Place Strategy: Retail

Presented by: Prof Joydeep Biswas

Marketing Management - II
Learning Objectives

Overview

Classification

Retailer Decisions

Key Takeaways

Measuring Profitability
 Overview Classification Retailer Decisions Key Takeaways Measuring Profitability

What is a Retailing?
• All the activities required for selling goods or services
directly to final consumers for personal, non-business
use.

• Retail store is any business enterprise whose sales

volume comes primarily from retailing
 Overview Classification Retailer Decisions Key Takeaways Measuring Profitability

Indian Retail Overview

• Largely unorganised and predominantly consists of small independent, owner-
managed shops

• Around 12-14 Million retailers in India with largest retail outlet density in the
world

• 96 per cent of these retail outlets are small with average area of less than 500
square feet which makes India's per capita retailing space lowest in the world

• High degree of fragmentation as compared to many developed nations - an

unaccounted number of low-cost kiosks (tea stalls, snack centre, barbershops
etc.) and pushcarts/mobile vendors
 Overview Classification Retailer Decisions Key Takeaways Measuring Profitability

Indian Retail Overview

• Indian retail trade is growing at an annual increase of 20 per cent

• Retailing is India’s largest industry in terms of contribution to GDP (nearly 18%

contribution )

Category Contribution Urban Rural

Food & Grocery 69 Grocers: 34.7% Grocers: 55.6%

Apparel 8 Tobacco : 17% General stores: 13.5%
Jewelry 6 General Stores 14.4% Chemists: 3.3%

Durables 6 Others: 34% Others: 27.6%

Others 11
 Overview Classification Retailer Decisions Key Takeaways Measuring Profitability

Indian Retail Overview

Emergence of Organized Retailing
• In urban India, families have experienced growth in incomes but dearth of time

• Increased demand for better quality products along with demand for
convenience and quality products and services

• Still contributes only 7% of Indian retail sector

Revenue generated from Organized Retail

(CRISIL Research Estimates)
Year Revenue
2009 US $15.5 billion
2012 US $41.1 billion
2019 US $94.8 billion (Projected)
 Overview Classification Retailer Decisions Key Takeaways Measuring Profitability

Indian Retail Overview

EMERGING
ESTABLISHED • Exclusive retailers
TRADITIONAL
• Kirana shops
• Itinerant salesman • Hypermarkets
• Convenience/
• Haats • Internet retail
Department stores
• Melas • Mall/Specialty malls
• PDS/Fair price shops
• Mandis • Multiplexes
• Company/Multi brand
showrooms • Rural oriented
formats
• Co-operative stores
• Fast food retailers
• Pan/beedi shops
• Service galleries etc.
 Overview Classification Retailer Decisions Key Takeaways Measuring Profitability

Retailer Classification
Classification of Retail Stores

Store Based Retailing Non-Store Retailing

Merchandise offered Form of Ownership Direct selling

Convenience stores Independent retailer Direct marketing
Supermarkets Chain retailer Automated Vending
Hypermarkets Franchise
Specialty stores Leased departments
Departmental stores Consumer co-operatives
Off price retailers
Discount stores
Catalogue showrooms
 Overview Classification Retailer Decisions Key Takeaways Measuring Profitability

Retailer Classification – Store based

• Store Retailers – Categorization based on Merchandise Offered
• Convenience Store – small stores close to residence
• Supermarket – large, low-margin, food & household products
• Hypermarket – huge selling space, superstores
• Specialty Store - narrow product line
• Department Store – several product lines, wide assortment
• Off-price Retailer – leftover, damaged goods
• Discount Store – low-price, high volume
• Catalog showroom – sold through catalogs
 Overview Classification Retailer Decisions Key Takeaways Measuring Profitability

Retailer Classification – Store based

• Store Retailers – Categorization based on Ownership
• Corporate Chain Stores
• Voluntary Chain – wholesale sponsored retailers
• Retailer cooperative - Margin Free
• Consumer cooperative
• Merchandising conglomerate – combines diversified retailers
• Franchise organization
• Trademark and licensing
• Start-up costs and licensing fees
• Standard system of doing business
• Loyalty vs Independence
 Overview Classification Retailer Decisions Key Takeaways Measuring Profitability

Retailer Classification – Service

• Store Retailers – Categorization based on Service offered
• Self-service – locate, compare, select
• Self-selection - assistance
• Limited Service – more information, credit and assistance
• Full service

• Non-Store Retailers
• Direct selling – Door to door
• Direct Marketing – direct mail, telemarketing, catalog, online
• Automatic Vending
 Overview Classification Retailer Decisions Key Takeaways Measuring Profitability

Retailer Decisions – Products

• Width and Depth
• Mass or Niche
• Rate of Assortment Change
• Extent of Customization
• Merchandising source
• Exclusive National Brands or Distinctive Merchandise
• Private Label
• (i) Lower cost (ii) Increase profitability (iii) Act as differentiator
(iv) Increased bargaining power
• Services
• (i) Pre-purchase (ii) Post-purchase (iii) Ancillary
• Manpower and Training
 Overview Classification Retailer Decisions Key Takeaways Measuring Profitability

Retailer Decisions – Price

• Turn vs Earn
• Value pricing
• Every Day Low Prices (EDLP)
• High-low prices
 Overview Classification Retailer Decisions Key Takeaways Measuring Profitability

Retailer Decisions – Place (Location)

Types of Location
• Central Business District

• Regional Shopping Centers

• Community Shopping Centers

• Shopping strips

• Stand alone stores

• Within a large store – Shop-in-Shop

 Overview Classification Retailer Decisions Key Takeaways Measuring Profitability

Retailer Decisions – Place (Location)

Evaluating a Location
• Consumer shopping habit

• Traffic vs Rent

• Target Markets and Catchment Area

• Competition

• Channels
 Overview Classification Retailer Decisions Key Takeaways Measuring Profitability

Retailer Decisions – Store Promotion

 Overview Classification Retailer Decisions Key Takeaways Measuring Profitability

Retailer Decisions – Store Promotion

 Overview Classification Retailer Decisions Key Takeaways Measuring Profitability

Retailer Decisions – Store Planning

• Store Planning – a schematic that shows where merchandise and
customer service departments are located, how customers
circulate through the store, and how much space is dedicated to
each department (space allocation)
• Back room
• Office and other functional spaces
• Aisles, services areas, and other non-selling areas of the sales floor
• Wall merchandise space
• Floor merchandise space
• Store Planning – Store Layout
• Free-flow layout
• Grid layout
• Loop layout
• Spine layout
 Overview Classification Retailer Decisions Key Takeaways Measuring Profitability

Retailer Decisions – Store Promotion

 Overview Classification Retailer Decisions Key Takeaways Measuring Profitability

Retailer Decisions – Merchandising

• Visual Merchandising

• Merchandise Presentation Planning

• Fixture Types

• Selecting Fixtures and Merchandise

 Overview Classification Retailer Decisions Key Takeaways Measuring Profitability

Retailer Decisions – Merchandising

• Visual Merchandising - attracting patrons with visual cues
• Consistency with shelf methodology
• Colour blocking, Block categories and Block Brand families
• Categories based on price flow and stock situation
• Space allocation based on volume movement
• No loss of shelf space
• Merchandise Presentation Planning
• Shelving, Hanging, Pegging, Folding, Stacking, Dumping
• Value/fashion image
• Angles and sightlines
• Feature Areas - The areas within a store designed to get the customer’s
attention:
• (i) End caps – displays located at the end of the aisles (ii) Promotional
aisle/area (iii) Windows (iv) Walls
 Overview Classification Retailer Decisions Key Takeaways Measuring Profitability

Retailer Decisions – Merchandising

• Target shelves which have easy access like cash counters

• Optimum height from the ground level

• Showcase bestsellers through lighting and props

• Arrange complimentary/coordinating products together

• Arrange in left to right fashion

• Change displays regularly

 Overview Classification Retailer Decisions Key Takeaways Measuring Profitability

Retailer Decisions – Merchandising

• Consider customer buying considerations
• High margin items should be placed in high traffic areas
• High demand items should be placed in low traffic areas
• Complementary items should be placed near each other
• Seasonal needs should be considered
• Items needing frequent restocking should be placed near
storerooms or cash registers
• Larger departments should be placed in lower traffic areas
• Recognize shopping behaviour and operational considerations
• Physical characteristics of products
• Selling rate of the product
 Overview Classification Retailer Decisions Key Takeaways Measuring Profitability

Retailer Decisions – Merchandising

• Escalators are a focal point of many stores. Ideal locations for
promotional signs and for impulse items
• A store’s most profitable departments should be close to the
main entrance to the store.
• An item in a glass case with a lot of space around it implies
real luxury
• “Dumping” method to display gloves, leather goods, scarves,
and other small items the same way bargain stores do. These
bins have a way of suggesting a “good buy.
• Consumers are more apt to buy clothes that appear in full size
and colour assortments
• Place impulse buys, like hair bows and costume jewellery, by
the cashier
 Overview Classification Retailer Decisions Key Takeaways Measuring Profitability

Retailer Decisions – Store Promotion

 Overview Classification Retailer Decisions Key Takeaways Measuring Profitability

Retailer Decisions – Store Design

• Interior Design

• Lighting Design
• Lights provide information and can add personality to a store’s image
• Good lighting can highlight merchandise, sculpt space, and capture a mood
that enhances a store’s image
• Typical 100,000 sq.ft. department store has over 1000 light fixtures

• Sounds and Smells: Total Sensory Marketing

 Overview Classification Retailer Decisions Key Takeaways Measuring Profitability

10 Things to Remember
• Store Front
• Wider the Better
• Layout
• Don’t make them hunt
• Avoid overdesign
• Easy Check-out
• Merchandising
• ‘Left’ is Right
• Merchandising - Reach and Touch
• Play of colors, sound and senses
• Consumer Behavior
• Men Don’t Ask and Women Need Space
• Make Kids Welcome
• Technology
• Make best use of available technology
 Overview Classification Retailer Decisions Key Takeaways Measuring Profitability

10 Ways to Turn off Customers

• Dirty Bathrooms
• Messy Dressing Rooms
• Loud Music
• Handwritten Signs
• Stained Floor or Ceiling Tiles
• Burned-out or Poor Lighting
• Offensive Odours
• Crowded Aisles
• Disorganized Checkout Counters
• Lack of Shopping Carts/Baskets
 Overview Classification Retailer Decisions Key Takeaways Measuring Profitability

Measuring Retailer Profitability

• Total Sales, Gross Sales, Net Sales
• Evaluate in-store marketing strategies, customer service & experience

• Sales Growth, Same store sales growth

• Gross Margin
• Cut the costs, tweak prices
• Sales per square foot
• Inventory, marketing, and layout decisions. Also measured as sales per
linear foot of shelf space

• Foot traffic or footfalls

• Store layout, marketing and advertising, staffing
 Overview Classification Retailer Decisions Key Takeaways Measuring Profitability

Measuring Retailer Profitability

• Conversion Rate
• Customer service, merchandising, shopper experience, staff training

• Average Transaction Value

• Rethink pricing, new sales tactics, upsells, bundles, revised product assortment

• Inventory Turns = Cost of Goods Sold / Average Inventory

• Inventory decisions, re-order frequency, stocking too much or too little

• Days of Inventory = Days in a Year/Inventory Turns per Year

• Product Returns
• Indicates problems in merchandise quality, customer service or marketing
 Overview Classification Retailer Decisions Key Takeaways Measuring Profitability

Measuring Retailer Profitability

• Sales by Department or Product Category = Category's Total
Net Sales/Store's Total Net Sales
• Department wise analysis

• Accessory Percentage=Accessory Sales/Product sales

• Measure of secondary sales

• Sales per Employee = Net Sales/Number of Employees

• Staffing and training decisions

• Employee Productivity = Net sales / Full Time Equivalent

employees
• Staffing and training decisions
 Overview Classification Retailer Decisions Key Takeaways Measuring Profitability

Measuring Retailer Profitability

• Sell through percentage = Number of Units Sold / Beginning
Inventoryx100
• Evaluate product performance, items put on sale, re-order, return to
manufacturer
• GM Return on Floor (GMROF) = Gross margin (Rs.) / Selling
space (sq.ft.)
• Productivity of space, space management, store layout changes, setting-
up of a new store
• Gross Margin Return on Inventory Investment (GMROII) -
amount of return for every dollar spent on inventory =
GM/Inventory Investment
• Indicates how store is doing as a whole, how well specific products are
performing, optimizing inventory, merchandising
 Overview Classification Retailer Decisions Key Takeaways Measuring Profitability

Measuring Retailer Profitability

Gross Margin Return on Inventory Investment (GMROII)
• Products or stores with high sales often have lower margin or
excessive inventory

• Products with a high stock turn that have a low margin

• High margin items that are slow sellers and thus produce low
profits

• High profit products with low margin, high volume sales but
also high inventory levels that prevent other products from
being displayed and sold
Learning Outcomes – Session 6 - 8

Overview

Classification

Retailer Decisions

Key Takeaways

Measuring Profitability