Retail…

“A customer is the most important visitor on our

premises.

He is not dependent on us. We are dependent on him.

He is not an interruption in our work. He is the purpose

of it.

He is not an outsider in our business. He is part of it.

We are not doing him a favor by serving him. He is doing

us a favor by giving us an opportunity to do so.”
-Gandhi
“Turnover is vanity,

profit is sanity,

cash is king”
With about 11 retail shops for every 1,000 persons,
India has the highest shop density in the world.

That's one shop for every 20-25 families.

In cities, the density is much higher. Delhi, for

example, has nearly 45 shops per thousand persons!

A nation of shopkeepers !!!

With hundreds of customers visiting every day,

scores of competitors continuously tempting the

customers every moment,

Retail is a sector with high wear & tear and most

exciting one too …

PATRONAGE

• Buy

• Basket size

• Frequency of visit

• Share of basket / wallet

• Recommend / refer
THE RETAIL ENGINE

Need
N

Know

Visit K

Revisit N
Choose
Referrals
Satisfied
Atul Natu
KNOW

• Store location
• Visibility
• Word of mouth
• Promotion
• Distance
VISIT

• Store front
• Ease of access
• Convenience
• Proposition
– Assortment
– Pricing strategy
• Promotions
• Referrals
• Past experience
CHOOSE

• Assortment
• Display
• Pricing
• Salesmanship
• Pricing
NEED GENERATION

• Display
• Pricing
• Assortment
• Location
• Assortment
• Display
 THEORIES OF STORE CHOICE
• Hedonistic model
• Utilitarian model
• Convenience model
• Gravity theory – This theory proposes that the probability of a store being selected by a
customer is directly proportional to the size of the store and inversely proportional to the
distance to be traveled to reach the store
• Linear model – The linear learning model is based on the premise that the customers’
choice of store is based on his / her previous experience with the store. Better the
experience, larger the probability that the store will be visited by the customer.
• Agglomeration forces – In some categories, more the number of stores are clustered
together, more will be the benefit to the retailer. The stores complement each other due to
the cluster
• Situational – This theory does not rely on gravity alone to explain the customers store
choice. It takes into account the purpose of the store visit. The customer selects a store
based on the purpose of purchase.
• Simultaneous process of store choice - Based on the utility theory, the simultaneous choice
model believes that the customer assesses the utility of each of the store and then selects
the store with maximum utility.
• Hierarchical choice –It assumes that the customers will not have awareness, time, ability to
know the offering of all the stores selling the desired product. Hence instead of comparing
all the stores, and their utilities, the customers first choose a cluster of stores. After
selecting a particular cluster, the customer chooses a store based on utility theory from
amongst the choices available in that cluster. A Stewart Fotheringham (1988) says
• Lowest total cost - Fixed and variable expenses of shopping
HYPOTHESES WRT STORE CHOICE FROM REVIEWED
LITERATURE

• Consumers selection of a store is not completely random but is biased by her

previous experience of a particular store and is proportional to the frequency of
her visit to the store
• Customers associate stores with specific store attributes. They select the store on
the basis of top-of-mind recall wrt its association with dominant store attributes
• Store choice is influenced by the situational factors related to the purchase. Eg –
shopping for gifting purpose v/s for one self, shopping in emergency v/s general
shopping
• The grocery shopping choice of formats is based on basket size and frequency of
trips. Larger basket size prefer EDLP whereas lower basket size prefer HILO. Higher
frequency prefer HILO whereas lower frequency prefer EDLP
• Customers weigh the total cost (comprising of the fixed cost and the variable cost
of shopping) while making a decision on store choice.
• Store attribute saliencies differ across task definitions and store choice is
differentiated by task definitions
• Customers decide upon a geographic area first before deciding on a store. They
select a store within that geographic area as a second level of decision.
RETAIL STRATEGY

• Customer
• 7 Ps
– Product - Assortment – width, depth
– Price – Full price, discount stores
– Place – towns, location strategy
– Physical ambience - size, interiors
– People, Promotion, Processes

• Property strategy – Owned / Leased /

Franchised / Dealer
• Formats – SIS / Own /
Operations
• Merchandising
• Category management
• Location
• Assortment
• Customer
• Competition
• Property
• Customer segmentation
• Store layout and display management
• Technology
 SOME RETAILERS
• Food & Grocery - More, Easyday, Food Bazaar, Reliance Fresh, Spencer's

• Foodservice - CaféCoffee Day, Mainland China, Haldiram's, McDonald's, Domino‘s, Pizza

Hut, KFC

• Consumer Electronics - Croma, Next, Reliance Digital, eZone, Reliance iStore

• Leisure – Crossword, Odyssey, Landmark, Planet M

• Beauty & Wellness - VLCC, Kaya Skin Clinic

• Pharmacy & Healthcare - Apollo Pharmacy, Guardian, Religare, 98.4

• Home & Interiors - Home Centre , Rosebys, Home Town, @home, Home Stop

• Department Store - Lifestyle, Pantaloons, Shoppers Stop, Westside

• Hypermarket - Spencer's Hyper, Hypercity, MORE, Big Bazaar, Reliance Mart, Star Bazaar
LOCATION, LOCATION, LOCATION!!!

• Largely defines & restricts the trading area, visibility

• Requires complex decision making

• Costs lots of money upfront as well as recurring

• Little flexibility once a location has been chosen

• Attributes of location have a strong impact on the

retailer’s strategy & Vice versa

STEPS FOR PLANNING LOCATION

• Plan the national footprint

• Plan the town level / city level zones
• Plan the format strategy
– Ownership
– Size
– Type (stand alone / high street / mall / SIS)
• Evaluate alternative geographic areas in terms of the
characteristics of residents and existing retailers (trading-
area analysis)
• Make a decision about location type
• Decide evaluation criteria
• Analyze alternate sites
• Assess viability
SITE EVALUATION

• Site condition
• Legal considerations (e.g. environmental
considerations, zoning restrictions, building codes,
signs, licensing requirements)
• Terms of lease/rent agreement
• Total cost of ownership
• Length of lease
• Local taxes
• Restrictive clauses in lease
 Types of Leases
• Percentage
• Fixed - Rate

Percentage leases - rent is based on a

percentage of sales.
• Retailers also typically pay a maintenance
fee based on a percentage of their square
footage of leased space.
• Most malls use some form of percentage
lease.
 Variations of Percentage Leases

Percentage lease with specified maximum -

percentage of sales up to a maximum amount.
• Rewards retailer performance by allowing retailer to
hold rent constant above a certain level of sales

Percentage lease with specified minimum - retailer

must pay a minimum rent no matter how low sales are.

Sliding scale - percentage of sales as rent decreases as

sales go up.
 Fixed Rate Leases

Fixed rate leases - used by community and

neighborhood centers.
• Retailer pays a fixed amount per month over the
life of the lease.
• Not as popular as percentage leases

Graduated lease - a variation of the fixed rate lease

• Rent increases by a fixed amount over a specified
period of time.
 Percentage or Fixed Rate Leases

Maintenance-increase-recoupment lease -
used with either a percentage or fixed rate lease.
• Rent increases if insurance, property taxes, or
utility bills increase beyond a certain point.

Net lease - retailer is responsible for all maintenance

and utilities.
Est MODEL

The Est model guides business leaders in making their

company the best in one of five critical areas
• § Assortment (biggest).
• § Price (cheapest).
• § Fashion (hottest).
• § Customer service (easiest).
• § Speed of service (quickest).

‘Winning At Retail: Developing a Sustained Model for Retail

Success’ -Willard N. Ander (Author). Neil Z. Stem
 RETAILER FORMATS FOR ACCESSING YOUR
TARGET MARKET

Retail Formats

Store-Based Nonstore-Based

Business Shopping Shop in shop

District Centers/Malls

Freestanding Nontraditional

Direct Interactive
Selling Internet
TV
SOME IMPORTANT METRICS

• Walk-ins
• Conversions
• Average Transaction Value (ATV)
• Sales per Sq.Ft.
• Gross Margin return on Investment (GMROI)
• Gross Margin return on Floor space
• Gross Margin return on Inventory
• Inventory turnover
• Sell thru
• Same store growth
• Markdown Goods percentage
• Shrinkage to Net Sales
 Store patronage model*
1 5
Store Attributes Store attribute
salience 8
6 Store experience
7
Store attribute
Store visit
perception

9
2.1 Purchase /
Product basket size

2.2
Task definition
10
4 Post sales
Marketing experience
factors

11
Customer subjective Patronage
Factors under management control intentions
3
New customer affecting Customer
Same customer affecting attributes
12
Word of Mouth /
Advocacy
* – Atul Natu
 Store factors • Customer factors • External retail stimuli
• Product
– Price – Educational levels – Industry reputation
– Quality – Professional activity – Public relations
– Assortment
– Availability – Family age – Sales promotion
• Service – Gender – Social responsibility
– Distance – Age
– Size
– Format
– Income
– Advertising – Values and culture
– Convenient parking facilities – Behavioral issues
– Convenient location
– Social expectations
– Convenient opening hours
– Friendliness of salespeople
– Service
– Fast checkout
– Store atmosphere
– Store image
– Ease of credit
 Factors studied *
Store Attributes Store attribute salience Store attribute perception
Location / Distance
Size
Price
Format – EDLP / HILO, Specialty /
general merchandise
Retail centers Marketing factors
Parking Feature advertising
Convenience Task definition Word-of-mouth
Assortment Gift v/s self
Product quality Time pressured
Freshness Risk perception
Basket size
Store experience
Billing speed
Store appearance
Store layout
Store assistance friendliness
Convenience
Products Customer attributes Trust
Food & Grocery Age Organisational benevolence
Apparel Social class perception / self image
Audio equipment Education
Soap Shopping frequency
Paper tissues Self confidence
Tooth paste Post sales experience
Occupation
Coffee Returns policy

* – Atul Natu
Thank you …
• Operations • Theories of retail
• Merchandising – NKVC – VKNC
• Category management – Time
– Convenience
• Location
• Retail Strategy
• Quotations
• 7 Ps
• Resources & references
– Product
– Price • Multichannel
– Place • Metrics
– Promotion • Shrinkage
– People • Challenges / constraints
– Physical ambience • Formats
– Processes – Brands – MBO / EBO
• Types of retail – Ownership – COCO / Dler / Franchisee
– Size –
• Technology – Assortment –
• Assortment – Locations – SIS / Standalone / Mall / High street / Out
• Supply chain of town / Downtown

• Customer
• Competition
• Property
• Customer segmentation
EXAMPLES

• Department store • Consumer electronics

– Shoppers stop – eZone
– Lifestyle – Croma
• Supermarkets
– D Mart
– Haiko