GYAN GANGA COLLEGE OF EXCELLENCE

RETAIL MANAGEMENT
UNIT II

 Merchandising Philosophy -
Businesses use many tactics to compel customers to buy their products. Sales, promotions,
giveaways and hosting events are just a few methods. However, companies also use tactics in
accordance with their merchandising philosophies. Such tactics are noticeable the moment the
consumer enters the store or flips through the company's catalogue: Product layout, design,
packaging and customer service are all expressions of this philosophy. Understanding merchandising
philosophy enables businesses to better target consumers.

A company's merchandising philosophy is the scheme it uses to attract consumers to buying its
product or products. Linda Welters, author of the book, "The Fashion Reader," defines
merchandising as a series of decisions that include setting prices, defining quantities and choosing
locations. Welters explains the philosophy pertains to everything except the good's production. The
attitude differs depending on the industry. While the fashion industry's decisions are based on
specific seasons that dictate design, fabrics and layouts, the electronics industry's philosophy relates
to time-sensitive releases of innovative products and remaining cutting edge.

Uses of Merchandising Philosophy -

Merchandising philosophies provide businesses with a type of marketing blueprint. This viewpoint
often dictates the style, expression and theme of the promotion. For instance, a high-end designer
handbag company may adopt the approach of opening stores in upper-class, downtown districts as
opposed to middle-class suburbs. Similarly, the its philosophy pertaining to pricing may compel the
business to offer its products at a high price tag with the knowledge that few consumers paying this
price will yield greater profits than a higher quantity of customers paying a lower price. Conversely,
Joseph Hair explains in his book "Essentials of Marketing" that a mass merchandising philosophy is
one that sets prices low to achieve a higher turnover rate at greater quantities.

Benefits of Merchandising Philosophy -

The benefits of a solid merchandising philosophy include carving a niche for the company and
differentiating its offerings from the competition. Many companies exert considerable resources in
developing a distinct look and feel of their stores. Even music influences customer decision-making:
Carl McDaniel elucidates in his book "Marketing" how rapid music compels restaurant customers to
chew faster and take larger bites, thereby freeing table space. Other types of music influence
consumers to linger longer and spend more time perusing store shelves.

Considerations

The digital era requires an additional consideration in a company's merchandising philosophy. The
layout of the business's website and font selection are examples of aesthetic details. Businesses also
develop a different pricing structure for online consumers, mostly because the Internet gives
customers the ability to compare a business' prices with a competitors with greater ease. Thus,
retailers in highly competitive industries have had to amend their merchandising philosophy to
accommodate this change.
  Merchandise Planning -
Merchandise planning refers to an approach based on data to select, buy, present, and sell
merchandise to consumers so that the maximum rate of investment can be achieved and
consumers demand can also be satisfied.

The purpose of merchandise planning is to fulfill consumers demand by making available right
merchandise at the right place, time at right prices, and in the right quantities.

It is normal to feel confused when it comes to defining and understanding merchandising planning.
You will get a new definition each time you will speak to a new retailer. The meaning f
merchandising planning is different for different retailers, and there is no single approach that one
can use.

This is because every retailer has different strategies and goals. Even merchandising planning has a
different meaning for a different retailer; it is not that complicated to understand. It is closely related
to assortment planning as assortment planning is about category management of merchandises.

You will be able to meet customers’ needs by making decisions and planning according to the stock
you store. In addition to this, you will also find it easy to meet your financial targets set by you by
choosing the right merchandise to sell.

Importance of merchandise planning -

Buying merchandise and placing them in store for selling is one of the biggest expenses a retailer
makes. There are several additional expenses that come with merchandise are delivery costs,
shipping costs, storing costs, etc. in case you order wrong merchandise, your expenses will be
doubled easily.

However, having a merchandise plan is much more important than only saving money. You will often
find yourself struggling to meet consumers’ demands if you don’t have a well-prepared merchandise
plan and satisfy the consumers’ needs is one of the most important duties of a retailer.

You can use available the right product, at the right time, at the right place, and in the right
quantities only if you plan everything ahead. You can think about the consequences in case you fail
to plan properly.

There are chances that your shelves will be overflowing with the wrong type of merchandise, and
then you will have to provide heavy discounts to get rid of the excessive undesired merchandise.

Moreover, if you fail to provide the right merchandise at the right time, then your customers will
move to your competition.

Challenges in planning merchandise -

1) A lack of clearly defined goal

Most of the merchandise planning challenges attributed to “lack of clearly defined goal. It happens
because merchandising planning is different for different stores depending on the size and type of
the retail store. for example, it is easy to diversify and focus on various goals in a large retail store.

However, excessive data available in large retail store sometimes can cause hindrance in
merchandise planning. Old data can make planner confused, and he might get lost in minute details.
Therefore, it is advisable if you take data and divide it into different sections to get desired outcomes
rather than replicating the whole process all over again. with a good sales plan you can reach your
financial goals easily.

2) Determining the balance between the right products and the right quantity

One of the biggest challenges for a retailer is to determine the balance between the right
merchandise and the right quantity. As per an old saying “too much of a good thing can also be
harmful” and becomes rather more difficult when you have to place an order today for next one
year not for next one month only.

Fortunately, you can use retail data to get help in making a decision. in fact, all-wise retailers make
the use of past data to plan for the future because an effective merchandise plan can’t be prepared
without past data.

Even retailers of 20 years of experience in retail business say that they only guess for how much
quantity they are going to need for a certain product in the near future.

Therefore, it is right to say that you can’t only depend on the data from the past, but you will also
need an experienced planner who understands the merchandise and its requires and also
understand buyers and their buying behavior.

Components of merchandising planning -

In this section, you will learn about the important components of merchandising planning

1) Product

Merchandise or product is the most basic component of merchandising planning. The retailer has to
provide products which are expected to be demanded by his consumers. He is required to keep
enough inventory of each products category so that he never runs out of it and lose business.

Products can be classified in the following categories:

i) Seasonal products:

This type of products is in demand in a particular season. An adequate amount of this type of
products has to be kept in inventory before the beginning of the season, and it should be maintained
properly so that it can sustain the whole season.

ii) Staple:

Products which are always in demand such as food, clothes, etc. irrespective of the season.
Adequate inventory should be maintained for such products.

iii) Fashions:

Products which will remain in demand until fashion prevails. The retailer has to buy an estimated
quantity of such products to last the fashion without running short of it.

iv) fads:

This type of products has a limited period of demand. Retailers have to buy such products carefully
by rightly estimating the fads.

2) Range
Range refers to breadth, width, and depth of products that you sell in your store. There should be
enough choices options for the customer so that they can choose the right products for themselves.
Stores with limited width should provide enough depth options.

For example, stores like Nike and Raymond’s are stores for particular categories. Therefore, it must
have depth such as different design, number, size, price range, and color, etc. so that customers
have enough options to choose from.

On the other hand, departmental stores, which deal with various categories of products, should not
only have width but also need to have depth and width.

You need to make more investment in a wide range of products. The retailer has to make sure that
he is getting profit on the investment he made. In addition to this, he also has to make sure that
products are in demand and saleable. Order and store only those merchandise which is saleable.

3) Price

Price is another important component of the marketing mix. Price is an important factor when your
customers are price sensitive. It is the job of a retailer to determine different segments of consumers
and which price segment they belong to.

You can make categories such as low, medium, and premium range. Customers should be offered
products of the price range they belong to.

In addition to this, the retailer has to adopt various strategies such as markdown prices, price
skimming, offers, and discount prices, etc. for example; you can give offers like “Buy one Get one”
depending on the product and its inventory in the store. Your planning should result in regular sales,
adequate profits, and stock clearance.

4) Assortments

Assortment means the combination of various products to be made available at retail stores.
Products should be assorted and presented department wise and category wise. For example,
toiletries, cosmetics, staples, electronics, furniture, vegetable, etc. each category of products will
have different price level, brands, and size.

The retailer should make systematic classification and assortment. Products which belongs to the
same category should be placed in one place. For example, electronic items should not be placed
near fruits and vegetables. Apart from this, the retailer should keep SKU (Stock Keeping Unit) for
each product and item.

He should regularly monitor than enough varieties of products are available for customers to make a
choice from and assortments of products is convenient for customers to locate, select, and adequate
variety available to select from.

Along with this, he should make sure that products are getting sold and there is good turnover, and a
line of product is contributing to the overall profit of the store. The products which are not popular
and in-demand should be replaced with products which are in demand and have new features.

5) Space

Visiting customers should be able to locate products easily. If a retailer has limited storage space,
then he should make sure that each type of product is displayed properly.
Available space can be utilized to display and showcase products, using a hanger, different types of
fixtures, mannequins, gondolas, and fridge depending on size, nature, and dimensions of products.

The retailer should also decide the hierarchy of products and decide how to create space for
different categories of products. For example, products can be categorized as fads, new arrivals,
vegetable, fashion staples, furniture’s, electronics, kids’, etc.

It is important to priorities place for different merchandises:

1) It should be convenient for customers to locate and pick products.

2) Products should be easily visible.

Implications of merchandising planning:

Merchandising planning is planning about the products, range, price, and assortments. Followings
are the implications of merchandising planning.

1) Marketing:

Retailers have to invest in marketing measures such as advertising sales promotions, etc. to ensure
the quick sale of merchandise in the store.

2) Finance:

A large part of finance is invested in buying merchandise for the store. Therefore, it is important to
plan price, range, products, etc. to make sure adequate profits on investment.

3) Store operations:

Each department in the store should be informed about the various merchandise bought, and they
should start thinking about various strategies to sell out the stock in the store.

With the help of effective merchandising planning, products can be labeled with the correct price,
offers, and showcase to increase the sales of products.

4) Warehousing and logistics:

Warehousing and logistics department is responsible for taking account of goods, receiving ordered
goods, dispatching them, and informing each department about the goods bought. Merchandising
planning is helpful in warehousing and makes it easy as it gives information about the quantities of
goods remaining in the store.

Process of merchandising planning

Presenting merchandise demanded by the customers at the right time and at right place ensures the
success of the retail business. Stores need to do meticulous planning for the products, their pricing,
presentation, etc.

The planning process should be done thoroughly, and it should be detailed. It must cover every
single aspect of merchandise management. A store’s success depends on what customers desire to
buy and how those things are presented to them.

Merchandise planning can be

1) Store-Based:

The demand for the store or department, products wise, category wise, etc.
2) Location-Based:

Ordering merchandising for the entire organization and dividing the quantities of merchandise on
the basis of the demand in each store.

3) Time-Based:

The annual budget must be prepared for the requirement of merchandise and then break down
expense on a quarterly, weekly, and daily basis.

Process of Merchandise Planning -

Following are the steps in the process of merchandise planning:

1) Forecast of Sales

Estimated sales are the key to deciding the merchandise budget and plan. It is important to make a
forecast of sales for the entire organization, department, and on the basis of categories of products.
Addition of new products and the elimination of non-performing products should be considered.

The forecast can be done on the basis of data obtained from present scenarios, past records, and
impacts of trend variations, the, etc. organization should also determine the pricing strategies on the
basis of the information for future sales of products.

2) Merchandise Budget

Estimation of merchandise required is made on the basis of expected sales. Estimation should be
made at the managerial level of the organization to determine the level of merchandise
requirements for each store and department.

Besides this, the organization should weight the implication of investment in the purchase of
merchandise. Effective planning ensures that the estimated return on investment will be achieved.
The plan must ensure that each department and store is getting merchandise as per the requirement
of each store.

Along with this, it should also make sure that there is adequate turn-over on merchandise and if
required, what strategies like markdown, discounts, offers, etc. should be given to get rid of stock.

3) Merchandise control

It is important for a retailer to balance between the purchase of goods and their sales.

Over or under-stocking of merchandise should be avoided. Daily and weekly reports should be
prepared to know about the sale rate of merchandise. Order for New merchandise should be placed
before the stock reaches a danger level.

Each organization has its own policies to maintain the stock level. Control over the merchandise can
be obtained by monitoring the movement of stock from inventory to store and store to the
department. If you keep control of the stock, then you can easily avoid clearance sales, discounts or
offers, etc.

4) Assortment Planning

The meaning of assortment is the arrangement of products on the basis of their categories. It means
the presentation of all range of products under department, categories, or section. For example,
food section, garments section, and cosmetic sections, etc.
A retailer should ensure the proper assortment. Each section and department must contain related
products. Each category should have enough SKU (Stock Keeping Units), and no shelf, rack, or display
should be empty.

Similarly, it should be ensured that no products category and department should be overloaded with
goods. All merchandises should be given optimum space on the shelf, and the space on the
department should be used properly.

What’s retail pricing?

Retail pricing is a core aspect of any business that sells products to customers. After all, consumers
may care about a number of factors when making purchasing decisions, but the price they will pay
for an item is almost always among their top concerns.

When it comes to setting prices for products offered at your retailer, there are numerous
approaches you could take, depending on your short- and long-term business goals. However,
generally speaking, the retail price you set for any given item must include the cost of that item plus
any markups you make in order to gain a profit from selling that item.

This pricing approach can be summarized with the basic formula:

Retail Price = [(Cost of item) / (100-markup percentage)] x 100

So, if an item cost you $0.50 to manufacture, and you hope to sell it with a 50% profit, your retail
price would be:

[(0.50) / (100-50)] x 100 = $1.00

What are your retail pricing objectives?

It should come as no surprise that every retailer seeks to maximize profits and keep profit margins
high.

Yet the world of retail is hardly stable, and your priorities as a business can shift over a matter of
weeks or months. Depending on the type of retailer you manage or the time of year, your biggest
objective may just be keeping your store afloat for a few months until you can draw in more
customers during the high season.

When setting the retail pricing objectives for your retailer, it’s important to consider factors besides
just profit margins and markup percentages.

The easiest way to do that is to ask plenty of questions.

 What is your brand’s mission?

 What are your future plans as a retailer?

 Who are your core group of customers?

By answering these questions truthfully, you can begin to get a sense of what matters to you in the
short and long term. After all, a retailer looking to achieve large profit margins in the short term to
finance the opening of new stores will have a vastly different pricing objective than a luxury brand
that wishes to keep its products coveted by consumers.
Factors that affect retail pricing

Although retail pricing is a complex topic with many different components, the factors that affect
how you price your products can be broadly categorized as either internal or external.

Internal factors are elements of your business that are generally under your control, such as the
costs and processes associated with manufacturing, or how much you invest in promotions and
marketing. Internal factors are important because they give you an idea of your baseline, or how
much you must earn from retail sales to keep your business profitable.

External factors, on the other hand, are largely out of your control. These factors include the
proximity and price range of your competitors or the buying power of your consumers. When
assessing external factors, it’s important to consider macro trends such as the current state of the
national, regional, and global economy, as they hugely impact customer purchasing behavior.

 Pricing Strategies -
Let's have a deep look at the most common pricing strategies that are used by retailers.

As mentioned above, every pricing strategy has a different outcome for short and long term with
different strategies and different objectives.

1. Manufacturer Suggested Retail Price (MSRP)

This pricing strategy is perhaps the most familiar for consumers. The idea behind the Manufacturer
Suggested Retail Price (MSRP) is to standardize the prices of products sold across multiple locations,
and it is often used for mass-produced items like consumer electronics or household appliances.

This approach can also be referred to as cost-based pricing, since it takes into account the cost of
manufacturing the product, a profit margin for both the manufacturer and the retailer, as well as the
prices of similar products. Generally, the manufacturer provides the products to the retailer at
roughly half the MSRP, enabling the retailer to turn a profit from the sale.

Pros: This approach takes the guesswork out of price-setting for retailers, saving them time and
energy.

Cons: Offering certain products at the MSRP can lower your competitive edge on those particular
products—after all, if you offer the same item at the same price as other retailers, how do you set
yourself apart?

2. Keystone pricing

Keystone pricing is essentially doubling the wholesale or production cost of a product to determine
the retail price.

This practice actually stems from the MSRP, which, as we mentioned, is generally double the
wholesale price.

Pros: Similar to the MSRP, this approach saves retailers time and energy, as it doesn’t require too
many calculations to determine the retail price of a product.

Cons: Although keystone pricing may work for some items, it won’t work for all of them. For items
that are truly worth more, you may be setting the price too low, which means you won’t achieve the
profit margins you feasibly could on that item. For other items, keystone pricing may be too high,
which will end up hurting your sales—especially if there is a nearby competitor selling the item for
cheaper.

3. Bundle pricing

Also known as multiple pricing, bundle pricing is when you sell a group of products for a single price
—think three-pack socks or five-pack underwear.

Retailers often prefer bundle pricing because it streamlines their marketing campaigns, as they have
to promote a single price instead of several price points. Customers also love bundle deals, since
they believe they’re getting more bang for their buck.

Pros: Bundle pricing often leads to larger-volume purchases of certain products or product groups,
so if you have unsold inventory you’re trying to move, this could be a smart tactic to employ.

Cons: Once you offer items in a bundle package at a low cost, it can be harder to sell them
separately at their original price. This is due to what is called cognitive dissonance, whereby the
consumers believe they’re getting less value for the amount they pay because they’re comparing it
to the bundle deal that was previously available (even if the bundle deal was more expensive than
the individually priced item).

4. Discount pricing

As the name suggests, discount pricing is the practice of selling products at a discount, whether it’s
through sales codes or coupons sent directly to the customer or through in-store discounts or even
store-wide markdowns. Although retailers don’t love the idea of discounting items as it generally
eats into their profit margins, offering the occasional sale can do wonders for getting more people
into your store and attracting new groups of customers who are out looking for a deal.

Pros: Discount pricing can be a great way for retailers to get rid of slow-moving or out-of-season
items.

Cons: If you offer discounts too frequently, it can lower your brand’s perceived value in customers’
eyes, making them unwilling to pay full price for your goods and services.

5. Penetration pricing

Often preferred by newer brands who are set to enter the market, penetration pricing is the
practice of initially keeping product prices low so as to introduce the brand and its products to as
many people as possible.

The idea is that by generating word of mouth among consumers, retailers can save on advertising
and customer acquisition costs down the road.

Pros: Offering lower prices than the established competition can help retailers strike the right chord
with shoppers, helping them to build a loyal customer base from day one.

Cons: If you make the switch from your initial low prices to regular pricing too abruptly, it has the
potential to backfire and alienate the customers you had acquired by that point.

6. Loss-leading pricing
This is the approach of luring customers in by offering a discount on a product they want, then
encouraging them to buy more products along with the original one once they’re in your store.

By using the loss-leading pricing, retailers hope to offset their profit loss on the discounted item by
selling additional products the consumer hadn’t initially thought of buying.

Pros: This approach often increases the average transaction value (ATV), or the amount a shopper
spends in a single shopping trip.

Cons: When it comes to implementing loss-leading pricing, it’s crucial to strike the right balance in
customer service. Just as you don’t want your customers to feel forced by staff to purchase items
they don’t need, you also don’t want to risk losing money by only selling the discounted items and
not much else.

7. Psychological pricing

Although the concept may sound like something out of a research paper, we all
encounter psychological pricing on a daily basis.

Also known as “charm pricing,” this approach relies on the theory that customers place greater trust
in prices that end with odd numbers like 5, 7, or 9, the last one being the most popular. So, instead
of offering an item for a rounded $200, the retailer may choose to price it at $199, and customers
will perceive this to be a better deal based on the number alone.

Pros: Psychological pricing is especially useful for brands that want to increase their overall sales
volume by driving customers to make impulse purchases of cheap to mid-range items.

Cons: Not all brands should implement psychological pricing. In fact, if you’re a premium or luxury
brand, implementing psychological pricing can have the opposite of the intended effect in that it
makes you seem “cheap” or “gimmicky” in the customers’ eyes.

8. Competitive pricing

As the name suggests, competitive pricing is the practice of using your competitors’ prices as a
benchmark and setting your prices lower. Again, retailers who take this approach hope to offset their
reduced profit margins by increasing the total volume of sales.

Pros: For large retailers who are able to negotiate deals to lower their unit costs, the competitive
pricing approach can really make a difference in getting ahead of the competition.

Cons: For smaller retailers, the only way this practice can be sustainable is to ensure that you sell
high volumes of the product. Also, depending on the product, it can make customers think of your
brand as the discount alternative to other brands.

9. Premium pricing

The opposite of competitive pricing, premium pricing is when you choose to offer your items at a
higher price than the competition.

Pros: When combined with the right marketing tactics, this approach can help your brand be
perceived as a “premium” or luxury brand.

Cons: Depending on your target customer group, premium pricing may not be the way to go. There
are many factors at play here other than a product’s price and perceived value, such as your
customers’ buying power, the quality of your competitors’ offering, or even your geographical
location.

10. Anchor pricing

Anchor pricing is the approach of placing both the discounted and the original prices of an item side-
by-side to give the customer an idea of how much they’re saving.

This method creates what’s known as an anchoring cognitive bias, where the customer considers the
listed original price as the reference point in evaluating whether to buy the discounted item.

Pros: Listing the anchor price along with the discounted price makes the customer feel like they’re
getting a deal, which can serve as an incentive to buy the item.

Cons: Don’t be tempted to increase your anchor price to an unreasonable level. Keep in mind that
consumers are much savvier today than they used to be, and thanks to the prevalence of
smartphones, they can access your competitors’ prices in just a few seconds.

11. Channel-based pricing

Channel-based pricing is a relatively new approach that’s applicable for omnichannel retailers or
simply those that sell their products across multiple channels like brick-and-mortar store, website,
and social media accounts. With this method, retailers set different price points for the same
product based on where it’s sold.

Pros: For retailers looking to promote one channel over another—say, to drive their e-commerce
operations or to draw more people into stores—channel-based pricing can be used as a great
incentive for customers to choose that particular channel.

Cons: Customers may feel outright cheated if they see that you offer the same product at two
distinct price points. One way to get around this is to keep prices the same but offer a channel-
specific discount, one that’s applicable only online or only in-store.

12. Wholesale pricing

Wholesale pricing is often used by retailers who sell their products to other businesses (B2B) instead
of directly to the customer (B2C). In some cases, the same retailer can offer prices at the MSRP to
the customer and at a discounted wholesale rate to other retailers, who then sell these products to
the customer for a profit.

To set the wholesale price, you must first calculate the cost of goods manufactured (COGM), which
includes both material and labor costs as well as additional costs like transportation and overhead
expenses. Then, you must factor in the profit margin, which should be at least 50%, before setting
your wholesale price.

Pros: Offering products at wholesale is a great option for retailers looking to move large quantities of
slow-moving inventory, but this approach can also be used by brands looking to introduce their
proprietary designs to a whole new group of shoppers.

Cons: For wholesale pricing to be sustainable for your business, you must ensure that your sales
volume stays consistently high—meaning you’ll have to make sure that the quantity of items in each
order meets the minimum required amount.
  Basics of Visual Merchandising -
Branding. Senses. Displays. These three words define the three most basic elements of visual
merchandising and can help you win at the point of sale, no matter what type of merchandise you
have to offer.

It all started in the late-1800’s when Marshall Field & Co. started to display product in the store
window. Today, the concept of visual merchandising goes far beyond the front window. It’s become
a strategic lever for retailers as they develop entire floorplans and carefully crafted shopping
experiences – all with the goal of capturing the shopper’s attention and motivating them to make a
purchase. Successful visual merchandising strategies always consider these three things:

Branding in Visual Merchandising

Visual merchandising should strive to bring the personality and essential characteristics of your
brand to life for all to see. From signage and imagery to product depictions, your visuals work
together to tell your brand’s story. When done well, it gives you an opportunity to differentiate
yourself from the competition, build brand loyalty and potentially command a premium price for
your product.

Senses in Visual Merchandising

One reason why brick-and-mortar retail stores continue to exist is because consumers still derive
value – and entertainment – from shopping in person. Online shopping can never duplicate the
immersive experience that is possible when you use visual merchandising to engage all of the
senses. For example:

 Sight: Dramatic lighting effects, bold uses of color and eye-catching visuals are tried-and-true
methods of inviting consumers to explore your brand.

 Sound: Music can be used to “target” your core audience and reinforce the defining
attributes of the brand.

 Scent: Utilizing scents that are unique to your store will create powerful brand recall
whenever and wherever consumers encounter a similar fragrance.

 Touch: Interactive installations engage consumers on a deeper level and make your brand
tangible and tactile.

Displays in Visual Merchandising

Retail has come a long way from the lifeless mannequin. These days, you’re more apt to find digital
screens that use color, sound and movement to communicate critical product information.
Sophisticated three-dimensional displays, similar to what you would normally see at trade shows,
have also become the norm. Advances in color printing and the use of flexible yet durable materials
means that retailers can utilize displays like props in a stage production – changing them out for
special promotions and seasonal events.
  What Is Retail Store Design?
Beyond just creating a good-looking store with aesthetically pleasing displays, retail store design is a
well-thought-out strategy to set up a store in a certain way to optimize space and sales. The way a
store is set up can help establish brand identity as well as serve a practical purpose, such as
protecting against shoplifting.

Aspects of Retail Store Design

Retail store design is a branch of marketing and considered part of the overall brand of the store.
Retail store design and display factors into window displays, furnishings, lighting, flooring, music and
store layout to create a brand or specific appeal. Part of the design intends to direct traffic to get
customers to "flow" to see more items and make impulse purchases.

Store Layout Basics

Stores are usually laid out with new merchandise up front to entice shoppers into the store. The
front of the store also creates a sense of the store's identity with displays of trademark products. For
example, having a centrally located checkout counter stocked with accessories to encourage impulse
item purchases. Even an exterior retail storefront design can entice shoppers inside.

Aesthetic Branding Aspects

Many stores take great pains to create a specific aesthetic with their catalogs, graphic design and
their store mood. A strong example of this kind of aesthetic branding is the clothing retailer
Anthropologie. Anthropologie's stores generally echo the style of its products.

Just as its products feature quirky, rustic and artsy features, the Anthropologie stores use
installations of old "found" pieces and rustic hardwood flooring to create a French flea-market kind
of feel. Meanwhile, other retailers, such as the Apple store, use clean lines and simple gray and
white furniture to emulate the look of its clean laptops. In this way these stores connect the look of
their products with their stores.

Retail Design Work

Store designers are either hired by a company or consult for several different stores. Top designers
have studied consumer psychology to understand what motivates shoppers to buy more and what
causes them to spend less.

Some stores or retail chains also hire store design interns to create the displays from season to
season. For many stores, these interns help lay out and build the designs implemented by the
corporation. They may be given a look book from season to season and build similar-looking displays
in their own store.

Other Design Purposes

Beyond helping to establish a brand identity or help sales, store design can help curb shoplifting. The
setup of specific stores can make sight lines more clear for store employees. If shoplifting is a
concern, setting up a store with few blocked-off corners and easy-to-view spaces is one step toward
reducing the incidence of shoplifting.

Retail layouts also put children's items on lower shelves where they can see them, put similar items
(like shirts and pants) near each other to stimulate more buying. Signs near one type of good can
direct shoppers to the location of related goods, such as a coupon offering a discount on leaf bags
near the rakes in a hardware store.

 PRINCIPLES OF RETAIL STORE DESIGN

Although every retail store is different, they all have one goal and one goal only: to get customers
over the threshold and influence them to part with their cash. Retailers have tried everything from
playing music, to filling their stores with alluring scents – and while it is nothing new, there is a real
art to getting it right.

It starts with retail store design, and with years of experience in delivering award-winning
commercial interior designs, we are masters of this art at Green Room. From the initial planning
through to implementation and delivery, the trick to getting retail store design right is understanding
the customer.

We’re going to look at seven retail design techniques that will transform any retail environment. But
before that, why not sign up to receive our newsletter?

1. EYE-CATCHING VISUAL MERCHANDISING

The power of retail window design should never be underestimated. A striking piece of visual
merchandising will capture shoppers’ attention. Window displays are usually the first point of visual
contact a customer has with a store and can often be the difference between a customer entering to
see more, or just walking on by.

After all, shop windows are the eyes of a retail store or shop. They should tell a story that is then
carried through into a physical space. The trick is to explore creative interpretations, while always
placing the product at the heart of the display. This should grab attention, while communicating a
message and telling a story.

To learn more about how to best take advantage of visual merchandising to maximise your sales,
read our article on the principles of visual merchandising.

2. SLOW DOWN THE CUSTOMER JOURNEY IN THE STORE

Modern consumers are extremely busy and have a tendency to shop in a hurry. It is the job of retail
interior design to slow down this journey and increase dwell time in the store, encouraging
customers to slow down, browse and potentially discover something new.

Encouraging this kind of shopping behaviour starts with your store layout and continues all the way
to creating an immersive experience. Your store layout determines how and where you’ll display
products and the path customers take through your store. Within retail store design there’s grid
layouts, herringbone layouts, loop layouts or free flow. The loop layout is particularly effective for
creating a path for customers to follow through your store.

You should also place a large, eye-catching display at the store entrance. Customers will decide very
quickly whether they like what they see, and placing key products at the front of the store can help
them make this decision. By stopping the customer at the store entrance, retailers can encourage
them to travel further into the space.

3. MARK OUT THE CUSTOMER PATHWAY AROUND THE STORE

Similarly, retailers will know the path they want customers to take around their store. They will have
a clear idea of which products should lead where and how they want customers to end up at the till.
Stores need to make this journey clearly apparent to shoppers.

You may have heard of food retailers strategically placing necessities such as eggs and milk at the
back of the store, meaning a customer has to then navigate through the other goods to reach it,
potentially becoming influenced to pick up other products. Department stores also use this strategy,
placing the kids department on the top floor so that parents have to make their way through other
sections, thus increasing the likelihood of additional purchases.

Some retailers fail to guide consumers around the store effectively; leading them up aisles without
thinking where in the store it’s taking them. Instead, brands should lead customers around a path
that increases dwell time and leverages sales.

4. STEER CUSTOMERS TO THE RIGHT OF THE STORE

Research into retail interior design has shown that customers naturally veer towards the right when
they enter a retail space. Given that the majority of the world’s population is right handed, this
makes complete sense. We can assume that the majority of the population are stronger on their
right, will generally reach with their hand and most importantly, tend to be drawn to the right hand
side of any space.

To capitalise on this, retailers should place visually arresting signs and Point of Sale displays on the
right hand side of a store. This will then naturally guide customers anti-clockwise around a space
which has been shown to be a preferred route. By factoring this into the pathway outlined
previously, brands can transform their retail space and leverage sales.

5. BE BOLD, CREATIVE AND INNOVATIVE WITH STORE DESIGN

With an increasing number of shoppers turning to e-commerce to purchase products, it’s all the
more important for brands to make their retail spaces enticing and interactive. Focusing on that
physical experience that e-commerce lacks is the key to keeping stores busy. The physical space can
be smaller and the levels of stock can be lower but the actual experience needs to be more
stimulating. One way of doing this is to focus on retail interior design. This allows brands the
opportunity to be bold with their spaces and attract customers in an entirely new way.

Through clever colour choices, bold signage, and innovative designs, stores have the potential to
create an immersive environment that reinforces brand advocacy and keeps customers coming back
to the store. The store is the ultimate showcase and it’s the physical touch point between the brand
and the customer. Creating an attractive space where a customer can be completely immersed in
the brand really brings it to life and turns them into a true brand advocate.

6. AERATE THE STORE DESIGN AND LAYOUT

While innovative and creative interior design can pack a punch, it is vital that retailers give their
consumers some breathing space. Busy, over-crowded retail environments can give the impression
that products are of a lesser quality. Instead, it is vital that there are gaps in the store design to allow
customers space to think and move around more freely.
Our collaboration with SEAT successfully achieved this in the form of the olive tree at the centre of
the retail concept store at Westfield, inviting tired customers to take a seat beneath it’s branches.

7. MAKE THE MOST OF ANY SHOP SPACE

For brands looking to enter a new market or boost their profile, it is often preferable to open a retail
concession or pop-up store. But just because there are restrictions, it doesn’t mean the design of the
store should suffer.

In fact, the design of these smaller, more temporary retail spaces needs to be even more eye-
catching. The principles remain the same, but retailers need to learn to adapt their offering.
Customers will expect an experience in these spaces, and the retail interior design will need to
reflect this. Our Philips Pop-up in Utrecht is a fantastic example of how to utilise a smaller space to
your advantage.

Have a look at our latest projects to find out how we have applied these retail store interior design
to help our clients maximise their sales, and get in touch with our team to discuss how we can help
you.

 What Is a Retail Store Layout?

A retail store layout (whether physical or digital) is the strategic use of space to influence the
customer experience. How customers interact with your merchandise affects their purchase
behavior. This retail principle is one of the many from Paco Underhill, author of Why We Buy: The
Science of Shopping, keynote speaker, and founder of Envirosell.

The interior retail store layout has two important components:

 Store Design: The use of strategic floor plans and space management, including furniture,
displays, fixtures, lighting, and signage. Website designers and user experience (UX) researchers
use space management techniques and web design principles to optimize e-commerce websites.
We’ll further discuss a variety of popular retail floor plans later in this article.

 Customer Flow: This is the pattern of behavior and way that a customer navigates through a
store. Understanding customer flow and the common patterns that emerge when customers
interact with merchandise based on the store layout is critical to retail management strategy.
Physical retailers are able to track this using analytics software and data from in-store video and
the wifi signal from smartphones. For example, solution providers like RetailNext provide
shopper analytics software for retailers to understand flow and optimize the customer
experience based on in-store video recordings. The technology also exists to track the digital
customer flow and online shopping behavior. Using “cookies” and other software, online
retailers can track customer behavior, including how customers interact with their website.

While the exterior retail store layout includes exterior store design and customer flow, it also
includes the following factors:

 Geographic location of the retail store (real estate)

 Size of the building and length of the walkways accessible from the entrance and exit

 Use of furniture and exterior space for people to gather and interact

 Style of architecture of the retail building

  Color of paint and choice of exterior building materials

 Design of the physical entrance and exterior window displays

The objective of retail store design is to positively impact customer experience and create value,
which is the primary goal of retailers in the supply chain.

 Exterior Design Considerations in Retail Store Design

The exterior design of any retail store must protect the interior from the outside elements (heat,
dust, humidity, light etc.). Just as important, it also serves to convey information to potential
customers. The exterior is first part of the store that potential customers see. They will determine
from the outside whether or not they wish to enter and shop. It is critical that the outside of the
store gain the attention of customers and entice them to enter. If the outside does not reflect an
image appropriate to customers, they will not enter into the store.

The important exterior design considerations for the retail store design are:

1. New Building versus Existing Facility

The decision to build a new facility or seek existing space is a critical element in exterior design
planning. Each option has its advantages. Building allows the retailer to design all aspects of the
exterior and interior. However, this option may be limited by location availability, time, or cost.
Buying, renting, or leasing existing space has the advantage of being much quicker, may offer the
advantage of a superior location and may be less expensive. However, a retailer is often limited in
what can be done with regard to design issues. It is often the case where major renovations of
existing space are as expensive as building from the ground up.

2. Restrictions

Recognizing the importance of the exterior, retailers have become very competitive in their designs.
Unfortunately, this has often led to many areas looking like a war zone of competing colors, signs,
shapes, and sounds. Both property owners and governments alike have taken steps to ensure that
consumers are not assaulted by on overwhelming amount of stimuli.

 Lease requirements. Many property owners require retailers that lease their space to
adhere to certain rules regarding store design. These rules serve two purposes. First, they
assure the owner that property will be maintained good condition; and second, they ensure
that the surrounding property does not lose value. For example, most malls require that
signs be certain sizes and often limit the use of intense light.

 Building codes. Most cities have building codes for businesses; often many are directed at
retailers. These serve several purposes. First, they protect the public. Fire codes and safety
regulations are examples. Some codes include sign ordinances that try to create some kind
of visual harmony. Second, they ensure equal access to shopping for those with disabilities;
and third, they reflect the community’s attitude with regard to appearance. For example,
many town recognize the need of retailers to promote their business through the use of
signs. However, for aesthetic purposes, they have limited or abolished signs in particular
areas.
  Theme areas. Theme areas are those in which buildings must meet structural requirements
that fit a certain theme. Many downtown areas are implementing very strict building codes
that allow businesses to stay only if they fit with the atmosphere the area is trying to create.

3. Color and Materials

The exterior color texture of a store give a lasting first impression to the consumer. Often, this will
be the first and sometimes the only thing a customer sees of a store. It is important that the exterior
look and “Feel” right to the shopper. The colors and material should express the image of the
store. Today’s retailers are increasingly using textured building materials (brick, rough-sawn wood,
and so on) at the store entrance to give a pleasant feeling to the facade. Steel buildings tend to
create an impression of strength, whereas glass tends to create an altogether different impression,
usually of a more modern store. Concrete or bock can contribute to the overall image of low cost or
value. Brick may create a more upscale feeling.

4. Signs

Effective use of signs identifies the nature of the business, build a corporate identity, communicates
an image, ties the company to its advertising through the use of a logo, and attracts to the store.
The most common signage is in plastic based materials despite the relatively high cost. Companies
find that effective signs have individual letters that are coated in tough plastics and illuminated from
within by neon tubes. This type of sign has advantages because it uses 15 to 20 percent less energy
than other lighted signs and has an extremely long life. Stores desiring a very contemporary look
may use exposed tubes; small strip shopping centers may use hand crafted wooden signs to
maintain a low profile. Backlight signs offer a slightly more expensive possibility. Instead of the light
splashing out of the front of the letter, it washes the wall with a silhouette. Mall tenants may be
limited in the type and size of their sign management rules. Signs from materials such as wood or
metal that have direct lighting can be used to create different images from luxury to country.
However, plastic technology today allows the creation of nearby and look.

 Exterior walls and signs. Many retailers use the exterior wall space to promote their store.
Painting the name and logo of a business on the exterior is often less expensive than having
a custom-made sign. Examples of this vary from a simple, elegant script indicating the name
of the store to more exotic art that includes not only the name but also pictures. It artwork
is used on the exterior of the building, it must conform to the principles of design, appeal to
the customer base, and be integrated with the rest of the architecture.

5.Windows

The main purpose of windows is to attract attention and create an image to potential customers
standing outside. Humor, theatrical flair, color, motion, or sound playing outside the windows work
well to increase the effectiveness of the display. One of the biggest advantages of display windows
is the ability to dramatically affect the exterior of the store. Most of the exterior requires major
renovations to change. A retailer can take advantage of its window space to reflect changes in the
store’s offerings on a seasonal or monthly basis. The window displays project the image of the store.
While one story may be trying to say “Quality” in its windows by showing specific brands or
fashions, other stores may use window displays to project a low price or value image. Regardless of
whether it is a children’s store, a sporting goods store, or a home furnishings store, the window
display is often one of the first efforts to communicate with customers and invite them. Window
design is a function of the physical design of the store, and not something specifically requested by
the retail manager or merchandising designer. The open back, as opposed to the closed back, is a
window through which the interior of the store itself becomes the display case. When open-back
windows are used, the store does not have valuable selling space tied up in windows, management
need not concern itself with planning window displays, and the problems of keeping windows clean
and timely are usually avoided. However, the open-back window can cause unexpected display
problems and exaggerate old ones. For example, the most significant concerns are reflection, sun
glare, sun control, artificial lighting for both day and night, and the necessity for a general
organisation of merchandise within a completely exposed store.

 Awnings. The use of awnings is a subset of the window and exterior design issue and often
poses a particular problem for retailers. Most awnings are made of fabric and are of the old
scissors or outrigger style. In recent years, fabric awnings that can be fastened into a
recessed box at the end of the building have been developed. Other ways of awnings are
structural part of the building. Awnings come in many assorted sizes, colours, and styles.
Merchants can take advantage of an awning to attract attention by using it as promotional
space. Many companies now sell custom awnings that are designed to fit with the store’s
image.

6. The Store Entrance

One of the first and most striking impressions customers get of a store is the one they receive as
they go through the front door. An entrance should be more than a device to keep people out of the
store, to encourage them to come in, or to protect against the elements. An entrance should have
character, and it should say to prospective customer, “Please come through the door where you will
be treated with courtesy and friendliness and served to the best of our ability.” The entrance might
be graceful and elegant or dull and functional; in any case, it should be compatible with the store
design and provide an easy way to enter.

7. Store Name

Although not strictly related to external design, the choice of a store name does have an effect on
the overall store image. The favorable or unfavorable image generated by the use of a name can
enhance or negate the style set by store design.

At first glance, choosing a name for the business may seem to be a rather easy task. Unfortunately,
this is not the case. The retailer who thought of the name Equ-ulus for a small gift shop certainly
made a mistake. This name is not pronounceable, and it has little meaning for the majority of the
customers to whom the store is appealing. Often it is desirable that the name sound not only
attractive but prestigious. Certainly it must fit the type of store. For example, Budget Weddings was
chosen as the name of store that provided package services for brides. It failed because brides-to-be
did not like the mental picture of a truck with that store name pulling up to the church and the
reception hall. They liked the low price but were embarrassed by the name.

8. Theft Prevention

Another area of concern with exterior design is employee and customer theft. The design must
consider the flow of people in and out of the store and how they may be observed or pass through
technology-based theft prevention. Exterior doors and docks for receiving goods or trash disposal
should also be designed and arranged to minimize opportunities for unauthorized entrance and exit.

9. Multilevel Stores

Because of the need for increased parking space in relation to shopping area in suburban stores and
shopping centers, the multiple-level store is especially appealing to retailers. Even super markets
have experimented with this type of design. Properly carried out, a multilevel facility offers the
merchant a means of both expanding the selling area separating areas from one another. It also
gives an overall feeling is that of “pulling people” though the store. Careful attention has to be paid
to which merchandise is in high demand so that it can be placed on the upper levels. In the process
of seeking it out customers will move through the store. Putting a restaurant on the top level, for
example, helps this pulling process.

 Colour Blocking in Visual Merchandising -

Colour blocking is a visual merchandising strategy that uses colour to encourage sales. The aim is to
drive shoppers’ attention to a particular brand on the shelf. Retailers everywhere use this strategy
for all kinds of products, from clothing to food.

Supermarkets have an especially challenging environment for capturing shoppers’ attention.

According to a report by Ehrenberg-Bass Institute for Marketing Science, the average consumer
spends only ‘13 seconds before choosing a brand in-store’.

If your brand doesn’t catch the shopper’s eye, you’re losing sales.

How to create a successful colour blocking strategy for your brand

1. Create a visual identity that resonates with your brand’s character

Understand what your brand assets are and use them consistently across your packaging. The colour
of your brand should create a unique visual experience for the shopper and signal your brand’s
dominance.

Take Cadbury, for example. Cadbury’s brand identity is so closely tied to the colour purple that for
over two decades they were able to claim a trademark.

They recently dropped the trademark, however, after applying for a new one that would expand
their colour monopoly across all of their categories. The UK Court of Appeal rejected the application
based on its decidedly broad language.

Cadbury is still very protective of its distinctive colour. Looking at the traditional chocolate block
photo, you can see why. Visually, Cadbury dominates the other chocolate brands.

Even with its strong visual identity, however, Cadbury struggles to grab attention in other categories.

In the baking chocolate display, they’re completely overshadowed by Nestle’s colour block. In the
drinking chocolate display, they’re lost in an array of colours, with Milo’s green being more
prominent.

But by keeping that colour consistent, even in categories where it isn’t the most dominant brand,
Cadbury manages to stay conspicuous on the shelf.

2. Use colour to communicate brand variety

When brand identity is less authoritative, strong colors can be used to signal distinctiveness. In the
photo below, it’s clear that all of these tuna brands are fighting for consumer attention.
The winner in this contest appears to be Sirena, with its bright yellow packaging. Using the slider on
the image, you can see a visual heat map based on eye-tracking data. The warmer colors (red,
orange, yellow) indicate the spots that get the most attention.

Sirena’s yellow colour block stands out on the shelf, making it easier for shoppers to find the product
and make a decision.

By using eye-catching colors to immediately attract the shopper’s attention, these brands have
successfully implemented impactful colour blocking at the point of sale. From the photos you can
see Cadbury owns the colour purple and Sirena Tuna jumps out in yellow. These colours are assets to
their brands and create fast recognition for shoppers.

3. Consider the point of sale context

When thinking about the colour that will represent your brand, consider the point of sale
context. For instance, there are categories that rely on certain palates to communicate their
product. In this case, it can be counterproductive to use colour blocking techniques.

Orange juice is a good example. Most orange juice brands use the orange and yellow palette on their
packaging, and they end up looking almost identical. In this context, however, it might be more
important to signal what the product is as clearly as possible rather than try to stand out.

3. Eliminate personal bias

Nothing is more frustrating than making the wrong decision based on personal bias. I have seen
outstanding colour blocking ideas thrown in the trash based only on personal opinion.

If you have a good visual merchandising strategy based on your brand’s identity and point of sales
context, don’t let personal opinions get in the way. Find evidence and make your case. You might
do group or social media research, but don’t rely on this solution by itself

For example, in the display above we thought that Bundaberg had the best colour strategy. When
we analyzed the image, we were sure it would come back with results to support that hypothesis.
But it turns out that Coca Cola captures the most attention in this display.

It goes to show that what you intuitively think the shopper is looking at isn’t always what the
shopper is actually looking at.