Set - 1 Questions

1. Define retail strategy. Discuss the various strategies adopted by retailers to grow their

business. 2+8

The term retail strategy refers to how a retailer intends to satisfy the needs

of the target market in an effort to develop a sustainable competitive advantage

through satisfying the needs of the consumers.

The various strategies adopted by retailers are :-

● Market penetration strategy

In this strategy, retailers follow an existing product range to penetrate the

existing target market segment, but aim to penetrate the market deeply. It can be

achieved by attracting new customers or competitor’s customers from the current

market, encouraging existing customers to purchase more frequently and in larger

quantites.

● Market expansion strategy

This strategy influences the retailers to target into newer markets with existing

retail and product formats or to expand their sales by attracting new market

segments. As this strategy involves expansion into a new region, it poses a greater

risk than market penetration strategy. Since, firms often lack extensive knowledge

of new markets, or may require time for such knowledge to be acquired, resulting

in inaccurate assessments of the market, which directly impact their business.

● Product development strategy

It is a strategy in which retailers expand their sales by improving their existing

product or by developing new products in the current market. It can also be

implemented by modernising current products with the likes and dislikes of

customers in mind. This strategy may pose some risk due to inherent risk

associated with product development

● Combination strategy

It combines all three strategies i.e. Market penetration strategy, expansion

strategy, product development strategy into an incorporated strategy where the

firm continues with its current product lines and also tries to develop new
products or improve its existing products.

2. The classification of retail stores can be summarised in store and non-store formats. List

and explain sub-categories of both store and non-store formats. 10

Retail store formats :-

● Convenience stores : These are characterised by their small size stores that are

located near residential areas, work long hours and usually offer food-oriented

items. In exchange for the facility provided, they ensure they offer a range of

basic stocks and high-turnover convenience products at a slightly higher price.

Examples are stores that are situated near or inside a petrol bunk; Shell,

Spencer’s, etc.

● Kirana Stores : They are individual, small, family-owned businesses that offer

daily use items serving small sections of the society.

● Departmental stores : Big sized stores that sell a wide variety of items and offer

several product lines. A general line of apparel for all members of the family,

household items, furniture, and applications is usually available.

Example : Westside, Pantaloons, etc.

● Specialty stores : This type of store consists mainly of stores that concentrate

mainly on selling only a single line of products or services. They usually

accommodate a narrow product line of food and non-food items with a deep

assortment.

Example : Starbucks, Tanisq, etc.

● Category killer stores :The main characteristics of these stores are that they are

usually large, specialised stores that carry a wide range of products. They usually

have a competitive advantage over other retailers.

Example : Simpli Namdhari; an organic food superstore that offers affordable organic

food and is the first vegetable growing and exporting firm in India to receive

EUREP-GAP certification.

● Discount stores : This type of stores usually offer huge discounts by incentivising
customers to buy products or services in bulk or by managing an efficient

distribution chain.

● Supermarkets : These are typically big stores that contain a diversified range of

food and non-food items. They often price their products at a slightly lower than

average price.

Example : Big Bazaar, More, etc.

● Hypermarkets :Stores that combine a discount department store and an economy

supermarket under one roof. They have a wider selection, more variety, and are

more affordable than supermarkets. They sell a range of food and non-food items

all at a discounted price.

Example : DMart, LuLu Hypermarkets, etc

● Superstores : They aim to meet customer demands by selling routinely purchased

food and non-food items at a much discounted rate, as well as providing many

other services like laundry and repairs.

Example : Onemart.

● Off price retail stores : It usually sells overruns, irregular products, and products

bought at lower wholesale prices than those in retail stores

● Malls : They are big retail stores that provide an ideal shopping experience by

providing a variety of entertainment like food, shopping, and ample parking all

under one roof.

Examples : Orion Mall, UB City, etc

Non-store format :-

● E-Tailers : Providing an online facility for buying and selling things through the

internet, they are today's trendiest way to shop. This enables retailers to have

virtually unlimited shelf space and lifetime, but it often lacks the feel and

authenticity of the products.

. Examples : Flipkart, Myntra.

● Vending machines : Specialised machines that independently trade small products

in exchange of cash or tokens

● Catalogue retailing : These are similar to e-tailers but here customers are made to

select from printed catalogues given from merchants before placing an order.

● Direct selling : Retailing of this type involves contracting directly at home

between a retailer and consumer, both of which are present at the time of sale

3. Do you think that the selection of retail store sites can be systematic based on certain

parameters and steps to be followed? Justify the context with description. 2+8

Yes, Retail store locations can be systematic based on several parameters.

Infact selection of a retail store is one of the elements in the retail mix. Considering

that setting up a store is a huge investment for any retailer, it can be eased by

analysing different criteria or following several steps. Because, once set up, a store is

almost immovable, but if successful, it can offer retailers a competitive advantage

over their competitors helping the business flourish.

Several parameters or factors to be considered while setting up a retail

store are :-

● Property cost : Retail stores are a huge investment and require a lot of

consideration. Before investing into the shop, one has to determine if they want to

rent or lease, and if so, how they are going to cover the costs.

● Legal restrictions and infrastructure : There are endless regulations laid by the

government and retailers have to abide by them to trade. The availability of

infrastructure facilities, such as roads or railways, can also have a significant

impact on the type of channel a retailer chooses to meet his demands.

● Labour cost : It refers to the cost incurred by retailers while setting up and to

maintain the shop. Retailers need to choose skilled employees with the right

mindset out of the available candidates.

● Size and type of goods a retailer is going to trade : the size and type of goods

should be able to meet the demands of the society or target segment. Example :
setting up a stationary store near a school.

● Level of competition and access to suppliers: It is the most crucial aspect to be

considered since it is external or beyond the control of retailers.

● Demand for the retailer goods and services : Business success is determined by

the location the retailer chooses because demand is one of the key factors

determining the success of the retailer.

● Access of retail shops to transportation and parking facilities : This is the most

significant factor that decides the footfall of people willing to visit the store.

● Customer attraction power : It is more of a reason for a customer to choose a

particular shop and a retailer must take all the steps possible to attract customers,

since it enables the retailer to be aware of current trends, consumer needs, and

demands.

Set - 2 Questions

4. Define retail pricing. What are the factors influencing retail prices? Elaborate various pricing

strategies available with the retailers. 2+4+4

The retail price is the final price a retailer chooses to charge its end

customers for their product or service at the point of sale. A retail price will be the

summation of all the manufacturing costs of the item and all of the overhead costs

that retailers will incur during the charging process to the customer.

There are many comprehensive factors that impact retail prices. The two

main broad categories are :

● Internal factors

It includes factors that are directly controllable by the retailer through

adopting different strategies. They include elements such as

a. Manufacturing cost : it is the sum of all costs of all resources incurred in the

process of producing a product, it can be dynamic depending upon the cost of

the raw materials, labour cost, etc

b. Predetermined objectives : It refers to objectives that are considered by

retailers before entering the market.

Example : The retailer may introduce a new product that has never been available

in the market in order to recoup prices by using market skimming strategy

c. Image of the firm : the price of the merchandise has a huge impact on the

image of the firm.

Example : A relatively high price for merchandise can mitigate high material

costs and establish the brand's premium image, but organisations should

consider this aspect cautiously since high prices may sometimes affect sales.

d. Product status : It is sometimes perceived that the price of the product

indicates the quality of the product. Furthermore, a product priced high often

evokes perceived value and, as a result, attracts more buyers.

e. Promotional activity : The retailer has full freedom to choose how to promote

his products or services, it is possible to do so through promotions such as

huge discounts, referrals, coupons, etc.

● External factors

Retailers cannot control these factors, so they can pose threats to their

business operations. To survive in such an environment, one must adapt by

changing their working mechanism. They include elements such as

a. Competition : Retailers must often analyse the markets for competition, since

competitors are beyond their control. Missing out on a chance can have a

tremendous effect on business.

b. Buying power of consumers : Consumers' buying power is inversely related to

price levels, so when the price declines, they have greater buying power

compared to when the price increases. As a result, retailers can benefit from

choosing a price that is comparatively lower

c. Government policies : Retailers must adhere and adapt to government policies

in an efficient manner, especially in the world of ever-changing government

policies.

d. Market condition : Retailers must always look for suppliers who are

responsive and adaptable to current market conditions, since no one can

predict what the future market will bring.

e. Levels of channels involved: sometimes retailers need to cater to customers

whose needs fall outside the range of what they can offer. Therefore, deciding

which path is most efficient can sometimes be a challenge for retailers since it

lies outside their control.

It is primarily the business strategies of retailers that determine pricing

strategies, Pricing strategies are based on several factors, including:

a. Competitors Price : Retailers should examine the selling prices, discounts and

promotions offered by their competitors in the market and price accordingly or

offer products and services at or near their competitors' prices to maintain

their share of the market.

b. Ceiling price : The ceiling price serves to mitigate high material costs and

establish a premium brand image, but retailers shouldn't price beyond the

ceiling price because there is always a limit. It is the price at which a product

or service can be offered in the long run to sustain the market. Retailers should

not exceed this price.

5. What are the two most common methods used to analyse the merchandise performance?

Explain in detail. 10

The two most common methods used to analyse merchandise performance

are :-

● ABC Analysis : It is an inventory management technique based on the pareto

principle that is also known as Always Better Control. It is a technique for

determining the value of inventory items based on their importance to business,

since every company is required to maintain several types of inventory, regardless

of its size. As a result of ABC analysis, total inventory is divided into three

categories, such as A- priority items with outstanding performance and an

improved sales forecast, B- Items of average importance that are monitored for

possible inclusion into category A or in contrast to category C. C- items that are

relatively unimportant and have low demand and are generally more costly in

terms of excessive inventory. By categorising items, businesses can identify their

highest margin items, optimise results, and ensure high stock turnover ratios by

streamlining and utilising resources efficiently. It is the intention of this analysis

to take advantage of the imbalances in sales by giving each item and item class a

corresponding weight.

For example, most online retailers don't carry every item on their website in stock.

Companies like Amazon.com maintain only the stocks of the popular items that

are frequently purchased. If an order is placed for an unpopular item, Amazon

requests it from its distributor, who then ships it to Amazon.

● Sell-Through Analysis : it is the percentage of a product or service sold by the

retailer after the product has been shipped by the supplier. By comparing actual

and forecasted sales volumes, this method determines if early markdowns should

be applied or new orders of additional merchandise should be placed to meet

current demand efficiently, allowing the supply chain to be monitored efficiently.

When additional stock of merchandise is to be ordered, it mostly depends on the

buyer's previous experience with the merchandise since there is no universal rule

to indicate whether a markdown or surge in demand exists.

Example : If a retailer has managed an inventory that deals with bags and other

products for past years, they would have definitely noticed a surge in demand for

school bags at the beginning of the academic year. Consequently, one would

definitely order for additional supplies of bags from the seller in bulk so as to

satisfy the demand and benefit from selling during the start of an academic

season, in which case one would otherwise only maintain a limited number of

school bags throughout the year.

6. Discuss the various types of store layout with examples. 10

Types of retail store layout

● Grid layout : Grid layout is the most common layout found in supermarkets and

discount stores where there are a huge number of products to be sold, it works by

using available space effectively by working to maximise product display while

minimising white space allowing unconfined movement within the area. Grid

layout consists of several long aisle with important or impulse buying items at

front followed by other items, the other merchandise is displayed in a parallel

manner Grid layout is effective in shops having large floor space.

Example : Big supermarkets like Dmart, BigBazar, etc

● Diagonal layout : Diagonal layout is mostly found in self-service and small sized

stores as it offers excellent visibility for managers and customers. It mostly uses

aisles that are placed diagonally to increase customer sightedness and exposes

new merchandise as one navigates through.

Example : Duty free area stores inside airports follow diagonal layout for it’s

excellent visibility.

● Loop layout or race track layout is a type of layout that offers unusual, interesting

and Entertaining Shopping experiences that controls the flow of people While

Also Increasing Impulse And promotional purchases by exposing them to more

products. This type of layout creates a deliberately closed-loop path that guides

customers around the store in a closed format so that the customers deliberately

walks past every piece of merchandise the store has to offer and eventually

guildes them all the way around to the checkout.

Example : Premium fruit and nut shops, Toffee stores, etc

● Freeform layout or mixed layout creates the most functional store design where

merchandise is arranged in an asymmetric manner keeping in mind as Customer

behaviour is the only consistent aspect of this kind of layout by incorporating grid

and diagonal layout where This unique layout has the potential to attract and
retain customers by offering an experience no other store can. It achieves free

form by not at all interfering into the flow of traffic; it is well-suited for a

creatively focused store or an upscale brand that wants to prioritise the customer

experience.

Example : Mostly found in high-end cloth and accessories shops. It is also

incidentally seen in car showrooms.