Retail Management

Dr Mallika Srivastava
Marketing Channels

A marketing channel is a set of interdependent

organization involved in the process of making
the product or service available for
consumption.
Marketing channel functions performed by
intermediaries
Three Flows Recognized

FORWARD
Goods and Services

BACKWARD
Payment for goods / returns

BOTH WAYS
Information

Company Customers
The Five Channel Flows

 Physical flow of goods

 Payment flows (financing and payment)
 Information flow (about goods, orders placed and orders executed)
 Promotion flows
 Title flow of goods (negotiation, ownership and risk sharing also)
Channel Levels

Manufacturer Manufacturer Manufacturer

Distributor/ wholesaler

Retailer Retailer

End User End User End User

Zero level One level Two level

What is Retailing?

 “Retailing includes all activities involved in selling goods or services to the

final consumers for personal, non-business use.” - Phillip Kotler

 Any organization that sells the products for consumption to the customers for
their personal, family, or household use is in the occupation of retailing.

 Retailers are part of distribution channel

Shopkeeper Vs retailer
 Retailers create value
 Providing assortment of products and services
 Breaking bulk
 Holding inventory
 Providing services
Functions of Retailers
 All marketing functions in order to provide consumers a wide variety
 Helps create time, place and possession utilities
 May add form utility (alteration of a trouser bought by a customer)
 Helps create an ‘image’ for the products he sells
 Add value through:
 Additional services – extended store timings, credit, home delivery
 Personnel to identify and solve customer problems
 Location in a bazaar to facilitate comparison shopping
Evolution of Retail
Retail lifecycle
The Indian retail industry

https://www.ibef.org/in
dustry/retail-india.aspx
Retailing in India (Recent Trends)
 New retail formats and combinations
 Internet age
 Specialty stores
 Sales promotion channels are increasingly becoming professional and
targeting differently to different lifestyle groups
 Today retail organizations are not only targeting big cities but are considering
tier II and tier III cities
 Use of Plastic Money
 Distance – No bar
 knowledgeable customers
 Need for retailing skills
 omnichannel
OMNICHANNEL
Retail Market Segmentation
Types of Retail Markets
 Organized Retail Organized Retailing is a large retail chain of shops run with
up-to-date technology, accounting transparency, supply chain management,
and distribution systems.
 Unorganized Retail Unorganized Retailing is nothing but a small retail business
conducted by an owner or a caretaker of the shop with no technological and
accounting aids.
Retail Sectors
“We have learnt that if we provide people with an occasion and an excuse to
shop, they will come.” - Kishore Biyani (CEO Future group)
 Food
 Clothing and textile
 Consumer durables
 Footwear
 Jewelry
 Books music gift articles
 Fuel
Retail theories

 Porters five forces

 In retail management, theories can be broadly classified as follows:
 Environmental Theory (Natural Selection)
 Cyclical Theory
 Conflict Theories (Evolution through Dialectic Process)
Retail Formats
 Business Models in Retail for start ups

Some business models in retail are:

 Independent retail model
 Existing Retail business model
 Franchise
 Network marketing
Retail Trifecta

Create a fantastic shopping experience.

Store
formats

Associates Technology
Break out room
Will India's retail industry survive the
COVID-19 lockdown?
Impact of COVID-19 on online shopping in
India
Shiny provision store: case
 Q1.Analyze the expenditure patterns of Reliance Fresh
and Shiny Provision Store customers.
 Q2.Discuss the retailing sales potential associated with
the Bangalore suburb area in which the research study
was undertaken.
 Q3.Analyze the image dimensions associated with Reliance
Fresh and Shiny Provision Store.
 Q4.Analyze the psychographic ratings of consumers
associated with the stores.
 Q5.Using the answers to question 1 to 4, what is the
strategy that you recommend for Shiny Provision Store?
FASTER approach for retailers
 Speed and agility will be key levers of success and retailers will need to adopt
a FASTER approach both to navigate the crisis “now” and to plan for the
“next” and “beyond”.
 Frugal in Finance
 Agile in thinking
 Spruced up in supply chain
 Tactful in talent management
 Effective in customer retention
 Responsible in regulatory and legal compliance
 https://retail.economictimes.indiatimes.com/
 https://www.youtube.com/watch?v=iAUKwMRHqjs
Summary
 What is Retailing?
 Shopkeeper vs retailer
 Retailer functions
 Evolution of retail
 Retail life cycle
 Indian retail sector
 Recent trends
 Omnichannel
 Retail sectors
 Retail theories
 Retail formats
 Retail business model
 Retail trifecta
 Impact of covid 19 on retail
Merchandise Management
Dr Mallika Srivastava
 “Advertising moves people toward goods;
merchandising moves goods toward people.”

Merchandising presents the products in retail

environment to influence the customer’s buying
decision
Types of Merchandise
There are two basic types of merchandise:
 Consumer products
 Staple
 Impulse
 Emergency
 Convenient
 Luxury
 comforts
 Industrial products
Category Management Process
Category strategies
Category tactics

 Assortment tactics
 Pricing tactics
 Promotional tactics
 Shelf presentation tactics
Merchandise Classification
Factors Influencing Merchandising

 Size of the Retail Operations

 Shopping Options
 Separation of Portfolios
Merchandise Management process

 Forecast category sales

 Develop an assortment plan
 Determine appropriate inventory level
 Develop a plan for managing inventory
 Allocate merchandise for stores
 Buy merchandise
 Monitorand evaluate performance and make
adjustments
Completing Your Six Month Merchandise Plan
 Step #1: Assemble Last Year’s Figures
 Step #2: Planned Sales
 (a) Sales Performance Coming Into The Season
 (b) Monthly Promotions
 (c) How is My Customer Changing?
 (d) Economic Factors
 Step #3: Planned Reductions
 (a) Planned Markdowns
 (b) Employee Discounts
 (c) Shrinkage
 Step #4: B.O.M. & E.O.M. Planned Inventory Levels
 Stock-to-Sales Method
 Stock turnover
 Basic stock method
 Weeks supply method
 Step #5: Finalization of merchandise plan
 Planned Purchases
 Planned Markup
Six month merchandising plan
CASE STUDY: MERCHANDISE PLANNING
Merchandise Performance
The following methods are commonly practiced to analyze merchandise
performance:
 ABC Analysis It is a process of inventory classification in which the total inventory
is classified into three categories
A – Extremely Important Items: Very crucial inventory control on order scheduling,
safety, prompt inspection, consumption pattern, stock balance, refill demands.
B – Moderately Important Items: Average attention is paid to them.
C – Less important Items: Inventory control is completely stress free.
 Sell-Through Analysis
 Multi-Attribute Method
 GMROI
 Inventory turnover
Retail communication mix

 Break out room : case discussion:

 Five guys promotion case
Retail Pricing
 Numerical
Retail Financial Strategy
Dr Mallika Srivastava
Role of financials in Retailing scenario

 Let us consider an organization that is entering into retailing business, earlier

it was a manufacturing company, to increase their turnover they are looking
forward to start a retail venture. Before you start any operational activity, it
is very important to understand the various aspects that make retailing
different from any other business format.

 What are the key success elements of Retail Business that makes it different
from any other business line??????
RETAIL FINANCIAL STRATEGY

Retailer Financial strategy integrates the retailer financial objective and goal,
which retailer develop to build a sustainable competitive advantage to generate
a desirable profit
How is a retail strategy reflected in
retailers’ financial objectives?
Objectives and Goals
 Financial
 Societal – helping to improve the world around us
 Personal – self-gratification, status, respect
Components of the Strategic Profit Model :
factors that affect the firms financial
performance
Components of the Strategic Profit Model : factors
that affect the firms financial performance
 Net profit margin Asset turnover ROA

Bakery 1% 10 times 10%

Jewelry 10% 1 times 10%

A Strategic Profit Model: Measuring Indian Apparel Retail Performance :
Numerical
Analysis of Financial Strength

 • Cash-Flow Analysis
 • Debt-Equity Ratio
 • Current Ratio
 • Quick Ratio
 2006 2007

Debt to equity ratio 1 0.86

Current ratio 3:1 4:1

Quick ratio 2.4 2

Performance measures and Audit in Retailing

 Pay back period

 Benefit-Cost Ratio
 Net Present Value
 Internal Rate of Return(IRR)
Some Common Appraisal Criteria in Retailing
 Sales per square Feet
 Gross Margin Return on Investment (GMROI)
 Inventory turnover ratio
Summary
 Financial performance
 SPM model
 Net profit
 Asset turnover
 Financial strength
 Cash flow
 Debt to equity
 Current ratio
 Quick ratio
 Performance measures
 Pay back period
 Benefit-Cost Ratio
 Net Present Value
 Internal Rate of Return(IRR)
 Some Common Appraisal Criteria in Retailing
 Sales per square Feet
 Gross Margin Return on Investment (GMROI)
 Inventory turnover ratio
Panel B
Percent change in selected items

Income statement:
Revenues
Operating loss
net loss
cost of goods sold
selling and administrative

Balance sheet:
Merchandise inventory
Property and equipment (gross)
Trade names and other intangibles (gross)
long term debt

Panel C
Selected items as percent of revenues

cost of goods sold

selling and administrative
operating loss
net loss

Panel D
Selected Dupont ratios

Return on sales
Asset Turnover
ROA
Panel E

Swings/points of significance in certain lines of consolidated statements of cash flows

Cash flows from operations

(gain)loss
Changes in:
Merchandise inventory
Net cash flows from operations

Cash flows from investing

proceeds from sale of property and equipment
Net cash flows from investing

Cash flows from financing section

(decrease) increase in short-term borrowings
Proceeds from long term debt issued
repayments of long term debt
net cash flow from financing
Examples of Performance Measures
Used by Retailers
 Case study : financial strength part A and part B
Strategic Planning in
Retailing
Dr Mallika Srivastava
Addons Targeting impulse
Q1. What are the factors/trends in the Indian marketplace that may impact growth in this sector?
 Factors that are identified as growth drivers for the fashion accessory category in Indian market(
customer related and market related)
Q2. How does Addons compare with the competitive offerings in the Indian marketplace?
 Product assortment, target customer, store presence, retail format, store size, price range, special
services, store promotions
Q3. What is typical consumer buying process for a lifestyle and fashion accessory product?
 Difference between contemplative and impulsive buying
 What are internal and external motivators for impulsive buying?
Q4. Brand loyalty or store loyalty?
Q5. Addons aspire to reach a 500 retail presence. What advice do you have for Singhee regarding this retail
strategy?
 Adapt Ansoff’s matrix
 Which are winning elements of Addons retail strategy and which needs enhancement?
 Target segment, retail formats, retail locations, store size, category mix, product development and design,
brand logo and design, branded and unbranded assortment, price range, promotions, store design and
layout
What is strategy???
Retail Strategy and elements
Retail strategy
examples
 Retail strategy elements continue…..

 Approaches for segmentation

 Target Market
Approaches for segmenting the Indian
consumers
 Chapter 4
Sustainable Competitive Advantage

 list the number of ways a retailer can get customers to

buy from them rather than their competitors.

 Now, indicate which methods are sustainable -- difficult

for competitors to match easily. Why?
Important opportunities to develop
sustainable CA
 Customer loyalty
 Location
 HRM
 Distribution and Information systems
 Unique merchandise
 Vendor relations
 Customer service
 Are you all loyal to any retail outlet. Why are you loyal
to that outlet? What can a retailer do to build loyalty?
 Which retail brands are you familiar with? Which do you
prefer over manufacturers’ brands? Why?
 Identify the locations of the nearest McDonald’s, and Burger King.
Who was in the location first? Describe that specific locale in terms of
traffic patterns, etc. Why can location provide a sustainable
advantage? Which local retailers have a good location? A poor
location? Why?
 describe your experience at a store where you could not find the
product/brand you wanted. If you contacted a store employee, how
did this employee respond? Evaluate and discuss.
 Do you buy private-label brands from your local supermarket. If so,
for which product categories? If not, why not? Also, how does their
view of private-label brands sold at stores differ from the private-
label brands sold at supermarkets and discount stores?
 Share about your experiences of good and bad customer service with
various retailers. Discuss how customer expectations of service vary
with different retail formats.
Strategic retail planning process
Retail Market Strategies
Strategies for Effective Market Segmentation ( Actionable, identifiable,
substantial,reachable)
Concentration (Niche) Strategy
Multi-segment Strategy
Strategies for Market Penetration
Price Penetration
Aggressive Promotion
High Product Distribution
Growth strategies
Market penetration
Market development
Product development
Diversification
Question 1. Market factors A. Bargaining power of vendors

2.Environmental factors B. Indicates how well a business can

seize opportunities and avoid harm
from threats in the environment

3. Strength and weakness analysis C. Indicates a retailer opportunity to

generate revenues to cover its
investments

4. Competitive factors D. Can affect market attractiveness ;

cover technological , economic,
regulatory, and social changes

1. 1: A, 2:C, 3:D, 4:B

2. 1:B, 2:D, 3:A, 4:C
3. 1:C, 2:D, 3:B, 4:A
4. 1:B, 2:C, 3:D, 4:A
Break out room in teams: sec B

Assume you are interested in opening a gift shop in your

town. Focus on conducting a situation audit of the local
market, identifying and evaluating alternatives, and
selecting a target market and a retail mix for the gift shop.
Break out rooms in teams: Section A

Assume you are interested in opening a restaurant in

your town. Focus on conducting a situation audit of the
local restaurant market, identifying and evaluating
alternatives, and selecting a target market and a retail
mix for the restaurant.
Assignment

Compare and contrast retail strategies of different

retailers in different retail sectors.
cases

 Retail strategy at spencer

Store Management
Dr Mallika Srivastava
Summary
 What is Retailing?
 Shopkeeper vs retailer
 Retailer functions
 Evolution of retail
 Retail life cycle
 Indian retail sector
 Recent trends
 Omnichannel retail
 Retail sectors
 Retail theories
 Retail formats
 Retail business model
 Retail trifecta
 Impact of covid 19 on retail
 Retail shopper behavior
 Omnichannel consumer
 Retail strategy: Strategic retail planning process
 Retail financial strategy
 SCM guest session
RETAIL LOCATION

 “while retailers can change their pricing, service, and

merchandise assortments in a relatively short time …
location decisions are harder to change because
retailers frequently have to either make substantial
investments to buy and develop real estate or commit
to long-term leases with developers”
To what extent does retail store location influence retail
store performance?
Let’s say you have two choices before you to select a retail store
location.

You can either choose a location in a busy area within the city which has
a considerably high rent, or you can choose a retail store location a small
distance away from the city with a lower rent.

What would you choose?

Choosing the wrong retail store location can have disastrous

consequences.
Types of Business Locations
Factors Determining Retail Locations

 Size of Catchment Area: Primary (with 60 to 80% customers), Secondary (15 to

25% customers), and Tertiary (with remaining customers who shop
occasionally).
 Occupancy Costs: Costs of lease/owning are different in different areas,
property taxes, location maintenance costs.
 Customer Traffic: Number of customers visiting the location, number of
private vehicles passing through the location, number of pedestrians visiting
the location.
 Restrictions Placed on Store Operations: Restrictions on working hours, noise
intensity during media promotion events.
 Location Convenience: Proximity to residential areas, proximity to public
transport facility.
Retail Site location

How do you select a particular retail site?

A flowchart of the location decision
making process
Site Analysis

Isolated store
Unplanned business
Type of site district
Planned shopping Centre

Economies of scale

Legal aspects
Negotiating lease
 Types of leases
 Percentage leases
 Fixed rate leases
 Graduated lease
 Maintenance increase recoupment lease
 Terms of the lease
 Co-tenancy clause
 Prohibited –use clause
 Exclusive-Use clause
Methods of estimating demand

 Proximal area method

 Huff’s Gravity model
 Multiple Regression model
 Ratio analysis
STORE MANAGEMENT

 When you stride in to a retail store, what part of the

store’s tone may have an effect on your shopping
familiarity?
 What turns you off in positive stores?
Major responsibilities of a store manager
 Managing store employees
 Controlling costs
 Managing merchandise
 Providing customer service
 Budgeting and planning
 Communication
Tasks performed at a store

 Store administration and premises management

 Managing inventory
 Managing receipt
 Customer service
 Managing promotions
Premises Management

Here are some basic formulae used while managing premises:

 Transaction per Hour = No. of Transactions/Number of Hours
 Sales per Transaction = Net Sales/Number of Transactions
 Hourly Customer Traffic = Customer Traffic In/Number of Hours
Inventory Management

Here are some formulae used for inventory control:

 Inventory Turnover Rate = Net Sales/Average Inventory
 Cost of Goods Sold/Average Inventory
 % Inventory Carrying Cost = (Inventory Carrying Cost/Net Sales) * 100
 Gross Margin Return on Inventory (GMROI) = Gross Margin/Average Value of
Inventory
Space management

 Sales per square foot per day

 Sales per linear foot
 Margins per square foot per day
 Occupancy cost/square feet of selling space
 Percentage of selling space=selling space in square foot/total space in square
feet
Employee management

 Employee productivity: total sales per day per employee

 Labour productivity: total labour costs/net sales*100
 Gross margin/total full time employee
Store Layout and Design
 Store Layout Formats
Store operations
Visual merchandising
texture
Six attributes
 Wipro visual merchandising Case study