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How can we grow our business while retailing a core of loyal customers?
ISB&M
Retail Management
ISB&M
Retail Management
Reduce costs
Improve cash flow Increase sales more rapidly Focus on area of expertise
Manufacturers also do operate retail facilities (besides selling at conventional retailers). In running their stores, these firms compete the full range of retailing functions & compete with conventional retailers.
ISB&M
Retail Management
Retailer-Supplier Relationship
Retailers are part of distribution channel, so manufacturers (wholesalers) are concerned about: Caliber of displays Customer service Store hours Retailers reliability as business partners
Retailers are also major customers of goods & services for resale, store fixtures, computers, management consulting ,& insurance. Retailers and supplier have different priorities on:
Control over distribution channel Profit allocation No. of competing retailers handling suppliers products Product display Promotion support Payment terms Operating flexibility
ISB&M
Retail Management
Both parties work together to maintain an image, assign self space, allot profits & costs, & advertise.
This is the smoothest channel relationship. Intensive Distribution Suppliers sell through as many retailers as possible. This maximizes suppliers sales & lets retailers offer many brands & product versions.
Retailers may assign little self space to specific brands, set high price on them, & not advertise them.
This is most volatile channel relationship.
Selective Distribution
Suppliers sell through a moderate no. of retailers carrying some competing brands. This combines aspects of Exclusive & Intensive Distribution
ISB&M
Retail Management
ISB&M
Retail Management
ISB&M
Retail Management
Determine the customer market to target on the basis of its characteristics (like gender & income level) & needs (like product & brand preferences).
Devise an overall, long-run plan that gives general direction to the firms & its employees. Implement an integrated strategy that combines factors like store location, transportation, product variety, pricing, and advertising & display to achieve objectives. Regularly evaluate performance & correct weaknesses or problems when observed.
ISB&M
Retail Management
Key to success
Growth-oriented objectives Appeal to prime market Distinctive company image
Focus
Strong customer service for its retail category Multiple points of contact Employee relations
Innovation
Commitment to technology Community involvement Constantly monitoring performance
ISB&M
Retail Management
Retailing concept
Retail Strategy
Value- driven
Goal orientation Customer orientation - The retailer determines the attributes & needs of its customers & endeavors (take action) to satisfy these needs. Coordinated effort - The retailers integrates all plans & activities to maximize efficiency.
Value-driven - The retailer offers good value to the customers, whether it be upscale (expensive) or discount i.e., appropriate pricing for goods & customer service.
Goal oriented - The retailer sets goal & uses its strategy to attain them.
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Retail Management
Ownership
Independent Chain Franchise Leased department Vertical marketing system Consumer cooperative
Convenience store Conventional supermarket Food-based supermarket Combination store Box (limited line) store Warehouse store Specialty store Variety store Traditional department store Full-line department store Off-price chain Factory outlet Membership club Flea (louse) market
Direct marketing Direct selling Vending machine World wide web (WWW)
ISB&M
Retail Management
ISB&M
Retail Management
Independent Retailer
An independent retailer owns one retail unit. Advantages
There is flexibility in choosing retail formats, location, assortment (variety), prices, hours etc., & devising strategy based on the target customers. Investment costs for leases, fixtures, workers, & merchandise can be brought down. There is no duplication of stock or personnel function. Responsibilities are clearly delineated (defined) within the store. Independents frequently act as specialist in a niche of the particular goods/services category. They are then more efficient & can lure (attract) shoppers interested in specialized retailers.
Independents exert strong control over their strategies, & the owner-operator is typically on the premises. Decision making is centralized & layers of management personnel are minimized.
There are certain image attached to independents, particularly small ones, that chains cannot readily capture. Independents can easily sustain consistency in their efforts because only one store is operated.
Independents have Independence. No meetings, union, stockholders & labor unrest etc.
Entrepreneurial drive.
ISB&M
Retail Management
Independent Retailer
Disadvantages
Less bargaining power with the suppliers as they buy less quantity. Cannot gain economies of scale (i.e. cost advantages that a business obtains due to expansion) in buying & maintaining inventory. Transportation, ordering, & handling costs are high. Operations are labor intensive.
They are limited to certain media for advt. because of financial constraints.
Family-run independents is overdependence on the owner. It is difficult to keep it up & running. Limited time allotted to long-run planning, since owner is intimately involved in day-to day operations.
ISB&M
Retail Management
Chain Retailer
Chain retailer operates multiple outlets (store units) under common ownership. It usually involves in some level of centralized purchasing & decision making. Advantages
Many chains have bargaining power due to their purchase volume. They receive new items when introduced, have orders promptly filled, get sales support, & obtain volume discounts.
Chains achieve cost efficiencies when they buy directly from the manufacturers & in large volumes, ship and store goods, & attend trade shows sponsored by the suppliers to learn about new offerings. They can sometimes bypass wholesalers.
Efficiency is gained by sharing warehouse facilities; purchasing standardized store fixtures; centralized buying & decision making etc. Headquarters have broad authority for personnel policies & for buying, pricing, & advt. decisions.
Computerized ordering merchandise, inventory, forecasting, sales, & bookkeeping. This reduces overall costs.
Take advantage of variety of media from print to electronic. Detailed & clear responsibility for employees with available substitute incase any employee is retiring or quitting. Spend considerable time in strategic planning. Opportunity & threat are closely monitored.
ISB&M
Retail Management
Chain Retailer
Disadvantages
Flexibility may be limited. Consistent strategies on pricing, promotions, & product variety must be followed throughout all units which may be difficult to adapt to local diverse market. Investment is high due to infrastructure & store as multiple store has to be stocked. Managerial control is complex due to geographically dispersed branches. Limited independence to the personnel.
ISB&M
Retail Management
Franchising
Franchising involves a contractual arrangement between a franchisor (a manufacturer, wholesaler, or service sponsor) & a retail franchisee, which allows the franchisee to conduct business under a established name & according to a given pattern of business. The franchisee pays an initial fees & a monthly %age of the gross sales in exchange for the rights to sell goods & services in an area. A franchisee operates autonomously in setting store hours, chooses a location, & determines facilities & displays. Three structural arrangements dominate retail franchising
Manufacturer-retailer A manufacturer gives independent franchisees the right to sell goods & related services through licensing agreement. (Eg., Auto/truck dealers like GM, Petroleum products dealers like IOC). Wholesaler-retailer Voluntary - A wholesaler sets up a franchise system & grants franchises to individual retailer. (Eg., Auto accessories stores, Consumer electronics stores).
Cooperative A group of retailers sets up a franchise system & shares the ownership & operations of a wholesaling organization. (Eg., Food stores).
Service sponsor-retailer A service firm licenses individual retailers so they can offer specific service packages to customers. (Eg., McDolands).
ISB&M
Retail Management
Franchising contd..
Advantages of Franchisees
They own a retail enterprise with a relatively small capital. They acquire well-known names & goods/services lines. Standard operating procedures & management skills may be taught to them. Cooperative marketing efforts (like national advt.) are facilitated. They obtain exclusive selling rights for specified geographical territories. Their purchases may be less costly per unit due to the volume of the overall franchise.
Disadvantages of Franchisees
Oversaturation could occur if too many franchisees are there in one geographical area.
Due to overzealous selling by some franchisors, franchisees income potential, required managerial ability, & investment may be incorrectly stated.
They may be locked into contracts requiring purchases from franchisors or certain vendors. Cancellation clauses may give franchisors the right to void agreement if provisions are not satisfied.
ISB&M
Retail Management
Franchising contd..
Advantages of Franchisors
A national & global presence is developed more quickly & with less franchisor investment. Franchisee qualification for ownership are set & enforced. Agreement require franchisees to abide by stringent operating rules set by franchisors. Money is obtained when goods are delivered rather than when goods are sold. Because franchisees are owners & not employees, they have greater initiative to work hard. Even after franchisees have paid for their outlets, franchisors receive royalties & may sell products to the individual proprietors.
Disadvantages of Franchisors
Franchisees harm the overall reputation if they do not adhere to company standards.
Franchisees, in greater number, are seeking to limit franchisors rules & regulations.
ISB&M
Retail Management
Leased Department
A leased department is a department in a retail store usually a department, discount, or specialty store that is rented to outside party. The leased department proprietor is responsible for all aspects of its business & normally pays a %age of sales as rent. The store sets operating restrictions for the leased department to ensure overall consistency & coordination. Advantages (from the stores prespective)
The market is enlarged by providing one-stop customer shopping. Personnel management, merchandise displays, & reordering items are undertaken by lessees. Regular store personnel do not have to be involved. Leased department operators pay for some expenses, thus reducing store costs. A %age of revenue is received regularly.
ISB&M
Retail Management
Leased Department
Advantages for Leased department operators
Stores are known, have steady customers, & generate immediate sales for leased departments. Some costs are reduced through shared facilities like security equipment & display windows. Their image is enhanced by the relationships with popular stores.
ISB&M
Retail Management
Type of channel
Independent system
Manufacturers or retailers are small Intensive distribution is sought Customers are widely dispersed Unit sales are high Company resources are low Channel members share costs & risk Task specialization is desirable Manufacturers & retailers are large Selective or exclusive distribution Unit sales are moderate Company resources are high Greater channel control is desired Existing wholesalers are too expensive or unavailable Firm has total control over its strategy Direct customer contact Exclusive offerings System is costly & requires lot of expertise
Channel Functions
Manufacturing Wholesaling Retailing Manufacturing Wholesaling Retailing Manufacturing
Ownership
Independent manufacturer Independent wholesaler Independent retailer Two channel members own all facilities & perform all functions.
Wholesaling
Retailing
All production & distribution functions are performed by one channel member.
ISB&M
Retail Management
Consumer Cooperative
A consumer cooperative is a retail firm owned by its customer members. A group of customers invests, elects officers, manages operations & share profits. They account for tiny piece of retail sales. Cooperatives are formed because they think they can do retailing function, traditional retailers are inadequate & prices are high. They have not grown because consumer initiative is required, expertise may be lacking, expectations have frequently not been met, & boredom occurs.
ISB&M
Retail Management
ISB&M
Retail Management
ISB&M
Retail Management
ISB&M
Retail Management
Parking is available
Basic configuration mall or strip centre with walkway Ideally enclosed & climate control
ISB&M
Retail Management
ISB&M
Retail Management
Bhubaneshwar
Bangalore Chennai
Hyderabad
Delhi
Indore Kolkata Gurgaon Noida Nagpur Udaipur
ISB&M
Retail Management
Retail Merchandising
ISB&M
Retail Management
What is Merchandising?
Merchandising is planning, buying & selling of merchandise (product). The American Marketing Association defined merchandising as the planning involved in marketing the right merchandise at the right place at the right time in the right quantity at the right price. Merchandising can be termed as the analysis, planning, acquisition, handling & control of the merchandise investments of a retail operation.
Merchandising function
Types of stores
ISB&M
Retail Management
Merchandise Planning
Merchandise planning can be defined as the planning & control of the merchandise inventory of the retail firm, in a manner which balances between the expectations of the target customers & the strategy of the firm.
Merchandise Planning
Store Operations Space planning Communication about new products & their features
ISB&M
Retail Management
Merchandise Budget
Sales Plan Stock support plan Planned reduction Planned Purchase Gross Margins
ISB&M
Retail Management
Company
Department
Merchandise Classification
Merchandise Category
ISB&M
Retail Management
ISB&M
Retail Management
June
21%
42,350
Planned purchase Planned purchases represent the merchandise that is to be purchased during any given period.
Planned Purchase = Planned Sales + Planned Reductions + Planned EOM Planned BOM
ISB&M
Retail Management
Retail Price
Gross Margin Gross margin is the difference between the selling price & the cost of the product, less reductions from markdowns, shrinkage & employee discounts. Profit = Gross margin operating expenses B.O.M (Beginning-of-month) & E.O.M (End-of-month) planned inventory levels Four Methods of Inventory Planning:
a. Stock-to-Sales Method
S/S Ratio = Stock in hand E.O.M (at retail value) Sales for the same month = Value of inventory Actual sales
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Retail Management
ISB&M
Retail Management
ISB&M
Retail Management
Menswear
Trousers
Accessories
Louis Philippe
Arrow
Color
Retail Management
The lower limit of the range width is often called aesthetic minimum
ISB&M
Retail Management
The process of merchandise planning may be top down or bottom up. Top down planning occurs when the corporate objectives dictate the companys financial objectives in terms of sales, profit & working capital. In Bottom up planning, individual department managers work on the estimated sales projections
ISB&M
Retail Management
40% (45) White 40% (18) Blue 30% (14) Cream 20% (9)
Cotton Blend
75% (14)
ISB&M
Retail Management
ISB&M
Retail Management
Branding Brand
The American Marketing Association defined a brand as a name, term, design, symbol or a combination of them, intended to identify the goods or services of one seller or group of sellers & to differentiate them from those of the competitors.
Branding existed from the time man felt the need to differentiate his products from that being offered by others.
Branding gradually became a guarantee of the source of the product & ultimately its use as a form of legal protection against copying grew. With the development of shops, shopkeepers hung pictures above their shops indicating the types of goods they sold. With industrial revolution mass production came into existence but the distance between the manufacturers & customers increased. This eventually led to the evolution of the role of the brands as tools by which consumers identified the products.
ISB&M
Retail Management
ISB&M
Retail Management
Support Functions
Suppliers
Retail Operations
Customer Mgmt.
Customers
Systems
ISB&M
Retail Management
Private Label
When the retailer decides to sell products or a line of merchandise which is owned, controlled, merchandised & sold by the retailer in his own store/chain of stores, he is said to be Selling Own Label / Brand or Private Label merchandise. The Private Label Marketing Association defines store products as all merchandise sold under a retail stores private label. That label can be stores name or a name created exclusively by that store. In some cases, a store may belong to a wholesale buying group that owns labels, which are available to the members of the group. These whole-sale owned labels are referred to as controlled labels A private label can be classified as: Store Brand which carries the retailers name, such as Westside, Food World, Big Bazaar etc.
An Umbrella Brand where a common brand name is used across multiple categories example Splash (Lifestyle), Bare (Pantaloon) etc.
Individual Brands where specific brand names are created for specific market segments and/or categories.
ISB&M
Retail Management
Private label carried the stigma of inferior quality & therefore inspired less confidence.
Generics, which were products distinguishable by their plain & basic packaging were the first type of private labels. With the increase in retail stores, the need to earn higher profit & the desire to service the gaps in consumer requirements gave rise to private labels, both in apparel & the food & grocery sector. Today, most of the large department stores have their own private labels which cater to a specific audience. Private labels rely on in-store advertisements. In order to compete with national brands, private labels need to focus on quality.
The average quality of one product compared to other Consistency in quality over a period of time
Private label goods become more successful where the no. of competing products is lower.
ISB&M
Retail Management
A private label allows the retailer to offer a unique product in the marketplace.
Private label allows a retailer to earn a higher margin than other brands he chooses to retail because designing, merchandising, sourcing & distribution is done by the retailer. Also, advertisement is in-store.
ISB&M
Retail Management
ISB&M
Retail Management
Quantity discounts
Seasonal discounts Cash discounts
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Retail Management
Common goals
Credible commitments 5. Analyzing Vendor Performance The total orders placed on the vendor in a year The total returns to the vendor, the quality of the merchandise The initial markup on the products The markdowns (if any) Vendors participation in various schemes & promotions Transportation expenses if borne by the retailer Cash discounts offered by the vendor The sales performance of the merchandise
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Retail Management
Category Management
- A Method of Merchandise Management
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Retail Management
Category Management
Category Management can be defined as the distributor/supplier process of managing categories as SBUs, producing enhanced business results by focusing on delivering customer value. A category is an assortment of items that a customer sees as reasonable substitutes of each other. A category management concept is a focus on a better understanding of consumer needs as the basis for retailers & suppliers strategies, goal, & work processes. The need to reduce costs, control inventory levels & replenish (refill) stock efficiently led to the concept of Efficient Consumer Response (ECR). Category management provides renewed opportunities for meeting consumer needs & at the same time, for achieving competitive advantage as well as lower costs through greater work process efficiencies.
ISB&M
Retail Management
2. It emphasizes decision-making based on complex analysis of consumer data & market level syndicate data.
3. It replaces the brand bias that stems from suppliers interest & encourages objective view based on consumers desires.
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Retail Management
Performance Measurement
Strategy
Organizational Capabilities
Business Process
Information Technology
ISB&M
Retail Management
ISB&M
Retail Management
This step decides the products that represent a category, sub-category & major segmentation.
At this step, the retailer assigns products to the various categories based on factors such as consumer usage & packaging. Step 2: Category Role It determines the priority & importance of each category in the overall business. It serves the basis of resource allocation. Consumer-based category roles: Destination categories Why you as a retailer? Preferred/routine category Occasional/seasonal category Convenience category one-stop shop
ISB&M
Retail Management
Winners
- Continue current policies - Be alert to adaptation of new products - Minimise operational problems like out of stock - Optimise margin mix
Market Share
Questionable
- Limit product mix to core assortment & delist marginal products - Look for price raises - Minimise self space at category level - Transfer logistical & operational work to third parties
Opportunities
- Harmonise product mix with market trends - Improve price image via low prices for key products - Maximise shelf space at category level - Give promotional support to key items
Market Growth
ISB&M
Retail Management
Turf defending
Profit generating Cash generating Excitement creating Image enhancing (Areas: Price, Service, Quality & Varity)
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Retail Management
ISB&M
Retail Management
People
Place
Customer Service
Promotion
Presentation
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Retail Management
Presentation
Customer Service
Promotion
Place / Location
Shopping Experience
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Retail Management
Sales Promotion
Advertising
Retail Communication Mix
Public Relations
Personal Selling
Direct Marketing
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Retail Management
ISB&M
Retail Management
Warehouse
Customer Transaction
Sales Analysis
Customer Database
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Retail Management
Why IT in Retail?
Scale & scope of operations
HR availability
Efficient Stocking of Merchandise Collection of Data Efficiency in Operations Helps Communication ISB&M
Retail Management
Application of IT
Electronic Data Interchange (EDI)
Database Management, Data Warehousing, Data Mining Radio Frequency Identification (RFID) Transaction Processing System (TPS) Decision Support System (DSS) Enterprise Resource Planning (ERP)
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Retail Management
SCM in Retail
ISB&M
Retail Management
Supplier
Manufacturer warehouse
Manufacturer Physical Flow
Finance Flow
Retailer
Retailer warehouse
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Retail Management
Network Strategy
Materials Management
ISB&M
Retail Management
Operational Production
Customer Satisfaction
Customer Service focuses on measurement of how well a firm meets the established performance standards that are viewed as important for meeting customer needs.
Customer Satisfaction is how the customers measure externally the service performance of a firm. ISB&M Retail Management
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Retail Management
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Retail Management
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Retail Management
In-store PoS Advertisement Merchandising Added value services Tailored, crosslearning based relationship
Most Valuable Segment
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Retail Management
ISB&M
Retail Management
Store Image
Store Theme
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Retail Management
ISB&M
Retail Management
Parking
Location
Access Store Design
Safety
Store Theme
Target Customer
Merchandise Mix
ISB&M
Retail Management
Layout
Space Planning helps determining: The location of various departments. The location of various products within the department i.e., creating planograms. The pros/cons of specific location for impulse products, destination areas, seasonal products, products with specific merchandising needs, adjacent departments etc. The relationship of space to profitability.
Atmosphere & Aesthetics Fixtures Flooring & Ceiling Lighting Graphics & Signage Theme graphics Campaign graphics Promotional graphics
ISB&M
Retail Management
Free-flow Layout
Fixtures and merchandise are grouped into free-flowing patterns on the sales floor. ISB&M Retail Management
Grid Layout
The counters and fixtures are placed in long rows or runs, usually at right angles, throughout the store. ISB&M Retail Management
Racetrack/Loop Layout
A major customer aisle begins at the entrance, loops through the store usually in the shape of a circle, square, or rectangleand then returns the customer to the front of the store. ISB&M Retail Management
Spine Layout
A single main aisle runs from the front to the back of the store, transporting customers in both directions, and where on either side of this spine, merchandise departments using either a free-flow or grid pattern branch off toward the back side walls. ISB&M Retail Management
Visual Merchandising
An orderly, systematic, logical, & intelligent way of putting stock on the floor.
ISB&M
Retail Management
Color dominance
Methods of Display
Coordinated presentation Presentation by price
ISB&M
Retail Management
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