Retail Management.

Roll No:- M20141

Section A.

Q1.
a. The first department store was setup in 1852 in Paris, the store was “Bon Marche” Bon
Marche revolutionised retail at that time by relying on volume rather than on high mark
ups.
b. It was the success of Bon Marche that let to other department stores come up in Europe
and America. The first chain store was A&P (Atlantic and pacific) a grocery store founded in
1859 by George F Gilman.
c. Also one of the evolution took place when there was the Rise of the Web
 The world of retail changed yet again when in 1995, Amazon opened its
doors to a world wide market on the web
 Evolution of retail formats worldwide has been largely influenced by a
constantly changing social and economic landscape
 Retailer on the other hand has been influenced by availability of real
estate and its increasing prices
 Retailer is faced with the challenge of adding on new services and the need for
differentiation
 This has led to specialization and the emergence of specialists
 Supply chain complexities and increasing pressure on margins has also forced the
retailers to look at new formats
d. Specialty Stores, Malls and Other Formats
 The need of the customers grew and changed
 This ensured the emergence of commodity specialized mass merchandisers in 1970s
 Seventies also saw the use of technology by way of introduction of the “barcode”
 Specialty chains developed in the 1980s as did the large shopping malls
 Shopping malls were created to provide for all of the consumer’s needs in a single
self-contained shopping area
e. The theories of retail development revolve around importance of competitive pressures,
the investments in organizational capabilities and creation of a sustainable competitive
advantage.
f. The theories that have attempted to explain the evolution of different formats in retail
include the following.

• The environmental Theory

• Cyclical Theory
• Conflictual Theory

1. Environmental Theory- The environmental theory is based on the Darwin’s principle of

survival. This includes three aspects in the retail environment, Customers, Competitors and
changing technology. Any change in either of these environmental factors can affect the
profitability of a single store or cluster of retail stores. Hence the success, development and
fall of a particular retail depends highly on the environment it operates.

2. Cyclical Theory- The cyclical theory is explained by the wheel of retailing. It is the most
well-known theory of retail evolutions. This theory helps in understanding the retail changes
in retail. This theory suggests that retail innovators often first appear as low price operators
with a low cost structure and low profit margin requirements, offering some real advantages
such as specific merchandise which enables them to take customers away from more
established competitors. In due course of time they develop their business, offering a
greater range or acquiring more expensive facilities, but this can mean that they lose the
focus that was so important when they entered the market. This happens when the retailer
becomes established. This enables other to enter and carry on the same process. As there is
maturity observed, there is a start of gradual decline. This explains the cyclical theory.

3. Conflictual Theory- Conflict is always seen between two similar formats or within brand
categories. The innovation in retail enables to have more retail formats rather than reducing
the amount of available retail formats. It is believed that retail innovation does not
necessarily reduce the number of formats available to the consumer, but leads to the
development of more formats. Retailing thus evolves through a dialectic process, i.e. the
blending of two opposites to create a new format. For example department stores and
individual retailers. This can be combined to develop hypermarkets and supermarkets.

Q2.
The classification of retail can be done as per the following parameters.
a. Based on location it can be further classified in Store based Retailing Classification of retail
formats is as follows –
1) High street - A shop located on the main street of a town or city which has high
profitability due to the high amount of customers.
2) Convenience - A convenience store, convenience shop, corner store, or corner shop is a
small retail business that stocks a range of everyday items
3) Destination- It refers to a particular retail store that the customer seeks out because of its
popularity. It is a popular store from whom customers, attracted by its price, size, variety
and ambience, will make a special effort to buy.

b. Store Based retailing can be further classified as

1) Form of ownership
2) Merchandise offered

c. Form of ownership includes the following types

1) Independent retailer – Which operates as an individual retailer in a particular are.
2) Chain Retailer – Chain retailers are large and hence are able to buy a wide variety of
merchandise in large quantity discounts. The discounts substantially lowered their cost
compared to costs of single unit retailers.
3) Franchise - The franchise approach brings together national chains and local ownership.
An owner purchases a franchise which gives her the right to use the firm’s business model
and brand for a set period of time.
4) Leased Departments - Department stores are characterized by their very wide product
mixes. That is, they carry many different types of merchandise, which may include
hardware, clothing, and appliances
5) Vertical Marketing System - A vertical marketing system is the type of cooperation
between the members of a distribution channel. It includes a producer, a wholesaler, and a
retailer collaborating to deliver necessary products to their customers and aims at achieving
better efficiency.
6) Consumer Cooperatives - A consumers' co-operative is an enterprise owned by
consumers and managed democratically.

d. Merchandise offered can be further classified as

1) Convenience Store- It is usually a food-oriented retailer that is well located, is open for
long hours and carries a moderate number of items.
2) Supermarkets - These are large, low cost, low margin, high volume, self service retailers
designed to meet the needs for food, groceries and other non-food items.
3) Hypermarkets - Also called as supercentre, this format is a blend of economy
supermarket with discount department store.
4) Speciality Stores- A specialty store concentrates on selling one product/ service line such
as apparel and accessories, toys, furniture.
5) Department Stores - A traditional department store is a large retail unit with an extensive
assortment of goods and services that is organized into separate departments for buying,
promotion, customer service and control.
6) Off Price Retailers - An off-price chain features brand name, sometime designer labels of
women wear, cosmetics, accessories, footwear, etc. and sell them at every day low prices in
an efficient, limited service environment.
7) Full Line Discount Store - It conveys the image of high volume, low cost, fast turnover
outlet selling a broad merchandise for less than conventional prices.
8) Similarly other types of stores include, Warehouse Store, Variety Store, Factory Outlets,
Catalogue Showrooms, Membership Clubs, Flea Market

e. Non Store Retailing can be further elaborated as follows

1) Direct Selling - Direct selling includes both personal contact with consumers in their
homes and offices and phone solicitations initiated by a retailer.
2) Direct Marketing - Is a form of retailing in which a customer is first exposed to goods or
service through a non-personal medium such as direct mail, newspaper, broadcast or
television and then orders are placed by mail, phone or computer.
3) Automated vending – Which can be seen in terms of vending machines which are pre-
loaded with products.
4) Online store- Ecommerce platforms from where goods can be purchased.
Q4.
a. Merchandise management refers to the process by virtue of which a retailer decides on
what items he should carry, how much to have on hand to meet the needs of customers,
where and how should that be displayed in the store in order to maximize sales and with
what margins should they be priced for maximum profits.
b. To explain it simply it incorporates all the functions right from analysis, planning,
acquisition, handling and control of merchandise in retail operation. It can be said to be the
core of retailing

c. The process of Merchandising management are as follows-

1. Collecting Information:
This is a very first step of merchandise buying and handling process. Once the firm’s overall
merchandise plans are defined, exact information about current market needs and potential
vendors is required.

2. Selecting Vendors:
After collecting the information about consumers’ demands, the next step is to select
sources of merchandise and to interact with them to select the potential vendors.
For selecting vendors, the retailers usually have three alternatives:
• Company-owned vendors
• External, widely used supplier
• External, not used supplier

3. Evaluating Merchandise:
After deciding upon the source of merchandise, next step is to evaluate the vendor’s
merchandise quality.
Here, a retailer is encountered with following situations:
(i) Whether the whole lot be examined, or
(ii) Purchasing be made only on vendor’s description.
For evaluating merchandise items, retailer has three choices in hand:
- Inspection
- Sampling
- Description

4. Negotiation:
Once the retailer has evaluated the merchandise quality and other features, he negotiates
with the vendor for its price and consequent terms and conditions. Both parties listen to
each other carefully and ask questions wherever doubt arises. Terms and conditions are
then decided and contract is made involving total amount to be paid by the retailer, delivery
date, delivery conditions and other legal aspects. A retailer while negotiating also talk about
the conditions for the re-order.

5. Buying Merchandise:
After negotiating the terms and conditions and agreed upon price, a retailer after placing
the size of the order (quantity and quality of each merchandise category), pays the initial
money as per the agreement. Big retailers usually place the order and pay the bills online
through electronic data interchange (EDI) and quick response (QR) Inventory planning, small
retailers due to limited sources, conclude purchase manually.

6. Acquiring Merchandise:
It means after paying for the invoices, retailer should receive the merchandise and stock it
properly. While acquiring the merchandise, retailer physically receive the items, counts the
supplies, pays the invoices, marks the items, displays the items and stock in
godowns/warehouses to avoid any pilferage and damage. In case of centralized buying,
goods are received by regional office/central warehouse and then transferred to chain
stores as per their requirements and order received from them.

Q6.
a. The store still has a bright future, but no one can deny that the current trading
environment is a lot tougher and the future less predictable than in the recent past.  
b. So it is more important than ever for retailers to ensure that their stores are performing
optimally, which means adopting practices and technologies designed to achieve
operational excellence.
c. Retail operations are the term used to describe all the activities that keep the store
functioning well. It includes people management, supply chain, store layout, cash
operations, physical inventory, master data management, promotions and pricing, and so
on.
d. Store operation is a major element of cost. So it is imperative that the store itself
becomes a critical asset of the retail business and store operations need to be managed very
well so as to achieve and sustain customer satisfaction and be cost effective.
e. In a retail store, typically, following major tasks are performed:
1. Management of premises: It involves managing on ground activities such as Outlet
arrangement, inventory management etc.
2. Managing store employees: It involves managing of human resources that are employed
on the store. It includes front end employees who handle billing, deals with customer and
the backend employees that include those employees who maintain the store.
3. Merchandise management: This involves arrangement of merchandise in the outlet or
flow of inventory in the store.
4. All administrative functions: This involves day to day admin works such as allocating task
or handling issues in the store.
5. Managing receipts: It involves billing towards customer purchase or receipts of employee
payment records.
6. Providing customer service: This involves maintaining customer relationship in order to
increase customer life time value.
7. Handling rejections: It involve handling of non-conversion of customer deals. It is
imperative to boost employee morals.
8. Evaluating store performance: It involves evaluating various key performance indicator in
order to find out how the sales are faring viz-z-viz other competitors.
9. Controlling shrinkage: It involves managing shelf availability at the store.
10. Controlling cost: This involves controlling cost which includes employee salary, electricity
bills etc.
11. Crisis management: This is very imperative in retail management. Crisis can occur
suddenly at the outlet. It is important to manage it properly as it directly affects customer
perception about the store.
12. Managing events, promotions and alliances: It involve managing of promotional
activities.

Section B

Q1.
Given: Gross Margin= 30,00,000
Average inventory= 2,00,00,000
To find: GMROI
Solution:
GMROI = (Gross Margin/ Average inventory) * 100
= 30,00,000/2,00,00,000 * 100
= 0.15 * 100
= 15%

Q2.
Given: Cost = Rs. 200
Retail Price = Rs. 400
To Find: Mark up %
Solution:
Mark up % = (Retail price - Cost)/Cost * 100
= (400-200)/200 * 100
= 100%
Therefore, the item will be marked up by 100%

Q4.
Given: Walk-ins for the day = 1000
Invoices for the day = 250
To find: Conversion %
Solution:
Conversion rate = Invoices for the day / Walk-ins or footfall for the day
= (250/1000) * 100
= 25%
Therefore, the conversion rate is 25%
Q5.
Given: Total Sale for the day = Rs. 25 lacs
Invoices made for the day = 1250
To find: Average invoice value
Solution:
Average value of invoice = Total sale for the day / invoices made for the day
= 25 * 100000 / 1250
= Rs. 2000
Therefore, the average invoice value is Rs. 2000