Case: Walmart Inc.

takes up on Amazon
From the 1st question: competitive advantage: use VRIO framework.

For the 3rd question, Financial data analysis: Calculate the Financial Ratios especially the Debt-
equity ratio and look at the market capitalisation to revenue ratio.

Why Market rewading Amazon than walmart?

Market cap - revenue ratio is high for Amazon. The growth of the company is significant and it is viewed as a company of fu
Walmart which is paying divident to the shareholders, Amazon's EPS is high

Mostly, Walmart will win the war because it is always easier for an offline store to go online than it is for an online store to go

Amazon's Strategy
Why is Amazon spending 26% of its revenue only on Fulfilment & Shipping?
To deliver quickly and reach out to the customer ASAP. It wants to compete with the Brick and Mortar stores (where the
consume before buying) and want to match that experience this way.

Amazon is at war with everyone, wants to get into every aspect of the household.

Amazon's principle of Customer-centricity comes from Zappos.

Retail Management Session-1 Theory

Retail stores: Like for Like (LFL) stores.

Retailing: A set of business acitivities that adds value to the products or services sold to consumers.
What kind of Value? Assortment, Availability, Accesibility, Look & Feel, Value Pricing, Convenience of Payment.
Nowadays, we are moving from a conventional and differentiated channel to a vertical marketing system.
More integration over time

Note: Close to 10% of India's workforce works in Retail sector

and 10% of India's GDP comes from the Retail Sector too.
 Key Learning From the Case:

Its easier for offline player to go online , but for online player
to go offline, it must incur cash burn

The ultimate strategic perspective is that, the integration of all

the channels is bound to happen in the future. Everybody who
is offline will go online too and everyone who is online will go
t is viewed as a company of future. Unlike offline.
EPS is high

n it is for an online store to go offline.

How Indian Market is different?

and Mortar stores (where the customers
this way. People buy more frequently - shrinking of kitchen size & preference
for fresh food
India - price is given more importan

In India, Reliance ready to take up on Amazon.

Where does Retailer Stand in the Supply Chain?

Manufacturer Maximum Margin
Distributor/Wholesaler 3-4% Margin
ce of Payment. Retailer 12-15% is the margin.
Consumer
High margin. WHY? Because takes the highest risk, cost of exit is
very high and the cost of operations is also very high.
Special Characteristics of Retailing
Small but frequent sale
Customer visibility is very high
Impulse purchases
Manpower is very high
Buyers come to the seller
line player

gration of all
rybody who
nline will go

e & preference

est risk, cost of exit is

s also very high.
Supercharging: How would you nudge your online customers to come to offline stores? Setting up
Evloution of Retail in India The format type depends on
Early Days: Rudimentary stage - Only ambience no customer practices Selection of objective and mi
1990's: GDP increased and increase in disposable income Defn of what kind of goods/
2000 to 2010: Entry of large business houses (Tata, Birla, Reliance) into the sector Understand the external env
2010 to now: Consolidation & Cautious growth; Entry and exit of international brands;
Self-service stores in increase and rapi growth of online players. Classification of format base

The social & economics conditions led to new and different forms of retailing having Store vs Non-Store
different operational methods What kind of merchandise to
Form of ownership
The food & Grocery where established in Chennai, Bangalore and Hyderabad Service type- self service, sel
Non-food & grocery in chennai, bangalore, hyderabad, bombay and delhi
Why?
F&G margin is very less
Realestate prices were less in SI compared to metro like delhi, bombay
It was easier for the retail format to come in these cities at the start Prici
Depends on the format type

Different player adopt di

discount to
Pricing based on
Merchandise type
Assortment & variety
Location
Target segment
Level of customer service

Bare-bone operation ( Aldi)

Used by retailers who are sel

Retail price formats used for

number of shoppers
frequency of shopping
shopping basket
On each shopping occasion, a consumer chooses a store based on the perceived utility from
that store
Fixed Utility - do not vary from trip to trip , not function of shopping list
Variable Utility - change from TOT , depend on size and composition of shopping list

Perceived shopping utility determines store choice and this in turn affects the three
performance metrics: (1) total number of customers, (2) total store visits, and (3) average
spending per shopping trip

variable utility is the product of size of the basket and the unit variable utility
Fixed utility increases with habitual shopping experience, storespecific service quality,
assortment, and decreases with time and distance involved in reaching the store

two w
fixed utility, or increa

store with low fixed utility but high unit variable utility will attract
shopping trips with larger baskets

The store with the lower perceive

improvement so
that the fixed utility is now higher
consumers with basket sizes abov
Note that th
lower the threshold quantity
(basket size).
Store B now captur
Store Positioning size is between the new
threshold and the original thresho
Thus, store B makes in
buy
smaller basket sizes per store visit
Store with high fixed and unit variable utilities of shopping is clearly
a “winner”
and a store with low fixed and unit variable utilities of shopping is a
“loser.”
Shoppers who shop at a store that has low fixed utility but
 Setting up of Retail Format What impacts the performance of the format
The format type depends on Size
Selection of objective and mission of the format Merchandise - number of categories
Defn of what kind of goods/ service category wil be offered Pricing
Understand the external environment Service level

Classification of format based on Operational Impact of format variables

Store vs Non-Store Number of shopping trips made

What kind of merchandise to sell - type and breadth Number of customer walk-in
Form of ownership Spending during each trip
Service type- self service, selef selection, limited service, full service Loyalty/ Stickiness to a format

Pricing Strategy Different types of format - Guest Lecture

Depends on the format type Exclusive Single Brand Outlet
Multibrand outlet
Different player adopt different strategy - Everything on Department store
discount to premium pricing Malls
Pricing based on Seemless Malls
Merchandise type Hypermarket
Assortment & variety Factory outlet
Flagship store
Target segment
Level of customer service Different Pricing
Full price
Bare-bone operation ( Aldi) and Limited service/assortment Discounted
Used by retailers who are selling at less price EDLP
Premium Pricing
Retail price formats used for increasing
number of shoppers Showrooming & Webrooming
frequency of shopping
shopping basket
 two ways to improve the overall perceived utility: increase
fixed utility, or increase unit variable utility and it has direct impact of store performance.

The store with the lower unit variable u

e with the lower perceived fixed utility (store B) makes an makes an improvement.
ment so Suppose the unit variable utility of shop
fixed utility is now higher. Prior to the change, store attracts increased, elevating the slope of the tot
ers with basket sizes above the original threshold. shopping.
Note that the effect of increasing fixed utility is to The effect of this change is to move the
e threshold quantity for store selection to the right.
size). Store A now ca
Store B now captures additional customers whose basket customers whose basket size is between
etween the new threshold and the new threshold.
d and the original threshold.
Thus, store B makes inroads into the class of shoppers who

basket sizes per store visit

formance of the format

ormat - Guest Lecture

he lower unit variable utility (store A)
vement.
t variable utility of shopping at store A is
ting the slope of the total utility curve for
s change is to move the threshold quantity
on to the right.
Store A now captures additional
e basket size is between the original
he new threshold.
CASE: RETAIL STRATEGY AT SPENCER'S
The Real-Estate in Prime Locations was on of Spencer's significant advantages
2006 to 2020: Spencer's had a change of 5 CEO's: Directional Changes
D-Mart is not really a retail player, more of a REAL-ESTATE PLAYER.
Penetration of F&G in Organized Retail: 3% to 5%, so a LARGE OPPORTUNITY

World Over, the Food & Grocery business is a VALUE-FORMAT, it mostly don’t come under the PREMIUM
SEGMENT. In such case you need to have less number of stores

LESSONS for Retail Strategy

In Retail, you either should have a UNIQUE product or UNIQUE price, otherwise your competitor's have an edge over you
In Reatil, you should manage a BUSINESS or a STORE at a time

For Brands: Market Share is important

For Retailer: Revenue per Store is important

Smaller Network implies Higher Trading Draw.

Trading Draw decreases with the years
 Competitive Advantage in Retailing
There are severals way to build Comp Adv. 3 generic ways are
STRATEGIC THRUST (Example: Zara)
Niche (Example: Max, Reliance Trends)
Mass Market Cost Leadership
Strategies Differentiation

Cost Leadership: Working on the TRIANGLE MODEL

LOGISTICS & SUPPLY CHAIN

ve an edge over you

SUPPLIERS TECHNOLOGY SYSTEMS/PROCESSES

The ultimate objective of working the triangle is to support the hexagon and ensure
sustainable growth

The Hexagon gives the five major customer facing activities through which
retailers visually differentiate themselves in the market.
Differentiation: Working on the Hexagon

VALUE PRODUCT (ASSORTMENT)

PENETRATION STRATEGY
PLACE

PEOPLE COMMUNICATION

Hexagon is the face of the retailer to consumer

Retailers must re-evaluate their position on the corners of the pentagon by:
systematically tracking the changing consumer, economic, and competitive
environment. Frequently, the environment is changing faster than the retailers.

Why retailers fail?

Fail to re-evaluate.
Lack of financial resources
 The elemets of the triangle supports the customer facing activities.
Hexagon that drives the top line (high sales per square foot), but it
is the triangle that drives the bottom line (high profit per square
foot).

System: controlling operations. They are carriers for operational

decisions and business processes. The information systems supply
can provide a competitive advantage if timely action can be taken.

Suppliers: How you manage the supplier wrt merchandising. The

supply relationship with the suppliers determine the terms, delivery
quantities, deals, etc.

Logistics: movement of goods from suppliers to stores, distribution

centers, online warehouses, and transportation. It is a major factor
in operations and financial performance.

MS/PROCESSES

The hexagon, represents what the customer sees when walking into the store.
All the six corners , have subcategories.
Place: Channel - Offline (brick mortors / online/ omnichannel)
Store Size , Locations ( trading draw), Layout Design & System Usability,
Navigation ( in case of Online Store)
Product: Product Placement, Merchendise Assortment, Merchandise Intensity
( how many dollars the retailer has invested per sq foot at cost in inventory)
People: Service Levels ( self service - retail employee services , in Online- Live chat,
Call centers)
Employee knowledge ( obtained by two ways - training the employee or hiring
trained employees)
Climate ( what customer think about buying there and what employee think about
working there)
Value: what the customer pay for what they get. It is ombination of price and
quality
Communication : Positioning Advertising -( communicating how the retailer is
positioned. eg: Walmart - EDLP), Promotional Advertising -yields immediate
response when the store is not a winner in one or more of the five corner
( running sales)
Penetration Strategy:
Ability to saturate, spread or extend reach
Constrained by : Availibility of resources , type of model , own or franchised.

on by:
titive
retailers.
 Advantage & Disadvantage of Retail Cl

Advantage:
In Retail - Market Share doesnt matter. Inventory Optimisation
As a retailer, you mjst think on how every Cost of communication comes down
store can earn profit. Supply, Logistics will become more effi
Effective HRM
For brands - Market share is important Managerial Supervision can be better

Disadvantage:
Law of diminishing returns - returns m
staturates adn then comes down
Canibalisation of your own stores
How technology used for ehnancing Systems ?

Electronic Data Interchange

POS
Carton Labelling - enable quicker movement b/t warehouse and stores
Planogram Software System - what goes into each shelf, how many phasings
are helped by this
Perpetual invetory GRAVITY: You want to be there wh
Programmed Supply Relationships similae stores are located; Benefit of
intensity
How Tech replaces labour

Front-end scanning
Labour schedulign scheme
Electronic Shelf Sticker
Store security system
 Retail Strategy
ge & Disadvantage of Retail Clustering of stores Target market -> Format -> Sustainable C
ge: Before setting up retail we must know:
y Optimisation
ommunication comes down Consumer behaviour
ogistics will become more efficiient What is you are serving
HRM Type of serving
rial Supervision can be better
What type of format
ntage:
iminishing returns - returns may incr at the start, For deciding the type of format -
es adn then comes down Outline the goals
sation of your own stores
Analyse the requirement of different typ
Competiton Intensity
Need to understand and analyse the follo
Competition intensity varies by catchme
Understanding the benefit of CI in differe
ITY: You want to be there where all the ( malls/standalone)
stores are located; Benefit of competition
intensity Sales potential in a catchment ( TG/ Freg
Can I afford to put up a store in this loacti
Is my ticket size good
Is my pricing good
Network Planning needs to For Network planning -
be done much before the
stores are opened Identifying appropriate catchments
What is my priority
What will be the hub capacity
CI- appropriate indexation
rmat -> Sustainable Competitve Advantage

etail we must know:

ur
ving

at
pe of format -
ement of different type of retailing
ty
d and analyse the following
ity varies by catchments
benefit of CI in different loaction is very important
)
catchment ( TG/ Freguency)
up a store in this loaction
od

ng -
riate catchments
ub capacity
exation
 NETWORK PLANNING PROCESS
Decide the number of stores Map the entire town
CASE: Carpenter Tan Handic
Risk is higher with the brand
In the initial days of franchise
Do not give the same franch

catchment analysis Zone your catchment

1. Catchment Potential 1. Company owned and Com
2. Catchment Intensity 2. Franchise owned and com
3. Spillage Factor 3. Franchise owned and franc
4. Company Owned and fran

R
Lower costs | Easier to mana
Less recuitment hassle | Po

DETERMIN
1. Social Interaction: Satisfac
2. Service Support: Assessing
3. Finances: Capturing the att
 FRANCHISING - Class + Guest Lecture | In today's VUCA world, a good b
CASE: Carpenter Tan Handicrafts
Risk is higher with the brand owner, because if things go wrong by the franchisee, its positioning gets affected
In the initial days of franchise stores, it is the brand which drives the sales rather than franchisee.
Do not give the same franchisee all your stores in a town because, if relationships go wrong tomorrow, your business could be in jeopa

Franchising Business Models

1. Company owned and Company Operated Initially companies start with this VALUES
2. Franchise owned and company operated Match of value sets (Ethical a
3. Franchise owned and franchise operated Most common form in India is this Alignment of principles of bo
4. Company Owned and franchise operated POSITIVE ATTITU
Aggressive and Ambitious
REASONS FOR FRANCHISING Self-driven and independent
Lower costs | Easier to manage | Faster expansion | Market penetration that is better
Less recuitment hassle | Potential to grow international | Local Market Knowledge

DETERMINANTS OF FRANCHISEE SATISFACTION 1. Franchisee is profit dr

1. Social Interaction: Satisfaction level of the interaction b/w franchisor & franchisee 2. A wrong p
2. Service Support: Assessing how well the franchisor provides support to franchisee
3. Finances: Capturing the attractiveness of franchisee arrangement
today's VUCA world, a good balance of COMPANY + PARTNER stores is ideal

our business could be in jeopardy

AN IDEAL FRANCHISEE CHARACTERISTICS

VALUES FINANCIAL & LEGAL MARKET KNOWLEDGE
Match of value sets (Ethical and conduct) Financially sound + Good credit and compliance record Knows the local market well
Alignment of principles of both Ability to invest to grow the business Advice and complement the brand
POSITIVE ATTITUDE HUMAN RESOURCES PRACTICES FAMILY INVOLVEMENT
Aggressive and Ambitious Has good HR practices Helps in continuity
Self-driven and independent Has good 2nd line HR team Succession planning

PITFALLS OF FRANCHISING
1. Franchisee is profit driven but brand is sales driven. Hence, they may do things sometimes which are good for profits but not sales
2. A wrong partner can compromise the customer experience and hurt the organizaional equity in the market
3. A very large franchisee/partner chain can start dictating terms to the brand.
MARKET KNOWLEDGE
e local market well
d complement the brand
AMILY INVOLVEMENT

for profits but not sales

n the market
Case Analysis:
Learnings:
Stores could do more to take advantage of the traditional Store Operation:
shopping season.
Store operation efficiency (SO
Store layouts & space alocation to product categories could be there
adjusted to feature prod with higher revenue/ sq. foot
potential. Inputs:
People you have in the store
Efforts should be made to understand what the customer want Time they spend in the store
and when they come to the store. What process/ tech the store
Creating propoer communica
If you are trying to expand the store operating hours, it must be
be done during the days/ hours when peak sales happen. Output:
creat customer experience
Advertise to your suppliers as much as you do for the enhance brand image
customers. leads to increased sales

Track demand by category & items to make sure they are

approp. priced.

Having seasonal sales targeted at specific categories.

Mistake they did: expanded the store timing when they entered
the slowest sales season, may be this is why their effort of
increased store hours didnt materialise. Why it is important to have

For Retailers:

To reduce cost -
operations is very important
in the store.

To increase profitability

To demonstrate ROI of the p

To make better decisions - st

decisions.

Best Practices to Enhance SOE: What Store Team Needs:

Change of mindset: They want autonomy

Draw boxes and say what are the do's and don't s
This gives them the autonomy at store level , letting them do what Staff Satisfaction
they want at the store level.
Better in store experience

Higher Satisfaction & engage

Automate: staff satisfation
Use of technology to automate most of the recurring tasks at store to
efficiently utilise HR.
Investing in store technologies like checkouts/ stacking/cleaning/
Customer service through kiosks & self help desks.

Enhance Customer Experience:

Teams to get trained on customer aervice to enhance CE instead of
engaging in low value tasks.

Identifying in-efficient tasks - so that yuo can help the staffs do better
things like Customer service.
Evaluate processes on constribution to the experience vs time taken
Measure & Monitor store performance :
Each stores must be considered as a seperate revenue drinver and
contin. monitoring must be done.
Teams to get trained on customer aervice to enhance CE instead of
engaging in low value tasks.

Identifying in-efficient tasks - so that yuo can help the staffs do better
things like Customer service.
Evaluate processes on constribution to the experience vs time taken

Measure & Monitor store performance : Challenges for a retailer in st

Each stores must be considered as a seperate revenue drinver and
contin. monitoring must be done. Lack of visibility as what goe

Limitations in measuring sto

Manual daily tasks such as u

time consuming

lack of support: decisions are

High employee turnover: spe

Processes involved in operation:

Consistant customer experience whether good/ bad is very important as customer

will start gettting used to certain kind of services

In india the biggest challenge for any retailer is inconsistant customer experience.

Inverntory Management

Protecting Organisational Assets

Statutory Compliance
All requirement from the govt rt licenses and statutory duties must come right in the
store level.
Checklist:
More detailed is a checklist , more efficient will be the store
operations
What a checklists can contain:
Duty Manager, Store Manager responsibilities
Do's & Dont's
Shelf Management Process
Processes for Home Delivery
Gandola Plan ( Free standing display units in retail store)
Store Returns
Store Operation:

Store operation efficiency (SOE): state of higher desired output requiring less input to get
there

Inputs:
People you have in the store
Time they spend in the store
What process/ tech the store adopted
Creating propoer communication ( not technically an operation function)
Output:
creat customer experience
enhance brand image
leads to increased sales

Why it is important to have SOE ?

For Retailers:

To reduce cost -
operations is very important to keep the optimum level wrt money you spend on staffs & resources
in the store.

To increase profitability

To demonstrate ROI of the physical store - as it helps retailers justify a store's existance better

To make better decisions - stores must enable repository of relevent data used to make better
decisions.

What Store Team Needs:

They want autonomy

Staff Satisfaction

Better in store experience

Higher Satisfaction & engagement - Higher SOE leads to speedy process that increases custoerm &
staff satisfation
Challenges for a retailer in store operations:

Lack of visibility as what goes into store operation as the stors are located in different locations.

Limitations in measuring store level performances which may hide away store level inadequecies.

Manual daily tasks such as unloading of trucks/ cleaning./ billing customer/ stacking which is very
time consuming

lack of support: decisions are taken at the corporate office which is loacted very far away.

High employee turnover: spending lot of time & money on training the same set of people

Key Practices that must be taken care for a SOE :

Customer Experience - Key Aspect : High SOP Scores , Cleanliness & neatness , Clean Backrooms & forecoat , Se
Lables, Promotions, Facings ( how you display the products)

Cost Control - Key Aspects: Shrinkage control , Damage & Expiry control

Inventory Mnagement - Key Aspects: Direct Store Deliver (DSD ) receipts, Goods Receipt Notes ( GRN) ,

Cash Management - Key Aspects: Deposit od sales collection of cash/coupons/ credit cards , Petty cash manage

Shrinkage Control
People Management
Protect Organisational Assets
Statutory Compliance -Key Aspects:

The store is completely responsible for Sales/Sq. Ft , Stock Turns

This is dependent on multiple functionalities like marketing, In-Store Activities, Supply Chain ,
Merchandising.
Moment of truth of a retailer is reflected when the suctomer walks in to the store.

Sales per sq. feet - Function of Footfall , Conversion, Ticket Value, each of which has number of facto
The store is completely responsible for Sales/Sq. Ft , Stock Turns

This is dependent on multiple functionalities like marketing, In-Store Activities, Supply Chain ,
Merchandising.

Moment of truth of a retailer is reflected when the suctomer walks in to the store.

Sales per sq. feet - Function of Footfall , Conversion, Ticket Value, each of which has number of facto
affecting it.
For many of these factors, execution responsibility is with many other functions but store ops is respon
for everything.

Digital Disruptions in Retail:

Inventory Accuracy Systems

Self Check out Kiosks
Beacons in Outlet
AI & BOT
Immesive Technologies
Sensors & Tags to reduce retail theft
ean Backrooms & forecoat , Self Edge

Receipt Notes ( GRN) ,

edit cards , Petty cash management

vities, Supply Chain ,

he store.

which has number of factor

vities, Supply Chain ,

he store.

which has number of factor

tions but store ops is responsible

 Responsibilities of a Store Manager Differences b/w a B
1. Recruiting employees for the store. Selling Price is fixed by the br
2. Delegate the responsibilities to subordinates according to their specializations Multi-channel distribution
3. Motivate team members from time to time. Margins get negotiated
4. Make sure store is meeting targets and earning profits. Inventory is flexible
5. Make customers feel safe & comfortable Flexibility in supplies also
6. Ensure sufficient inventory is available at store.
7. Ensure store is free from pilferage
8. Drive his operations through a checklist.
Note: Recruit people living closer to store coz they tend to stay longer in that case

Vendor Management
Choosing the right vendor ensures
Right Products
Right Prices
Right time
Right terms
Desired Skills: Communication skills, People skills & Negotiation Skills

Case: Royal Beginnings

FMEA: A good way to reduce a relationship to a number; Helps put a number to every supplier.
Sometimes it's good for both the parties to evaluate every year.
If you do not ask, you will not get. So either you ask or force a supplier to ask you by playing around with other suppliers
Keeping the customer happy is primary; Profits and margins are secondary.

Negotiation: TWO TYPES & T

Preparation for negotiation: Establish a bargaining position - Be ready with your BATNA, WATNA & WAP (Keep WAP a secret a
1st Phase: Exchange of Information
In this the tricky part is to decide what information to reveal and what not to.
2nd Phase: Bargaining
This is the heart of Negotiation process; Be prepared with a 'What-to-expect' list.
3rd Phase: Closing
This is the time for reaching consensus and building an agreement
Negotiation Scorecard: A weightage for different parameters can be given, for example in case of Suppliers, Margin %, credi
 Differences b/w a Brand Vendor & Private Label Vendor from a retailer's POV
Selling Price is fixed by the brand owner Selling Price fixed by retailer
Multi-channel distribution Usually single channel distribution
Margins get negotiated Cost price gets negotiated
Inventory is flexible Purchase Quantity often rigid
Flexibility in supplies also Inventory borne by retailer

TKI Matrix

Apply this to your team and understand their style

WHY?
Because we need to understand the importance of issue and relationship with respect to the
But if there is a way to COLLABORATE, go for it.

und with other suppliers

Negotiation: TWO TYPES & THREE PHASES

& WAP (Keep WAP a secret and remain firm)

of Suppliers, Margin %, credit period, MOQs, channels of distribution, Frequency of fill at supplier, priority during new product launch e
ationship with respect to the power you hold.

y during new product launch etc

 KPIs for evaluating the value delivered by Vendor
Create a Vendor scorecard with a weightage for the following parameters:
1. Quality 5. Credit Period
2. Delivery 6. Margin %
3. Frequency of Supply 7. Promo Support
4. Innovation 8. Priority during new launch

Merchandiser/Category Manager: Similar to a product manager in FMCG company.

Categories in Retail: Food retail, Apparel Retail, Home furnishing etc.
There are different levels of hierarchy for these categories. Most retailer have 4 levels, can go up to 6; The last one being the

Category Roles: How important is that particular category and what is your level of investment?

Examples
Destination Men's formal wear in SS
Routine Diary products at super markets
Seasonal/Occassional Mangoes/Diwali Sweets/Holi Colors
Convenience Nail Polish at the cash counter
Strategies
Traffic Building Attract the crowd
Turf Defending Unbeatable
Transaction Building Increase the average spend
Excitement creation Innovation/Something new
Image Enhancement

Category Management
The process of managing items in a product category as a Strategic Business unit by determining
Pricing
Merchandising
Promotion
Product Mix
based on category goals, competitive advantage and consumer behaviour.
 Merchandise Planning & Supply Chain : Core of any retail firm
Merchandise Planning means planning and control of merchandise inventory of the firm
Process: First you develop the sales forecast and then determine the merchandise requirements
Planning:
1. Merchandise Budget: Sales Plan, Stock support plan, planned reduction, planned purchase and gross margins
2. Assortment planning: determining the quantities of each product that will be purchased to fit into the overall merchandise
Ideal situation: Work with 0 working capital, very TOUGH because as inventory goes down, chances of stock-out also increa

Merchandise/Inventory Plan
1. Forward weeks of supply method (FWOS): Project week wi
to 6; The last one being the SKU level. 2. Sell through percent method: Divide the sales by the stock
3. Basic Stock Method: Suitable for SKU level planning and wh
4. OTB (Open to buy plan): Fashion business & much higher le
of investment? MBQ (Maximum Base Quantity) = Average daily sale

Ca
mal wear in SS
ducts at super markets
/Diwali Sweets/Holi Colors
h at the cash counter

he average spend
n/Something new

PLAN-O-GRAM
Do not follow a "One size fits all" approach.
Map of the category as represented in the store
Gives the position of every "SKU" in store
Purpose:
1. Ease of Shopping
2. Aesthetics
3. Ease of display
4. Tactical Benefits
Translates into a better revenue & gives good margin also. Focus on promotional items and seasonal categories.
Figure out the trading space & non-trading space
 l firm

d gross margins
into the overall merchandise plan
ances of stock-out also increase drastically.

Merchandise/Inventory Planning methods

thod (FWOS): Project week wise sales
: Divide the sales by the stock at the beginning of the time period
for SKU level planning and where there is a space constraint in store
hion business & much higher lead times.
Quantity) = Average daily sales * No. of stock days cover

Category Role Matrix

Remove the rehabilitate items because they are not contributing to your revenue.
Upon their removal, Gross Margin will go up and you will have space for new items
Objective:
Maintain and Grow becomes Cash Machine
Under Fire becomes Cash machine
Core traffic becomes Flagship
Cash machine becomes Flagship

Any decision on the assortment will be taken by referring to this matrix.

ms and seasonal categories.

Shelf Management is the biggest weapon of a retailer.

Flagship Products - Put it in eye level as it contributes to both margin and sales
Core Traffic - put it in above/below eye level

Allowing shelves to be sold is a bad practice. Never allow a brand to buy

space in your shelf

Planogram helps in

increase revenue
improve gross margin
help in focus on promotion items
focus on seasonal kind of category
helps in figuring out trading and non-trading space in the store

Important Factors for defining the category roles:

% of customer who are buying the category

number of items that is being purchased in a bill

Destination drives footfall to the store, and you may use that to sell occasional,
convinience and routine.
The profit margin may be very narrow as the promotions are mostly done in this
category

For a grocery business:

category that you may not promote - convinience
because it is the category which will not affect the sales
it could be a category which drive your gross margin , so the retailer may not be
willing to sell it at a promotional price.

Where to stock the convinience category - POS Tills / Start of the store.

Category play important role in margin enhancement - occasional , routine

Category that determine the image of the retailer - destination

for example: sports- decathlon , jewellery- tanishq
Steps to create category management -

Clarity of Value proposition

Clarity of category proposition
Define clear category growth plan
Focus on Key Value Item SKUs - fastest selling items ( for example in dept store -
blue men's shirt of size 40,42 )
Standardisation of the layout
Rationalisation of SKUs - through the category role matrix
Localisation focus on assortment
Improvement in Fill rate & scanned margin ( margin that you get when you scan
the item in the POS Tills - difference between the selling price and the cost price)
by constant vendor management.

Always prefer scanned margin over other extra margins ,as this remains consistant
over time and the brands can anytime cancel the extra margin

Key Focus Areas for any category sales.

What do we want to be known for - ex: quality & price of

____

What are our customer initiatives - in terms of product

availability ( throughout the day/month) , range ( favourite
brand/ local brand), price& promotion

What are our operational Initiatives - Promotion ,

Planning,Execution & exit of promotion, POG, Better
Assortment, Improving Availability, Imrpoving Margin, Increase
brand participation in store.
What are our people initiatives - coaching & training of staffs ,
towards building team spirit, change mindset of merchandising
team
Stockout Vs Inventory Level

As inventory increases , stockout will decrease, which is natural.

But if you increase your inventory level by keeping more and more range, it may
lead to higher stock out as well.

When there is more supplier, more items and more ranges, the stockout will
come down to a point and start going up.

This is similar to the revenue vs inventory graph, where as inventory increases,

the revenue will increase, but after ccertain point it starts to plateau.

Phantom Stockout - when book value is high ,but the physical stock is less, that
difference is called phantom stock out.

when th range increase and there is no there is no propeer cycle check on the
stock, then there is a high difference in the book stock and physical stock.
This will impact the inventory management.

Gap Check Process - this enable retailer to catch any phantom stock out.

Understanding Plannogram:

Sales per bay - this tell which category to increase shelving and which category
to decrease the shelving.

Category Matrix - which item will go to which shelf.

Use software to use design a plannogram.

A master data must be available on the dimensions of the product for a proper
plannogramming.

Ideally there should not be more than 2-3 fingers space between the top of the
product and the next shelf for the customer to pull out the product.

Every single bay should have 4-5 promotion talkers as they give a feel of low
price and value for money for value format such as food and grocery.

Always give the customer the information & choices for taking a discerned
decision.

What Does a category ca

Planogram / Modular Re

Weekly reporting of cate

Marketplace Analysis

Yearly Review of the cate

What Does a category ca

Planogram / Modular Re

Weekly reporting of cate

Marketplace Analysis

Yearly Review of the cate

Ad hoc analysis per buye
 Category Captain:

One supplier forms the alliance with a retailer to help

gain consumer insight,
satisfy needs.
help improve performance,
profit potential across category.

3 Step Process -

Understanding retailers goals, objective, and current market position

Uncovering opportunities and providing solutions

Communication adn Tracking

Case Analysis:

To Become a cateogry captain :

You must guarantee a minimum gross margin for the retailer

Understand the retailer's growth expectation and quote more than that.

Time Period for captaincy - Longer the contract, it will be difficult to pull out ,
later.

As a retailer :
Category which are outliers and not very important and doesnt contribute much
to the sales , must be given for CC
Convinience and Occasional categories

What Does a category captain do?

What Retailers Seek in CC
Planogram / Modular Responsibilities 1. Good Size & Performance in the market
2. Dedicated Resources
Weekly reporting of category results 3. Long Term Commitment
4. Skills anad Experience
Marketplace Analysis 5. Shopper Focus
6. Retailer Understanding
Yearly Review of the category for insights 7. Innovative Concepts
What Does a category captain do?
Planogram / Modular Responsibilities
Weekly reporting of category results
Marketplace Analysis
Yearly Review of the category for insights
Ad hoc analysis per buyer requests
What Retailers Seek in CC
1. Good Size & Performance in the market
2. Dedicated Resources
3. Long Term Commitment
4. Skills anad Experience
5. Shopper Focus
6. Retailer Understanding
7. Innovative Concepts
8. Objectivity
e market
e market
 Benefits of Category Captaincy
Enhanced performance in the category
Time savings and cost savings
Customer insights
Offering consumers the right product type, size and format and ensuring availability
Proper pricing strategy

MOATS
Any kind of competitive advantage that we can build that makes us stay one step ahead of our competitors
It can be some kind of value created through innovation
Every successful business will have a moat
For any business it is always good to look at its moats
For example, driving retail business with the help of real-estate business for higher revenues is the Moat for D-Mart

RETAIL PRICING
Today's customers seek for Value when buying a product or service.
They have many alternatives to choose from and they are rational and knowledgeable
VALUE = PERCEIVED BENEFITS/PRICE

VALUE LEADERSHIP - CHOOSING VALUE DISCIPLINES

1. Product Leadership - Product Differentiation - Apple
2. Customer Intimacy - Customer Response - Amazon (Zappos)
3. Operational Excellence - Operational Competence - Walmart
Very soon, you will have to be good at all the three

INFLUENCERS OF RETAIL PRICING

1. Price sensitivity of consumers
2. Competition
3. Cost of merchandise/service
4. Legal constraints
Customer Income, Need for the product,
Availability of product from competitors
and frequency and amount spent on
product

PRICING ISSUES
1. Strategy: EDLP vs Hi-Lo pricing
2. Ideally Demand-oriencted prices
3. In reality, cost oriented prices
Any retailer would do a combination of
both EDLP and Hi-Lo depending on the
category

Demand is more predictable in EDLP, hence, less stock-outs; Better SCM and low labour costs also.
 RETAIL PRICING STRATEGY

1. RETAIL OBJECTIVES 2. PRICING STRATEGY

Sales Demand
Profits Cost
Return on Investments Competitive
Early recovery of cash Integrated

4. IMPLEMENTATION OF PRICING STRATEGY 6. BROAD PRICE POL

Customary & Variable pricing Target market
One price & flexible pricing Retail image
Odd pricing Retail mix
Leader pricing Selection of price po
he Moat for D-Mart Multiple unit pricing
Price lining

Some other pricing strategies

1. Freemium - LinkedIn premium, hotstar
2. Network Effect - More of a consumption and shopper perspective side effect; WhatsApp.
3. Subscription - Amazon Prime and Netflix; Dollar Shave Club
4. Give away free - Power of free is very high; Sunny clothing company; Jio also started this way only.

LESSONS
1. In retail, it is imp to understand the gap between a person's consumption and what they actually sho
2. Adapt to what your customers want. Do not try changing the behaviour of your cu
3. Always layered discounts are better than flat discounts (40% + 10% better than
4. Never change the pricing strategy in the middle and abruptly.
 3. PRICE ADJUSTMENTS
Markdown
Additional markups
Employee discounts

6. BROAD PRICE POLICY

Target market
Retail image
Retail mix
Selection of price policy

effect; WhatsApp.
ub
started this way only.

nd what they actually shop for, and price accordingly.

g the behaviour of your customers.
ts (40% + 10% better than 50%)
middle and abruptly.
Different Type of Price Adjustments:

Markdowns
Coupons
Rebates
Price Bundling
Multiple- Unit Pricing
Variable Pricing

Setting up of retail price based on cost

1. Determine the COGS

2. Planned and Forecasted Reductions
3. Desired Maintained markups

Based on this you calculate the initial

markup.

Based on cost of merchandise and the

initial markup , you set the price

Markdown - reduction of the pricing of the product.

Why it is done:
To get rid of slow-moving, obselete , uncompetitive priced merchandise
Increase of sales and profits
Generate cash for buying better selling merchandise
Increase traffic flow and sale of complementary products.

Markdown could become a price discrimination when a firm sells the

same product to two or more customers at different prices.

Vendor selling to retailer @ markdowns is generally considered unfair,

except when
the product costs are different
quantity and functional discounts
the market condition is changing

Retailers selling to consumer - its legal

Retailers use price discrimination to charge every customer the

maximum that they are willing to pay.

However the problem is,

determining the customer's willingness to pay is difficult

with list prices, you cant prevent customers having high willingness to
pay from buying at low price
determining the customer's willingness to pay is difficult

with list prices, you cant prevent customers having high willingness to
pay from buying at low price

Variable Pricing - different pricing for different customer sgement.

Some examples:

By Location - zone pricing

this has to be done in a subtle manner - in case, of a cafe business, if
you price the products high in a shop and less in other, you can give
only coffee in one place, while coffee + cookies in other.
Other ways: Calling the store differenty or by having different product
mix in different location/ format.
Early Bird Special

Student Discounts

Over Weekend Disounts

Quaterly Discounts

Different pricing in different channels.

E-Commerce has potential for charging different pricing to each

customers.

Price Lining - Different pricing for different grades/ different level of

service

Helps in getting extra margin in sensible manner.

Always have 3 or more than 3 price points/ varieties and never give
just 2 price points, bacause in many cases it is ineffective.

Example: Rs.59.99 ( good) , Rs.89.99 ( better), Rs. 129.99 ( best)

Also while categorising, avoid using words like economic etc, rather you
can try using good/better/best.
Benefits:

Eliminates confusion in prices

Gives the customers more flexibiliy
merchandising task will be more simplified
Gives more chances for the customers to "trade up"
Gives the customers more flexibiliy
merchandising task will be more simplified
Gives more chances for the customers to "trade up"

Odd Pricing -

The price ending in odd number.

Best Example: Bata in India - Rs.299 / Rs. 999/ Rs. 99 etc.

It breaks the pshycological barrier. 2 digit over a 3 digit price.

Issues in Retail Pricing:

Price Discrimination
Vertical Price Fixing
Horizontal Price Fixing
Comparative Price Advertising
Bait & Switch Tactics
Scanned vs Posted Prices

It is always good to remember that

Price Breaks barrier/ inhibition in India
Zones of Tolerance :
Customers’ service expectations exist at two levels, the desired level and the adequate level.
The desired service level denotes the service that the customer hopes to receive.
This level constitutes a blend of what the customer believes ‘can be’ and ‘should be’ provided by the service pr
The adequate level describes the level customers find acceptable. This level reflects customers’ evaluation of w
service ‘will be’, or in other words customers’ prediction of the level of service.
A level below the zone of tolerance will lead to customer frustration, decrease customer loyalty, and, hence,
dissatisfaction.
A level above the tolerance zone will lead to delighted customers, strengthen loyalty, and, hence, satisfied cus

Stages of Loyalty:

Cognitive Loyalty:

It determined by information relating to the offering, such as price, quality, and so forth.
It is the weakest type of loyalty, since it is directed at costs and benefits of an offering and not at the brand
itself.
consumers are likely to switch once they perceive alternative offerings as being superior with respect to the
cost-benefit ratio.
Affective Loyalty:

This is a kind of attachment or attitude to the brand , which is based on pleasant experience of using the
brand.
The consumer’s commitment to the brand in this stage is called emotional loyalty, which is impressed as a
form of cognition and affection on consumer’s mind.
While cognition can be affected by new information easily, affections are hard to change.

Affective loyalty is also subject to deterioration, caused primarily by an increased attractiveness of competitiv
offerings and an enhanced liking for competitive brands.
brand.
The consumer’s commitment to the brand in this stage is called emotional loyalty, which is impressed as a
form of cognition and affection on consumer’s mind.

While cognition can be affected by new information easily, affections are hard to change.

Affective loyalty is also subject to deterioration, caused primarily by an increased attractiveness of competitiv
offerings and an enhanced liking for competitive brands.

Conative Loyalty:

This stage is achieved after repeated formation of positive feelings toward a brand. Conation is defined as a
kind of commitment or plan to purchase from a certain brand again.
Repeated delivery failures are a particularly strong factor in diminishing conative loyalty. Consumers are more
likely to try alternative offerings if they experience frequent service failures.

Even though the consumer is conatively loyal, he has not developed the resolve to avoid considering
alternative offerings.
Action Loyalty:

Highest level of loyalty.

the intention created in the previous stage turns into a greater willingness to buy.
The consumer is ready to overcome possible obstacles for using certain products or services and finally
reaching their desirable brand.
Competitive offerings are not considered as alternatives

Why Loyalty Program?

Today a large % of households participate in loyalty programs , but only sizable % are active participants in loyalty
program.

Reduces Customer churn rate

Decreasing churn rate from 10% to 5% increases the NPV of the business substantially.
Following good Loyalty practices generates great returns on the Loyalty + Marketing investments

Loyalty program can be used when:

Service/ Product Differentiation is very less, then Loyalty can be a differentiator.

Customer aquisition is more expensive than customer retention, loyalty programs helps in customer retention.Small
improvements in retention generate great returns
Service/ Product Differentiation is very less, then Loyalty can be a differentiator.
Customer aquisition is more expensive than customer retention, loyalty programs helps in customer retention.Small
improvements in retention generate great returns

Different Type of Loyalty Programs:

The usual-points for every purchase.

Eg: 1 point for every Rs.100 spent

Do it differently:

20% bonus points if no of items is more than 5 in a single bill

Focus on some merchandise:

additional 50% points on certain SKU/SKUs

Have different weightage for purchases in a financial year:

Upto Rs.40,000 - 1 point / Rs.100 purchase
Rs.40,000 - Rs.1,00,000 - 1.5 points / Rs.100 purchase
Every incremental above Rs.1,00,000 - 2 points / Rs.100 purchase

Relationship building: double points on purchases during special days like birthday, wedding anniversary, etc..

Segmentation in Customer Loyalty:

Value of purchase

Frequency of purchase

Recency of purchase

Online shopping behaviour - none, partial, fully

Lifecycle - young adults, young family, older family, empty nesters

Psychographics - NCCS segmentation

 ate level.

’ provided by the service provider.

s customers’ evaluation of what the

omer loyalty, and, hence,

ty, and, hence, satisfied customers.

o forth.
ering and not at the brand
uperior with respect to the

xperience of using the

, which is impressed as a

change.

ttractiveness of competitive
, which is impressed as a

change.

ttractiveness of competitive

d. Conation is defined as a

yalty. Consumers are more

avoid considering

.
r services and finally

ve participants in loyalty

estments

n customer retention.Small
n customer retention.Small

ing anniversary, etc..

What impacts the Consumer/Shopping behaviour?
1. Communication
2. Products/Services
3. Environment
4. Behaviour

Retail Communication Mix

Bring traffic into store, into selling areas and make purchases.
Advertising, Sales People, Sales Promotion, Store atmosphere and Visual Merch.

Elements in Atmosphere/Store Design: Atmosphere influences Emotional Response tha

Exterior Entrances
Storefront Should be consistent wit
Entrances Reflect the nature of the product
Dsiplay Windows Should invite and help dire
Height and size of building Errors: Too much or too
Visibility & Uniqueness

General In
Flooring - Less joints; Large sized
Width of aisles (Hypermarket and
Dressing facilities
Self service, kinds of merch
Cleanliness and use of tech

Store Layouts Im
Allocation of Floor Space Enables higher utilis
Traffic Flow Impproved flow o
Department locations Impr
Arrangement within departments Impr

EATALY CASE LEARNINGS

Destination category at Eataly is the EAT category
Key Value propositions: Customer experience and authentic italian food
Despite high real estate costs, ROIC of eataly is very high, due to the -125 Cash conversion cycle
More of a niche market
Sales per sqft is low in eat but high in buy and balances out, that's why Gross margin is as high as 42%
Emotional Response that further influences Behaviour like time spent and buying

Entrances Display
Should be consistent with interiors Used to enhance image
he nature of the products and size of stores Expose shoppers to new products and seasons
ould invite and help direct attention Elevated/Boxed/Shadow/Island
Errors: Too much or too little stuff Plan to change display ideally 15-20 times/yr
Attract attention

General Interiors
- Less joints; Large sized marble or tiles; Store levelling
aisles (Hypermarket and Supermarket: Less than 3 ft)
Dressing facilities and personnel
f service, kinds of merch and how you display it
eanliness and use of technology/modernisation

Importance of Layout Types of Layo

Enables higher utilisation of space, equipment and people 1. Grid Layout: Linear Design; Low cost, ease
Impproved flow of Information, material and people 2. Free-flow: Opp. of grid layout; cost is more an
Improved client interaction 3. Loop: Multi entrances; makes customer visit more departm
Improved employee morale 4. Soft-aisle
5. Minimal: Apple
6. Combination
 Types of Layouts
Linear Design; Low cost, ease of cleaning but boring
of grid layout; cost is more and less efficient use of space
s customer visit more departments; racetrack around aisle perimeter
4. Soft-aisle
5. Minimal: Apple
6. Combination
 Product

Place Cost Supply Chain

Price

People Insights
Packaging Promise

Insight - The ability to see, understand clearlu the inner nature of things, esp
by intution.
It is a deeply ingrained customer belief/ desire/ practice.
t could be universal truth ( or univ myth) seen in a fresh context.

Benefit Barriers - thoughts about your brands' current strategic benefit that are
in the minds of sizeable set consumers that stand between what they currently
do, and what you want them to do.

Areas of Benefit Barrier - dig deeper into thses areas

" I dont want the benefit"
"I dont believe you deliver the benefit"
"I already have the benefit"

Store Design & Layout Application

Colors :

Green , Brown -Relaxing Colors

Light Colors - White/Beige/Light Grey - Makes custoemr stay longer

Red, Yellow - Rushing In & Rushing Out - Used if you want the customr to leave fast like in
QSR
Music:

Rock Music increases order - in crowd places - eg: Pubs

Soft Music increases sophistication - in Fine Dining

Aroma

Lighting:
Soft Music increases sophistication - in Fine Dining

Aroma

Lighting:
Retail Marketing Mix consist of: How to design Prom

Merchandising Promotions must be

Advertising such as :
Promomtion
Branding Location - primary tr
Private Labels
Loyalty Programs Do Building and Fixt
Is the promotion in c
What motivates the shoppers: Lower the rent , high
Buying : Consumption Problem Solution New stores need mo
Personal : ( Diversion/Physical Activity / Sensory Simulation/ Out of the way locati
Self Gratification ( I just love shopping))
Social : Group Interaction/ Hobbies/ Pleasure of Bargaining)
Steps in Developing
Customer Shopping Missions:
Destination Purchases ( online) 1. Establish the positi
Planned Regualr Purchases (Online)
Planned Comparison Shopping Visits (Online) 2. Determine the bu
Planned Browsing visit (online)
Impulse Purchases ( could be) 3. Allocate Budget -
Distress Purchases ( rarely online) of goods/ Level of Co

4. Implement & Eval

Profiling Target Consumer Group

1. Broad Customer Typology ( Demographics / Geographies

/ Socio economic classification/ Family Life Cylce / Family
buying unit size.

These are factors that influence customer category.

2. Customer Lifestyle
3.Shopping Related Lifestyle
4.Customer Qualification ( extent of knoweledge/ interest/
confident/ readiness to buy)
5.Shopping Missions
6.Situations

These are factors influencing customer store selection and

purchase decision process
Retail Communication Mix:

It must be designed to bring traffic to the store/ Move the

traffic to selling are and also entice th sutomer to make a
purchase.

Object of the communication:

Inform
Persuade
Remind.

How to?

Advertising
PR
Store Atmosphere/ Virtual Merchandise
Sales Promotion
Sales People
How to design Promotions.

Promotions must be integrated with the other management decisions

such as :

Location - primary trading area

Do Building and Fixture decisions support the promotional strategy
Is the promotion in consistant with the store image?
Lower the rent , higher is the promotional budget needed
New stores need more promotion than established stores
Out of the way locations need higher promotional budgets.

Steps in Developing a retail promotion mix.

1. Establish the positioning , sales goals, communication objectives

2. Determine the budget - Marginal Analysis , Objectives and Tasks , Rule of thumb

3. Allocate Budget - This depends on various factors: Age of Store/Store Location/ Type
of goods/ Level of Competition/ Market area size / Supllier support.

4. Implement & Evaluate the program.

Setting Promotional Objects:

It must be specifc and measurable

1. Increase traffic during slow period

2. Move old merchandise
3. Attract new customers in the community
4. Strengthen Store image
5. Identify with national brands.

Long Term Objectives help in

Creating a positive Store Image - Merchandise Category , Price & Quality , Specific Attributes
or Benefit

This impact the stages in consumer decision making processes.

Short run Objectives are:

Increases patronage from existing customers

Attracts new customer
Generating traffic
For Special events

These objectives are interdependent and the retailer may take steps to achieve one, which
This impact the stages in consumer decision making processes.

Short run Objectives are:

Increases patronage from existing customers

Attracts new customer
Generating traffic
For Special events

These objectives are interdependent and the retailer may take steps to achieve one, which
may impact the other
 Mall Space: Store space as well as Atrium Space (Lower rentals)
Need not necessarily have the shops in the groound floor, depends on the entry & exit points

What do people do Online?

The four major domains:
1. Search
2. Socialize
3. Entertain
4. Commerce - This is where you can make most of the money; Transaction costs (Tencent)
Everybody wants to be in everything.

GAFA - Some recent trends in India - $3.4 million market cap

Adoption of IoT in E-commerce: Zara and RFID example
Biggest Internet trends of 2020

Three types of Strategies that firms usually follow

1. Classical Strategy - Look for best answer and then explore it
2. Adaptive Strategy - Experiment at a constant rate
3. Self-tuning strategy - The strategy adapts itself to the dynamic conditions
 E-COMMERCE MODELS
A) Categorization on the basis of types of Products/Services:
1. Largely Digital: Music/Books/Ticketing
2. Fulfilment cost is very low v/s Margins: Luxury products (LV)
3. Products where installations are required: Consumer electronics
4. Low ticket size/Low shelf life: Very difficult to fulfil profitably; F&G

B) From the Customer Perspective

1. Vertical Vs Horizontal
2. Own Vs Marketplace: Multibrand Platform (Tata Cliq) or Multibrand Marketplace (Amazon)
3. Asset Light Models: Aggregation (Swiggy, Ola, Uber, Policy Bazaar) and Rerence/Classifieds

TYPES OF MARKETPLACES
1. Pure: Ebay
2. Hybrid: Flipkart
3. Hybrid + Physical: Walmart, Amazon and Alibaba

How can a brand engage with Marketplace Players?

1. Ignore or Stay Away
2. Sell through authorized resellers
3. Sell as a third party merchant
4. Sell as wholesaler to marketplace
5. Depending on SKU's both third party or wholesaler
 In India, there are many large brands which can actually pull
out of Amazon but under the so-called Salesman Pressure of
maintaining the 'n' number of sales at the month end, they are
not doing that. This is largely affecting the distribution
channels.

Pros
1. Greater Visibility
2. Access to markets you may not be able to serve
ketplace (Amazon)
erence/Classifieds Cons
Amazon is a retailer too, if you are also a retailer then there is no point

How do you survive without Amazon?

1. Build an efficient and effective distribution channel.
2. Before going online, develop your own website and your brand

NOTE

What a retailer does or what your competitor does, should not affect
your decision. You should be able to build a brand that can stand-up and
compete.

Create a hook to make your customers come to your website.

Create an online community.
 What is Customer Services:

Ways by which a retailer can provide customer services The set of activities and programs undertaken by retaile
make the shopping experience more rewarding for the
Accepting multiple payments options customers
Alterations of merchandise
Returns How can you do that:
Gift wrapping
Trial rooms Hire the right people
Child care facility Hire with the right fit - Customer & Employee must be c
Credit the socio-economic segment , so that you need not trai
Home/work delivery employees in behavourial aspects, rather it can focus on
Product demo products.
Parking - valet Going beyond just being “nice” to customers
Wheel chair access - ramp
Repair services Must always remember that If we don’t take care of ou
Rest rooms customers, someone else will
Shopping carts
Special/customised orders Challenges in providing good CS
Warranties
Personal assistance while shopping Customer service is intangible - what one may think goo
ATM terminals be bad.
Displays & Signages inconsistancy in service eg. Air India
Provisions for shoppers with special needs Customization vs. Standardization
Evaluating Costs vs. Benefits

Service Quality evaluation - Customer Service perceptio

expectation based on previous experience and knowled
ServQual - instrument, designed to capture consumer
expectations and perceptions of a service along the five Expectation is also a function of store format and varie
dimensions that represent service quality.
What Customer expects
Reliability Dependable outcome
Assurance Easy access
Tangibles Responsive systems
Empathy Flexibility
Responsiveness Apology/compensation for things gone wrong

SQ = P - E What Cues are used by customers to assess service

SQ is service quality Reliability – billing accuracy, adherence to delivery date

P is the individual's perceptions of given service delivery Assurance – return policy, guarantee
E is the individual's expectations of a given service delivery Tangibility – store, staff
Empathy – personalization
Responsiveness – returning calls/mails; prompt service
Customer expectations >> perceptions of received delivery,
service quality is deemed low.
Perceptions >> expectations then service quality is high. Even if you are not able to solve a problem , train your s
emphathetic
Gap 1 – Knowledge gap
Difference between the expected service and management's
perceptions of the target market's expected service.
Gap 2 - Service Standard Gap
Vishal Retail - EDLP
Management might think that customers will find their way to the Difference between management's perceptions
product shelf. expectations and the service procedures and sp

Probable Causes Probable Causes

Insufficient marketing research Lack of commitment to service quality
Too many layers of management - it is always advisable to have Inadequate goal setting
not more than two layers between the store manager and the Inadequate task standardisation
ceo.
Not being aware of what customers expect How to bridge the gap
Commitment to high quality service – top down
How to bridge the gap Defining role of service providers
Market Research Setting service goals – specific, measurable
Measuring service performance – mystery shop
Giving information and Training
vices:

d programs undertaken by retailers to

perience more rewarding for their

Customer & Employee must be close in

gment , so that you need not train the
rial aspects, rather it can focus on only

g “nice” to customers

r that If we don’t take care of our

lse will

g good CS

angible - what one may think good may

In India Service Delivery Gap is high.
e eg. Air India
dardization The inconsistancy in delivery in organised retail sector prevail
nefits because diff store manager thinks differently.
Consistancy in delivery is very important.

How to do it? Standardisation.

Greeting Customer - 3 feet rule
Wearing Uniform - staff grooming
Training them on product knowledge , behavorial specific

tion - Customer Service perception vs their

previous experience and knowledge .

nction of store format and varies across it

Gap 4- Communication Gap
ts
Difference between service delivery intentions and what is
communicated to the customer

n for things gone wrong Probable Causes

Poor communication with advertising agency
y customers to assess service Inadequate communications between sales and operations
uracy, adherence to delivery date
Differences in policies and procedures across branches
icy, guarantee
ff How to bridge the gap
tion
rning calls/mails; prompt service Make realistic commitments in promotional campaigns

e to solve a problem , train your staffs to be

 Gap 3- Service Delivery Gap
tandard Gap Difference between service quality specifications and the service
actually delivered
en management's perceptions of customer
the service procedures and specifications Process interms of training done well, but delivery not
happening
ment to service quality Probable Causes
setting Lack of perceived control
standardisation Poor employee-job fit
Poor technology- fit
e gap Poor supervision or training
high quality service – top down Not delivering to service designs and standards
ervice providers
oals – specific, measurable How to bridge the gap
e performance – mystery shoppers Improving internal communications
n and Training Empowering store employees
Providing Incentives
 Case Learnings:
Service can also be used as a differentiator

CS is extremely important, irrespective of product categories and service

Setting up of standards and implementing of it must be done.
Proper allocation of sales and non-sales hours for the employees is important
Incentive:
Incentive must be always be a % of the base salary and never a multiplier of salary.
ector prevail Quarterly budgeting for incentive
In cases, when there are no free riders , group incentives can also work
Keep it has a % of the revenue
Employee incentivising must be done at different stages to ensure that they deliver proper
customer service from beginning to end

specific

nd what is

operations
nches

paigns
s and the service

elivery not
roper
 Revised MYSTERY SHOPPERS - Find a service delivery gap
Store incentives are based on Mystery Shopping Audit report

Store Opening : Move double the crew; Do night filling and stocking
New store opening team to setup and hand it over to staff later

Luxury Retail: Worth $14 trillion globally

1. Can be a status symbol.
2. Have a superior quality
3. Craftsmanship
4. Uniqueness
5. Personalization

NOTE
1. Luxury Retail is clearly an overpriced category.
2. Largely a niche player.
3. Luxury can be in any category, Liquor, Apparel etc.

Typical Behavior of Indian Luxury Consumer:

1. Value Seeking (Practical as well as Value conscious)
2. Experience oriented (Expensive holidays rather than products)
3. Desire for Social Status (stems from need for Social Gratification)

The impact of country of origin is high on a luxury product

except when there is standardization and homogenity.

Reasons consumers tend to buy luxury products abroad:

1. Brands do not manufacture in India and hence, Import duty is very high.
2. The collection is less; Indian stores are like factory outlets for these brands.
 Investment in Hub and Spoke Model
One hub and many spokes
The set-up cost of hub is very high
There is a corporate office
Investment in terms of space, people and storage systems

Types of Expenditure in Stores

1. Capital Expenditure Vs Revenue Expenditure
2. Fixed costs Vs Variable Costs
3. Controllable Vs Non Controllable Costs
Objective: Make all costs controllable in nature.
Example: Different store timings for different days in a week
Result: People costs & Electricity costs can be controlled.

The Retail Productivity Loop

1. Reducing the Operating Expenses
2. Reducing Prices
3. Increase the net sales
4. Reinvest

Strategic Resources in Retail

1. People - GMROL - Gross Margin/FT Employees
Helps identify overstaffing and understaffing and increase customer conversion rate
Helps identify training needs for customer service
2. Inventory - GMROI - Measures how effectively inventory is turned into profit - Gross Marg
How to improve it? Increase the Sales, Increase GM and Reduce stock
Most important profitability metric in retail
3. Space - GMROF - Gross Margin/Selling Feet
Stockout, Artifical sale increases impact GMROF.
Helps in identifying productive categories and distribution of space

Business Plan Vs Retail Plan

1. Focusing on market opportunity and retail footprint.
2. Looking at FCF and Net profit
3. Creates positioning approach and defines the execution of positioning
 Profit & Loss Statement
1. Dump: Throw these away due to inefficiencies; Expired or damaged
2. Shrink: Like Pilferage; Physical Inventory loss; Dump is known shrink
3. What constitutes Miscellaneous Income? Scrap Selling (high chances of Pilferage here)

Excel Sheet
1. There is no proftability in having an entire paid inventory. There should be credit also.
2. Variation in Weekdays & Weekends: Hire part-time staff
3. No variation in weekdays and weekend: Have full-time employees only.

s in Retail

omer conversion rate

urned into profit - Gross Margin/Average Inventory

 Caselet: High footfall and conversion but less average value per customer

What could be possible reasons:

1. Running promotion on low ticket value products

2. Less avaliability of products - supplier fill rate is coming down due to which customers are not able
to fill their cart.
3. Maybe due to high freqency of visits, it is possible that the bill is getting split
4.May be due to some changes in plannogram due to which high value items are hiding away.

In Impulse buying, how budget conscious or value conscious is Important.

There is a direct correlation between display and consmption.

Higher the stock pressure through trade channel activation or display space buying the retailer is
more to push the products.

Category Planning
Understanding th shoppers buying behavior
Category Captaincy
can help the brand in increasing the sale

Consumer Shopper
A passive (& sometimes active )recipient  An active agent of Purchase decisions
of Advertising messages.
They Buy
They Demand
Shoppers engage with the brand and retailer.
Consumer Engage with brands
Shopper Need - Requirements that are fulfilled as
Consumer needs - requirment that are fullfilled the part of the shopping process.
by the products a person buys for themselves eg: Variety, value, convinience, experience
or their family
eg: Healthy, Durable, Filling, Tasty

How Brand should communicate to the shoppers & consumers

Consumer Mode :
Audience - "Who she is"
Task - " Get into their mind"
Story must evolve around - " The reason to buy"
Content - " Emotional benefits leads while practical benefit must support it"

Shopper Mode :
Audience - "How she shops"
How Brand should communicate to the shoppers & consumers

Consumer Mode :
Audience - "Who she is"
Task - " Get into their mind"
Story must evolve around - " The reason to buy"
Content - " Emotional benefits leads while practical benefit must support it"

Shopper Mode :
Audience - "How she shops"
Task - " Get into their cart"
Story must evolve around - " The reason to buy right now"
Content - " Practical benefits leads while emotional benefit validates it"

Being a consumer or a shopper shifts throughout the purchase cycle.

A shopper is actually engaged in the action of shopping, which includes from
initial product research to purchase. Shoppers are more actively engaged on
a product level, working to narrow the competitive set and ultimately make a
purchase.

As Consumer become more brand-aware they increase their competitive set.

They take in information, process it, and move on. Engagement is minimal
here.

After a purchase is made and actual consumption begins, the shopper shifts
back to consumer. Here, a consumer engages with the product and ultimately
makes decisions about repeat purchase.
Awareness:.
Core communication about what a brand is and does.
Consideration:
At the consideration stage of the purchase cycle, product communication helps make
the shift from consumer to shopper.
A shopper will engage with the brands in their consideration set on a higher level, but
a decision on what to buy becomes product-benefit driven.
Intent:
Once there is intent to purchase, brand investigation is most likely completed, and
product-specific and promotional communications invite purchase.
Effective communications are highly tactical and should be spread across multiple
media. “Consumers’ intent to buy escalates when they see an ad in more than one
place.
Purchase
At purchase, shopper communications close the deal and drive up-sell. Shoppers have
already made the decision to buy, but not necessarily how and what.
After purchase:
loyalty communications keep the consumer engaged and increase purchase frequency.
The Retailer wants the shopper to buy any brand  in their store while the
Marketer wants the shopper to buy their brand in any store. Blue Ocean

Breaking the Value-Cost tradeoff

How Customer Trends can affect shopping Aligning the firm's activities with a
strategic choice of differentiation an
Retail landscape is changing – Formats, locations, channels, services​ cost
Shopping behaviour is changing – frequency, product types/form, multi-
channel, customization​ Creating uncontested market space
Consumer segments are proliferating – youth, middle India, early nesters,
rural​ Making competition irrelevent
Lifestyle patterns are changing rapidly – brands vs. products, eating out,
entertainment, travel, transport, health & wellness, experience categories Creating and capturing new demand
in services etc​
Media options are increasing; consequently media habits are changing 

Those who seek to create Blue Oce

They try to attempt the value inno
Shopper Marketing buyer and company and
opening up new and contested ma
From Brand's perspective:

Improving Business results by delivering better value​ to the

Retailer & Shopper
​
How?
Drives Consumers for the brand​
Creates differentiation in the minds of Consumers​
Develop Marketing function that focuses on Consumer
behaviour​
Creates constant excitement, improves frequency of visits to
the Store​
Stimulates interest & consideration through communication 

Shopper Marketing

From Retailer's perspective:

Improving Business results by delivering better value​ to the Shopper

​ ow?
H
Drives Consumers to your Store​
Creates differentiation in the minds of Consumers​
A Marketing function that focuses on Transactional behaviour​
Creates constant excitement, increases frequency of visits to the Store
Partnerships with Brands

Challenges a retailer will face:

1.To think like your Shopper and identify with their needs​
2.Design product offerings, services, programs and promotions to appeal to
Drives Consumers to your Store​
Creates differentiation in the minds of Consumers​
A Marketing function that focuses on Transactional behaviour​
Creates constant excitement, increases frequency of visits to the Store
Partnerships with Brands

Challenges a retailer will face:

1.To think like your Shopper and identify with their needs​
2.Design product offerings, services, programs and promotions to appeal to
different Shopper segments​
3.Customize the suite of offerings in sync with the economic climate, the
demographic segment, the attitude and behaviour of your Shoppers

Learnings:

Companies must be cautiou

too offerings, which pull ne
grwoth by creating value th
Shopper Segmentation
For WAWA:
Need driven​
Impulse driven​ The clustering of the store
Value seekers​ advantages:
Brand seekers​ Advertising
Experience seekers​ More Managerial visits into
Casual & Carefree shoppers​ knowing what was and was
Serious & Informed shoppers​ to customers)
Store shoppers​ Movement of stocks from o
Internet shoppers
Saturating the market with
helped them in keeping the

What WAWA did?

They flipped the categories

Groceries became routine

QSR became th destination

Future for WAWA

Leveraging technology to e
Digital savy restaurants
Starbucks in Food - Providi
Linking more customers an
Ocean
ng the Value-Cost tradeoff
ng the firm's activities with a
gic choice of differentiation and low
ng uncontested market space
ng competition irrelevent
ng and capturing new demand
Red Ocean
Making the Value-Cost tradeoff
Aligning the firm's activities with a
strategic choice of differentiation or low
cost
Competing in existing market space
Beat the competition
Exploiting existing demand

who seek to create Blue Oceans do not benchmark against competition.

ry to attempt the value innovation which focuses on creating value for both
and company and
g up new and contested market space.

Six Principles of Blue Ocean Strategy:

Formulation Principles:

Reconstruct market boundaries.

Focus on the big picture, not the numbers.
Reach beyond existing demand.
Get the strategic sequence right.
Principles that address execution risks:

Overcome key organizational hurdles.

Build execution into strategy.
 Formulation Principles:
Reconstruct market boundaries.
Focus on the big picture, not the numbers.
Reach beyond existing demand.
Get the strategic sequence right.

Principles that address execution risks:

Overcome key organizational hurdles.

Build execution into strategy.

Learnings:

Companies must be cautious about exploiting a rapidly growing market with me-
too offerings, which pull new players who wish to exploit the market than earn
grwoth by creating value that attract buyers.
For WAWA:

The clustering of the store was the biggest strength that led to following
advantages:
Advertising
More Managerial visits into stores ( listening to store/ front end employees,
knowing what was and was not working , moivate them to deliver great service
to customers)
Movement of stocks from one another

Saturating the market with WaWa stores along with high brand name recognition
helped them in keeping their competitors out.

What WAWA did?

They flipped the categories

Groceries became routine

QSR became th destination

Future for WAWA

Leveraging technology to enable last mile delivery

Digital savy restaurants
Starbucks in Food - Providing throughout the day service like a cafe
Linking more customers and delivering to home they can sell more
 Back-end functions
Maintaining products according to planogram
Product mix
New products
Promotions and B&M
Financing and HR

Optimal back end cost for a retailer- If margin is 25-30%, so back end cost can be around 5-7%. Lesser than the

Supply chain dynamics

Stakeholders are retailers, vendors, distributors & transportation companies
Transport is mostly outsourced.

Note: For reducing the transport cost, took the example to look for companies which use trucks only in
daytime & not at night, so you can ask them to reduce costs when you work early morning & late night
so his trucks get utilized.

Benefits of efficient supply chain

reduced stockouts, more sales, higher inventory turns, lower markdowns

Factors causing stockouts

store forecasting, stocking, ordering, warehousing
around 5-7%. Lesser than the front-end

ch use trucks only in

morning & late night