
expense control, customer service and sales supervision, personnel administration and development and community
relationships.
• In a large retail store there will be numerous departments, classified for convenient operations like Apparels,
Footwear, Home furnishings and so on. Each of these departments will be headed by a department manager
who reports to the store manager.
• The departmental operation involves stock management, sales, customer service, visual merchandising and
housekeeping. The department manager is supported by a team of supervisors, senior customer service persons,
and customer service persons.
• The departments will be assisted by support functions both at stores and regional / head offices.
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3.9.1 Support Functions
• Inventory: The inventory plays a very crucial role in the operations as it keeps a check on the stocks in each
department. Every Inward and Outward has to go through the inventory control. They perform “stock take”
periodically. Perpetual (regular) inventory is conducted every month for all the brands of all the concepts. The
inventory team takes care of all the documentations involved in movement to merchandise to the store and
back to the warehouse.
• Information Technology (I.T.): The I.T. at the store is responsible for the infrastructure and software support at
the store. They work along with the other function to manage data on stocks, sales, price, discounts, inventory,
reports, prepare tax assessment.
• Administration: The Administration department is responsible to manage security, facilities and maintenance
of the store, issue of Gift Vouchers. It is also responsible for managing customer grievances.
• Cash and Billing: The Cash and Billing department is responsible to facilitate the billing process. They maintain
all records of sales transaction and report to the appropriate authority. The Cash and Billing department is headed
by Chief Cashier and supported cashiers.
• Marketing: Marketing takes care of various promotional events in the store like Diwali promotions, Annual
day celebrations and Promotions, Christmas promotions and so on. Marketing supports all the departments
in running their internal promotions by providing communication materials, taking care of visual branding,
Institutional sales, out-store tie-ups.
• Security: The Security department is responsible for the safety and order of the store. The Security personnel
conduct safety checks on employees and customers to avoid undesirable events. They conduct regular patrolling
in the store to safe-guard the premises and assets, maintain the parking areas, support in valet parking, checking
garments in trial rooms, maintaining staff and visitors movements, the security personnel reports to the store
manager.
• Maintenance: The Maintenance department is responsible for maintenance of facilities at the store like lights, air
conditioners, generators, escalators and elevators. The Maintenance personnel reports to the Store Manager.
• House-keeping: They are in-charge of maintaining the basic cleanliness and hygiene standards of the store.
The Housekeeping personnel reports to the store manager.
• Human resource: The HR function is responsible for the workforce management, like recruitment and
induction, training and development, compensation, maintaining personnel records, career planning, performance
management, Industrial and Employee relations. The Store HR manages the HR functions at the store.
• Commercial: The commercial department is responsible for financial control and audit of store and warehouse.
The department takes care of the cost control, financial accounts of store, payments like expenses incurred by
the company, budgeting, over heads, budge versus actual analysis, sales analysis, stocks inwards and outwards,
and payments of non-trading items.
• Warehouse: A Warehouse is a commercial building for storage of goods. The warehouse stocks goods received
from the vendor/manufacturer and on requisition is sent to the store. The warehouse operation largely involves
inspection of stocks which arrive at the ware-house, Tagging and Bar coding, safe keeping and retrieval, dispatch
to stores and customers, handling store returns.
3.9.2 Merchandise Management

• Merchandise management attracts people with strong analytical capabilities, an ability to predict what merchandise
will appeal to their target market, and a skill to negotiate with vendors as well as store management to get things
done. Many retailers have broken this function into merchandising planning and buying functions.
• Buying function of buyers are responsible for knowing customers needs and wants, monitoring competition and
working with vendors to select and purchase merchandise. They must constantly stay in touch with their store
by visiting them, by talking to sales associates and managers and by monitoring the data.
• Merchandise planners have a more analytical role that buyers do. Their primary responsibility is to determine
how many styles, colours, size and individual items to purchase. Planners are also responsible for allocating
merchandise to the stores.
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• Once the merchandise is in the store, planners closely monitor sales and work with buyers on decisions such
as how much additional merchandise to buy if the merchandise is doing well, or when to mark down the
merchandise if sales are below plans.
3.9.3 Project / Store Design

Retailers are finding that clearly defined, comfortable and visually pleasing stores give them that extra edge over
competition. Key elements of store design in future include easy-to-shop, easy to maintain, flexible store layouts.
Talented and creative architecture students find this department with good growth opportunities.
3.9.4 Training of Employees

The expression training denotes to the achievement of knowledge, skills, and competencies as an upshot of the
teaching of vocational or practical skills and knowledge that narrate to explicit practical competencies.
In the retail perspectives training is one of the imperative challenges as it’s impact is to reduce employee turnover
and to increase productivity. High turnover reduces sales and increases cost. Sales are lost because inexperienced
employee lacks the skill and knowledge about the company policies and merchandise to effectively interact with
customers. Cost increase due to the need to continually recruit and train new employees. Retail Training caters to the
retail industry and trains students for entry-level merchandising, sales and supervisory positions in the industry.
Training plays an important role in decreasing employee turn-over by creating an atmosphere of mutual commitment
in the firms. When a retailer demonstrates its commitment to employee development, employee responds by
developing loyalty to the company. Training is particularly important in retail industry because more that 70 percent
of retail employees have direct contact with the customer. They are responsible for helping customers satisfy their
need and solve their problems. A well trained employee will be able to meet the customer’s expectation and satisfy
his needs adequately. Training is crucial as it provides the new employee with valuable information about the
organisation’s culture, as well as information about company’s product, services and policies. Training for current
employees provides retail personnel with new information and innovative ways to get the task performed faster,
more accurately, and with less stress.
Training for the retail staff is usually conducted in the following areas:
• About the organisation: Here, the employee is informed about the organisation history, its structure, the policies
and procedures, rules objectives and expectations.
• Product knowledge: Product knowledge is very important for a retail sales person. He/she needs to know the
features, process, qualities and benefit of the product that they are selling. The sales person should also know
the current market trends and the offerings of his competitor. Product knowledge many times is the key factor
in the customer’s decision making process.
• Return and exchange process: The sales person should be aware of the policies on return and exchange of a
product in his store. This enables him to guide the customers properly in case they have an issue.
• Customer service: To serve the customer efficiently, the sales staff should be aware of the various ways to ensure
the customer is happy shopping at the store and will return in future. Most retailers attach a lot of importance
to customer service programs. The retailer’s customer service standards are communicated to the staff in such
programs.
• Personal grooming: The sales person in the face of the organisation to the customer hence he should be well
groomed at all time. This program will provide information to the staff regarding the stores grooming standards,
uniforms, shoes, personal hygiene.
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3.10 Motivation: A Key to Employee Performance
Performance is considered to be a function of ability and motivation, thus ability in turn depends on education,
experience and training and its improvement is a slow and long process. On the other hand motivation can be
improved quickly.
One of the critical tasks of human resource management is to motivate employees to work towards achieving the
firm’s goals and implementing its strategy. Many people know motivation as the driving force behind an action.
This is probably the simplest explanation about motivation. Motivation can be considered the state of having
encouragement to do something.
There is an old saying you can take a horse to the water but you cannot force it to drink; it will drink only if it’s
thirsty - so with people. They will do what they want to do or otherwise motivated to do. Whether it is to excel on
the workshop floor or in the ‘ivory tower’ they must be motivated or driven to it, either by themselves or through
external stimulus.
Retailers generally use three methods to motivate their employee:

Policies and Supervision
Having a written policy on what an employee is supposed to do and have a supervisor enforce these policies forms
the basis here. For example, retailer can have a policy on how customer has to be welcomed to the store. If employees
use the written policies to make these decisions, their actions will be consistent with the retailer’s strategy. It should
also be noted that strict adherence to the policies can reduce motivation. Employee will not have many opportunities
to improve on his area of work. As a result he may find his job uninteresting.
Incentives
Incentives are another method of motivating which a retailer frequently uses. A buyer will be motivated to focus on
the firm’s profitability if they receive a bonus on the profitability of the merchandise they buy. There are two type
of incentives normally used such as commission and bonus.
40
35
Percentage of Firms
30
25
20
15
10
5
0
Bonus Pay Bonus And Commission No Incentive
Commission Pay Pay
Pay (Pure Salary)
Fig. 3.8 Two type of incentives

(Source: http://ars.sciencedirect.com/content/image/1-s2.0-S001985019700045X-gr1.gif)
Incentives are very effective in motivating employee to perform the activity on which the incentive is based. But
incentives may cause employees to ignore other activities. For example, sales persons whose compensation is based
entirely on their sales may be reluctant to spend time say merchandising.
Organisational culture
The final method for motivating and employee is to develop a strong organisational culture. An organisational
culture is the set of values, traditions and customs in a firm that guides the employee behaviour. The guidelines are
not written in a set of policy documents but they are traditions that are passed along by experienced employee to
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new employee. Many retail firms have strong organisational culture that gives employee a sense of what they are
supposed to do on their job. For example, Nordstrom’s strong organisation culture emphasise customer service,
while Wal-Mart organisation culture focuses on reducing costs so the firm can provide low price to its customer.
Organisational culture are developed and maintained through stories and symbols. Values in an organisation culture
are often explained to new employees and reinforces to present employees through stories. A commission is a
compensation based on a fixed formula such as say 1 % of Sales. For example, many retail sales persons receive
compensation on the basis of the value of sales he has made.
A bonus is additional compensation awarded periodically based on an evaluation of the employees performance.
Example, store manager receive a bonus based on the stores performance relative to budgeted sales and profit.
Evaluation of the employees performance

The majority of business has a prescribed performance appraisal system in which employee job performance is
analysed on a customary root, typically once a year. A good performance appraisal system can to a great extent
promote an organisation. It facilitate direct employee activities in the direction of organisational goals by letting
employees know what is predictable of them, and it yields information for making employment judgments, such as
those regarding pay raises, promotions, and discharges.
Performance appraisal
Performance appraisal, also known as employee appraisal, is a method by which the job performance of an employee
is evaluated. Performance appraisal is generally done in terms of quality of the work done, quantity of the work done,
cost incurred and the time taken for the work. Performance appraisal is a part of the career development program in
an organisation. Performance appraisals are regular reviews of employee performance within organisation. Generally,
the aims of a performance appraisal are to:
A common approach to assessing performance is to use a numerical or scalar rating system whereby managers are
asked to score an individual against a number of objectives or attributes the basis for performance evaluation is
the goals that have been set. Goals which are specific, tied to rewards and voluntarily committed to by employee,
work as a motivator to perform well. Performance can be enhanced through measures taken to clarify and establish
work goals. Goals make the expected level of performance clear and help improve performance by measuring the
progress of a task. Good performance is recognised and poor performance is also be identified and addressed with
constructive criticism.
An important part of the goals is the measurement and the comparison of the employee’s actual performance with the
standards set. Ideally, when employees recognise employee training needs, forms a basis for personnel decisions:
• Salary increases
• Promotion, disciplinary action and so on
• Provide feedback on performance to employees
• Offer the opportunity for organisational diagnosis and development
• Facilitate communication between employee and administration themselves have been involved with the
goal setting and the choosing the course of action to be followed by them; they are more likely to fulfil their
responsibilities.
Some of the important features of goal setting are:

• Motivation: Involving employees in the whole process of goal setting and increasing employee empowerment
increases employee job satisfaction and commitment.
• Better communication and coordination: Frequent reviews and interactions between superiors and subordinates
helps to maintain harmonious relationships within the enterprise and also solve many problems faced during
the period.
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• Clarity of goals: Goals are clearly understood. In a retail organisation, the goals for performance would depend
on the role performed by the individual. The goals set for a buyer or merchandiser would be different from those
for the sales staff. For example, the sales staff will be evaluated on the basis of achievement of individual targets
and the departmental targets, and buyer will be evaluated for setting up a line of merchandise with maximum
sell through.
GOAL
Fig. 3.9 Clarity of goals in the form of SMART

(Source: http://www.michaelallangreen.com/wp-content/uploads/2010/03/goal.bmp)
Compensation
One key factor attracting and retaining employee is the method used to compensate and otherwise reward them.
Employee compensation refers to both the payment of money for services performed and any benefit the employees
is to receive from the retailer, such as health insurance, life insurance, paid holidays, car loan and so on. Whatever
method is chosen to reward the employee for their work, the compensation plan should be fair to all employees as
well as to the retail organisation.
Following is the description of various compensation plans:

• Hourly wages: The retailer pay’s the employee a fixed amount of money depending on the number of hours
he has worked.
• Straight salary: This is a fixed amount on a specified period of time at work. The payments are made monthly
in most cases.
• Straight commission: A commission is paid on the amount of sales an employee generates, in quantity or value.
Since this method compensates the employee bases on their own performance, this is preferred by employees
who are hard working and are highly extrinsically motivated.
• Salary plus commission: In addition to a fixed salary the employee also get a commission depending on the
sales he has generated. In this method, the employee is guaranteed a minimum salary and an addition commission
depending on his performance.
• Salary plus bonus. Many executives and senior managers prefer a system that gives them a salary but also
provides a bonus for extraordinary work. This system allows employee to earn a good living while also having
the opportunity to work harder and earn more money as bonus.
In addition to the above plans, retailers often grant the employees with fringe benefits. Some of the major fringe
benefits are:
• Insurance: Health and Life insurance is provided under this scheme. The insurance may be for the employee
only or for the employees’ immediate family.
• Recreational facilities: Many retailers offer employee facility to relax or work out. This may come in the form
of health club membership or an exercise room.
• Employee discount: Employees are often awarded discount at the retail outlet for products they purchase from
the retailer.
• Profit sharing: Profit sharing programs allow employees to share in the retailers overall profits. Employee stock
option is also another method of sharing the profits.
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Summary
• The HR function is responsible for the workforce management, like recruitment and induction, training and
development, compensation, maintaining personnel records, career planning, performance management, industrial
and employee relations. The Store HR manages the HR functions at the store.
• Job Analysis is a procedure to recognise and establish in facet the particular job duties and requirements and
the comparative significance of these duties for a given job.
• Manpower management is in addition called as Human resource management, which means employing people,
developing their resources, utilising and sustaining the process implicated are managing, planning, organising,
directing and controlling.
• Motivation and employee to perform better is another challenge.
• An organisational structure is a principally hierarchical perception of subordination of entities that work together
and add to serve one universal aim.
• Organisations are a variation of clustered entities. It allows the articulated portion of responsibilities for dissimilar
functions and processes to diverse entities such as the branch, department, workgroup and individual.
• Performance appraisal, also known as employee appraisal, is a method by which the job performance of an
employee is evaluated. .
• Manpower planning is the first step towards manpower management. It refers to the process of using available
assets for the implementation of the business plans.
• Recruitment is the procedure of attracting potential employees and stimulating them for applying job in an
organisation.
• Retail organisation structure differs according to the type of retailer and the size of the firm. A retailer with a
single store will have a completely different structure that a national chain.
• Teams can be both horizontal and vertical.
• Training plays an important role in decreasing employee turn-over by creating an atmosphere of mutual commitment
in the firms.. Training the employees to do the role better and faster is another important function.
• Training helps to reduce employee attrition and builds organisations ability to manage change.
• The process whereby individuals or persons are put to take measurement in the energetic running the task in an
organisation is called human resource management.
• The manpower management is the actual utilisation of man in the detection of a particular goal or purpose,
whereby such individual does not get lost away from the focal point or said goal.
• The main purpose of conducting job analysis is to prepare job description and job specification, which in turn
helps to hire the right quality of workforce into the organisation.
• Recruitment is the process of attracting prospective employees and stimulating them for applying job in an
organisation.
• A retail store is usually managed by a store manager of a business manager. Successful store manager must
have an ability to lead and motivate employees.
References
• Bradt, G. and Vonnegut, M., 2009. Onboarding: How To Get Your New Employees Up To Speed In Half The
Time. John Wiley & Sons.
• Mejia, G., Luis R., David B., Balkin, and Cardy, R.L., 2004. Managing Human Resources. 4th ed. Upper Saddle
River, NJ: Prentice Hall.
• Staffing and Recruiting Essentials. Employee Hiring Checklist [Online] Available at: <http://www.staffing-and-
recruiting-essentials.com/Hiring-Checklist.html> [Accessed 22 February 2012].
• eGyankosh. Managing Manpower. [pdf] Available at: <http://www.egyankosh.ac.in/bitstream/123456789/39074/1/
Unit-3.pdf> [Accessed 22 February 2012].
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• JamesVardaman. Human Resource Management Lecture 1 Part 2 [Video online] Available at: < http://www.
youtube.com/watch?v=6QFHXZOlCZs> [Accessed 22 February 2012].
• Nptelhrd. Lecture - 19 Manpower Planning [Video online] Available at: < http://www.youtube.com/
watch?v=zv2jKnaY2YU> [Accessed 22 February 2012].
Recommended Readings
• Grote, Richard C., 2002. The Performance Appraisal Question and Answer Book: A Survival Guide for Managers.
AMACOM Books.
• Kleiman, L.S., 2000. Human Resource Management: A Tool for Competitive Advantage. Cincinnati: South-
Western College Publishing.
• Noe, R. A., John R. H., Barry G., and Patrick M. W., 2000. Human Resource Management: Gaining a Competitive
Advantage. 5th ed. Boston: McGraw-Hill/Irwin.
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Self Assessment
1. ___________ refers to the process of finding right people.
a. Recruitment
b. Planning
c. Managing
d. Training
2. Which of the following statement is false?

a. Human resource management is a very important in retailing because employees play a major role in
performing critical business functions.
b. Retailers rely on customers to perform the basic retailing activities such as buying, displaying merchandise,
and providing service.
c. Since retail is a labour intensive industry, labour cost accounts for a significant percentage of a retailer’s
total expenses.
d. Effective management of employee can produce a cost advantage for the retailer.
3. Which of the following is a process in which individuals or persons are put to take measurement in the energetic
running the task in an organisation?
a. Management
b. Recruitment
c. Human resource management
d. Organisational structure
4. Which of the following is not one of the steps performed under strategic management?
a. Develop a retail strategy
b. Selecting store location
c. Buy a merchandise
d. Identifying target market
5. Which of the following task is performed under merchandise management?

a. Recruit
b. Promote the firm
c. Plan work schedule
d. Negotiate with Vendors
6. Which of the following is the first step of manpower management?

a. Manpower planning
b. Training
c. Recruitment
d. Resource management
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7. Which of the following is not a step in manpower planning?
a. Design job description and the job requirement
b. Predict manpower plans
c. Job analysis
d. Give boost to youngsters by appointment
8. A ___________ is a list of the general tasks, or functions, and responsibilities of a position.

a. job description
b. job analysis
c. job training
d. performance standard
9. __________ is the process of attracting prospective employees and stimulating them for applying job in an
organisation.
a. Management
b. Recruitment
c. Human resource management
d. Organisational structure
10. Which of the following is not a part of external sources?

a. Press advertisement
b. Educational institutes
c. Placement agencies
d. Recruitment cycle
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Chapter IV
Managing Merchandise
Aim
• introduce the concept of merchandise management
• elucidate the concept of supply chain
• explain the management of supply chain
Objectives
• explain the management of merchandise costs
• describe the management or merchandise quality
• elucidate the merchandise display
Learning outcome
• understand the keys to successful merchandise display
• identify the retail margin
• understand the GMROI tool
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4.1 Introduction
As a retailer, one of your important assets is ‘space’. On the other hand, in numerous situations the quantity of space
you have is a limited resource. It needs to be well managed. The homelands that have enjoyed the utmost trade and
communal development have been those with a well-built retail sector. Why has retailing turn out to be such a well-
liked method of conducting business? The credit goes to merchandise, which is an easier access to a multiplicity of
products, liberty of choice and elevated levels of customer service.
In previous unit we had observed that the terminology ‘retail’ is consequential from the French work retailer, meaning
‘to cut a piece off’ or ‘to break bulk’. The business processes are organised in a tree structure. The allocation of
consumer products commence with the producer and ends at the decisive consumer. Linking the producer and the
consumer there is a middleman—the retailer, who relates the producers and the eventually consumers.
After discussing a lot on how to manage customer and further manpower, the next important task is management
of commodity. The present unit “managing merchandise” leads in this direction. This unit provides the learner with
a comprehensive view of managing commodities.
4.2 Merchandise Management

Merchandising has steps forward to churn out to be so much further than the buying and selling of products. At the
instant no product should be purchased without a good idea to which it will be sold and when. In a merchandise
management, a business model represents a sample business situation in which the product may be used. A
merchandise management describes a state of affairs in which various parties use merchandise to achieve their
needs. Merchandise management can be defined as managing the various elements of merchandise, such as supply
chain, cost management, quality management and shipping procedures. We will discuss all these terminologies in
a more elaborative manner once we go into the depth of this unit
4.3 Supply Chain

Supply chain products successfully lend a hand to deal with business complication and optimise the supply chain.
With real-time group effort and visibility transversely the enterprise, decisions are made more speedily and disruptions
minimised.
Supply chain management is defined as the systemic, strategic co-ordination of the traditional business functions
within a particular company and across businesses within the supply chain, for the purposes of improving the long-term
performance of the individual companies and the supply chain as a whole (Mentser, 2001). Internet-enabled supply
chain applications model the supply chain, and when combined with advanced execution solutions, substantially
get better productivity from beginning to end quantifiable inventory and product cost reductions. These benefits are
comprehended all the way through sooner response to market opportunities, enhanced customer satisfaction, and
true group effort with suppliers and customers.
4.3.1 Managing Supply Chain

Managing supply chain involves a definite ambition, information and service level agreements. A goal could be
‘the ability to ship specified products to customers on time’. In order to successfully administer the supply chain,
following information is needed:
• Current average and peak demand for each product supplied
• Any anticipated increases in demand
• Length of time to receive new product from supplier
• Target inventory levels
• Reorder points and reorder quantities.
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The supply chain management necessitates proper understanding of supply & demand considerations. In order to
understand the product demand or requirement, we shall have to determine:
• Demand from customers by product & day
• Plant turnaround time by product
• Quantities already shipped to depots by products
• Extra inventory for new accounts
• Percentage of products to be upgraded
• Reports and trend analysis
In order to understand supply realities, we have to determine:

• Lead time from each supplier
• Volume discounts from each supplier
• Cost from each supplier
• Quality from each supplier
Ordering Documents is the next step wherein we review three types of documents:
• Purchase Orders from Buyer
• Shippers’ Challans/Documents
• Goods Received Note of the ware-house
Supplier’s Invoices: These solutions offer an integrated suite of advanced forecasting, planning, and scheduling to
manage the supply chain. An integrated framework supports various modules and state-of-the art tools for a broad
range of business decisions. These enable the business to monitor the condition of the supply chain and provide
immediate feedback and exception notices.
Supply chain solutions offer the following benefits:

• enhanced efficiency
• superior inventory management
• more capacity utilisation and throughput
• abridged operating and distribution costs
Better Visibility
• Common view of forecast, orders, and inventory across the supply chain
• Ability to access and use plant information to improve decision making
Enhanced Response and Implementation

• Reduced time required to respond to opportunities and disruptions
• Faster recognition of deviations
• Improved decision-making tools to determine the right response
• Improved integration for communicating new plans and schedules
• Information available to support ongoing continuous improvement
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4.3.2 Warehousing Facility
Warehousing facility should be appropriate to use up terns of right size, structurally sound, well maintained and
clean. The question arises - should size determine product volume or product volume determines size? This is defined
with the following parameters - proper equipment on hand (lighting, labeled racks, containers, forklift, and so on),
efficient product flow (LIFO vs. FIFO), security, and centralised or decentralised facility.
4.4 Managing Merchandise Costs

Cutthroat competition in the retail industry is generating a new dilemma for manufacturers: how to concord with
the accumulation of returned merchandise that is the outcome of a self-motivated liberalisation of arrival policies.
Merchandise cost management is an expensive and time-consuming activity for any retail organisation.
Now-a-days, aggressive retail atmosphere requires real-time data communication between stores and the corporate
office for store-level activities—including item look-up, stock counts, and transfers—in order to get better the
eminence of inventory information, in-store efficiency, and sell-through. Managing this mountain of merchandise
has turn out to be a principal meet head-on to manufacturers that must be familiar with and live out the products
flipside into their allocation channels for purposes of refurbishing, remanufacturing, recycling or liquidating the items
returned by end users. With the rising volume of substance, a noteworthy amount of a manufacturer’s productivity
may depend on its ability to deal with the invalidate flow of its goods.
We also need to understand Managing Merchandise Costs consists of purchase price, processing labor and product
longevity. Dealing with suppliers involves bid specifications as follows:
• Description
• Size
• Composition (that is Nylon or Polyester)
• Color
• Weight (that is lbs per bale)
• Construction
• Delivery costs and timetables
• In order to obtain the Best Value for the purchase, one should ensure:
• Competitive bids from several suppliers
• Bid specs and RFPs make “Apples vs. Apples” comparison possible, among several bids received.
The analysis of bids should consider the following:

• Freight and terms are made part of the price equation
• Technical & sales support
• Volume discounts and price guarantees
• Best price does not necessarily mean best value
• Reliable supply is as important as price
• Primary and secondary suppliers
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4.5 Managing Merchandise Quality

Managing merchandise quality translates into delivering a product that meets or exceeds specifications, auditing
procedures of new products, quality assurance for processed products & product security. Some of the quality
control activities that are conducted on receipt of supplies/production are as follows, depending upon the type of
products:
• Physically counting all or a specified % of received product or weighing bales
• Visually inspecting product for defects
• Isolating test pieces to measure shrinkage, durability, pilling, color loss and so on
• Individual operator audits
• 2% + random sample
• Generate a quality rating for each operator
• Shipped Product Audits
• Audit entire containers to develop a plant quality score
• Service Department Questionnaires
• Auditing product at customer locations
• Physical inventories
• Comparing actual usage to intended usage
4.6 Merchandise Display and Store Capacity

Merchandise displays are special presentations of a store’s products or services to the buying public. The nature
of these displays may range somewhat from industry to industry, but all merchandise displays are predicated on
basic principles designed to increase product purchases. Indeed, merchandise displays are an integral element of
the overall merchandising concept, which seeks to promote product sales by coordinating marketing, advertising,
and sales strategies.
Many business consultants consider that small business owners are among the leaders in ground-breaking merchandise
display strategies. W. Rae Cowan noted in Chain Store Age Executive, for example, that “in many instances, smaller
specialty chains are leading the way in store ambience supporting their overall marketing strategy in a broad range
of categories from fashion through hardware and house wares and building supplies areas. By their very nature,
specialty stores depend on their fixtures to generate a differentiation or niche in the marketplace and being physically
smaller in some cases allows for faster response to market trends and conditions such as, successful retailers today
are using their fixtures to productively dispense their merchandise and communicate an appropriate environment
on the retail floor.”
4.6.1 Basic Formats of Merchandise Display

Merchandise displays generally take one of several basic forms as discussed below:
• Storefront Window Displays: These typically open on to a street or shopping mall walk or courtyard and are
intended to attract passers by that might not otherwise enter the store.
• Showcase Displays: These typically feature items that (i) are deemed to be too valuable for display in storefront
set-ups, or (ii) are niche items of high interest to the business’s primary clientele. These display centers are
usually located in high traffic areas and typically feature multiple tiers for product display and a sliding door
on the clerk’s side for access.
• “Found-Space” Displays: This term refers to product presentations that utilise small but nonetheless usable
areas of the store, such as the tops of product carousels or available wall space. Storefront window displays and
“found space” displays are particularly popular tools for publicising and selling sale items.
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4.6.2 Keys to Successful Merchandise Display
Trudy Ralston and Eric Foster, authors of How to Display It: A Practical Guide to Professional Merchandise
Display, cited several key components of successful merchandise display that are particularly relevant for small
business owners.
• First, displays should be economical, utilising only space, materials, and products that are already available.
• Second, displays should be versatile, able to “fit almost anywhere, exhibit almost any merchandise, and convey
almost any message.”
• Finally, displays have to be effective. The ideal display should be readily visible to any passer-by and should
be arranged so that there is no time or space lag between when a potential buyer sees the design and when he
or she can react to it. The ideal display also shows the customer what the product actually looks like, not some
flat and intangible picture of it. Few other forms of promotion can give such a vivid presentation of both the
merchandise and character of a store.”
4.6.3 Important Tips on Merchandise Display

The effectiveness of these cornerstones of merchandising display strategy can be increased by remembering several
other tips as well, including the following:
• Allocate merchandise display space and expenditures appropriately in recognition of customer demographics. If
the bulk of your business’ customers are males between the ages of 20 and 40, the bulk of your displays should
probably be shaped to catch their interest.
• Be careful of pursuing merchandise display designs that sacrifice effectiveness for the sake of originality.
• Make certain that the cleanliness and neatness of the display is maintained.
• Do not overcrowd a display. Customers tend to pass over messy, busy-looking displays. Instead, Ralston and
Foster affirm that “a display should feature a single item or point of interest.” Every primary article [in a display]
must interact with every other so that they all come together as a group. If they don’t it will look as if there is
not one design, but several.
• Combine products that are used together in displays. For example, pairing ski goggles with other outdoor apparel
is apt to be more effective than placing it alone or with some other product that is only tangentially related to
skiing.
• Small items should be displayed in a way so that would-be customers can get a good look at them without
having to solicit the help of a member of the staff.
• Pay attention to details when constructing and arranging display backgrounds. For example, Foster and Ralston
counsel business owners to “avoid dark backgrounds when customers will be looking through a window, since
this makes the glass behave as a giant mirror.”
• Merchandise displays can sometimes be utilised to educate customers. A well conceived display could, for
example, illustrate a product use that may not have occurred to most customers. “In addition to selling actual
merchandise, display can be used to introduce a new product, a fashion trend, and a new ‘look’ or idea,” explained
Martin Pegler in Visual Merchandising and Display.
• “Display can be used to educate the consumer concerning what the new item is, how it can be worn or used,
and how it can be accessorised. The display may also supply pertinent information, the price, and other special
features.” All of these considerations need to be weighed when putting together a merchandise display. But
ultimately, the final barometer of a display’s worthiness is its ability to sell products. As Martin Pegler bluntly
stated, “The test of a good display today is: Does it sell?”
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4.7 Shrinkage & Loss Prevention

4.7.1 Shrinkage
The percentage of loss of products between manufacture and point of sale is referred to as shrinkage, or sometimes
called shrink. The average shrink percentage in the retail industry is about 2% of sales. While that may sound low,
shrinkage cost U.S. retailers over $31 billion in 2001 according to the National Retail Security Survey on retail
theft. Here, are the four major sources of inventory shrinkage in retail.
• Employee Theft: According to the National Retail Security Survey, the number one source of shrinkage for a
retail business is internal theft. Some of the types of employee theft include discount abuse, refund abuse and
even credit card abuse. Unfortunately, this is one loss prevention area that generally doesn’t receive as much
monitoring as customer theft.
• Shoplifting: Coming in at a close second is shoplifting. Customer theft occurs through concealment, altering
or swapping price tags, or transfer from one container to another. While shoplifting remains a smaller inventory
loss source than employee theft, stealing by shoppers still costs retailers about $10 billion annually.
• Administrative Error: Administrative and paperwork errors make up approximately 15% of shrinkage. Simple
pricing mistakes due to markups or markdowns can cost retailers quite a bit.
• Vendor Fraud: The smallest percentage of shrink is due to vendor fraud. Retailers report that vendor fraud
occurs most when outside vendors are responsible to stock inventory within the store.
4.7.2 Loss Prevention

It is concerned with the prevention of ‘disappearance of merchandise and currency’ within the store. Most retail
establishments take a physical inventory annually, while some do it semi-annually. This activity is termed as ‘stock
taking’ When the count is completed, the difference between the actual inventory on hand and what it should be
according to purchase and sales records is called shrinkage.
Some of the methods involved with loss prevention activities are as follows:
• Store Mapping: It represents the area identified within the store, within this area the stock take will be done
for all the items displayed or stored. In larger stores, there are several departments and sections and hence, it is
always helpful to demarcate areas as per different sections to be covered for stock-take activity.
• Wireless LAN: This is necessary to link the POS (point of sales) billing, stock inward or stock outward system
with the main server at a central location, to keep track of the activities happening at the store level.
• Task Assignment: Stock take is an important exercise and hence, needs to be assigned to people who can do
the same objectively. Thus, normally there is some-one from the central office or a senior member from the
accounts or software team is present who is familiar with the total stock-take process and is assisted by the staff
assigned to this specific task.
• Mobile Computers: This is used where the POS system as explained above is not linked within the LAN
(local area network). Here, the mobile computer is used to feed the stock-take data through internet and to get
the immediate feedback from the main office on the variation between the actual physical stock and the system
stock at the main office as per the records of inward, outward, sales, returns and so on.
• Barcode Scanning: It is a system whereby through a hand-held electronic instrument the scanning of barcodes
on each of the item is done to get the data entered into the stock-take software.
• Supervisory Control: There needs to be someone at the supervisory level who is keeping centrally track of
physical stocks at various locations and variations if any in different stores under his/her control and taking
necessary corrective steps about the same.
• Data Exchange: This is a system/process whereby POS data exchange takes place on-time basis with the main
data-base and maintains the information on various activities like stock inward, stock outward, sales, customer
returns, and balance stock position on-time basis. Thus, both the person at the store and at the central office can
access the same data on-line basis.
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• Exchange facility: It is also connected with the vendors thereby they are also in touch with the day to day
operation at the store level and are able to directly arrange for stock replenishments based on on-time sales
activity and stock levels at the store.
• Reports: These reports on physical stock take process showing item wise stock of all the items covered during
stock-take (through bar-code scanning). Report also shows the variation between the system stock and the actual
stock-take. There are other reports related to sales and stock also generated.
• Physical Stock Takes: Today’s organised retailers operate a chain of retail outlets across the territory of
operation, in various formats like Convenience Stores, Supermarkets and Hypermarkets. Daily groceries,
toiletries & cosmetics, and even fresh vegetables and fruits are on offer. The chains are well spread out with
stores covering large urban and suburban areas. The larger the spread, greater is the distribution of inventory
across the organisation.
It is always desirable for these enterprises to carry out physical stock take exercises for all the Retail Outlets and
Distribution Centres, so that stock visibility is 100% and also reconciliation can be done regularly. This prevents
pilferage and stock irregularities. The exercise is currently done meticulously, but is entirely manual. Therefore,
the time taken is too long and the loss of business is very substantial, since the store remains closed for business till
then. Further, the manual data consolidation takes too long and is very error prone.
The business wishes to implement a stock taking system that will eliminate these shortcomings in the manual process,
and will carry out the process much sooner so that there is a reduction in the loss due to closure. Following needs
presently partly or fully exist with respect to the different software available for Stock Take Solution in Retail:
Need #1: To identify, count and record the physical stock available in the store.
Need #2: To reduce manual errors in the process and increase accuracy.
Need #3: To ensure that the entire stock take exercise takes place in a timely manner so that loss of sale due to
closure is minimised.
Need #4: To have the entire data of the stock take exercise ready in a proper format without the need for any manual
data entry.
Need #5: To reduce product movement and handling during the stock take process.
4.8 Retail Margin Analysis

Mathematics is used at every level of retailing. From the basic functions of counting money and making change, to
computing the total amount of a sales transaction involving calculating percentages to determine discounts, sales
tax and shipping charges. More complex retail tasks require more advanced retail math skills. Use these retail math
calculators, retail equations and formulas to calculate gross profit margins, cash flow, start-up costs, break even
analysis, retail profitability, and dollar planning and control.
4.8.1 Inventory Turnover

Measuring inventory turn is the first step in building an inventory plan, which eliminates unnecessary inventory and
frees up cash. Controlling inventory turnover is the key to keeping our shelves stocked with interesting products and
keeping the cash flowing. We want to buy the merchandise, move it quickly and then repurchase more products for
our customers. However, if the turnover becomes too high, sales may be lost because of reduced customer selection.
Here’s how we calculate inventory turns to help create a proper inventory control:
• Start with the Beginning Inventory at Cost
• Add Purchases at Cost
• Subtract Ending Inventory at Cost
• Subtract Cost of Scrapped and Lost items (if applicable)
• Divide by the Cost of Average Inventory at the end of the month for the period under consideration (so if the
average inventory is to be calculated for the past. 12 months period, then average cost value is to be taken of
the end of the month inventory during the last 12 months period).
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• The result is the number of times the average inventory is sold and replaced.
• Inventory turnover can be calculated in whole, as well as by department or merchandise category wise. Inventory
turns can be calculated by the month, quarter, season or year.
4.8.2 GMROI
Gross Margin Return on Inventory Investment (GMROI also known as GMROII) is an important tool in analysing
your sales and inventory. The GMROI calculations assist retailer in evaluating whether a sufficient gross margin is
being earned by the products sold, compared to the investment in inventory required to generate those gross margin
dollars. The procedure for the calculation of GMROI is as follows:
• Find the average inventory at cost.
• Calculate the gross margin of the item.
• Divide the gross margin by the average cost of inventory to get GMROI.
• The result is a ratio indicating the number of times gross margin is earned from the inventory investment.
• GMROI calculation can be used to measure the performance of the entire shop, but it is also more effective if
used for a particular department or category of merchandise.
4.8.3 Break-even Point

The point in business where the sales equal the expenses is defined as the break-even point. At this point there is
no profit and no loss.
Break-Even Point (`) = Fixed Costs ÷ Gross Margin per unit
4.8.4 Retail Math Formulas

Use these retail math formulas to track merchandise, measure sales performance and create pricing strategies.
Formulas for calculating markup, gross margin, open to buy and other retail math equations are given below:
• Acid-Test Ratio = (Current Assets – Inventory) ÷ Current Liabilities
• Cost of Goods + Markup = Retail Price
• Retail Price - Cost of Goods = Markup
• Retail Price - Markup = Cost of Goods
• Break-Even (`) = Fixed Costs ÷ Gross Margin Percentage
• Contribution Margin = Total Sales - Variable Costs
• Cost of goods Sold (COGS) = Beginning Inventory + Purchases - Ending
• Inventory Gross Margin = Total Sales - Cost of Goods
• GMROI = Gross Margin (`) ÷ Average Inventory Cost
• Turnover = Net Sales ÷ Average Retail Stock
• Margin % = (Retail Price - Cost) ÷ Retail Price
• Markup (`) = Retail Price - Cost
• Markup % = Markup Amount ÷ Retail Price
• Net Sales = Gross Sales - Returns and Allowances
• Average Inventory (Month) = (Beginning of Month Inventory + End of Month Inventory) ÷ 2
• Open To Buy (retail) = Planned Sales + Planned Markdowns + Planned End of Month Inventory - Planned
Beginning of Month Inventory
• % Increase/Decrease = Difference Between Two Figures ÷ Previous Figure
• Quick Ratio = Current Assets - Inventory ÷ Current Liabilities
• Reductions = Markdowns + Employee Discounts + Customer Discounts + Stock Shortages
• Sales per Square Foot = Total Net Sales ÷ Square Feet of Selling Space
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• Sell-Through % = Units Sold ÷ Units Received
• Stock-to-Sales = Beginning of Month Stock ÷ Sales for the Month
4.8.5 Measuring Retail Performance and Productivity

Your shop has customers steadily coming through the doors, employees are busy and there is the frequent impact
of the cash register, but how well is your business really doing? One simple way to know if business is good is to
compare this year’s same-store sales data to last year’s revenue.
What if your store has been open less than a year?

It is critical for the success of your business to constantly work towards improving not only the efficiency of
employees, but the productivity of the store’s selling space and inventory as well. This can be achieved by using
various retail math formulas and calculations based on sales.
Performance of Selling Space

In view of the retail space becoming costlier it has become pertinent to measure the performance of the space from
time to time to ensure that the sales to space performance ratio is on an upward trend or in pace with the current
trends.
Sales per Square Foot

The sales per square foot data is most commonly used for planning inventory purchases. It can also roughly calculate
return on investment and it is used to determine rent on a retail location. When measuring sales per square foot, keep
in mind that selling space does not include the stock room or any area where products are not displayed.
Sales per Linear Foot of Shelf Space

A retail store with wall units and other shelf space may want to use sales per linear foot of shelf space to determine
a product or product category’s allotment of space.
Sales by Department or Product Category

Retailers selling various categories of products will find the sales by department tool useful in comparing product
categories within a store. For example, a woman’s clothing store can see how the sales of the lingerie department
compare with the rest of the store’s sales.
Measuring Productivity of Staff

In the present scenario cost of hiring and maintaining staff including taking care of their training needs make the cost
of staffing a significant expense, and hence, the retail management needs to keep the costs and relevant performance
parameters under constant control. Some of these parameters are given below:
• Sales per Transaction: Also known as sales per customer, the sales per transaction number tells a retailer what
is the average transaction in dollars. A store dependant on its sales clerks to make a sale will use this formula
in measuring the productivity of staff.
• Sales per Employee:When factoring sales per employee, retailers need to take into consideration whether the
store has full time or part time workers. Convert the hours worked by part-time employees during the period to an
equivalent number of full-time workers. This form of measuring productivity is an excellent tool in determining
the amount of sales a business needs to bring in when increasing staffing levels.
• These are just a few of the ways to measure a retail store’s performance. As retailers track these numbers
month after month and year after year, it becomes easier to understand where the sales are generated, by which
employees and how the store’s merchandising can maximise sales growth.
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4.9 Open-to-Buy Planning: Controlling your Inventory

Good inventory control is critical to ensuring an adequate level of stock is on hand for the amount of sales being
generated. A retailer can be sure to stock the right quantity of the right products at the right time by using an Open-To-
Buy (OTB) plan. Some of the concepts to be implemented along with the open-to-buy plan are explained below:
4.9.1 Store Level Stock Planning

After determining the broad categories of merchandise the store is to stock (men’s clothing, stationary, costume
jewelry, and so on), the retailer divides the broad categories into smaller categories called classifications (men’s
suits, tuxedoes, raincoats, and so on). In turn, the classifications are divided into sub-classification (single-breasted,
double breasted, and so on). A unit stock plan of the number of items to be stocked in each by price, style, color
and size is then prepared. The purpose of this approach is to ensure that the stock will present an assortment of
items that will satisfy the wants and needs of the broad section of targeted consumers. One element of the stock
plan approach is the model stock or basic stock list. This list will contain those items that the customer expects to
find in stock at all times. These are the musts or never-out of stock items, which are sometimes referred to as the
bread-and-butter items.
The number of items in all stock plans is multiplied by the price line to arrive at the dollar value of the planned
inventory. Adjustments in the stock plan may be necessary if the financial constraints preclude an ambitious stock
assortment.
4.9.2 Avoiding Mismanagement of Merchandise

To avoid mismanagement of merchandise, the below plan is applicable to all forms of retailing at all sales levels. It
is most often a six-month merchandise plan but there can be time frame variations depending upon the merchandise.
The first six-month plan includes February-March-April (spring) and May-June-July (summer). This plan is prepared
and finalised in the previous August to permit early buying of imports and other merchandise. The second six-month
plan includes August-September-October (fall); and November-December-January (winter). This plan is prepared
and finalised in the previous February for the same reasons as stated above.The following important items to be
considered on monthly basis when developing your six month. Merchandise Plan is as follows:
• Net Sales: This figure represents a realistic dollar estimate of your monthly merchandise sales. These sales
estimates are based on past experience and on future considerations including; business conditions, competition,
inflation, promotional plans, merchandising opportunities, and merchandise availability.
• Stock: In order to achieve your estimated (planned) sales figure you must provide sufficient stock to permit
a satisfactory selection for your customers.This stock figure can be determined by calculating your inventory
turnover rate or your sales-stock ratio, or by estimating the maximum quantity for each item or the stock
requirements based on expected weekly sales.
• Reduction: Reductions refer to the lowering of retail value of your inventory and is caused by planned
markdowns, shrinkage (stock shortage) and discounts to employees or other special groups. Since these are the
only three things that can cause the retail value of the inventory at the end of a period to have a lower valuation
than it should have been otherwise, hence, they are to be included in the plan.
• Purchases: This figure represents the dollar value of merchandise the buyer must purchase to replenish the stock
likely to be sold to your retail customers. It is calculated by subtracting the dollar value of the stock-on-hand
at the beginning of the month from the total dollar value of the planned net sales, shrinkage, and reduction for
the month. The result is the planned purchases for the month.
• Open-To-Buy: To arrive at the open-to-buy figure for the month, it is necessary to subtract (from the above
planned purchases figure) the dollar value of the commitments already placed for delivery during the same month.
Since each month is an entity by itself, it is not possible to carry any unspent open-to buy commitments over
to the next month. Knowledgeable buyers generally commit about 50 percent of the planned purchase figure in
order to allow funds for reorders, fill-ins, and to take advantage of unexpected marketing opportunities.
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4.10 Keywords
• Information: Integration of processes through the supply chain to share valuable information, including demand
signals, forecasts, inventory, transportation, potential collaboration, and so on.
• Inventory Management: Quantity and location of inventory, including raw materials, work-in-progress (WIP)
and finished goods.
• Cash-Flow: Arranging the payment terms and methodologies for exchanging funds crossways entities surrounded
by the supply chain.
• Value: Value is the supplementary profits over and beyond the costs of structure the network. Co-creating
value and sharing the benefits suitably to persuade effectual Managing Merchandise participation is an input
challenge for any supply system.
• Retail logistics: “The process of managing the integrated flow of merchandise from buying, through distribution,
into the retail store, and ultimately into the hands of the consumer”.
• Sourcing Strategy: Identifying and prioritising supply and demand improvement opportunities by area of
spend.
• Sourcing Operating Model: Process and organisation required to support the overall sourcing strategy, goals
and objectives.
• Vendor Management: Approach and process required to manage vendors to ensure that product is provided
at the right total cost with minimised risk.
• Cost Management: Knowledge of product/service total cost and applying the understanding of cost drivers in
vendor negotiations.
• Sourcing Technology: Tools required to enable the sourcing organisation to realise cost-savings goals.
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Summary
• Merchandising has steps forward to churn out to be so much further than the buying and selling of products.
• Supply chain products successfully lend a hand to deal with business complication and optimise the supply
chain. Managing Supply Chain involves a definite ambition, information and service level agreements. A goal
could be ‘the ability to ship specified products to customers on time’.
• Warehousing facility should be appropriate to use up terms of right size, structurally sound, well maintained
and clean.
• Managing merchandise quality translates into delivering a product that meets or exceeds specifications, auditing
procedures of new products, quality assurance for processed products & product security.
• Merchandise displays are special presentations of a store’s products or services to the buying public.
• The effectiveness of these cornerstones of merchandising display strategy can be increased by remembering
several other tips as well.
• The percentage of loss of products between manufacture and point of sale is referred to as shrinkage, or
sometimes called shrink.
• Measuring inventory turn is the first step in building an inventory plan, which eliminates unnecessary inventory
and frees up cash.
• Controlling inventory turnover is the key to keeping our shelves stocked with interesting products and keeping
the cash flowing.
• Gross Margin Return on Inventory Investment (GMROI also known as GMROII) is an important tool in
analysing your sales and inventory.
• In the present scenario cost of hiring and maintaining staff including taking care of their training needs make
the cost of staffing a significant expense, and hence, the retail management needs to keep the costs and relevant
performance parameters under constant control.
• The number of items in all stock plans is multiplied by the price line to arrive at the dollar value of the planned
inventory.
• Reductions refer to the lowering of retail value of your inventory and are caused by planned markdowns,
shrinkage (stock shortage) and discounts to employees or other special groups.
• To arrive at the open-to-buy figure for the month, it is necessary to subtract (from the above planned purchases
figure) the dollar value of the commitments already placed for delivery during the same month.
• Integration of processes through the supply chain to share valuable information, including demand signals,
forecasts, inventory, transportation, potential collaboration, and so on.
References
• Jakson, T. and Show, D., 2008. Mastering fashion buying and merchanidising management, Palgrave.
• Cooper, M.C., Lambert, D.M., & Pagh, J., 1997. Supply Chain Management: More Than a New Name for
Logistics. The International Journal of Logistics Management.
• egyankosh. Managing Merchandise. [pdf] Available at: <http://www.egyankosh.ac.in/bitstream/123456789/39075/1/
• slideshare. Merchandise Management [Online] Available at: <http://www.slideshare.net/Annie05/merchandise-
management-presentation-704616> [Accessed 23 February 2012].
• RCABelfast. CIMA E3 Lecture 16 Managing Supply Chain [Video online] Available at: <http://www.youtube.
com/watch?v=FAl0dHaqsH4> [Accessed 23 February 2012].
• eHow. Advertising Techniques : Visual Merchandising Tips [Video online] Available at: <http://www.youtube.
com/watch?v=NXeoQPzVz2k&feature=results_main&playnext=1&list=PL98D7EB1D75128083> [Accessed
23 February 2012].
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Recommended Reading
• Halldorsson, A., Kotsab, H., Mikkola, J. H., Skjoett-Larsen, T., 2007. Complementary theories to supply chain
management. An International Journal.
• Hines, T., 2004. Supply chain strategies: Customer driven and customer focused. Oxford: Elsevier.
• Ketchen, Jr., G., & Hult, T.M., 2006. Bridging organisation theory and supply chain management: The case of
best value supply chains. Journal of Operations Management.
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Self Assessment
1. In a _______________, a business model represents a sample business situation in which the product may be
used.
a. merchandise management
b. retail management
c. business process
d. communal development
2. Which of the following statement is false?

a. Merchandise management can be defined as managing the various elements of merchandise, such as supply
chain, cost management, quality management and shipping procedures.
b. In a merchandise management, a business model represents a sample business situation in which the product
may be used.
c. The allocation of consumer products commence with the consumer and ends at the decisive producer.
d. A merchandise management describes a state of affairs in which various parties use merchandise to achieve
their needs.
3. What is the ability to ship specified products to customers on time called?

a. Merchandising
b. Warehousing
c. Supply chain
d. Retailing
4. Which of the following is not required to understand the product demand?

a. Demand of customers by product and day
b. Extra inventory for new accounts
c. Lead time from each supplier
d. Report and trend analysis
5. Which of the following is not one of the benefits offered by supply chain solutions?
a. Enhanced efficiency
b. Lead time for supplier
c. Better visibility
d. Enhanced response and implementation
6. ____________is/are special presentations of a store’s products or services to the buying public.

a. Merchandise displays
b. Merchandise business
c. Merchandise management
d. Merchandising
7. Which of the following is not one of the basic formats of merchandise display?
a. Storefront window displays
b. Showcase displays
c. Found space displays
d. Economical displays
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8. __________ term refers to product presentations that utilise small but nonetheless usable areas of the store.
a. Storefront window displays
b. Showcase displays
c. Found space displays
d. Economical displays
9. Which of the following is not one of the major sources of inventory shrinkage in retail?
a. Employee theft
b. Shoplifting
c. Vendor fraud
d. Displays
10. ____________ represents the area identified within the store, within this area the stock take will be done for
all the items displayed or stored.
a. Store mapping
b. Wireless LAN
c. Task assignment
d. Mobile computers
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Chapter V
Introduction to Stores
Aim
• introduce the store planning
• elucidate the basic functions of store houses
• explain the sizes of store
Objectives
• explain the various types of constructions of store
• describe the types of doorways and flooring
• elucidate the types of roofs
Learning outcome
• understand the size of the stores
• identify the varieties of stores
• understand the importance of safety/ health
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5.1 Introduction
In this chapter, we will see the various aspects of storage planning and store buildings to ensure smooth stores
operations.
5.2 Basic Functions of Stores Houses

• To receive raw materials, components, equipments, finished goods, arrange for their inspection and provide
adequate and proper storage for them.
• To issue these items to inventors as and when demand arises from user units and keep account of the same.
• To ensure proper preservation and maintenance of stock.
• Carry out verification of go and assist in effective purchasing.
• To adopt inventory (or stock) control measures for reduction in costs.
• To carry out environmental functions like collection of scraps and waste and salvage, recovery and recycling
of materials, which cannot be used straight way.
• In order to properly discharge the above functions, storage buildings and stockyards have to be planned in a
proper way.
Since various organisations have different needs under different situations, it is difficult to generalise sitting and
construction of storage buildings. Based on problems commonly encountered with the existing store buildings some
guidelines can be drawn.
5.2.1 Size of Stores

In order to determine the volume of the stores building and the storage space therein needed in an organisation
many factors have to be considered.
• Storage Activities Involved -Receipt, sorting, storage, handling and issue
• Volume of Stock Transaction -Type of stock, volume of stocks handled at a given time and handling methods
adopted
• Handling Methods - Manual / mechanical power handling and whether in storage area or away from it
• Materials to be stored
• Type of item (raw materials for use in production line, finished items)
• Physical characteristics of items (size, weight, volume, shape, nature whether perishable / hazardous or not)
• Location of storage (whether in the manufacturing area or away from it)
• Storage Methods -whether in bulk or in shelves, racks, bins and so on
• Special storages open stockyard required or not
• Physical characteristics of space available
• Floors - whether single storey or multi-storey
• Column spacing
• Clear height
• Aisles
• Doors
• Light
• If materials are received by road, number of vehicles to be loaded / unloaded and at what time
• If receipt is through rail transport, number of wagons required inwards/outwards and at what time
• Number of staff to be employed and space for their working, recreation and other amenities.
From the above data, the site and building details can be worked out.
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5.2.2 Site Selection

While selecting the site of the stores building, the following points are to be considered:
• The storage house should be as near as possible to the geographical centre of the area to be served by it.
• If road transport is to be a major feature, the proposed site needs a good access road, is to be away (preferably)
from a traffic congested area and be as near as possible to some highway.
• If rail traffic is to be handled, it should be near a railway line, must be sufficiently extensive, and level enough
to allow construction of railway sidings.
• Site should be fairly level, having proper drainage facilities and close to the essential services like electricity
and water supply and so on.
• Site should have space for movement of vehicles, area available for outside stockyard in the open and provision
for future expansion, if required.
• Land cost should be reasonable. Besides the above there may be restrictions imposed by bye-laws of certain
local bodies, pollution control boards or fire departments and so on.
5.2.3 Construction
After selecting a suitable site, you have to plan the size, shape and the type of construction of the storehouse. This
is to be done carefully because the building would be in use for a long time and any mistake made at this stage may
cause day to day problems in running the stores affecting its efficiency. As regard the storehouse buildings, they
can be either single-storied or multi-storeyed.
Single-storied buildings
Where extensive land is available in proper location without any restriction; single storied building is the best
proposition. It is difficult to make cost comparison with multi-storey constructions. But you should bear in mind
that land cost may be the highest single cost and an overriding one for a proper site. Normally, clear spans between
columns can be about 20 m for steel framed construction and about 12 m for concrete construction. In case of single
storied construction, storage modules can be conveniently fixed for standard bins and so on for storage. This would
not be easily possible in multi-storey construction where clear spans may be limited.
Advantages of single storied construction for storehouses are as follows:

• In a single storey construction, smaller structural members can be used resulting in a shell of lighter construction
than that for a building having upper floors. Hence, cost per cubic metre of storage space would be less.
• Since there are no upper floors, weight carrying capacity is not normally limited by structural considerations.
• Natural day light can be better utilised.
• Natural ventilation will be more easily ensured.
• Greater flexibility of layout is possible.
• Fire risk can be reduced as fire-fighting is much easier in single storied building.
• However, special care is needed to ensure dimensional compatibility of binning, racking and handling
arrangements.
Multi-storeyed buildings
Where land cost of a suitable site is prohibitive or the site is small, multi-storeyed store construction would be
preferred. However, handling appliances used would need heavier supporting members or supports at closer spacing,
restricting the freedom to plan for convenient storage modules. The factors in favour of multi-storeyed constructions
are:
• More space is available for stores for storage in a small area.
• If stores that is to serve production / process plants already operating in the upper floors of a multi-storeyed
building, a multi-storeyed stores building connected therewith would be better.
• Better natural lighting for work and cleaner air for the storage of delicate materials at the top floor.
• Use of gravity for delivery to lower levels from the floors above.
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Prefabricated buildings may normally be considered. Standard modular units can be used to save time, money and
maintenance cost.
Foundation / Floors
Floor is an important feature of any storehouse because not only does it have to carry the weight of all stock held but
also provide a suitable surface for the operation of wheeled vehicles, whether manually or mechanically operated. Floor
must therefore, be of adequate strength and have a good, hard, smooth finish with a minimum of obstructions.
First of all you have to decide whether the floor would be at ground level or not. This would depend on handling
methods employed. Where overhead cranes and so on are used, the floor should preferably be at the ground level.
In case lift / trucks / conveyors are used, the floor can be raised to the height of the platforms of road lifting. In that
case, ramps may be provided from ground to floor with suitable slope and widths to allow access for vehicles.
Accordingly, the anticipated floor loading can be calculated and design of the foundations and floor may be done.
The following points are to be considered while designing the foundations floors:
• When power driven vehicles stop and start frequently, floor should be reinforced as loads created by such vehicles
exceed those by normal rolling motion.
• Normal factor of safety for floor strength for rolling loads is more than that for static uniformly distributed load.
In addition, dynamic load imposed by a moving truck is about 25% above its static weight.
• Speed, accuracy and safety in handling depend on the condition of the floors.
• Floor should be such that it offers the least “interactive resistance” (force required to overcome resistance to
movement). More interactive resistance in floors would result in the increase in fuel consumption. At the same
time, floor should be hard enough, skid proof and dust proof.
• The best type of flooring is concrete flooring, which provides a hard surface and reasonable grip to vehicles to
avoid slippage.
Floors have to be of even level to reduce interactive resistance and to lessen wear and tear of the equipment used.
This is more important where high rise racks are used for keeping the stocks.
Floor Maintenance
Proper floor treatment and maintenance are very important in storehouses for the following reasons:
• To avoid accidents and to protect the goods stored on the floor from water seepage.
• Prevention of dust raised by the movement of handling vehicles.
• Reduction of skidding of vehicles.
• Avoidance of slippage of stock.
Cracks occur due to the movement of mechanical and manual handling equipments and immediate repairs should be
undertaken for rectification. Concrete floors can be kept clean by mapping it with a damp cloth. Lines painted on the
floor indicating lanes for pallet trucks, and so on become indistinct over time and need to be repainted. Flammable
liquids and hazardous goods are to be stored in a separate go down as per government rules.
Multiple Flooring
Building storage factor (ratio of usable storage space to total area of floor) can be increased by the use of pallets
and block stacking. In the case of bins, double tier bins can be used. In double tier bins, since tops of lower bins
support the next, higher ones, layout of lower bins is somewhat in flexible and they cannot be moved at will. Where,
flexibility of layout of lower bins is essential, mezzanine floors are constructed. A mezzanine floor effectively
improves the available floor space but the disadvantages would be that reduction of the natural lighting in the area
below the mezzanine floor. Steel platform construction for mezzanine floor would be better as the same can be
easily erected or dismantled.
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Structure
Design of the framework for storehouse depends on whether it is to carry the weight of the building only or to
carry also overhead cranes, conveyors and so on along a minimum height of about 8 m to the eaves is therefore
necessary. Where power handling is employed, example, cranes and such, the supporting structure should be able to
carry both the crane and its maximum load. For storehouses not employing overhead lifting equipment, minimum
height of the building can be about 4.5 m to the eaves. Greater height may allow the flexibility for extension in
terms of mezzanine flooring at a later date. This aspect can be carefully thought as the height of the building can be
increased by a few metres without a proportionate increase in overall cost. However, this may involve additional
expense for extra lighting.
The choice of building material to be used in construction is governed not purely by economic consideration but
also by the safety provisions, especially against fire hazard. It is usual to construct lower walls of storehouses in
brick I concrete blocks niasonry, with supports for attachments. This is better than asbestos, which is fragile and
may get damaged due to accidental impact by transport vehicles and other handling equipment. Roof can be clad
with corrugated steel or other sheeting materials.
Where overhead gantry cranes are employed, the structure should have an independent steel framework designed
for this purpose. Steel frame construction can be more readily modified than brick and concrete construction. But
in the case of standard concrete construction units, fixing facilities to house canopies, doorways and openings and
so on can be more easily provided. Fire resistance is quite a difficult problem for which special provisions are to be
made. Necessary statutory provisions with regard to fire have to be made.
Doorways and Openings

Security is the most essential in stores and store planning. Doorways and openings shall be suitably secured against
unauthorised entry. Positioning of doors is very important. A common arrangement is the provision of doors at the
opposite ends of the stores.
Rolling shutters are preferred for despatch and receiving bays which can be locked and are therefore more secure.
Normal single double leaf shutters are satisfactory for heavy traffic. Where, heavy mechanical transport traffic is
envisaged, provision of ‘in’ and ‘out’ doors side by side could be considered. They should be easily operatable.
Doors should be of sufficient width so that vehicles can easily pass through without causing damage to the sides of
the door. Small doors could be provided at sides so that staff has easy access during times when it is not necessary
to have the main doors open. But with large doors, rain water may pass underneath during rainy season. The floor
below may be raised with slopes on both sides.
Sliding doors can be used for access stores from outside. Folding doors are expensive, but the width of the door
opening can be controlled at will, thereby restricting the entry of outside elements. They are easy to handle and
speedy in operation. Where, security is important, automatic sliding doors can be used with an electronic sensing
device.
Height of the doorway is important and carefully considered at the initial stage. Future requirements regarding the
headroom and so on has to be thought of in detail as the cost of modification for extra door height along with the
take into consideration cost of increasing the lintel height at a later stage after occupation can be too high. Design
of doors should also the possible fire hazards and provisions may be made for the same.
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Lighting
Construction should be such that natural lighting is used as much as possible.However, while making use of natural
light, the following points are to be kept in mind:
• A power other than direct sunlight may be diffused and tends to be cut off by storage equipment.
• The angle of direct light (and thus degree of obstruction) is lower during morning and evening periods.
• Natural lighting is not constant through different weather conditions and in different seasons.
In most storehouses, shelves or racks are placed along the walls, and hence side windows should be at such a height
that the day light through them is not obstructed by these fixtures. Lighting through roofs is a necessity in large
storehouses and the best use can be made of a roof space by installing continuous glazing. They should preferably be
with wired glass as far as practicable passages should get the full benefit of natural light. Sufficient opening panels
must be installed to provide adequate ventilation and they should be capable of being securely fastened.
As regards artificial lighting, installation should be planned depending on the layout of bins and racks so that
maximum amount of light shines into storage compartments. Lighting fittings should not come in the way of any
cranes or other handling equipment.
Fluorescent tubes are more efficient than bulbs but may involve larger investment. For lighting in areas prone to fire
hazards, flameproof equipments are to be used. General illumination for traffic areas and stockyards can be with
standard Sodium vapour / Mercury vapour lamps with fittings mounted at about 6 m height on wooden 1 concrete
poles or columns. For larger stockyards having widely dispersed goods, light source must be at a still greater height
and with rotation / swivelling attachment to give proper lighting effects and distribution.
Ventilation
Normal ventilation should be sufficient in most stores. Control is needed if goods stored may give off toxic gases
or noxious fumes. Ventilation in stores should meet the fire safety requirements.
Roof ventilators when backed by automatic sprinklers on segregating curtains play a major role to help extinguish
fire in case of fire accident. If automatic ventilators are provided provision for manual operation also should be
available to open them in case of fire.
Roofs
The cost due to increase in ceiling height is less in comparison with the cost of other building materials. This is
more so in case of storehouses with large floor areas where ratio of wall to foundations and floor area is low. It is
normally observed that additional cost due to increase in height from 3 m to 6 m is about 5% of total cost and from
3 m to 10 m it is about 7%.
Shape of roof and disposition of roof lights are also the materials used for roof insulation influence fire safety. Clear
roof height should at least be one metre above the top of racks and bins to enable access to fire-fighting. Roof costs
go up if spacing between columns are very large, but more space would be available for proper storage. If the roof
has to carry over head conveyors and so on roof members should be designed as load bearing structures
.
So far we have discussed the various aspects to be considered while planning for new store buildings. However, due
to financial constraints or otherwise, it may not always be possible to build a new stores building, and the alternative
is to go for an available existing stores building to be used for stores operation.
Normally, such buildings are old store buildings. It is also possible that these buildings may have been originally
constructed for other purposes and later taken over as storehouse with a minimum of adaptation. In any case, such
buildings need improvements before they can be used as a store building. There are some general points needing
consideration in such instances.
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Access
It happens to be the most common unsatisfactory feature. It should be ensured that access roads are properly made
up, doors are relocated and height of doors modified if necessary.
Structure
Roofs may be too high. This may be taken advantage of by putting in another storage floor and availing thereby
more usable space.
• Access to upper floors if existing may be poor. This can be rectified by improving the access but if not permitted,
then by the installation of a new one.
• Floors of existing building may be bad or not have been properly maintained.
• It would be preferable to provide a new and correctly levelled concrete floor.
• Natural lighting is inadequate. There may not be natural lightening in the roof.
• Windows may be less in number and the existing windows may be smaller and too far apart. This can be
improved by putting continuous glazing on the roof and existing structure permitting, side windows can be
raised or extended.
In case any unnecessary internal structures are there they can be removed without any problem provided they do
not support the main structure.
5.2.4 Fire Precautions

Fires in storehouses would result in damages to storage areas and materials housed therein. In addition to hazards
of the inflammable materials and liquids, problems arise due to loose packing materials, lying in unpacking areas
and despatch bays. You should take the following precautions against fire hazards:
• Restrict the access to store area.
• Provide fire-fighting equipment with audible warning systems.
• There should be provision for fire escape.
Where the materials in store present an exceptional risk, avoid timber in construction as much as possible and
cladding, which has been treated with a bituminous compound or other inflammable mixture. Water mains providing
adequate supply should be suitably located and equipped with sufficient hydrants.
Fire safety in stores and storage areas depends on a number of factors from which some general observations can
be made. Fires spread by conduction, convection and radiation and its growth in a building can be controlled by
imparting to it the properties of integrity stability and insulation. Then there is the method of extinguishing fires by
water, the cheaped and most commonly available fire-fighting medium.
As fire needs fuel (materials) to burn, the first step to control it is to limit the fuel (materials) present, and in stores
this can be achieved by dividing very large spaces into smaller compartments. Reasonably well-constructed brick /
R.C.C. walls and roofs have the required measure of integrity, stability and insulation thus, providing a certain degree
of fire resistance. Separating the store from, say, the timber yard in the open by about 100 m would protect it from
the radiated heat from an accidental fire in the yard. Then, a source of ignition is needed to start a fire. Defective
electrical installations (sparks) and undetected smoking (glowing buttons) are two common enough sources to which
we can add, for instance, welding carried out in manufacturing. It should be possible to eliminate the first two by
exercising control and the third by maintaining a minimum separation between production and storage. As regards
provision of water, there can be automatic sprinklers, manually operated hydrants, or buckets and extinguishers,
which the personnel can (and should be trained to) use, coupled with all this is a measure of watchfulness like a fire
check before closing time and during week ends and holidays when the premises is unoccupied for long periods.
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5.2.5 Security
Security of the storage area and materials stored are important in any stores. Direct access to stores must be limited
to authorised staff only. If due to necessity other staff need to enter and withdraw materials, they should do so only
after due verification except for access by fire and security officers. Doors provided should be restricted to the
minimum number necessary for efficient operation. They should be fitted with adequate locks. All windows and
sky lights must be capable of being securely fastened and preferably protected with wire mesh and bars. It would
be best if issue area is segregated from storage area. Store staffs have the responsibility for the care and custody of
all materials from the time of receipt to the time of issue.
For security outside normal hours, access to storehouses and stockyards may be allowed to only store staff and fire
officers. Vigilance / security should be provided round the clock for the stores area / stockyard area.
It is said that if an intruder is resisted from gaining unauthorised entry for the first five minutes, then he is usually
discouraged and apprehensive of being seen by the patrolling staff goes away. So, the fencing, the locks, the doors
and such other security measures have to be sufficiently robust and strong to withstand the assaults by the intruder
for those crucial minutes and the system of patrolling is to be such that all areas are visited a number of times during
security rounds.
5.2.6 Safety / Health

In store-keeping, safety is a very important matter and the materials have to be so stored that damage to goods,
equipment and injuries to staff are kept at a minimum. It should be the responsibility of each store staff to ensure
his own safety and the safety of others around him.
The following points are important:

• Training: Those employed in stores should be made aware of the risks faced in the locations they are working.
They should be informed about safety, law, incidence of accidents and their prevention.
• Stores to be kept neat and tidy.
• Storage and handling equipment to be properly maintained.
• Working conditions of staff have to be improved. Safety kits, hats, gloves, protective foot wear and so on have
to be provided.
• Safety signs are to be used. Signs indicating particular risks associated with individual items should be
marked.
• First aid kit has to be provided. Equipment for use in an accident should be kept closer to stocks of materials
prone to hazards.
5.3 Classification of Store

Stores generally fall into two broad categories: Functional and Physical. Functional classification relates to the
function because as the firm grows and production is increased, special decentralised stores may be separated out
of the main stores.
Functional Classification: Functional stores are normally stores, which are attached to various units in a production
complex. These stores serve the concerned unit in order to fulfil the purpose for which the unit is meant. Example
for such stores are raw material store, procured material store, general store, jig and tool store, piece parts store,
finished parts stores and so on. They are usually located within or near the units they serve.
Physical Classification: Such stores are based on physical consideration like the bulk or volume of materials and
the distances they are to be carrying before they are used.
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Examples of this category are:

• Central Store
• Concentration Store
• Substore
• Group Store
• Open Access Store
• Transit Store
• Site Store and so on
In large factories, the stores are usually decentralised storing only the items (and not everything) needed in the units
they serve, thus displaying a high degree of specialisation. The variety of such stores is many; and it is difficult to
classify them under set rules. Also, there are instances when the stores may belong to either of the classification
or both. For example, a departmental store of a big manufacturing department of a large complex displays the
characteristics of both. The descriptions which follow are of stores which show a mixed degree of centralisation
and decentralisation.
5.3.1 Varieties of Stores

Departmental Store
These stores are set-up to serve a particular department. The range of goods kept in such stores would be exclusively
for that department. Such goods may be delivered directly there instead of through the main central stores thereby
avoiding double handling and reducing associated costs. Usually departmental stores are controlled by the department
they serve. A departmental store may also contain goods received from the main central stores through centralised
control.
Raw Material Store

This is provided usually with its own intake bay depending on the mode of transportation (rail or road) for receipt
because a common intake may delay the receipt, especially in case of delivery by road. In the intake bay for materials
delivered by road, a large delivery truck may have to wait for its turn while smaller vehicles ahead of it are unloaded.
Such large carriers are usually operated under a penalty clause for waiting. Raw materials prone for contamination
or of poisonous nature should be kept separate from other incoming goods.
Production Store
Houses materials consumed during production such as oils, abrasives, eye shields and so on. In case there is no
separate jig and tool store, production store may also include small tools and equipment.
General Store
Contains goods consumed throughout the factory for general use like paint brushes, cleaning materials and so on.
Jigs and Tools Store

Normally, it is located away from the main store and closer to the tool room. This can be included in the plant
engineering section also.
Lifting and Handling Store

This could be located either in the main store complex or separately. It would be preferably adjacent to the location
of the lifting equipment store or near the issue section of lifting tackles, which are to be tested periodically.
Salvage Store
Normally located near the exit so as to ensure segregation of rejected materials from the production area, thereby
saving valuable production space and for easy disposal.
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Packing Store
Contains packing materials and preferably is to be under direct control of the packing section.
Piece Parts Store

Contains small, fast moving components and require special binning arrangements for easy storage and issue.
Plant Engineering Store

Normally keep materials, which are needed by the plant engineer and the machines maintained by him and is better
located near his work centre.
Quarantine Store
Store for finished raw materials received and the inspection test results of which are awaited. The materials there
are not for issue. This is essentially a transit store and preferably be located near receipt area to reduce handling. If
inspection is carried out in the store itself, necessary equipments to be kept there and the area is to be large enough
for inspection purposes.
Bonded Store
This is for customer’s materials ready for inspection and certification by Inspection Excise officials. It should be
located outside the main building to reduce unauthorised entry there. Such stores are also used for explosives and
other hazardous materials and are to be located at a distance from other buildings.
Finished Parts Store (Spare Parts Store)

There would be no need for this store if production flow could be perfect and spares were never needed for maintenance
for plants already sold. If finished parts remain in store unsold, it may result in lower profits. This store is difficult
to control economically due to different needs for various parts. Such a store may also contain spares, which are
exclusively meant for sale outside. In that event, some pre-packing may be carried out to facilitate quick release of
a consignment.
Work in Progress Store

This represents ‘idle stock’ and such stores may not be necessary in small production units. In bigger units, where
goods pass from one process to another, and a completely balanced flow of production is not possible, these stores
are used.
The physical existence of the store depends on volume of movement, flow rate, degree of security needed to ensure
that only approved items get into the production lines after inspection. The time of waiting and the nature of goods
produced are also factors to consider. These are located at appropriate places along production lines.
Semi-finished Store
These are essentially a form of work-in-progress stores. Components may be made in bulk and part finished for used
in production later. Their equipment and control would be based on the needs of the production department. They
are used where considerable quantities of semi-finished parts are required in addition to work-in-progress stocks.
Transit Store
Some authors define Transit Store as a separate store. But every store is a transit store, where goods to support the
work at a distant place can be stored ready with the main items. This, therefore, comes under both classifications.
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5.3.2 Central or Main Store

Central or Main Store is a store, which would contain most of the materials serving all the needs of the users. Two
forms of centralisation are to be considered.
• Single Central Store to cater for all the needs of units within a single complex.
• A store to cater for units that are geographically separated.
A central store for a small factory appears to be a straightforward issue, but this is not so if there are functional,
considerations, especially where user points are dispersed and the consumption is heavy. Anyway, a central store in
a small factory ensures better control, efficient record keeping and quick communication. If, however, it is within
the production area the advantages thereof will be gone when the demands of production will push the store into a
continuously shrinking area leading to not increased efficiency but chaos and muddle. It would be better to consider
a store outside the production area with facility for future expansion and power handling.
Advantages of a Single Central Store House

• More material can be stored than that in a smaller storehouse.
• Better stock control can be exercised.
• Use of modern handling methods is possible.
• Goods in bulk occupying lesser space can be stored.
• Purchases in bulk can be had at better price.
• Testing and Inspection can be done in a better way with more area at disposed for, such purposes.
Disadvantages of Centralised Stores

• Cost of land / construction of a centralised storehouse may be very expensive.
• This would involve extra transport cost if user points are far away.
• More staff would be required since the quantity handled is more.
• Unless the organisational planning is good, there would be recurrent shortages as direct control over complete
stock is exercised.
• Fire accidents may cause more damages and greater loss of stock and hence, fire precautions needed to be taken
more carefully.
5.4 Location of Stores

5.4.1 Location of Main Stores
Following points and questions need to be considered while deciding on the location of main stores or main
departmental stores in large production units.
In Case of Centralised Production

• Whether materials are collected at the central stores and later delivered at their user points.
• Are the works furnished with open access storage?
• Is there any risk in bulk storage of materials inside the factory?
• Is the handling of materials manual / powered?
• Does the stores area remain open during night shifts and overtime?
• Are the materials difficult to handle and transport (hazardous, fragile materials, and so on.)
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In the Case of Scattered / Dispersed Production
• The extent of geographical dispersion of the factories.
• Do they differ considerably in size?
• Are their products similar?
• The volume and value of stock throughout the year.
• Are the materials handled hazardous / fragile?
• What is the mode of communication between various user points?
• What is the staff life of the materials?
• Are supervisor / operational labour available locally?
• What are the costs of transportation?
• What are the off loading / loading facilities available?
• Is there a need for inspection / testing of materials?
Many mathematical methods are there to determine the optimal location of a central store in a large manufacturing
organisation by considering the points and such other details we discussed earlier. The simplest is to find out the
centre of gravity of the system by including the frequency of vehicle movement per unit period, the tonnage moved
during that time and the distance over, which it was moved in a mathematical formula. This is done in the same
way as in determining the centre of gravity of a loaded beam or shaft.
The difference is that the beam or the shelf would usually be straight while the production units and the stores would
be rarely aligned that way. As regards the various stores described under functional classification, their location
depends on the locations of the units they are to serve.
It is necessary, however, to take into account the practical difficulties encountered while deciding on the location
of a new storehouse or stockyard. Some of these problems are listed as follows:
• Heavy capital investment may have already been made in existing storehouses / stock yards.
• Location of supply sources may be unsuitable for the site envisaged.
• Lines of communications in a physical sense as also by written words may be too long difficult.
• Seasonal demands are different for each of the constituents.
• Material availability may not be consistent throughout the year.
5.4.2 Stockyards and its Location

It would be extremely costly and unnecessary to house all materials in a covered store building. Stores buildings
involve construction costs and they are to take only those materials, which must not be stored in the open. There
are many, heavy, large, awkward shaped items, which do not deteriorate under weather conditions. These can be
stored in open stockyards subject to security conditions.
Surfaces normally used in stockyards are:

• A bed of consolidated cinders and ashes finished off with fine ashes and then rolled.
• A bed of suitable hard core, materials rolled and consolidated, covered with a layer of tarmac, finished off with
a cost of fine tarmac and then rolled.
• A bed of hard core rolled and consolidated, topped by a layer of concrete reinforced by steel mesh.
Access roads occupy considerable areas of stockyards. It is economical to make concrete / tarmac access roads
and to surface the stacking areas with ashes. Usually, a store or a stockyard should be as near as possible to the
geographical centre of the area to be served. Mechanical handling becomes necessary in the stockyard if the goods
are in bulk. For transportation later to work centres directly from the stockyards also such appliances are useful.
It is better to locate the stockyards away from the production centre for securing reasons and fence them properly
with minimum number of gates.
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Stockyards may not always be a cheaper alternative to storehouses. If bulk materials in large sizes are kept in
stockyards to save space, they require stronger foundations cost is more than that of a normal building; they also
need costly mechanical handling methods.
Fencing and gates and other security arrangements may involve heavy expense. Since stockyards are in open,
expenditure is involved in providing proper drainage. Protection against spread of fire (in case of inflammable
goods) is provided by constructing barrier walls, trenches, drainage channels, and so on.
5.5 Layout of Store

Layout planning of stores is influenced by:
• Nature of goods to be handled.
• Methods of handling: Manual or Power.
• Weight and volume per unit.
• Issue point for goods: at the main stores or at the work centres.
• Provision for future expansion / extension.
• Site constraints /building regulations, if any.
• Transport used and type of security and supervision needed.
• The layout and location of stock in stores should ensure that the flow of materials there in is smooth. Flow of
materials has the following main characteristics.
• Speed of flow depends on the demand.
• Direction of flow depends on the layout and in turn influences the layout. So, provision is to be made for any
future change in the direction of flow.
• Frequency of movement: This would involve movement of personnel at intake and issue.
A good layout is essential for efficiency in flow. However, in very efficient layouts supervision tends to be difficult
because of bottle necking or bunching of items at some points in the line of flow. The length of communication
should be simple and as short as possible. A good layout of stores with adequate provision of marshalling areas
would minimise the length to be travelled for material picking operations.
The following points are to be kept in mind for proper layout planning of stockyards:
• Supervision in storehouses is much easier than in the stockyards, which are to be manned continuously. Good
housekeeping of stockyards is more difficult than that of stores.
• Travelling distances are to be reduced between the stores and other units as well as that between inter-sections.
Clear indication of traffic lanes is necessary. So is the provision for future expansions.
• Where risks of fire are present, the store needs to be divided into fire-resisting compartments.
While planning the layout of stores to be adapted from an existing building, it would be better to prepare a complete
drawing of the existing store building incorporating modifications of access, structure and services duly approved.
Logical sequence of activities from receipt to issue through various areas and the handling methods proposed should
be incorporated. Outdated and old bins / racks may be removed along with old handling equipment and, accordingly,
a new layout may be worked out. Office area can be modified based on the staff proposed to be employed and may
be sited to give good visibility of stores activities, providing easy access to people with the need to walk through
the stores area.
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5.5.1 Stock Location Alternatives
The various alternatives for stock locations are:
Frequency Location:
An ‘ABC’ analysis (as id inventory control) on the basis of frequency of daily movement of all fast moving items
may be conducted. The items are to be located in the descending order of frequency of movement. However, in this
analysis value of material, space occupied and weights moved are not directly related. The fastest moving items
can be located nearest to the issue point.
Commodity Classification Location

It would be logical to arrange stores strictly in time with the commodity catalogue and coding but it is very difficult
to achieve and maintain the same. This is possible if:
• commodity groups are well-defined
• range of commodities is stable and
• supplies need special storage
Sequential Location to Match the Supply Schedule

This method aims to minimise movement of materials and is dependent on the production schedule.
Job Allocation and Reservation Sequence

It is useful in situations where availability of all materials is required for a project at any time is stipulated. But this
may result in idle stock and losses to stores. It may also result in wastage of space.
Free Space Location

Also known as ‘Random location’. Instead of areas based on the type of materials, stock on arrival is placed in to
the first available empty bin, rack or stack. Though this ensures that storage portion is fully occupied, there is no
difference between the fast and slow moving items. This may result in long distances for picking supplies where
manual handling is employed.
5.5.2 Practical Problems in Location of Stock

However, there are some practical difficulties in following any of the methods described above:
Near Identical Items of Supply
It is possible that items similar and difficult to distinguish may be in adjacent bins in stores, like G. I. fittings, gas
jets with difference of bores not noticeable to the naked eye and so on. One way can be to arrange them diameter
or bore wise of different lengths in one row and different bores diameters can be kept in other rows. A better way
would be to introduce a totally different class of goods in between such bins to avoid confusion.
Bulky Goods of Low Specific Gravity

Materials like ‘glass fibre insulation boards’ can be stored at a height above the bins. It, however, should be
remembered that insulating materials are inflammable as also susceptible to moisture. Price / unit volume would
be low for such goods but the cost of storage may become appreciable especially if the materials are retained for a
long time. Anyway, glass fibre is not combustible.
Exceptionally Heavy Goods

Presence of exceptionally heavy goods along with the normal goods in storages area may create problems /while
the latter is issued out. It would, therefore, be advantageous to take the heavies out of normal system of storage.
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5.6 Materials At Risk in Storage

5.6.1 Conditions Affecting Life of Goods
All materials stored for a considerable time are susceptible to damage of some nature or the other.
Types of Damage
Types of damage encountered in storage are broadly classified as biological damage and non-biological damage.
Biological Damage
Damages occurring in organic substances and materials such as the ‘rot’ in timber, cloth moths’ infect woollen
cloths, white ants, and so on.
Non-biological Damage
These are in processed materials like rust and corrosion in metals, aging, expiry of shell life in dry batteries,
mechanical wear and tear, and so on.
Moisture
Moisture is the main reason for most of the damages, both biological and non-biological. The presence of moisture
leads to corrosion of metal, films and fungus formation in optical instrument, setting of cement and so on. Rubber
is one material, which is not affected by moisture but, in fact, is better preserved.
Temperature
Increased temperature affects materials like rubber, chemicals, plastics, electronic goods and so on.
Exposure to Light and Air

It affects rubber, plastics, chemicals, rubber products, and so on.
Contact with Corrosive Substances

Acids and alkalies affect metal, plastics, leather, textile, and so on.
5.6.2 Store for Special Type of Materials

Some items require specially designed storage facilities like cement in bulk, grain, flour, fuel, oil, petroleum,
explosives and so on. Petroleum and explosives storages are subject to government regulations with regard to their
mode of transport, design of buildings and safety precautions. For other materials, protective measures are necessary
during storage.
Cement
Cement sets and solidifies if it gets damp. It must be stored in a dry building and should be kept off the floor because
of condensation at times on concrete floors. The cement bags are ensured therefore stored on wooden planks platforms.
Proper air circulation should be around the stacks of cement bags. Vertical stacking of bags should be limited to 10
to 15 bags only. Length of stacks should not be more than 15 bags. Stocks can be placed back to back with nominal
space in between. Between the stacks, there should be a gap of at-least 0.6 m to ensure not only air circulation but
also for purpose of issue verification of bags.
Timber
Timber is susceptible to rot if it is wet when it is attacked by fungi. Sawn timber is best stored inside or in sheds
with sides open. Boards if stacked should be stacked interleaved with scantlings so that air circulation is ensured
throughout the stack.
All metals are liable to corrosion, especially iron and steel, if kept for long periods. It is necessary to protect them with
a coat of oil, grease (for steel bars kept in open), but in the case of iron castings corrosion is not of significance.
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‘0-s Tyres if stored in piles one on top of another may damage the internal fabric which, is to be avoided. They
should be kept upright on their treads. Since it is made of rubber, too much heat may be harmful and hence is to be
kept away from heat sources.
Agricultural Produce
Crops if kept in store for long periods are liable to germinate or are likely to be attacked by pests. The grain bags
should be kept dry and at intervals may require dusting with rot prevention compounds or insecticides.
Machinery and Equipment

If they have to be kept for years, they are to be completely enveloped in an airtight covering of a suitable such as
plastics material.
5.6.3 Storage of Explosives

Sale, storage and transportation of explosives are governed by statutory regulations, depending on the quantity
stored. But in general points to be considered are:
• The storehouse must be licensed by the Competent Authority after due verification inspection.
• The store building housing should be located at least at a distance of 100 to 200 m from the stores housing other
materials or work sites.
• A strong building is to be constructed with provision of a lighting conductor.
• Dampness should be avoided as also the presence of iron, steel or grit. Entry is to be restricted to authorised
staff only.
• Safety precautions have to be followed strictly. Warning signs are to be displayed along with notices prohibiting
making anywhere in the vicinity.
• Rigid security, constant supervision and controlled storage conditions are to be maintained.
5.6.4 Storage of Chemicals

Petroleum spirit is to be stored after obtaining license from the concerned authority and such premises are subject
to inspection by its personnel. Conditions to be followed during filling emptying are:
• Vehicle tanker engine must not be running vehicle earthed and hose must be opened.
• Storage tanks must be clearly numbered, tank’s delivery and dip stick readings should be against that number.
• Before delivery from tanker commences, it should be ensured that there is sufficient room space in the tank to
receive the same as no escape overflow of the liquid should be allowed during delivery. This should be done
by competent person only.
• The location for the store should be accessible to delivery vehicles and tankers. In case of underground storage,
it should not interfere with sewerage services of the area.
• It should be away from likely sources of explosion for which constant supervision is to be maintained. It should
also be away from sources of ignition.
• Provision for fire-fighting is to be made with proper equipment. Drainage away from the site with provision of
sumps is to be ensured.
• Location should be nearer to fire-fighting unit of the undertaking concerned.
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5.7 Store Efficiency

Stores efficiency can be measured in a number of ways such as:
• Financial
• Service Consideration
• Control Consideration and
• Warehouse / Storekeeping methods
Financial goals would be minimum capital blocked, high stock turn, low operating costs, minimum overheads and
so on.
Services considerations would be prompt response to requests, issue of fresh materials, avoiding stock-outs, issue
with least formality and so on.
Control considerations would demand proper up keeping of records, proper auditing, accurate maintenance of
records, proper documentation of returns, and so on.
The considerations described above are based on what you have learnt from other units.
From stores buildings point of view, the stores efficiency should aim at the following:
• Efficient use of storage space.
• Minimum handling and employment of effective handling aids and methods.
• Avoidance of accidents.
• Adequate staffing and their personnel training.
• Centralisation where it is possible and appropriate.
It is likely that the goals of efficient warehousing may not be the same as the goals of other departments. For assessing
stores efficiency; these overall objectives have to be carefully considered.
An overall statement of aim of stores and stock control activity would be difficult to enumerate. The basic objective
should be to perform the stores operation with efficiency so as to get things in an economical way and to achieve
the desired result.
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Summary
• To receive raw materials, components, equipments, finished goods, arrange for their inspection and provide
adequate and proper storage for them.
• In order to determine the volume of the stores building and the storage space therein needed in an organisation
many factors have to be considered.
• After selecting a suitable site, you need to plan the size, shape and the type of construction of the storehouse.
• Where extensive land is available in proper location without any restriction; single storied building is the best
proposition.
• Where land cost of a suitable site is prohibitive or the site is small, multi-storeyed store construction would be
preferred.
• Floors have to be of even level to reduce interactive resistance and to lessen wear and tear of the equipment
used.
• Cracks occur due to the movement of mechanical and manual handling equipments and immediate repairs
should be undertaken for rectification.
• Building storage factor (ratio of usable storage space to total area of floor) can be increased by the use of pallets
and block stacking.
• Security is very essential in stores. Doorways and openings shall be suitably secured against unauthorised entry.
Positioning of doors is very important. A common arrangement is the provision of doors at the opposite ends
of the stores.
• Fluorescent tubes are more efficient than bulbs but may involve larger investment.
• Shape of roof and disposition of roof lights are also the materials used for roof insulation influence fire safety.
• Fires in storehouses would result in damages to storage areas and materials housed therein.
• Central or Main Store is a store, which would contain most of the materials serving all the needs of the users.
Two forms of centralisation are to be considered.
• Stores buildings involve construction costs and they are to take only those materials, which must not be stored
in the open.
• Fencing and gates and other security arrangements may involve heavy expense.
• A good layout is essential for efficiency in flow. However, in very efficient layouts supervision tends to be
difficult because of bottle necking or bunching of items at some points in the line of flow.
• While planning the layout of stores to be adapted from an existing building, it would be better to prepare a
complete drawing of the existing store building incorporating modifications of access, structure and services
duly approved.
• Petroleum and explosives storages are subject to government regulations with regard to their mode of transport,
design of buildings and safety precautions.
References
• Cambridge International College. Store Management [pdf] Available at: < http://www.cambridgecollege.co.uk/
coursesattachments/stkmod1.pdf> [Accessed February 2012].
• Logistic Cluster. Warehousing and Inventory Management [Online] Available at: < http://log.logcluster.org/
response/warehouse-management/index.html> [Accessed February 2012].
• Richards, G., 2011. Warehouse Management: A Complete Guide to Improving Efficiency and Minimizing Costs
in the Modern Warehouse. Kogan Page Publishers.
• Pradhan., 2009. Retailing Management 3E. 3rd ed. Tata McGraw-Hill Education.
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• techwisetv , Store Operations Analytics [Video online] Available at <http://www.youtube.com/watch?v=-_

qiau1SI-k> [Accessed 20 March 2012].
• supplychainer, Improving Store Operations at Wilson’s leather [Video online] Available at <http://www.youtube.
com/watch?v=k9xoP-OMdTc>[Accessed 20 March 2012].
Recommended Reading
• McNair, M.P. and Gragg, C.I., 1931. Problems in retail store management. McGraw-Hill.
• Warman, J., 1972. Warehouse management. Heinemann.
• The University of Michigan. Printers’ ink, Volume 226. Printers’ Ink Pub. Co., 1949.
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Self Assessment
1. Which of the following is not a basic function of a store house?
a. To ensure proper preservation and maintenance of stock.
b. Carry out verification of go and assist in effective purchasing.
c. To check the volume of stock.
d. To receive raw materials, components, equipments, finished goods.
2. Which of the following factor is not put into consideration while determining the volume of the stores?
a. Column spacing
b. Aisles
c. Windows
d. Light
3. Which of the following is not an advantage of a single storied building?

a. Natural daylight can be better utilised
b. Natural ventilation will be easily ensured
c. Greater flexibility of layout
d. More space available for stores in small area.
4. ____________ is an important feature of any storehouse because not only does it have to carry the weight of
all stock held but also provide a suitable surface for the operation of wheeled vehicles.
a. Floor
b. Windows
c. Doors
d. Layout
5. ___________ of the framework for storehouse depends on whether it is to carry the weight of the building only
or to carry also overhead cranes.
a. Product
b. Floor
c. Ventilation
d. Design
6. Which of the following is the most essential part of storage planning?

a. Ventilation
b. Security
c. Shutters
d. Flooring
7. ________ are preferred for despatch and receiving bays, which can be locked and are therefore more secure.
a. Rolling shutters
b. Sliding doors
c. Folding doors
d. Double leaf shutters
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8. Which of the following is not taken into consideration before building can be used as a store building?
a. Access
b. Structure
c. Lighting
d. Area
9. ____________ are normally stores, which are attached to various units in a production complex.
a. Functional stores
b. Central stores
c. Transit stores
d. Sub stores
10. ___________is a store, which would contain most of the materials serving all the needs of the users.
a. Transit store
b. Functional stores
c. Sub stores
d. Main Store
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Chapter VI
Managing Space
Aim
• introduce the importance of space
• elucidate the skills required to manage space
• explain the competition among brands
Objectives
• explain the space planning concept
• describe the process of space planning
• elucidate the strategic approach adopted
Learning outcome
• understand the optimisation of space availability
• identify the development of planograms
• understand the maintenance of space
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6.1 Introduction
Getting the accurate blend of merchandise and maximising efficiency with assortments tailored to local preferences
and each store’s physical layout are challenging for any retailer. They are essential for regional chains, competing
with global giants.
Successful retail establishes, which categorise the accurate position and creating them ideal occupant mix to go well
with a meticulous target market, and this is a dynamic environment that we comprehend. Whether it’s at concept stage
or a fully-functioning shopping centre, the aim of the retailer is to adjoin significance each step of the technique.
Once a retailer decides what to buy from vendors and how much of it to allocate to specific stores, someone needs to
decide where in the stores the products will sit.This is a very important step in retail since store layouts are crucial
to the shopping experience. Products need to be easy to locate, near related products, and have the correct facings.
Should this product be on the endcap? Should it be at eye level? Should it have 8 facings or 10? Space management
is about maximising every inch of the selling floor.
The objective of the retailer is to house, display and sell products and services and realise a return on investment.
Two fields that are essential for developing a retail environment are marketing and design. From the marketing field,
we use sub-related fields such as consumer behaviour, communications, the marketing mix and strategy.
The design field is concerned with translating the marketing strategy into a three dimensional form, which takes
into account all the other factors, such as function, merchandise, operations, service and image and is in essence a
communication medium between buyer and seller. Ultimately, it is all these factors brought together in an integrative
and supportive manner that will result in the final retail concept and its success.
The success of a retail concept will also heavily depend on the training of staff on an ongoing basis, and manuals to
describe how to utilise the concept. It is also dependant on a team of people, such as suppliers, advertising agency,
and other professionals and so on. The concept should take into account historic data, current market realities and
prediction about the future consumer and retail business environment.
A retail concept should be far more than mere whimsical aesthetic considerations. It also needs to be innovative
and cost effective, flexible and oriented towards the target market. More importantly it also needs to differentiate
itself from the competition so that customers would prefer shopping there rather than elsewhere. The concept
should not just be a look but a complete experience. To this end, signage and graphic communications and visual
merchandising are key elements for consideration. Goods and services need to be presented in a way as to increase
the average consumer transaction.
Apart from it there are certain Retail Space Management software, which uses influential automation, optimisation,
graphics, workflow and analytics in an easy solution to foster enhanced decisions more rapidly. It aids teamwork
across well designed groups, allows management greater visibility into imperative business metrics and improves
group effort with vendor partners.
Thus, we had observed that presently like a long-lasting soap opera, it has been unfolding for approximately a year.
Each episode brings a new expansion. The Indian public has been tour it up in right intense. And a quiet revolution
is brewing in the Indian retail space.
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6.2 Skill of Managing Space
Once the inventory comes within a retail store, the subsequently gigantic thing, which comes within the mind of
a retailer, is to make a decision where to put it and how much vicinity should be allocated to the specific product.
The decision of where in the store the products will sit is very imperative footstep in retail since store layouts are
crucial to the shopping experience. Products need to be straight forward to place, be near related products, and have
the truthful facings. Space management is about maximising each edge of the selling floor.
6.2.1 Store Design

Accounting the derivatives of store designing, Jagdeep Kapoor, Chairman and Managing Director, Samsika Marketing
Consultants Pvt. Ltd. mentions, “Navigation and access and ease of browsing and picking up determine the store
design.”
Chandru Kalro, executive VP-marketing, TTK Prestige Ltd, says, “Our stores are designed in such a way that the
customer can have a non-obtrusive shopping experience. But in value formats, catering to masses, it is packing as
much merchandise as possible with not much emphasis on having it very organised. In formats catering to high end
customers, stores are designed to make the shopping experience great and there is a ‘stunner’ factor in the store.”
6.2.2 Shelf Location and Space

A literal meaning of sales display is arranging systematically saleable goods so as to attract the attention of the
customer. In retail industry, product visibility of any brand is necessary to promote its sales. Many a times, space is
often limited and merchandise to be displayed is more, so one needs to really utilise the space well - herein comes
shelf management. Kalro says, “Shelf management plays an important role in managing merchandise well and
helps to focus on categories or products that retailer intends to promote.
When asked how do retailers decide what to put and where on shelf, Kalro said,” Buyers do not always come to the
store with a preset list in their minds about the products they want to buy. We plan our shelf to ensure all products
in our range are well displayed as lot of the purchase is impulsive. Also while planning our shelf we see to it that
there is optimum utilisation of space and maximum amount of merchandise can be displayed.”
6.2.3 Visibility and Sales Promotion

According to Kalro, product visibility plays a major part in customers’ buying decisions ‘One buys what one sees’,
therefore, product visibility is very important. It is a function of persistence, precision and repetition. Your message
needs to be heard repeatedly to rise above the background noise of daily business. Organised retail business in
India is still competing to spread its foothold in India. The modern retailers are trying to increase the consumption
to create an urge for purchase; make people buy even if there is no great urgency to purchase. Supporting the fact,
Kapoor, says, “Product visibility is what leads to impulse purchase inside your store. Product must be neatly stacked
and visible face up.”
Many brands and retailers try to engage the customer at the point of sale. Product promotion inside the store is very
important to make consumers aware of sales promotion schemes as advertising in mass media is expensive and
deliveries are not 100 percent. Today, brands and retailers are cutting down on expenditure in mass media and focusing
on the customer contact point. This is going to become more pronounced as the modern retail grows in India.
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6.2.4 Competition among Brands

The next lesson of shelf management is managing competition among different competitor brands. While providing
answer on how a brand survives in front of another brand having an ongoing offer inside the store. Kalro says that
“even if there is no offer on a brand and it is there on another brand we try to do justice to both..If the brand has an
ongoing offer, the offer is highlighted, but if another brand has no offer on it, its product features are highlighted to
highlight its presence inside the store. Though, at TTK Prestige, we have only single brand stores, there is competition
amongst sub brands within categories. But we try and do justice to all sub brands or categories.”
Kapoor also believes that consumers have their own preferences. He says, “Some people have preferences for
brands, on the other hand some have preferences for schemes and deals. Therefore, all the brands inside the store
thrive depending on the consumer preferences. Both need to be given equal importance.”
So does that mean the brand featuring an ongoing offer have its negative impact on brand without offer? As per
Kalro, offers are not the end of it all. Customers are ready to buy brands for the benefit and value proposition. There
are many brands that have no offers at all and yet they sell.”
Agreed with the Kalro point, Kapoor says, “I also believe that offer doesn’t affect sales too much. In fact the brand
with the offer can have a negative impact on the consumer giving a signal that is slow moving and hence the need
for an offer.”
6.2.5 Screening of Products

To line the old Smokey Robinson and the Miracles’ song, the slogan of consumers nowadays is “You superior
shop in the region of.” For discount retailers like Wal-Mart, Future Bazaar and Reliance Fresh Stores and Target,
that viewpoint presents a growing confront. With more shopping alternative than earlier from online merchants to
retailers are hard pressed to differentiate them from the collection.
6.3 Space Planning Concept

We appreciate that ‘retail is detail’, but it is difficult for a retailer to identify the most critical part of it relevant
familiar terms with which fragment of detail matters the majority, at any given time, for his business. We will
facilitate out you to reflect about what factors are influencing performance in your business, and where to spotlight
to formulate the most of what is working well, and sort out what is not. After people, space is the principal asset in
a retail business. Every square foot should distribute sales and gross profit returns that pay for store labor, marketing
investment and logistic costs. Good Better Best can lend hand retailers of all sizes to understand how to get to grips
with what is arguably their most critical investment – their retail space and how to plan that space to deliver both
customer choice, and a sustainable financial return on each square foot.
Space planning concepts are defined by architectural/interior designers, which are concept oriented in the design
and planning of architectural interior space, and other three dimensional environments. The theoretical point of
reference is strongly aggravated by a marketing/strategic approach, the intention of which is to help businesses
to position and differentiate them effectively. This is done by research, marketing and branding, leading to totally
integrated concepts. The ultimate aim is to obtain superior profitability and hence a good return on investment. Cost
effective, yet innovative, space planning solutions are used in the attainment of this aim, which go beyond aesthetic
considerations. Measurement techniques are used to evaluate concepts, which help to demystify and objectify the
process.
6.3.1 Objectives of Space Planning

• To enable retail business, through design as a tool, to reach their growth and development objectives, by
understanding their needs, developing strategies and conceptualising facilities that is strategic and innovative,
results driven, flexible and cost effective.
• To have a thorough understanding of the consumer, business and social trends and combine this with specific
design objectives to arrive at a three dimensional selling environment.
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• To recommend possible combinations of products and services.
• To demonstrate how we will maximise the probability of success of the project.
• To be in the business of design- designing for business, the objective of which is to assist with the turning on
and inspiring people, adding value, creating desire all by enhancing the customers experience
• To see retail not only as a commercial activity but also a social activity.
• To keep up to date with current and future trends, which we then implement in our projects
• To take an integrated design approach in our work that takes into account all the factors which will impact on
the project.
• To apply retail science techniques in order to obtain maximum space efficiency and productivity.
6.3.2 The Process

Space planning criteria lists precise necessities, which define and make available specialised working environments
within the retail outlets according to departments and function areas surrounded by the departments. The criteria
make available contemporary guidance for the well-organised utilisation of space to meet the requirements. Private
sector standards of practice and exceptional requirements have been taken into consideration during the progress
of these criteria.
Each section of space planning criteria provides the purpose and scope, definitions, policies, required program data
elements, and specific space planning criteria by functional area.
• Analysis of objectives and research
• Concept generation
• Space planning for optimum placement and display of all merchandise
• Colour, material and lighting considerations
• Signage design and placement for optimum impact
• Detailed drawings
• Fixturing design and placement for optimizing display and flexibility
• Selection and/or custom design of components
• Contract documentation
• Certification and regulation compliance
• Project co-ordination and supervision
• Coordination/installation of furniture, furnishings and clutter packages
• Post installation evaluation in terms of issues/shifts in marketplace
• Continuous measurement/analysis of performance of concept against a set of criteria
• Turnkey projects
6.3.3 Strategic Approach

Go beyond cosmetic or aesthetical considerations.Identify the target market, review current demographic, economic,
competitive factors, and shopping patterns and purchasing characteristics of the consumer pertaining to the particular
market and business
• Analyse the product and services offering
• Create the right type of market alignment and supportive environment for a store, including strategic identity,
visual merchandising, branding and other design parameters
• Develop financial criteria for a store pre and post reformatting that analyses a stores performance
• Increase productivity and profitability of the retailer
• Employ merchandise presentation techniques to generate higher stock turns
• Train staff in all aspects of concept and merchandising
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• Follow the progress of the store by critique and feedback

• Adjust and modify continuously
6.4 Optimising Space Availability

Retailers face challenges from competitive discounting strategies, fluctuating consumer demand, and seasonal
inventory issues. Space and Category management, originally developed to help supermarkets improve sales,
has evolved into a “must have” for retailers. Companies that embrace advanced solutions to space and category
management can rise above competitors, grow market share, and improve satisfaction levels by integrating intelligent
forecasting and demand data.
6.4.1 Clusters based on Similar Demand Trends

Utilising demand data gathered from similar purchasing patterns helps planners create intelligent forecasts for
specific products; these forecasts are then used to create store clusters. Clustering based on demand insight allows
organisations to make allocation and replenishment decisions, as well as reduce uncertainty by having a flexible
plan that can be tweaked to accommodate shifts in consumer demand for more effective product launches.
6.4.2 Accurate and Efficient Assortment Management

Intelligent forecasts help retailers determine trends in advance and plan for what products should be in what stores
at a specific time. Using demand insight to drive planning allows retailers to predict trends for new and seasonal
products, determine assortments, and calculate store and shelf placement. Demand planning also allows stores to
localise assortments based on the demographic of shoppers.
6.4.3 Creating Floor Plans that Increase Store Productivity

Maki ng sure the right space is allocated, which suppose to be critical to store productivity. Using an intelligent
forecast to develop a floor plan allows retailers to decide on the placement of specific products to maximise the real
estate available based on future demand. High-traffic areas can be used to sell the higher demand items or promote
seasonal products.
6.4.4 Efficiently Develop Planograms for Improved Space Management

Understanding shelf space availability, along with consumer demand, allows retailers to develop a replenishment
strategy to avoid excess inventory and plan for a rise in the purchasing of a product based on season or promotions.
Maximising the space available and reducing excess inventory can increase revenue and efficiency. In the past,
merchants have often been forced to choose between quantity and quality when developing planograms. However,
advanced solutions such as JDA Software’s Planogram Generator enable retailers to create large quantities of
planograms without sacrificing quality.
6.5 Return on Space

GMROF stands for Gross Margin Return on Floor Space is a way for measuring of inventory productivity that
expresses the relationship between your gross margin, and the area allotted to the inventory. GMROF is expressed
as a percentage or rupees multiple, telling you how much returns you’ve gotten per area (selling feet) during a
specified period.
• Gross margin return per sqft. = Gross margins / sqft
• Gross margins ( GM ) = sales – cogs ( cost of goods sold )
So to state the obvious the higher the GMROF the better, evolved retailers use this as a benchmark in getting
efficiency of departments within a store and between stores comparison.
Strategies for GMROF increase:

• increasing the mix of private labels share sale
• increasing the sell thorough
• better margin negotiation from suppliers and vendors
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Operational Measures
• Put your best people to sell more of the high GM category
• Effective Use of VM to drive sell thorough
All this gets measured by a strong MIS back up, which makes the measurement of the same effective. Since real
estate costs are one of the largest expense items for a retailer it is very important for a retailer to track how this
resource is being used and how the same can be leveraged further. Indian retailers have managed to make the best
use of this, one to note is Shoppers Stop, which has evolved on this front.
6.6 Maintenance of Space

As retail companies strive to provide in-store services and localised amenities to offer a differentiated shopping
experience, the planning and execution of retail floor space becomes a top priority. Only appropriate Space
Management optimises retail space for maximum profitability and provides retailers with photo-realistic, three-
dimensional floor plan views of each store. This maximises the return on investment (ROI) and utilisation of space,
one of retailer’s most precious assets.
6.6.1 The Challenges of Space Management

Retailers seek to meet local consumer needs by customising assortments, store layouts, merchandisable and non-
merchandisable space, and unique promotions. They must do so while also maximising profit and ROI from every
inch of each store’s space. This requires appropriate planning of space allocation—from the floor space assigned
for each category to the shelf capacity for individual items. However, the lack of visibility into each individual
store’s actual fixture and space constraints means that prototype store layouts and one-size-fits-all planograms are
developed. As each individual store strives to achieve localization, it can be difficult to ensure that what it executes
meets headquarters’ overall category goals and corporate objectives.
Furthermore, because space planners at headquarters rarely have visibility into and an accurate understanding of the
actual modifications performed at each individual store, future space planning becomes cumbersome.
In addition, retailers often manage space planning in a silo, leading to significant disadvantages throughout the
retail organisation. For example, retailers that manage space with no regard for category level roles, strategies, and
objectives may find themselves having adjacencies that do not complement one another or not allocating enough
space to high-demand categories. Further, space constraints such as fixture capacity must be communicated and
understood throughout the supply chain. If constraints are not communicated downstream, there is a risk of inaccurate
inventory planning, inadequate service levels, and out-of-stocks on the shelves.
6.6.2 Maximise the Profitability of your Space

An ERP like system provides a solution to these common but difficult issues and enables retailers to achieve maximum
profitability across every square foot of their stores. It provides a link between merchandising and store planning,
construction, operations, and inventory management. An IT solution also allows for the creation and automation
of detailed floor plan layouts including fixture capacity, location, and merchandisable and non-merchandisable
space.
6.6.3 Key Features of a Space Management Software

Space management software should be an integrated store floor and shelf space solution that delivers comprehensive
functionality to empower retailers to maximise their return on space.
• Store-specific floor plan management: Automated drawing maintenance tools allow for the seamless
incorporation of fixture and planogram changes to all affected store floor plans.
• Planogram maintenance and publishing: A performance-driven planogram maintenance tool enables retailers to
centrally manage planogram information while sharing and updating information with store-level personnel.
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• Store category space and adjacency analyses. These analyses leverage powerful category and planogram
performance metrics at the chain, cluster, and store level to identify potential floor or planogram adjacency
opportunities across the entire store. Importantly, this solution integrates with Oracle’s proven optimisation
analytics, maximising space utilisation.
• Drawing automation and two-way CAD communication. Automated drawing management tools ensure
that store-specific drawings can be created and maintained in a dynamic merchandising environment via two-
way communication with AutoCAD. This integration with a retailer’s CAD process and its item management,
supply chain, and planogram development processes ensures that changes that affect the store’s floor plan are
seamlessly incorporated, with minimal user intervention.
• 3-D store plan visualisation and maintenance. Detailed fixture and store environmental libraries enable photo-
realistic, walk-through environments of a new or prototype store.
• Single common relational database. A common relational database leveraging Oracle Retail database technology
stores detailed reports on inventory, fixturing, merchandising, and space/performance return.
• Integrated fixture takeoff and ordering. Direct integration with existing fixture libraries and manufacturer
ordering information enables Oracle Retail Macro.
Space planning is used to deliver version-specific fixture takeoffs and fixture ordering for store plans. Additionally,
a store difference report highlights additions and returns to stock of fixtures and fittings from remodel and
remerchandising initiatives.
6.6.4 Adherence of Space Plan

Retailers seek to meet local consumer needs by customising assortments, store layouts, merchandisable and non
merchandisable space, and unique promotions. They must do so while also maximising profit and ROI from every
inch of each store’s space. This requires appropriate planning of space allocation from the floor space assigned
for each category to the shelf capacity for individual items. However, the lack of visibility into each individual
store’s actual fixture and space constraints means that prototype store layouts and one-size-fits-all planograms are
developed. As each individual store strives to achieve localisation, it can be difficult to ensure that what it executes
meets headquarters’ overall category goals and corporate objectives.
Furthermore, because space planners at headquarters rarely have visibility into and an accurate understanding of the
actual modifications performed at each individual store, future space planning becomes cumbersome.
In addition, retailers often manage space planning in a silo, leading to significant disadvantages throughout the
retail organisation. For example, retailers that manage space with no regard for category-level roles, strategies, and
objectives may find themselves having adjacencies that do not complement one another or not allocating enough
space to high-demand categories. Further, space constraints such as fixture capacity must be communicated and
understood throughout the supply chain. If constraints are not communicated downstream, there is a risk of inaccurate
inventory planning, inadequate service levels, and out-of-stocks on the shelves.
6.6.5 Avoid Mismanagement of Space Managing Space

Management of space provides a solution to these common but difficult issues and enables retailers to achieve
maximum profitability across every square foot of their stores. It provides a link between merchandising and store
planning, construction, operations, and inventory management. Oracle Retail Macro Space Management als allows for
the creation and automation of detailed floor plan layouts—including fixture capacity, location, and merchandisable
and non merchandisable space. The environment leverages AutoCAD and enables seamless integration with the
retailer’s existing drawings and eliminates the need for redrawing. These store floor plans can then be linked to shelf
planograms. Importantly, Oracle Retail Macro Space Management offers all of this in a photo-realistic, dynamic
interface
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6.6.6 Cleanliness of Place
You may have fabulous merchandise to sell, but if you give the customer even one reason to assume that store
cleanliness is not a priority, they will take their wallets elsewhere.
• First Impressions Count: Is the parking area clean of litter and brightly lit? Is the entrance clean and inviting
with a trash receptacle available?
• Front Door Assumption: Is the glass clean and free of fingerprints? Customers will make the assumption if
the front door is dirty the rest of the store may be the same.
• Make it Glitter: If it’s glass or metal it must be clean. Make it a priority to dust and use glass cleaner every
morning after vacuuming.
• Shoulders to Knees: Customers notice the majority of “merchandising” between their shoulders and knees.
Make those areas a priority of cleanliness.
• Behind the Scenes: If the customer uses a fitting room, keep it spotless. 80% of a customer’s buying decision
happens in a fitting room. If you have a back stock area, keep it closed to the customer’s eyes.
• Necessary Rooms: Customers should be able to use your restrooms. Not only should it say “squeaky clean”
to your customers but it also should say something about how you value your employees and their comfort
level.
• Clutter Free: Shipping boxes, pallets, rolling racks, shipping materials needed for the operation of the store
should be out of site or neatly stored away from the traffic flow in the store.
• Ease of Shopping: Overstocking of merchandise can be overwhelming to the customer and they can “assume”
your store is messy merely because of the volume of merchandise. How easy is it to get around your store? Can
you get a stroller or wheelchair easily around the store?
• Aroma: Does your store “smell clean”? Customers can make an assumption of whether a store is clean based
on what they smell? If you have become to immune to any smell your store may have, ask friends or new
employees to give you their opinion.
• Register Area: The most important area of the store, no matter what kind, is the place you exchange your hard
earned money for something you value, your purchase.
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Summary
• A retail concept should be far more than mere whimsical aesthetic considerations. It also needs to be innovative
and cost effective, flexible and oriented towards the target market.
• Retail Space Management software, which uses influential automation, optimisation, graphics, workflow and
analytics in an easy solution to foster enhanced decisions more rapidly.
• A literal meaning of sales display is arranging systematically saleable goods so as to attract the attention of the
customer.
• Today brands and retailers are cutting down on expenditure in mass media and focusing on the customer contact
point.
• Space Planning concepts are defined by architectural/interior designers who are concept oriented in the design
and planning of architectural interior space, and other three dimensional environments.
• Cost effective, yet innovative, space planning solutions are used in the attainment of this aim, which go beyond
aesthetic considerations.
• Space planning criteria lists precise necessities, which define and make available specialised working environments
within the retail outlets according to departments and function areas surrounded by the departments.
• Retailers face challenges from competitive discounting strategies, fluctuating consumer demand, and seasonal
inventory issues.
• Clustering based on demand insight allows organisations to make allocation and replenishment decisions, as
well as reduce uncertainty by having a flexible plan that can be tweaked to accommodate shifts in consumer
demand for more effective product launches.
• Intelligent forecasts help retailers determine trends in advance and plan for what products should be in what
stores at a specific time.
• High-traffic areas can be used to sell the higher demand items or promote seasonal products.
• Understanding shelf space availability, along with consumer demand, allows retailers to develop a replenishment
strategy to avoid excess inventory and plan for a rise in the purchasing of a product based on season or
promotions.
• GMROF stands for Gross Margin Return on Floor Space is a way for measuring of inventory productivity that
expresses the relationship between your gross margin, and the area allotted to the inventory.
• An ERP like system provides a solution to these common but difficult issues and enables retailers to achieve
maximum profitability across every square foot of their stores.
• Space management software should be an integrated store floor and shelf space solution that delivers
comprehensive functionality to empower retailers to maximise their return on space.
• Management of space provides a solution to these common but difficult issues and enables retailers to achieve
maximum profitability across every square foot of their stores.
• The space planning concepts are strongly motivated by a marketing/strategic approach, the intention of which
is to help businesses to position and differentiate them effectively.
References
• Indian Retailer, 2009. Skills of managing Space [Online] Available at: <http://www.indianretailer.com/article/
operations/store-management/Skill-of-managing-space-381/> [Accessed 27 February 2012].
• Egyankosh. Managing Space. [pdf] Available at: <http://www.egyankosh.ac.in/bitstream/123456789/39076/1/
• Newman, A. and Cullen, P., 2002. Retailing: environment & operations. Cengage Learning EMEA.
• Varley, R., 2006. Retail product management: buying and merchandising. 2nd ed. Routledge.
• YoniWagschal, 2010. Ways to. Increase Sales in Retail Store- New Store Marketing Ideas [Video online] Available
at: < http://www.youtube.com/watch?v=-8Pdx13QcWo&feature=related> [Accessed 21 March 2012].
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• 1000MarketingSecerts, 2011. Retail Store Cleaning [Video online] Available at :< http://www.youtube.com/
watch?v=vVB_E1jHbFA> [Accessed 21 March 2012].
Recommended Reading
• American Marketing Association, 1960. Marketing keys to profits in the 1960’s. American Marketing
Association.
• Berman. Retail Management, 2007. A Strategic Approach, 10/E. Pearson Education India.
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Self Assessment
1. Which are/is the field/s that are/is essential for developing a retail environment?
a. Retailing
b. Marketing and design
c. Location
d. Merchandising
2. The decision of where in the store the products will sit is very imperative footstep in retail since _______________
are crucial to the shopping experience.
a. retailing
b. merchandising
c. store layouts
d. customers
3. What is systematic arrangement of saleable goods called?

a. Sales display
b. Merchandising
c. Visual display
d. Shelf display
4. ___________ concepts are defined by architectural/interior designers, which are concept oriented in the design
and planning of architectural interior space.
a. Visual merchandising
b. Retailing
c. Space planning
d. Marketing
5. Which of the following is not one of the space planning criteria by functional area?
a. Analysis of objectives and research
b. Concept generation
c. Detailed drawings
d. Kind of merchandise displayed
6. _____________ also allows stores to localise assortments based on the demographic of shoppers.
a. Demand planning
b. Visual merchandising
c. Detailed drawings
d. Space planning
7. Which of the following is a way for measuring of inventory productivity that expresses the relationship between
your gross margin, and the area allotted to the inventory?
a. GMROF
b. MGROF
c. ROFMG
d. GMRF
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8. An/A ___________ like system provides a solution to these common but difficult issues and enables retailers
to achieve maximum profitability across every square foot of their stores.
a. Retail
b. Marketing
c. GMROF
d. ERP
9. Which of the following provides a link between merchandising and store planning, construction, operations,
and inventory management?
a. Retail
b. Marketing
c. GMROF
d. ERP
10. Which of the following is one of the criteria in the cleanliness of a store place?
a. Front door assumption
b. Unregister area
c. Shoulder to knees
d. Cluter free
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Chapter VII
Managing Capital Assets
Aim
• introduce asset management
• elucidate the types of assets
• explain the role of computer software in facilitating assets
Objectives
• explain the return on assets
• describe the product strategies
• elucidate the asset utilisation
Learning outcome
• understand the net profit on total net asset value
• identify the depreciation on assets
• understand the management of assets
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7.1 Introduction
Perhaps the only most damaging blunder in industry at the moment is the frequent practice of overlooking asset
management concepts during the design, formulating and startup of foremost innovative facilities. The global cost of
this poor management practice with relevance to assets pertains to retail is beyond doubt. New facilities familiarity
unnecessary unplanned downtime, resulting in extreme costs and loss of critical production due to quality and
quantity issues is also one of the agenda.
These losses can be let alone by implementing appropriate business processes and high-quality operational planning
preceding to facility startup. As everyone knows that any business is constituted of assets either made of fixed assets,
machinery, manpower or non fixed assets. Thus, retail is also constituted of assets, which are mainly constituted by
fixed assets, manpower, and non fixed assets. While the topic of man-power assets is dealt under the development
of ‘managing manpower’ topic we shall be dealing here with only non-human kind of assets, their significance and
their management.
There are also certain software with the help of those assets of retail business is managed. The aim of this software
is to provide finance professionals and management decision-makers with the capability to witness both fixed and
portable items, allowing detailed information to be stored against each asset. Portable assets can be recorded using
the latest Pocket.
PC technology enabling new, transferred and disposed assets to be rationalised in the system. The aim of this asset
management is not only to streamline the fixed asset management tasks , but also enables one to work out with
effectual control and with well-organised and unproblematic reporting on summarised and detailed movements in
fixed assets.
7.2 Classification of Assets

A retail store comprises of many assets that need managing. Generally, the assets in the store can be classified into
three categories such as fixed assets, semi-fixed assets, and movable assets. Let us try to understand the kind of
assets classified under each category.
Capital retail is a well-known innovator in this sector. Capital retail manages roll out disposal strategies for a cross
section of retailers in addition to being recognised as leading shopping centre advisers, with over 7.5m sq ft of let
table space currently under remit. A partnership committed to extracting added value across our client portfolios
through a pro active, lateral attitude to retail property.
Assets
(1) (2)
Real Assets Fictitious Assets
(a) (b)
Fixed Assets Current assets
(i) (ii)
Tangible Assets Intangible Assets
Liquid Quick Floating or

Assets Circulating Assets
Fig. 7.1 Classification of assets

(Source: https://encrypted-tbn2.google.com/images?q=tbn:ANd9GcRsVy1WFgjQIY2Mxx7NZn5RSnu9SWSiX
UfiTGg36xkA6BWx2Y9SVQ)
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7.2.1 Fixed Assets

It can be defined as those types of assets, which are fixed in nature and once installed, cannot be easily removed
or moved from one location to another as easily as other types of assets. Generally, the assets that come under this
class are the capital assets like building, fixed structures, huge installations like power generators, air condition
installation, tiles or wooden flooring, chiller units for fresh and perishable merchandise, safe deposit vaults, kitchen
equipments and so on.
7.2.2 Semi-fixed Assets

These are assets, which are not totally fixed but can be moved with some efforts. For example various types of fixtures
used for display of materials like water-falls, big browsers, four-way browsers, and so on; various types of storage
fixtures; split or window A.C. units; display tables & racks; cashiering/billing tables; electronic wall units like TV
Screens, Security Equipments/ Cameras, Fire-Alarm system, Fire- Prevention Equipment, Lighting Equipments,
Electrical Fittings and Wiring and so on
7.2.3 Movable Assets

These are assets as is clear from their name are the ones, which can be easily moved with little effort. For example
computer desk top system, weighing scales, trolleys, baskets, small display units and fixtures, chairs, sofas, decorative
items, photo- frames, poster frames/ display arrangement on walls used for visual merchandising and branding,
flower plants, movable fans, bar-code machine, tagging/labeling gun, bar-code reading hand-held machine, security
tags/labels/ locks, various types of props used for window display as well as merchandise display, mannequins and
many more.
7.2.4 IT Assets
IT Management, which takes into consideration hardware and software, is directly or indirectly comes under
the domain of Classification of Asset. But when we talk in a retail perspective, IT had a great impact on retail as
technology is playing a great role in this sector:
• Fixed Assest
• Semi-fixedAssets
• MovableAssets
Knowing which IT assets you have and how they are used has become a confront in today’s complex and ever
evolving IT infrastructure. An archetypal IT infrastructure has numerous diverse assets of a range of types, and new
assets are being deployed daily to sustain the evolving business needs. Tracking hardware and software inventory
has become a trouble for many IT managers.
But taking IT inventory is not adequate. Once you put on control over your IT inventory, the subsequent footstep
is to link them against the associated financial assets, such as contracts, software licenses or service agreements, to
comprehend how they transmit to the business and acquire any actions required. IT Asset Management will facilitate
in effortlessly track the assets and comprehend how they contact the business.
Challenge addressed by IT Asset Management

• Knowing which IT assets you have, and their configuration, you can easily audit your entire infrastructure, and
deploy proper hardware asset management processes.
• Tracking changes to your assets, such as new computers or software installations.
• Planning IT migrations and new IT projects.
• Correlating IT assets against business financial records such as contracts and licenses.
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Reduce Costs by Better Managing and Administrating the IT Assets
• IT Asset Management can facilitate reduce the cost of administrating the hardware inventory, improve security
and ensure that one should be always ready for the next IT audit.
• Ensure software compliance by knowing what you have and what you use.
• Align IT with business goals to support business decisions such as purchasing or renewals.
IT Assets
• Hardware
• Software
• Printers
• Other
Financial assets
• Software Licenses
• Service Agreements
• Hardware Leases
• Maintenance contracts
Correlate Assets
• Align IT Assets to
• Financial Assets
Optimise Assets
• Impact analysis
• Discover gaps
• Risk management
• Cost reduction
• Take action
Improve productivity by empowering the IT administration team to easily track and manage assets and their
changes.
Detect unauthorised and illegal software by adopting a software usage policy and easily detecting any policy
deviations.
Role of Computer Software in Facilitating Assets

In the present scenario when things are changing very fast, specially in retail sector, the role of computer software
in facilitating assets is vital. The computer software had not only streamlined the asset but also facilitated the retail
organisation to integrate the process.
Below mentioned are the certain benefits pertaining to business and technology:
• Simplifies and streamlines the asset management
• Asset value at the figure tip
• Depreciation as per department, location, division, branch and so on
• Allocation and reallocation of asset management
• Tracking of the movement of fixed assets
• Insurance tagging to assets
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• Ensures complete visibility of assets across the enterprise

• Provides greater controls and better financial discipline
• Enhances decision making capabilities
• Helps to forecast and better planning
• Helps to reduce cost and increase profitability
• Boost business productivity
• Keeps pace with the growing business needs
• Periodic reports
7.3 Asset Grouping Based on Purpose of Usage

Further the Assets can be grouped as per the purpose of the usage or the final aim of having the said asset in
place.
We can group assets into three types of usage categories as follows:

• creating facility and convenience for the customers
• creating right ambience for the store as per store positioning and product strategies
• for stock storage, and security purpose
7.3.1 Creating Facility and Convenience for the Customers

As the title suggest under this grouping, we can list many assets class irrespective of whether the asset belongs to
the fixed asset category or semi-fixed or movable category. For example, fixed assets like building, fixed structures,
huge installations like power generators, air condition installation, chiller units for fresh and perishable merchandise
will fall under this grouping; but also semi-fixed assets like water-falls, big browsers, four-way browsers, split
or window a.c. units; display tables & racks; electrical fittings and wiring will also be part of the grouping under
creating facility and convenience for the customers. The movable assets like computer desk top system, weighing
scales, trolleys, baskets, small display units and fixtures, chairs, sofas and so on will also fall under this grouping
of assets. Thus, we have seen irrespective of the asset class the assets under this category can be grouped under a
specific purpose being served.
7.3.2 Creating Right Ambience for the Store as per Store Positioning and Product Strategies
Here, the purpose is to have assets that will facilitate in directly or indirectly in creating right type of ambience for
the store as per the decided strategic positioning of the store like store positioned for the high fashionable and high
priced products, or store positioned for its high class elegance, or store positioned for its simplicity in ambience
and overall appearance, or store positioned towards common public for its grocery products of daily use, and so
on. The assets that can be classified under this grouping are as follows: tiles or wooden flooring, various types of
fixtures used for display of materials like water-falls, big browsers, four-way browsers; split or window a.c. units;
display tables & racks; electronic wall units like TV screens, trolleys, baskets, small display units and fixtures, chairs,
sofas, decorative items, photo-frames, poster frames/ display arrangement on walls used for visual merchandising
and branding, flower plants, types of props used for window display as well as merchandise display, mannequins
and so on.
7.3.3 For Stock Storage and Security Purpose

The purpose or the usage of this class of assets is clearly to store the material for the purpose of security reasons.
The security reasons could be for the purpose of securing the assets or materials kept for sale and thereby prevent
pilferage or securing the lives of the customers and other inhabitants within the store. The kind of assets that can be
grouped under this category are building, fixed structures, safe deposit vaults, for securing the assets; good quality
kitchen equipments for ensuring health of customers and safe handling by the kitchen users; various types of storage
fixtures for safe storage of materials, security equipments/ cameras, security tags/ labels/locks for preventing pilferage
of materials; fire-alarm system, fire-prevention equipment, good quality lighting equipments and electrical fittings
and wiring to prevent fires due to mishandling of equipments or fire-circuits etc.; bar-code machine, tagging/labeling
gun, bar-code reading hand-held machine, for facilitating correct billing and thus avoiding pilferage and missing
on smallest items purchased.
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While grouping assets as per its usage we have seen there are some classes of assets, which fall under more than
one grouping like the asset class of buildings and fixed structures serve the purpose of security & safety as well as
facility & convenience of the customers. Similarly, assets like sofas and chairs serve the purpose of both convenience
& facility to customers as well as fulfilling the purpose of creating right ambience for the store.
In terms of importance of this grouping we can rank them as follows. Assets falling under ‘stock storage, and security
purpose’ can be listed as the most important, followed by ‘creating facility and convenience for the customers’ as
the second most important category and the third important grouping is ‘creating right ambience for the store as per
store positioning and product strategies’.
7.4 Asset Utilisation

Every physical asset in the store needs attention and care to facilitate optimal asset usage. The general principle of
“maintenance is better than cure” applies to all types of assets in the store. Sometimes the asset condition can be
the difference between smooth functioning of the store versus breakdown during peak business hours. For instance,
non-functional diesel generator sets during peak business time, particularly during these days of power-cuts, can
throw the store into darkness, which can result into very low customer entry during peak time. Thus, causing huge
loss to store for the need of proper maintenance of DG sets.
It is essential for all retailers to generate a list of assets in their stores and create maintenance and safety plans for
each of the assets. A list of possible assets in the store, their purpose, and their maintenance requirements are stated
below.
The Flooring in the Retail Store

Flooring is an integral part of retail look and feel. Different types of retailers use different types of material to create
the required store environment for the customers.
Combining colors, texture, functionality and a diversity of designs, nothing transforms the retail commercial
environment like a contemporary finish. Research has shown that the look and feel of a commercial environment
can sway the amount of time a customer spends browsing and even the urge to purchase. And color, of course, has
been proven to affect their moods. So, especially when it comes to flooring, floor polishing services will have a big
impact due to the sheer surface area it covers.
High end stores use very expensive materials like granite to create impact. Some retailers use carpets while others use
ceramic tiles. Store managers need to familiarise themselves with the kinds of materials used for flooring in stores
and ensure that they have a clear understanding of the kind of maintenance that these floors require, for example
wooden flooring may require regular polishing to retain the shine of the floor. Dirty and ill maintained flooring gives
a sense of untidiness and many customers get put off when they enter such stores. Thus, management will have
to determine the frequency of cleaning or polishing of flooring in consultation with house-keeping experts, from
in-house team or outside, and draw out a preventive maintenance program, so as not to affect the regular business
of the store.
Lighting System
A good store would definitely have many kinds of lights for numerous purposes. Some lights are used to light up the
floor while some are used to draw attention to the merchandise moreover on the floor or in windows. Every light has
a rationale and fused bulbs if unattended can upshot into creating un-intended dark and light effects on the retail floor.
Many fashion retailers use lights as the means to create effect on the garments to make them look more attractive
to customers. Further, it is necessary to keep check on the fittings and fixtures used for light bulbs, to ensure there
are no possibilities of short-circuit due to defective wiring or fittings. Thus, again a preventive maintenance based
on the kind of fittings used can be drawn to avoid any mishaps.
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Fig. 7.2 Lighting system in store

(Source: http://www.gandana.com/wp-content/uploads/2010/12/Store-lighting-system.jpg)
Point-of-Sale (PoS) Machines

Point-of-Sales machines are desk-tops used for mainly billing and generating reports and other information as per
the need of the management. POS machines need to be functioning very efficiently as during peak hours, even
if one machine is off the system it develops into big chaos as the line at each of the other billing desk increases,
which generates lot of dissatisfaction among the customers standing in queue. Further the POS system used on such
machines and the machines per se must be of best quality to work smoothly, efficiently, and quickly. Dissatisfaction
on this count may cause the customers to divert their purchases to other stores. This is particularly truer for grocery
types of stores and supermarkets. Hence, the regular maintenance and updating of the machines and software to
handle customer traffic and billing needs is of vital importance.
Various Types of Storage Fixtures

Storage fixtures need proper maintenance depending upon the type of material used in making the same. If a wooden
fixture is used then naturally it is to be polished or painted as per the ambience of the store and more importantly
applied anti-white ant/termite polish on regular basis to avoid soiling of material. If the fixtures are made from iron
or steel, then these are to be treated with iron-oxide paints besides other decorative paints for anti-rusting effect.
Thus, there needs to be at least once a year program to take necessary preventive steps in this respect.
Chiller Units for Fresh and Perishable Merchandise

These as the name suggest is very important part of the stores selling fresh vegetables, fruits, meats, fish, chicken,
and so on. Maintaining such unit is of extreme importance not only because any mal-functioning will cause loss
of inventory kept within the unit but also loss of customers due to non-availability of their daily requirement or
of low /sub-standard quality product; if the problem is not detected well in time by the personnel looking after the
withdrawal of items from the storage unit. This being a specialised unit needs well qualified personnel to look after
its daily maintenance and up-keep to ensure smooth and efficient working of the system all twenty-four hours.
The preventive maintenance and up-gradation of technology depending on the new developments and need of the
store will be required on regular basis. For this purpose, the arrangement may have to be made with the supplier
of the chilling unit only. The best course of action is to decide on all preventive maintenance features/up-gradation
requirements during the negotiation stage at the time of purchase of the unit.
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Air Conditioner Units
Imagine that the Air Conditioning is not working during the summer time in the store. Then the customers will fail
to enter inside the store as it will cause a suffocating and very uncomfortable environment inside the store. Thus,
it has become of great importance for every store, small or big, to install right AC system to create a cooling and
comfortable environment within the store.
AC maintenance is generally outsourced with specialised firms in this field or it is included as part of the purchase
contract. Normally a quarterly/half yearly servicing of the AC plant or the unit is done.
Safe Deposit Vaults

In most of the big stores provision is made for storage of cash and other important documents, certificates, contracts
and so on in safe deposit vaults.
Generally, for big super markets or grocery stores most of the transaction is done against cash, and hence there is
need to regularly store the cash in safe deposit vault to avoid incidence of robbery or pilferage. Generally, the cash
deposited in safe deposit vault is withdrawn by an authorised person and further deposited with company’s banker.
The functioning of the safe deposit vault needs regular checking by the supplier of the vault as well as from security
point of view the locking code needs regular changing to avoid vault breakage incidence.
Wash Room Fixtures, Fittings and Toiletries

It goes without saying that the maintenance of the store or a house is judged from the upkeep of its toilet. Hence,
all large stores ensure that the fixtures and fittings used inside the toilet are well maintained and of best quality to
reflect the proper standard of the store. Along with fixtures and fittings the store must ensure that proper toiletries
like hand-wash liquid, soaps, room-fresheners, hand-towels, driers, toilet-papers, and so on are well kept. Again
the maintenance and up-keep of these facilities are out-sourced most of the time, as a proper team of house-keeping
personnel is necessary to maintain the efficient servicing of the facility.
Various Electrical and Electronic Equipments

There will be many electrical equipments as well as electronic equipments like music system, lighting system and
so on, which needs regular maintenance to keep them running in the most efficient manner.
These equipments always carry risk of causing short-circuits or power failures and hence need proper regular
maintenance by an expert team from in-house or outsourced.
Weighing Scales
Fresh vegetables, fruits, and certain grocery items like rice, grains, dals, flours, and so on are sold on the basis of
weight. Hence, the weighing scale must give proper weight to avoid dissatisfaction of customers by raising doubt
in their minds about the exact weight of the quantity. Nowadays, many stores use electronic based weighing scale,
which shows to the customer on the opposite side of the weighing or billing desk the exact quantity being weighed,
thereby giving confidence to the customer about the correctness of the weight. Thus, it is of extreme importance to
ensure the weighing scale is functioning to the dot and decimals. Again the maintenance and upgradation of such
machines is outsourced to supplier of the said machine.
Kitchen Equipments
Many big stores have facility of in-house kitchen to provide tea and/or food to their employees. Hence, maintaining
well equipped and clean kitchen is utmost importance from hygiene point of view. Certain large format stores have
also started the facility of providing snacks and food items to customers visiting the store through separate stalls or
counters. Thus, keeping the kitchen equipments neat and clean besides well functioning goes without saying. While
regular cleaning is done by the staff looking after the kitchen the regular maintenance of equipments is outsourced
to the specialised agency or to the supplier of such equipments.
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Power Backup Equipments like Diesel Generator Sets

As discussed in the initial part of this topic, maintaining Generator Sets has become of vital importance nowadays
due to frequent power cut and power failure situation.
Generator Sets being highly technical equipment needs daily check-up and normal maintenance, and hence many
stores have to employ in-house team for looking after these equipments 24X7 days. Certain high caliber preventive
check-ups/maintenance and up-gradation is usually out-sourced to the supplier of such equipments and charges for
the same are usually negotiated at the time of purchase of such equipments. The industrial generators with a heavy
duty facility from Kirloskar, Jackson, and so on could be the vendors who are in this field.
7.5 Return on Assets

There are various ways in which one can find the return on Assets. Some of the common methods are as follows:
Net Profit on Total Net Asset Value

This is calculated by dividing the net profit earned during the year, after adjusting for interest, depreciation, and
taxes; with net value of all the assets used within the store after adjusting for depreciation on the asset. The said
value will be in terms of ratio for converting the same to percentage return on asset value we have to multiply the
ratio with 100.
Thus for example:
Gross profit of the store is Rs 1000000;Interest is Rs 100000;Depreciation is Rs 300000;Tax is Rs 120000
Carry forward Asset Value at the beginning of the year is Rs 10000000.
Thus, the Net Profit = Gross profit – Interest – Depreciation – Tax
= 1000000 – 100000 – 300000 – 120000
= 480000
Managing
Net Asset Value = Carry forward Asset Value – Depreciation Capital Assets
= 10000000 – 300000
= 9700000
Thus, Percentage Return on Asset = (480000 ÷ 9700000) x 100
= 4.95%
Gross Profit on Total Net Asset Value

This is calculated by dividing the gross profit earned before adjusting for depreciation and taxes, but after adjusting
interest, as this being taken as part of the expenses of the business; with net asset value after adjusting the asset
value for depreciation. The said value received will be in the form of ratio for knowing the percentage return on
Asset value we have to multiply the ratio with 100.
Let us see what will be percentage return on investment with gross profit as the basis with the help of the figures
given in the above example.
Gross Profit after Interest = 1000000 – 100000
= 900000
Net Asset Value = 10000000 – 300000
= 9700000
Thus, Percentage Return on Asset = Gross profit after Interest ÷ Net Depreciated
Asset Value
= 900000 ÷ 9700000
= 9.28%
Hence, we can see the big jump in percentage return on Asset value when we convert the Net profit to Gross profit.
Most of the businesses take gross profit after interest to calculate the return on investment in Asset.
One may also like to know the sales over the Net Asset Value. The above values provide significant insight into the
utility value of the asset and one may like to see this utility value increases every year with the growth in business The
return on investment is also an indication of whether the right decision being made on the part of the management.
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If the investment is correct it will naturally reflect into higher return on investment by bringing in more traffic of
satisfied customers.
The percentage of old customers returning to the store is also the indication of the best use of the asset by providing
right kind of ambience and service to customers.Since the topic of depreciation has come up in this section of the
subject it will be appropriate to discuss the concept.
7.6 Depreciation on Assets

Depreciation is a statutory provision made under the Income tax rule and thus, has been adopted by accountants
all over the world as a normal practice of maintaining proper account books showing depreciation of Assets under
the accounting system.
The purpose of calculating depreciation is to allow for deterioration of the assets over period of time due to wear
and tear of the normal business use. Thus, by allowing certain percentage of the assets to be worn down over a
period of time the accounting system is providing to the business with cash reserve for replacement of the asset or
up-gradation of the asset by undertaking renovations and repairs. Hence, for a running business this becomes a very
important part of the process. Generally, there are two methods of depreciation system followed.
Straight Line Method

Under this method, a fixed percentage (as statutorily decided) of the original asset value is deducted every year from
the original Asset Value to determine the net depreciated value of the asset at the end of the year.
Written Down Value Method

In this method, a fixed percentage (as statutorily decided) of the written down value (WDV) of the Asset at the
beginning of the year is calculated and the said value is further deducted from the WDV of Asset at the beginning
of the year, so as to arrive at the WDV of the Asset at the end of the year.
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Summary
• A retail store comprises of many assets that need managing.
• Generally, the assets in the store can be classified into three categories such as Fixed Assets, Semi-fixed Assets,
and Movable Assets.
• Capital retail manages roll out disposal strategies for a cross section of retailers in addition to being recognised
as leading shopping centre advisers, with over 7.5m sq. ft. of let table space currently under remit.
• The computer software had not only streamlined the asset but also facilitated the retail organisation to integrate
the process.
• Flooring is an integral part of retail look and feel. Different types of retailers use different types of material to
create the required store environment for the customers.
• High end stores use very expensive materials like granite to create impact.
• Store managers need to familiarise themselves with the kinds of materials used for flooring in stores and ensures
that they have a clear understanding of the kind of maintenance that these floors require.
• Point-of-Sales machines are desk-tops used for mainly billing and generating reports and other information as
per the need of the management.
• The percentage of old customers returning to the store is also the indication of the best use of the asset by
providing right kind of ambience and service to customers.
• Lighting or illumination is the purposeful application of light to accomplish some aesthetic or practical effect.
• Lighting includes use of both artificial light sources such as lamps and natural illumination of interiors from
daylight. Lighting can also be an inherent constituent of landscaping.
• Point of sale/service (POS) machine is used to demeanour retail transactions. It can make available numerous
services, including credit card processing, check reading and cash transactions, depending on the model.
• Depreciation is a statutory provision made under the Income tax rule and thus, has been adopted by accountants
all over the world as a normal practice of maintaining proper account books..
References
• Eugene, F. B. and Ehrhardt, M.C., 2004. Financial Management. Austin, TX: Harcourt Publishers.
• Burns, William T., Jr., 2005. Accounting for Managers. Thomson/ South-Western.
• eGyankosh. Managing Capital Assets [Online] Available at: <http://www.egyankosh.ac.in/
bitstream/123456789/39077/1/Unit-6.pdf> [Accessed 28 February 2012].
• Investopedia. Asset Class [Online] Available at: <http://www.investopedia.com/terms/a/assetclasses.
asp#axzz1nfFsblBo> [Accessed 28 February 2012].
• unepAndYou. Absolute Assets: Accounting for natural capital session-2011 UNEP FI Global Roundtable [Video
online] Available at : <http://www.youtube.com/watch?v=tsV_Lapfvwc> [ Accessed 20 March 2012].
• 678partners.Grow assets under management, retail existing clients, find new clients and grow your revenue
series [Video online] Available at: <http://www.youtube.com/watch?v=KvVH7nuAO14> [Accessed 20 March
2012].
Recommended Reading
• Higgins, Robert C., 2001. Analysis for Financial Management. New York, NY: McGraw-Hill/Irwin.
• Horngren, Charles T., 2005. Accounting. Upper Saddle River, NJ: Prentice- Hall, Inc.
• Stickney, Clyde, P., Brown, P. and Wahlen, J.M., 2004. Financial Reporting and Statement Analysis. Mason,
OH: Thomson/South-Western.
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Self Assessment
1. _______________ is a well-known innovator in asset sector.
a. Capital retail
b. Retailing
c. Fixed retail
d. Semi fixed retail
2. Who rolls out disposal strategies for a cross section of retailers?

a. Retail managers
b. Capital retail manages
c. Fixed retail managers
d. Semi fixed retail managers
3. Which of the following assets are fixed in nature and once installed cannot be easily removed or moved from
one location to another as easily as other types of assets?
a. Semi fixed assets
b. Movable assets
c. IT assets
d. Fixed assets
4. Which of the following is not a type of assets?

a. Fixed assets
b. Semi fixed assets
c. Movable assets
d. Immovable assets
5. Which of the following is not one of the types of usage categories in group assets?
a. Creating facility and convenience for the customers
b. Creating right ambience for the store as per store positioning and product strategies
c. Allocation and reallocation of asset management
d. For stock storage, and security purpose
6. ______________ is an integral part of retail look and feel.

a. Flooring
b. Lightening
c. Fixtures
d. Chiller units
7. Which of the following statements is false?

a. Every physical asset in the store needs attention and care to facilitate optimal asset usage.
b. The general principle of “maintenance is better than cure” applies to all types of assets in the store.
c. The purpose or the usage of this class of assets is clearly to store the material for the purpose of security
reasons.
d. It is not at all essential for every retailer to generate a list of assets in their stores and create maintenance
and safety plans for each of the assets.
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8. Which is the material is usually used by high end stores to create impact on flooring?
a. Copper
b. Silver
c. Graphite
d. Wood
9. Which of the following fixtures should be polished or painted and applied anti-white ant/termite polish on
regular basis as per the ambience of the store?
a. Steel fixtures
b. Wooden fixtures
c. Iron fixtures
d. Copper fixtures
10. _______________ calculated by dividing the net profit earned during the year, after adjusting for interest,
depreciation, and taxes; with net value of all the assets used within the store after adjusting for depreciation on
the asset.
a. Net profit on total net asset value
b. Gross profit on total asset value
c. Tax on total asset value
d. Asset value on gross asset value
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Chapter VIII
Standard Operating Procedure (SOP) and Transaction Matrix
Aim
• introduce the concept of SOP
• explain the SOP in retail
• describe the SOP process
Objectives
• explain the SOP documentation
• elucidate the transaction matrix
• elucidate the measuring performance
Learning outcome
• understand the ways to achieve best result on sales
• identify the influencing factors in sales
• understand the retail business drivers
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8.1 Introduction
A Standard Operating Procedure (SOP) is a set of written instructions that document a routine or repetitive activity
followed by an organisation.
The development and use of SOPs are an integral part of a successful quality system as it provides staff with the
information to perform a job properly, and facilitates consistently in the quality and integrity of the end-result.
SOPs take into consideration the regularly recurring work processes that are to be conducted or followed within an
organisation. It not merely elaborate but also document the way activities are to be performed to facilitate consistent
conformance to technical and quality system requirements and to support operation.
An SOP may describe, for example, a fundamental or critical process with steps in which it has to be done. SOPs
are intended to be specific to the organisation or facility whose activities is described and assists that organisation
aim is to maintain their quality control and quality assurance processes and ensure compliance with governmental
regulations.
The development and use of SOP has various advantages for the organisation:
• An SOP minimises the variation and promotes standardisation through consistent implementation of a process
or procedure within the organisation.
• Temporary or inexperienced staff can do the job satisfactorily when SOP is followed.
• SOPs can indicate compliance with organisational and governmental requirements and can be used as a part of
a personnel training program, since they should provide detailed work instructions.
• An SOP minimises opportunities for miscommunication and can address safety concerns.
• It can be frequently used as checklists by inspectors when auditing procedures.
8.2 The SOP Process

8.2.1 SOP Preparation
The organisation should have a procedure in place for determining what procedures or processes need to be
documented. Those SOPs should then be written by individuals knowledgeable with the activity and the organisation’s
internal structure.
These individuals are essentially subject-matter experts who actually perform the work or use the process. A team
approach can be followed, especially for multitasked processes where the experiences of a number of individuals
are critical, which also promotes “buy-in” from potential users of the SOP.
SOPs should be written with sufficient detail so that someone with limited experience with or without knowledge
of the procedure, but with a basic understanding, can successfully reproduce the procedure when unsupervised.
8.2.2 Review and Approval

SOPs should be reviewed (that is, validated) by one or more individuals with appropriate training and experience
with the process. It is especially helpful if draft SOPs are actually tested by individuals other than the original writer
before the SOPs are finalised.The finalised SOPs should be approved as described in the organisation’s Quality
Management Plan or its own SOP for preparation of SOPs.
8.2.3 Frequency of Revisions and Reviews

SOPs need to remain current to be useful. Therefore, whenever procedures are changed, SOPs should be updated and
re-approved. If desired, modify only the pertinent section of an SOP and indicate the change date/revision number
for that section in the Table of Contents and the document control notation.
SOPs should be also systematically reviewed on a periodic basis, example, every 1-2 years, to ensure that the policies
and procedures remain current and appropriate, or to determine whether the SOPs are even needed. The review date
should be added to each SOP that has been reviewed. If an SOP describes a process that is no longer followed, it
should be withdrawn from the current file and archived.
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8.3 SOP Documentation
Standard operation process document helps in the smooth conduction of the business process. It helps to minimise
errors and improves scalability of a business model. Critical SOP, if not followed properly, could lead to loss in
customer’s perception of the store besides incurring financial losses.
8.3.1 Objective of SOP

The objective of this Standard Operating Procedure is to offer a smooth experience to the customer, coupled with
a complete proof internal system, during the process of having the merchandise altered as per the customer’s
requirement.
8.4 Process at the Alteration Counter

• The customers coming to the counter for alteration should have paid for the merchandise and the invoice
necessary to accept the merchandise for alteration.
• If the customer comes back for alteration on any day other than the day on which he has bought the merchandise,
the Alteration Request Slip issued by the Security at the Entrance is required along with invoice.
• The Alteration Request Form shall be issued to the customer as below:
Original copy - To the Customer
Second copy - Together with merchandise to the Tailor
Third copy - Office copy(shall remain in the book)
• The alteration slip is per style and as many alteration slips shall be required/ issued to get the requirements of
alteration correctly.
• Alteration slip shall be signed by customer for having deposited the merchandise to carry out the requisite
alteration.
8.4.1 Process at the Tailor’s Desk

• Merchandise collected at alteration counter shall be delivered to the Tailor in a retailers carry bag together with
the second copy of alteration slip.
• After completion of alteration, the Tailor hands over the merchandise to the Alteration Counter.
• It is expected that within half-an-hour of alteration request, we are able to alter and deliver the merchandise
to the customer. During off-sale time, depending on the workload, the Store Manager has to decide on the
benchmark for alteration time.
• The Alteration Counter staff shall acknowledge in the Register maintained by the Tailor, for having received
the altered merchandise from the Tailor.
8.4.2 Process at the Alteration Counter

• The Alteration Counter shall deliver merchandise to customer on production of the original copy of Alteration
Slip.
• The Alteration Counter staff takes acknowledgement of customer on the third copy of Alteration Slip as token
of having delivered the merchandise to the Customer.
• Register as per Performance (Annexure – III) shall be maintained showing clearly the audit trail for the entire
transaction.
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8.4.3 Daily Audit by Inventory Department

• At the end of every day, Inventory Department has to check the Register maintained by the tailors to tally
physical stock of merchandise pending alteration. Also, Inventory staff has to check the number of altered
garments pending delivery at the Alteration Counter.
• After checking, he will specify and sign for the number of garments pending alteration and altered garments
pending delivery in the register maintained by the tailors. Store Manager has to check this on a daily basis and
sign the register.
• Every day, Inventory staff will check the Alteration Register maintained by tailors to ascertain whether barcodes
specified in the register matches with the Invoice Number mentioned.
• In case of merchandise altered and which has not been collected by customer has to be closely monitored and
efforts taken to deliver the merchandise.
• Inventory Department has to report on any discrepancy in the process every month in their Audit Report.
8.5 Alteration Request Slip

8.5.1 Annexure – I
Lifestyle International Pvt. Ltd.
ALTERATION SLIP
Sl. No. 5198
Date:.................................
Date of delivery: .......................
Time of Delivery:...........................
Date of delivery:..........................
Customer Address:........................
Telephone No.:.........................
Cell No.:......................
Invoice No.:....................
Invoice Date:................. I
Item Code :............
Brand Description Qty.:.....................
Customer Signature :............
Staff Sign.:............
Delivered by:.....................
Altered garments cannot be exchanged.
Altered garments are to be taken with in 30 days of time.
Altered Garments are not delivered after 9.00 p.m.
Nature of alteration:..........................
Lifestyle International Pvt. Ltd.,

Sl. No. 5198
Date:.................................
Customer Name:................................................................................
Please produce the slip for collecting the altered garments.
Alteration Request Format

Annexure-II
Lifestyle International Private Ltd.,
No:.................
Date:..........................
Customer Name:...................
Phone/Mobile No.:...................
Bill No.:..............................
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Brand I:..................
Item Code:........................
Size:...........................
Nature of Alteration:...................
Time In:........................
Customer Signature:.............
Staff Signature:.....................
Time Out:............................
Date of Delivery:.............................
Customer Signature:.........................
Staff Sign:.................
Annexure - III
Sl. No.:................
Alteration:....................
Customer Inv. no/ Item Description:......................
MRP :....................
Time of Customer:........................
Slip no.:........................
Name:...........................
Date code:....................
Recipt by Completion signature:...................
Tailor with date:...............
Signature & time:......................
Retail transaction information contains an unbelievable prosperity of data about numerous aspects of a retail
enterprise. From this data, a retailer can derive customer behavior, employee and store-level performance, promotional
effectiveness, profit drivers and many other significant factors.
8.6 Understanding Retail Business Drivers

Prior to talking about the retail business drivers, let us initiate with the technology driver. What are drivers? Drivers
are the factors that drive the business or trade or sales. The factors that are the cause for the sales, or business or
trade, happening in the particular industry. What are the drivers for the retail trade? One can list number of Drivers
for the retail trade; among them the major ones are as follows:
Further, one can classify the Drivers as Strategic Drivers and Transactional Drivers.
Strategic Drivers: These are very important drivers of a given retail business or showroom. As these needs to
be well defined at the start of the business. The better defined and focused theme is the more effective they are in
driving the desired traffic to the store. As each of these drivers is well explained in other sections of the course,
hence, they are not defined over here.
• Resultant Driver: We saw that walk-ins is the result of the strategic drivers like Brand Positioning, Store
Positioning and Target Consumers, which help in generating traffic to the store because of the target customers
finding the brand meeting / accepting their requirement and fulfilling their needs both from the consumption
point of view as well as aesthetic point, thus Walk-in is the Resultant Driver.
• Tactical Drivers: In generating enough walk-in to the stores retail companies have to resort to Promotion and
Advertising schemes, which act as both parts of Strategic Drivers as well as Tactical Drivers. But, it must be
noted that Tactical Drivers act always as sub-part of the Strategic Drivers as they always have to be in alignment
with the Strategic Drivers.
Thus, we saw that drivers need to be understood in the right context to understand their respective importance
and roles. The above discussion brings us to the Transactional Drivers, which are under direct control of the store
management. Let us understand more about the transactional drivers through the method of Transactional Matrix.
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8.7 Transaction Matrix

The Transactional Drivers form the parameters or basis of measurement for the Transactional Matrix. The transaction
matrix is used to measure performance of the business on a store-2-store, day-2-day basis. By monitoring the
transaction matrix, we come to know the extent to which the store potentialities make best use of the customer entry
into the store.The parameters measured in the matrix are meant to be used by ALL retailers - whether small or big.
Key variables to be measured for the matrix include:
Conversion Rate: It is quantifying the ratio of potential shoppers that have decided to buy. Rate varies considerably
by retail format, time of year, promotional activity. All these are measured with reference to a specific time frame.
Conversion: How many customers out of 100 who enter our store leave with a purchase measures how well we
convert “Shoppers to Buyers” The higher the conversion rates the better.
This is the driver, which finally decides whether the business is going to be successful or not, and hence, its importance
in the Transaction Matrix. If the store management is not effective and efficient in their overall handling of customers
then naturally the conversion will not be the desired one, even though company has been able to drive the traffic or
enough walk-ins to the store. Hence, many stores have practice of monitoring this driver on daily basis to understand
the effectiveness of its store personnel inside the store.
8.8 Influencing Factors

Let us understand what influences this driver. Some of the important factors that influence this driver are:
• Appearance and Quality of the Employee: For the kind of brand position, store position and target consumer
we need to employ staff who can match the needs of the brand in terms of physical appearance, grooming level,
and educational qualification. The overall standard of the employees working in the store adds to the ambience
of the store as well as act as part of the first impression formed by the consumers entering the store. Hence,
in International Brand stores lot of attention is given to the appearance of the staff, his/her grooming level,
communication skill and accent, inter-personal skills, question/objection handling, attitude and so on. This is a
necessary aspect of their branding and store positioning as their customers belong to high profile category and
may include foreigners and NRI customers too.
• Communication Skills: As we have seen in other sections covering communication skill, we know that
communication is not only how one speaks the given language but it involves the two way process of also
carefully listening to the customer and understanding very well the customer requirement. It involves the way
customer is welcomed to the store and then guided through the store and its product range. There are various
aspects to communication skill, which needs to be well understood by all the staff that has to deal with customers/
consumers.
• Practical Understanding of Consumer Psyche: This aspect of understanding consumer psyche comes through
years of experience and training and dealing with different types of customers/consumers. It has to be understood
by the front sales staff that each customer comes with certain peculiarities and needs. The well experienced sales
staff understands these peculiarities through initial questions asked to the customer and observation of body
language of the customer. Certain consumers may like the sales staff who is very interactive and conversational
while certain consumers want their own space and time to go through the collection before they need sales
personnel help. Thus, the sales staff must be able to correctly judge each customer’s personal likings.
• Product Knowledge: It must be understood by all store managements that without a proper understanding of
the product knowledge the concerned front sales staff will not help in making the conversion of the shopper
into buyer. Of course the level of product knowledge the sales person needs to have depends upon the profile
of the consumers, the brand position and the store position. The higher the level of these factors the higher the
need of product knowledge requirement of the sales staff. A consumer who wants to buy high priced product
say apparel, which is priced at Rs 10,000/- will naturally need to know every aspect of the product. Hence, the
product knowledge of the sales person needs to be of the highest level as compared to that of the sales staff that
has to sell apparel, which is priced at Rs 200. When we discuss about product knowledge the kind of details the
sales staff needs to be aware of for say a Garment are as follows:
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Product Content with content percentages, Special Texture or Features if any, Accessories Details if any Trims
have been used, Embellishments if any like embroidery/print/other hand-work and so on. Colour Names, Styling
Details, Type of Fittings for wearable, any other value additions. Besides the sales staff needs to be aware of
wash-care instructions and need to guide the customer on this aspect carefully to avoid a dis-satisfied customer
after the sale.
• Closing the Sale: This is the most important aspect after the customer is taken through the range and is convinced
on product quality and the reasonableness of price. The closing of sale needs utmost care at the sales staff
level. He or she has to ensure that once the customer is nearing to make a choice his/her attention need not be
diverted to something else in the same collection thereby again creating a state of uncertainty in consumer’s
mind. Sometime the sales staff plays a deciding factor while finalising the choice of the customer by aiding the
customer in making the right choice by making some subtle suggestions on colour or texture of the material or
about the styling or cut of the garment, which will suit the customer’s body feature.
Thereby, gaining customer confidence and expediting the choice making process for the customer. It must be
understood that each customer do need reinforcement of their decision making process to make him/her feel satisfied
about the correct choice made. After the choice is finalised then there may be opportunity for doing cross selling,
again it has to be done in a suggestive manner without appearing to be overbearing.
Finally, the customer needs to be guided to the billing counter with sales staff helping the customer with his/her
baggage or personally carrying the product to the billing counter and facilitating the billing /payment process.
The sales staff should also make effort to get customer fill in their details or comments in the visitors book. The
customer mandatorily needs to be wished good-bye by the sales staff and invited to come to the store in the near
future next time. This helps in living a lingering feeling in the customer’s mind and also a feeling of importance
and satisfaction.
8.9 Average Transaction Size

Let us try to understand the second important factor in the transaction matrix as it determines the level of business
achieved per customer bill. Thus, we shall define Average Transaction Size or Cash Memo size as:
• How much does the average customer spend in the store?
• Average transaction size = Sales / Number of transactions (cash memos)
• This is a critical number as it measures our ability to sell more of what we have to customers we already have
in the store.
• This figure should always be improving as then it will indicate the ability of the sales staff to upgrade its existing
customers who are regular buyers in the store to new category of items of higher value or expose the buyers to
items of different features and qualities.
8.10 Influencing Factors for Achieving Higher Ticket Size

While the factors that we discussed in the earlier section like Appearance and Quality of the employee; Communication
Skills; Practical Understanding of Consumer Psyche; Product Knowledge; and Closing the sale will continue to
be important influencing factors besides this the sales staff will have to be equipped with the following strategic
selling processes, so that he/she will know what strategic approach he/she will have to take in case of new or existing
customer walking into the store.
For this purpose let us understand the Product-Customer Matrix, which is a matrix that helps in determining the line
of action, the business needs to take when it has to consider expansion of the current business. It provides different
options the business has for expanding its existing line of business and thus, it acts as a basic guiding business model.
Let us try to use this model in dealing with transaction factors for helping in increasing the Transaction Size.
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8.10.1 Upgradation to Higher Priced Items

This is another important technique that helps us in improving the ticket size. For this the front sales staff must be
well equipped with psychological understanding of customer needs as well as superb product knowledge. The sales
staff must know at what stage he has to initiate this process without creating any type of confusion in the customer’s
mind. Thus, many well experienced sales staff plays a safe game by first identifying the style, cuts, colour and so on
of a particular item and keep it aside for later selection, while suggesting the customer to identify something similar
in basic features but may be in better material or with different embellishment features, while explaining their salient
features; thus helping the customer to upgrade its choice. So the customer being assured about the choice made of
earlier item he/she is recently shown some improved features or options with somewhat increased price or with
smaller price increase, thus tempting customer to go for product with better features.
8.10.2 Requirement of Management Action

For improving ticket size the most important action from the management size is to recruit right kind of sales staff
to match the product and branding profile. Besides this the training of sales staff on psychological understanding of
customer needs as well as superb product knowledge need not be further emphasised. The training of sales staff to
handle strategic thinking and selling techniques as explained in earlier part will also help.
8.10.3 Items per Ticket

This is another important factor in the transaction matrix as explained here below:
• It measures how many items the average customer purchases.
• It tells us how we are performing in suggestion selling.
• It should be increasing as it indicates the strength of it sales staff in selling more items to the same person as
well as strength of its product range in convincing the customer why it should buy more number of items from
the same store.
8.10.4 The Influencing Factors

Again all the factors, which we discussed earlier like appearance and quality of the employee; communication skills;
practical understanding of consumer psyche; product knowledge; and closing the sale will continue to be important
influencing factors as without these factors there will be no conversion, which is the first stage before the sales staff
tries to influence customer to buy more number of items from the same store.
Besides these factors the sales team will also go back to Product – Customer Matrix in Figure 1. In order to increase
the number of items per bill we can use Cell C, which allows us to sell New Products to Current Customer; Cell B by
selling Current Products to New Customers and Cell D by selling New Products to New Customers. Thus, through
these strategic thinking and customer management process we are in a good position to influence the customers for
increasing the number of items per bill size. While dealing with these customers again care has to be taken of never
over-imposing any thing on them but to show the new items/products in a very subtle polite manner.
8.11 Measuring Performance

Each of the transaction factors like Conversion Ratio; Ticket Size; and Items per ticket in itself are measuring
performance of the store on both day-to-day basis besides store to store basis as well as comparison of the figures
for the one month with another or yearly trend in one year with that of the previous year’s trend. Thus, these kinds
of analyses give greater insight into the working of the store as well as its progress.Besides the above measurement
factors, we can also measure employee based factors as:
Average ticket size per employee = Average ticket size per bill number of full time employees per store.
Average Number of Items per Employee = Average Number of Items per Bill Number of Full Time Employees.
The above measures will also tell us about the productivity achieved per employee in a given store at various point
of time besides providing comparison with other similar types of stores for the same period. Thus, helping us to
determine the standard strength of full time employees required, to achieve the given targets on the Transaction
Factors.
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8.12 The Final Word on Achieving Best Result on Sales
‘Sale’ is a very lucrative terminology in customer perspectives. It is also a driving force behind attracting customers
towards the store. There are certain following, aspects which can better conceptualise this thought.
• High sales mean fast depletion of stocks.
• Low sales mean risk of high stock levels. This means more of what we already have and hence no new
merchandise on floor.
• More fixtures means less space for customers and hence not enough circulation area
• Big back stock means higher risk of shop soiled merchandise and hence loss of sales.
• High stocks at the front end ensure that customers see a bad looking store.
• When we need to increase sales do not get into non sellers before exercising our winning horse
(merchandise).
• If we or our people do not understand the merchandise rest assured our customers won’t appreciate us or our
merchandise.
• If we expect others to train us in life without us seeking the same, we run the risk of missing the bus.
• Simple things in retail make first impressions on customers: Security guards, loose, uniform, cleanliness on
floor, method of handling merchandise.
• The attitude that we bring into the store in the morning determines what we are to achieve during the day. Do
not forget to have fun by achieving.
• We can either choose to be a fire-fighter or a planned player in life.
• The only power that sales personnel have is greater understanding of customers.
• Plan and get enough feedback and act on it.
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Summary
• A Standard Operating Procedure (SOP) is a set of written instructions that document a routine or repetitive
activity followed by an organisation.
• The development and use of SOPs are an integral part of a successful quality system as it provides staff with
the information to perform a job properly, and facilitates consistently in the quality and integrity of the end-
result.
• The organisation should have a procedure in place for determining what procedures or processes need to be
documented.
• SOPs should be reviewed (that is, validated) by one or more individuals with appropriate training and experience
with the process.
• SOPs need to remain current to be useful. Therefore, whenever procedures are changed, SOPs should be updated
and re-approved.
• The objective of this Standard Operating Procedure is to offer a smooth experience to the customer, coupled
with a full proof internal system, during the process of having the merchandise altered as per the customer’s
requirement.
• Retail transaction information contains an unbelievable prosperity of data about numerous aspects of a retail
enterprise.
• Drivers are the factors that drive the business or trade or sales. The factors are the cause for the sales, or business,
or trade, happening in the particular industry.
• The Transactional Drivers form the parameters or basis of measurement for the Transactional Matrix.
• The transaction matrix is used to measure performance of the business on a store-to-store, day-to-day basis. By
monitoring the transaction matrix, we come to know the extent to which the store potentialities make best use
of the customer entry into the store.
• For improving ticket size, the most important action from the management size is to recruit right kind of sales
staff to match the product and branding profile.
• ‘Sale’ is a very lucrative terminology in customer perspectives. It is also a driving force behind attracting
customers towards the store.
• Conversion Ratio is defined as how many customers out of 100 who enter our store leave with a purchase? It
measures how well we convert “Shoppers to Buyers”. The higher the conversion rate, the better.
• Drivers are the factors that drive the business or trade or sales. These are the factors that are the cause for the
sales, or business, or trade, happening in the particular industry.
• Standard operation process document, help in the smooth conduction of the business process. It helps to minimise
errors and improves scalability of a business model.
• The organisation should have a procedure in place for determining what procedures or processes need to be
documented.
• The Strategic Drivers are Brand positioning, store positioning, target customers and promotion schemes.
References
• Pradhan, S., 2009. Retailing Management. Tata McGraw-Hill Education.
• George H, Lucas Jr., Robert P. B, Larry G G., 1995. Marketing information: A professional reference guide.
Georgia State University Business Press.
• International Biopharmaceutical Association Publication. SOP Writing for Clinical Trials: Staff Training Aspects
[Online] Available at: <http://www.ibpassociation.org/IBPA_articles/sop_writing.htm> [Accessed at February
5, 2012].
• eGyankosh. Standard Operating Procedure (SOP) [Online] Available at: < http://www.egyankosh.ac.in/
bitstream/123456789/39078/1/Unit-7.pdf> [Accessed at February 5, 2012].
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• ATEtv., 2009 What is an SOP? [Video online] Available at : < http://www.youtube.com/watch?v=JY2uWUqfZkI>
[Accessed 21 March 2012].
• mbukay, 2009.Standard Operation Procedure (SOP) Training [Video online] Available at :< http://www.
youtube.com/watch?v=rk9n3PHA_oc > [Accessed 21 March 2012].
Recommended Reading
• Lamba, A.J., 2002. The Art of Retailing. Tata McGraw-Hill Education.
• Berman, B., Evans, J.R., 1995. Retail Management; A Strategic Approach. Prentice Hall.
• Tummala,R.R., Swaminathan,M., 2008. Introduction to system-on-package (SOP): miniaturization of the entire
system. The McGraw Hill Companies.
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Self Assessment
1. Which of the following is a set of written instructions that document a routine or repetitive activity followed
by an organisation?
a. Retail business
b. Transaction matrix
c. Standard Operating Procedures
d. Documentation
2. Which of the following is not a part of SOP process?

a. SOP preparation
b. SOP documentation
c. Review and approval
d. Frequency of revision and reviews
3. __________________ helps in the smooth conduction of the business process.

a. Retail
b. Development
c. SOP documents
d. Alteration counter
4. Which of the following is an objective of Standard Operating Procedure?

a. To offer a smooth experience to the customer during the alteration of merchandise
b. To utilise space of the store
c. To alter the traditional look of the store
d. Full proof external system
5. Match the following

A. It is a sub-part of the Strategic Drivers as they always have to
1. Strategic Drivers
be in alignment.
2. Resultant Driver B. They are in driving the desired traffic to the store.
C. It helps to minimise errors and improves scalability of a busi-

3. Tactical Drivers
ness model.
4. SOP Documenta- D. Fulfilling customer’s needs both from the consumption point
tion of view as well as aesthetic point.
a. 1-d; 2-a; 3-c; 4-b
b. 1-c; 2-b; 3-d; 4-a
c. 1-b; 2-d; 3-a; 4-c
d. 1-c; 2-a; 3-b; 4-d
6. Which of the following forms a basis of transactional matrix?

a. Strategic Drivers
b. Tactical Drivers
c. Resultant Driver
d. SOP
130/JNU OLE
7. _____________ is quantifying the ratio of potential shoppers that have decided to buy.
a. Conversion rate
b. Transaction matrix
c. Influencing rate
d. SOP rate
8. Which of the following is not the influential factor in transactional matrix?

a. Appearance and quality of the employee
b. Communicational skills
c. Understanding of consumer psyche
d. Opening the sale
9. ______________ is a matrix that helps in determining the line of action the business needs to take when it has
to consider expansion of the current business.
a. Product matrix
b. Product customer matrix
c. Customer matrix
d. Retail matrix
10. Which of the following is not one of the aspects of sales?

a. High sale means fast depletion
b. Low sale means risk of high stock levels
c. More fixture means less space for the customers
d. Less fixtures means less space for customers
131/JNU OLE
Store Operations
Case Study I
Subhiksha: Managing Store Operations
Introduction
Founded in 1997, Subhiksha had grown from one store in 1997 to more than 1000 retail outlets in 2008. It sold
FMCG, grocery, pharmacy, mobile products, and fruits and vegetables (F & V). It was the largest supermarket and
mobile retail chain in India with presence in 90 cities. In 2008, organised retail accounted for about 4% industry
share. Although, organised retail was identified as high-growth area by the middle of 2008, players who had entered
the Indian retail had realised that organised retail in India was going to be tough business.
Strategy
Various players (Reliance, Bharti, Birla, and the Future Group) were experimenting with different formats and
models. Subhiksha decided to come up with its own model, which in its view was suitable to the Indian context.
Subhiksha targeted the middle and lower classes and not the high-end customers. To do so, it operated with an
everyday low pricing model and located several smaller stores to move closer to the customer. At the operational
level, it constantly planned to increase the supply chain process efficiency to deliver goods at low prices. The
Subhiksha business model is explained through a detailed description of operations of a store (Indiranagar) located
in Bangalore. It also describes operations of the distribution centre, which served the Indiranagar store apart from
serving 58 other stores. The case discusses the challenges of organised retail in general and specific challenges of
inventory and cost management for a discount retailer. It also provides detailed data, which can be used for the
diagnosis of the supply chain system at Subhiksha.
Conclusion
The Subhiksha case is a comprehensive case dealing with retail operations and supply chain issues in the retail
context. It is also a useful case discussing the complexity of introducing a unique business model in the Indian
organised retail context.
(http://hbr.org/product/subhiksha-managing-store-operations/an/IMB323-PDF-ENG)
Questions
1. When was Subhiksha group founded?
Answer
It was founded in 1997.
2. What are the issues handled by Subhiksha case study?

Answer
The Subhiksha case is a comprehensive case dealing with retail operations and supply chain issues in the retail
context. It is also a useful case discussing the complexity of introducing a unique business model in the Indian
organised retail context.
3. How is Subhiksha Bussiness model explained?

Answer
The Subhiksha business model is explained through a detailed description of operations of a store (Indiranagar)
located in Bangalore. It also describes operations of the distribution centre, which served the Indiranagar store
apart from serving 58 other stores.
132/JNU OLE
Case Study II
Fraschetti: Automates Warehouse to Improve Operations
Fraschetti, a leading Italian hardware and household item retailer, purchases from more than 500 suppliers and
restocks approximately 2,500 sales points throughout Italy, often with exclusive products purchased in Europe or
the Far East and distributed under its own logo. Due to the size of the sector and the numerous product categories
within, the distributor has a prominent role in the exclusive distribution of big name brands.
“To work efficiently with traditional shops you have to be service oriented,” Giorgio Fraschetti, Vice President of
sales, said. “We have a network of 44 single-brand representatives connecting with the company at least once a day.
Our program involves deliveries at least twice a week over the whole area and once a week in the more inaccessible
areas. In some ‘privileged’ areas like Rome and Naples and the entire Latium coast, deliveries arrive every day. An
order received by noon today is filled by tomorrow.”
The widespread nature of the deliveries means Fraschetti manages an enormous number of orders that invoices each
day. Working closely with Intermec partner Incas, Fraschetti now uses Intermec’s 2455 vehicle mount computers in
place of traditional paper-based means of shipping and receiving to ensure the right products and correct amount are
delivered to the appropriate retail locations. The logistics involved in managing this many orders can be daunting.
Consider a large number of deliveries that each include an extremely complex assortment of goods of different
amounts, examples, 10 pulleys, nine tubes, 11 boxes of nails, six bags of earth, four pipes, and so on. The inventory
management and distribution process could be staggering. The use of Intermec’s 2455 vehicle mount computers
has enabled the Italian retailer to easily move nearly 12,000 items per day without error.
Improving Inventory Management

Delivery is guaranteed by Fraschetti; therefore, 85 percent of the daily work involves orders received the same
day. To make it easier to locate and track items, goods are now checked upon receipt using Intermec 2415 wireless
handheld computers. The Intermec 2415 confirms quantities and makes note of any discrepancies in the delivery.
The content of the supplier’s shipping note is then loaded into a computer with the production of load units and
instructions for the formatting of the goods.
After an item is formatted, it is assigned a bar code label. The bar code label is identified by the Intermec 2455
vehicle mount computer. The goods are then handled as indicated by the computer. The Intermec 2455 shows where
to position goods in accordance with a specially designed logic as well as the items’ destination. After the positioning
of the goods, all handling, movement and checking is done using the Intermec 2455.
Since using Intermec, the improvement in warehouse operations has been dramatic. The entire warehouse area
is now mapped allowing Fraschetti to track all of its items at all times. A considerable increase in the number of
operations performed and a steep fall in the number of errors occurred has contributed to the organisation’s increased
profitability. In the future, Fraschetti plans to implement an automation system for its other very important operations,
such as the optimisation of loads and the automatic weighing of larger packages.
About Fraschetti
The company’s history began in 1870 when Francesco Fraschetti opened a small ironmongery in Ceprano and by
doing so paved the way for what was to become one of Italy’s leading household and DIY (do it yourself) item
marketing companies.
The ownership of the company has always remained in the family and after periods of strong growth and others of
consolidation; it is now in its fourth generation. The company today operates across the centre and south of Italy
providing a very high level of service and annual sales totalling around 35 million Euros. In the last few years, the
sector has moved on with the advent of the new DIY chains of shops, but the traditional sales point, the old-fashioned
hardware store, still accounts for them largest percentage of business.
133/JNU OLE
Store Operations
(Source: http://www.intermec.com/learning/content_library/case_studies/cs2057.aspx)
Questions
1. What is the work involved by Fraschetti?
2. How does Fraschetti manages to balance it’s every day work?
3. Which software has helped Fraschetti in managing work drastically?
134/JNU OLE
Case Study III
RGIS Pilots Space Optimisation Solution for Family Dollar
COMPANY OVERVIEW
Family Dollar, a successful Retail chain with more than 6,700 stores, located from Maine to Arizona, offers consumers
a wide array of products, shopping convenience and daily low prices.
PROBLEM
Family Dollar stores vary in size and product assortments. Although Family Dollar conducts store surveys on a project
basis for remodels, there was a need to collect spatial data for purposes of evaluating performance and determining
courses of action related to merchandise assortments and allocation of selling floor space. There was no facility for
the central repository of information across the chain or a market. This created two primary challenges:
Evaluation of product placement and adjacencies in specific stores and formats was difficult to track and manage.
There was limited visibility to understand and prioritise both large and small-scale space re-alignments
SOLUTION
RGIS and Family Dollar collaborated on a pilot program for the Baltimore, Maryland store locations in order to
map the store planogram, determine the gap between actual fixture and product placement and the realogram and
provide an accurate floor plan for fixturing and current space allocation. The objectives of the pilot included:
• Providing an analytical platform to more effectively evaluate space allocation and layout decisions
• Enabling faster execution through the use of improved store planning tools and fixture ordering processes and
eliminating the need to survey each specific store
• In mapping the pilot stores, RGIS used Smartspace™, an innovative suite of macro space planning solutions,
designed to optimise the use of available space. Specific tools included:
Smartspace™ StorViewer™ – a powerful space planning, reporting and collaboration tool. StorViewer™ can be
utilised by all levels of an organisation from store management to the C-suite to create chain-wide analysis, reporting
and heat maps. By connecting to a central store database over the internet or company intranet, StorViewer™
allows management to evaluate specific store performance and identify improvement opportunities across the
organisation.
Smartspace™ StorPlanner™ is an intelligent retail planning and space management application. StorPlanner™
enables retailers to evaluate the effectiveness of store layouts at the individual store, within clusters/geographies or
across the enterprise. The use of StorPlanner™ can result in significant productivity improvements in the management
and allocation of store space.
In order to populate the Smartspace™ StorPlanner™ database, RGIS used its proprietary data collection tool to
validate and update each store’s AutoCad drawing and associate planograms to each fixture section in each store.
RESULTS
Through the collaborative pilot, Family Dollar was able to gain increased visibility into the store layout, product
adjacencies and opportunities for enhancing available space.
Family Dollar’s Vice President, Format and Space Management reports: “Through this pilot, we were able to gain
greater intelligence about the space in our stores allowing us to make better decisions about how to use that space.
With a space optimisation tools StorPlanner™ and StorViewer™, we can make faster, high quality decisions to
ensure our stores are easy to shop for our customers and that they’re able to find what they need quickly.”
(http://www.rgis.com/us_en/services/smartspace/casestudies/2010/discount-retail.aspx)
135/JNU OLE
Store Operations
Questions
1. What is the work profile of Family Dollar?
2. What were the objectives of pilot programme?
3. What was the result of collaborative pilot programme?
136/JNU OLE
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Store Operations
Self Assessment Answers

Chapter I
1. b
2. b
3. a
4. d
5. c
6. d
7. a
8. b
9. d
10. a
Chapter II
1. c
2. b
3. a
4. a
5. c
6. d
7. b
8. a
9. b
10. a
Chapter III
1. a
2. b
3. c
4. c
5. d
6. a
7. c
8. a
9. b
10. d
Chapter IV
1. a
2. c
3. c
4. c
5. b
6. a
7. d
8. c
9. d
10. a
140/JNU OLE
Chapter V
1. c
2. c
3. d
4. a
5. d
6. b
7. a
8. d
9. b
10. d
Chapter VI
1. b
2. c
3. a
4. c
5. d
6. a
7. a
8. d
9. d
10. b
Chapter VII
1. a
2. b
3. d
4. d
5. c
6. a
7. d
8. c
9. b
10. a
Chapter VIII
1. c
2. b
3. c
4. a
5. c
6. d
7. a
8. d
9. b
10. d
141/JNU OLE

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II. List of Figures......................................................... VII

III. List of Tables........................................................VIII

V. Case Study.............................................................. 132

VI. Bibliography.......................................................... 137

VII. Self Assessment Answers................................... 140

Chapter VII............................................................................................................................................... 106

• introduce the origination of stores

• elucidate the visual merchandise in stores

• explain the various store operations

• explain the logical activity flow of store operations

• describe the store operations management system

• elucidate various retail stores in India

• understand the strategy behind store design

• identify retail management system for store operations

• know various store operations solution

1.2 Origination of Stores

Fig. 1.1 Visual merchandise in stores

1.3.1 Major Responsibilities of a Store Manager

Conversion Rate Customer Service

Fig. 1.2 Skill-set thoughts

The Store Performance Improvement Continuum

The Right People Providing an

Fig. 1.3 The store performance improvement continuum

1.3.3 Logical Activity Flow of Store Operations

Customer Customer Billing

Fig. 1.4 Major responsibilities of a store manager in a store operation

1.4 Store Operations Management System [Soms]

Fig. 1.5 Retail management systems for store operations

1.5 Microsoft Dynamics Retail Management System (RMS)

Set up and use easily

Automate inventory and purchasing management

Manage complex, multidimensional inventory requirements with easy-to-use matrix forms.

Streamline transaction processing

Improve marketing efforts

Analyse data with flexible reporting options

Integrate with other solutions

Scale to meet business growth

1.6 Retail Store in India

1.6.1 Curtain Raiser to WIPRO Retail

1.6.2 Big Bazaar: The Brand Building Challenge

Factors that shaped Big Bazaar during its life cycle:

Influence of Sarvana Stores located in Theyagraya Nagar, Chennai

Observing customer regularly store operations

Imbibed entrepreneurial spirit in organisation

Building on core values

1.7 Strategy behind the Store Design

1.7.1 Store Space: Case Study of Store Hanger

1.7.2 Fraschetti: Automates Warehouse to Improve Operations

Improving inventory management

1.8 Introduction to Store Operations Solutions

1.8.1 Task Manager

1.8.2 Workforce Manager

1.8.3 Time and Attendance

1.8.4 Store Walk

4. Match the following:

• introduce the importance of customers in retail business

• elucidate retail customers

• explain the types of customers

• explain loyal customers

• describe customer segmentation

• elucidate the needs of customers