Module-5 ( 9 Hours)

Setting up Retail organization: Size and space allocation, location strategy, factors Affecting the
location of Retail, Retail location Research and Techniques, Objectives of Good store Design.
Retail Market Strategy - Financial Strategy Human Resource Management, Information Systems
and supply chain management & Logistics. Store Layout and Space planning: Types of Layouts,
role of Visual Merchandiser, Visual Merchandising Techniques, Controlling Costs and Reducing
Inventories Loss, Exteriors, Interiors. Store Management: Responsibilities of Store Manager, Store
Security, Parking Space. Problem at Retail Centers, Store Record and Accounting System, Coding
System, Material Handling in Stores, Management of modern retails stores.
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Module-5

Retailing strategy for setting up Retail Organization and planning

Retail market strategy:

 Retailing strategy outlines the mission& vision

 It is a systematic plan which provides the retailers overall framework for dealing with its
competitors, technological and international movements.
 Strategic management actually is of recent origin as far as retailing is concerned.
 Retailing strategy sets the tone for creating sustainable competitive advantage through
the optimization of available resources.

Strategic retail planning process:

Step 1: Define the business mission

Mission statement-broad description of a retailer’s objectives and the scope of activities it

plans to undertake.

1. What business are we in?

2. What should our business be in the future?

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3. Who are our customers?

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Prof. Manjunatha S Department of MBA, SVIT

 4. What are our capabilities?

5. What do we want to accomplish?

Step 2: Conduct a Situation Audit

Situation Audit-and analysis of the opportunities and threats in the retail environment and the
strengths and weaknesses of the retail business relative to its competitors.

Market Factors

• Market size – large markets attractive to large retail firms

• Growing markets – typically more attractive than mature or declining

• Business cycles – retail markets can be affected by economic conditions – military base
towns

• Seasonality – can be an issue as resources are necessary during peak season only
Competitive Factors Barriers to Entry Bargaining Power of Competitive Large Vendors
Rivalry Customers Threat of Substitution Environmental Factors

• Questions for analyzing

• New developments or changes -- technologies, regulations, social factors, economic

conditions

• Likelihood changes will occur

• Key factors determining change

• Impact of change on retail market and competitors

Strength and Weakness Analysis

• Indicates how well that business can seize opportunities and avoid harm from threats in the
environment
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Management Capability:
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 Capabilities and experience of top management Depth of Management--capabilities of middle
management Management’s commitment to firm financial Resources: Cash flow from existing
business Ability to raise debt or equity financing Operations: Store Management Capabilities
Overhead cost structure Management capabilities Quality of operating systems Quality of
sales associates Distribution capabilities Commitment of sales associates to firm Management
information systems Loss prevention systems Locations Inventory control system
Merchandising Capabilities: Knowledge and skills of buyers Customers Relationships with
vendors Loyalty of customers Capabilities in developing private capabilities

Step 3: Identify Strategic Opportunities

After completing the situation audit, the next step is to identify opportunities for increasing
retail sales

Step 4: Evaluate Strategic Opportunities

• Evaluate opportunities that have been identifies in the situation audit the evaluation
determines the retailer’s potential to establish a sustainable competitive advantage and reap
long-term profits from the opportunities being evaluated.

Step 5: Establish Specific Objectives and Allocate Resources

• Establish a specific objective for each opportunity

• Three components:

1. Performance sought Included a numerical index which progress may be measured

2. Time frame within which the goal is to be achieved

3. Level of investment needed to achieve the objective

Step 6: Develop a Retail Mix to Implement Strategy

Develop a retail mix for each opportunity in which an Investment will be made and control
and evaluate performance
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Step 7: Evaluate Performance and Make Adjustments

Prof. Manjunatha S Department of MBA, SVIT

 • Evaluate the results of the strategy and implementation program

• If the retailer is meeting or exceeding its objective changes aren’t needed but if the retailer
fails to meet its objective, reanalysis is required

• The conclusion would result in starting a new planning process, including a new situation
audit

Financial strategy:

 Finance is the backbone of any successful business, retiling is not an exception

 Be it manufacturing, whole selling or even retailing, without finance no business can
survive for long.
 Retail firm requires finance to run their business and meet day to day requirements.
 For the success of a business, there should be continuous movements of funds in and
outside the firm.

Retail Cash Flow Management

 It is the procedure of monitoring, analyzing, and adjusting the cash flow that comes through
selling merchandise.
 For retail business managing cash is to avoid shortage of cash
 The larger the gap, chances are of failure
 Optimum balance is required
 Thus, effective cash flow management is imperative at all stages

A retail firm may be profitable one as per financial statements but in actual it is unable to pay the
bills on time.

Budget and Budgetary Control

 Retail Budget: A retail budget is a financial plan or blue print of overall financial
transactions that shows how the resource will be acquired and used over a period of time.
 Budgetary Control: It is the use of budgets as a means of controlling financial activities.
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  Budgeting: Budgeting refers to the management’s action of formulating budgets to
facilitate various departments to operate efficiently and economically.

Income Statement

 It is the statement of the profit earned or loss incurred during an accounting year,usually a
month, a quarter, or a year.
 This represents a summary of a retailer’s revenues and expenses over a particular period
of time such as April1, 2010 to March 31, 2011.
 A profit or loss account or an income statement has the following components:
 Net Sales
 Cost of Goods Sold
 Gross Margin
 Operating Expenses
 Net Profit

Asset Management

 Each retailer has assets to manage and liabilities to control.

 It is the retailer’s ability and efficiency how effectively he manages the inputs and outputs.
 Balance sheet is a statement that reports the values owned by the retail firm and the claims
of the creditors and owners against these properties.
 In an organization, balance sheet is known by different titles (name). These are:
 Statement of assets and liabilities
 Statement of resources and liabilities
 Statement of financial position
 Statement of financial soundness
 Statement of assets, liabilities and owners fund etc
 Balance sheet/ General balance sheet
 Statement of stocks/position

Site and locations:

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Retail Location:

Prof. Manjunatha S Department of MBA, SVIT

Location is the most important ingredient for any business that relies on customers. It is also one
of the most difficult to plan for completely. Location decisions can be complex, costs can be quite
high, there is often little flexibility once a location has been chosen and the attribute of location
have a strong importance on retailers overall strategy.

Importance of Location Decision:

Location is a major cost factor because it:

 Involves large capital investment

 Affects transportation cost
 Affects human resources

Location is major revenue factor because it

 Affects the amount of customer traffic

 Affect the volume of business

A location decision is influenced by the flow of pedestrian and vehicular traffic, which determine
the footfalls in a retail store. Footfalls refer to the no. of customers who visit a store in a defined
time period.

Levels of Location Decision and its Determining Factors:

1. Selection of a city:

Factors to be considered for selection of a city:

 Size of the city’s trading area: A city’s trading are is the geographic region from which
customers come to the city for shopping. A city’s trading area would comprise it suburbs
as well as neighbouring cities and towns. Cities like Mumbai and Delhi have a large trading
are as they draw customers from far off cities and towns.
 Population or population growth in the trading area: A high growth in population in the
trading area can also increase the retail potential.
 Total purchasing power and its distribution: Cities with a large population of affluent and
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upper middle class customers can be a attractive location for stores selling high priced

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 purchasing power and its distribution among a large base of middle class is contribution to
a retailing boom around major cities in India.
 Total retail trade potential for different lines of trade: A city may become specialize in
certain lines of trade. Moradabad has become important location for brassware products,
Mysore-silks.
 The retailer also consider, number, size, quality of competition before selecting a city.
 Development cost

Margin Free Market, the Kerala based retail chain (grocery and toiletry product targeted middle
and lower class) located 250 stores in small towns in Kerala.

II. Selection of an Area or Type of Location within a city.

Evaluation of the following factors required:

 Customer attraction power of a shopping district or a particular store(commercial

street-Bangalore, Chandni Chowk in Delhi)
 Product lines carried by other stores, number of stores in the area.
 Availability of access routes- There should not be traffic jam and congestion
 Nature of zoning regulations: Retailers should examine the plans of zoning
commissions and municipal corporations regarding the development of shopping
centres, residential areas, flyovers.
 Direction of the spread of the city. For ex. Mumbai’s subarbs and Navi Mumbai are
growing at a fast rate.

III. Selection of a specific Site:

1. Adequacy and potential of traffic passing the site: The volume of vehicular traffic and
pedestrian shoppers who pass by the specific site shoud be assessed since they represent the
potential customers.

2. Ability of the site to intercept the traffic following past the site. The vehicular or pedestrian
traffic moving past the site would be attracted only if it represents the segment the store is targeting.
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3. Complementary nature of adjacent stores: a store selling school uniforms would have greater
potential if adjacent stores sell school books, stationary etc.

Type of Retail Location:

1. Free standing location: Where there is no other retail outlets in the vicinity of the store and
therefore depend on its own pulling power and promotion. Dhabas on highways.

2. Neighbourhood stores: Located in residential neighbourhoods and serve a small locality. They
sell convenience products like groceries.

3. Highway stores: Located along highways or at the intersections of two highways and attract
customers passing through these highways. Fast food restaurants, Dhabas with good parking
facilities.

4. Business associated location: These are locations where a group of retail outlets offering a
variety of merchandise work together to attract customers to their retail area but also compete
against each other for the same customers.

This can further be classified into two:

a) Unplanned business districts

An unplanned business district is a type of retail location where two or more retail stores locate
together on individual consideration rather than on the basis on any longrang collective planning.
We may find 4-5 shoe stores, 3-4 medical stores in a cluster, but no grocery store. Connaught place
in New Delhi

i) Downtown or central Business District: A CBD usually has a trade area that varies
according to the size of the city or town. CBD s in major metro like Delhi, Mumbai
even draw customers from far off places. In major metros like Delhi and Mumbai we
find two or more CBD’s each serving different segments. Commercial streetBangalore,
Chikpet in Bangalore Chandni chowk –Delhi.
ii) ii) Secondary Business District: They are composed of an unplanned cluster of stores
often located on a major intersection of a city. Koramangala in Bangalore.
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 iii) Neighbourhood Business District: Stores located in Neighbourhood business district
form a small cluster and serve neighbourhood trading area. (Cities and towns)
iv) Suburban business District: Stores located on the town’s periphery have lower rents,
often rely on traffic generated by the downtown and may sometimes offer parking
facilities. The malls in Gurgaon near Delhi are good examples.
b) Planned Shopping Centers

A planned shopping centre consists of a group of architecturally owned or managed stores,

designed and operated as a unit, based on balanced tendency and surrounded by parking facilities.

Regional shopping centre malls:

Regional shopping centres or malls are the largest planned shopping cantered; often they are
anchored by two or more major department stores, have enclosed malls, serve a large trading area
and have high rents.( cross roads in Mumbai, Ansal Plaza in Delhi, Spencer Plaza in Chennai,
Metropolitan Mall in Gurgaon.

Neighbourhood/community Shopping centre:

Usually have a balanced mix of stores including a few grocery stores a chemist, a variety store,
and a few other stores.

Specialized Markets: In India most of the cities have specialized market famous for a particular
product category. For ex: Chennai- Go down street is famous for clothes, Usman street for
jewellery, T. Nagar for readymade garments.

Periodic Markets:

Another peculiar type of market found in India is the periodic market, which is established at
particular places on a particular day in a week. Most of these markets operate in evening hours.
These markets are mostly associated with the name of the day it is held on.

Type of consumer Goods and location Decision:

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1. Convenience Goods –low price, purchased frequently- convenience stores located in central
business districts, such as low priced, ready to wear have a limited mobility to generate their own
traffic. eg. Subhiksha has an expansion strategy of setting up one outlet within every 3-4 km.

2. Shopping Goods- involve more intensive selling effort – suits, automobiles and furniture-
shoppers stop and Westside prefers to locate in Central business districts or major secondary
business districts.

3. Speciality Goods- imply products with high unit price, brought infrequently, require special
effort – may use isolated locations because they generate consumer traffic.

Trading Area:

A trade area is a contiguous geographic area from which a retailer draws customers that account
for the majority of a store’s sales. A trade area may a part of a city, or it can extend beyond the
city’s boundaries. A trade area can be divided into 2 or 3 zones.

Trade Area Analysis: It is necessary to estimate market potential, understand consumer profile,
competition etc. GIS (Geographical Information System – combine digitized mapping with key
location data) used for this purpose. A saturated trade area offers customers a wide variety of
merchandise, which also ensures impressive profits for retailers in the market.

Site Selection Analysis: A retailer has to consider the following factors while selecting a site.

1. kind of products sold:

*convenience goods – quality of traffic most important – large window display area is usually a
better site.

* Shopping Goods – quality of traffic most important-The emergence of several apparel factory
outlet within a short stretch on the on the Delhi Jaipur highway is driven by this factor.

* Speciality Goods- may desire to locate close to the shopping goods store.

2. Cost Factor in Location Decision: Traditionally retail community own the place. Space cost
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(combination of rent, utilities, leasehold improvements, general decoration, security, insurance,

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and all the related cost of having a place to conduct business operation) is important factor.

Prof. Manjunatha S Department of MBA, SVIT

3. Competitor location: Intense competition in the area shows that new businesses will have to
divide the market with existing business.

4. Ease of traffic flow and accessibility (studying flow of traffic, nothing one way street, street
widths, and parking lots)

5. Parking and Major Thoroughfares: The way parking lot is laid out, the direction of the travel
lanes and spaces, landscaping. The ideal ratio for food stores is in the magnitude of 7-8 cars per
1000 square feet of food store.

6. Market Trends: Discussions with the business owners and officials are a good source of
information. Make use of information available through the chamber of commerce.

7. Visibility: It is important when a shopper is trying to find the store for the first or second time.
The question relevant to this factor is: who will be the store’s neighbour, what will be their effect
on store sales, how much space is needed.

Selection of a particular shopping centre or Market Area:

The following consideration influence the selection of a particular shopping centre:

1. Merchants’ Association: can strengthen business and save money through group advertising,
insurance plans and collective security measures.

2. Responsiveness of the landlord: Prospective retailers expect landlord’s acknowledgement on

the following issues: placement and size of signs, maintenance and repairs, and the adjacent retail
space.

3. Zoning and planning: The zoning commission will provide the latest “mapping” of the retail
location and surrounding area under consideration. Are there restrictions that will limit operation;
- will construction or changes in city traffic or new highways present barriers.

4. Leases: Before entering into any lease agreement, retailers should collect information on future
zoning plans and decide how long it will be viable to run business at a particular location.
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5. Building Layout: Age and condition of the building, adequacy of all mechanical system,
remodelling needs, storage availability, security needs, restrictions on alterations and
improvements to the property.

Location Assessment Procedures:

To determine the best possible retail location for the prospective retail outlet.

1. Checklist Analysis: simple framework regarding geo-demographics, shopping behaviour,

competition, cost and accessibility to the particular site.

2. Analogue Analysis: It attempts to predict the economic performance of a particular site by

assessing its potential against the already running stores.

3. Financial analysis: regarding development and operation of an outlet, comparing the

development cost, capital investment on site, building and variable cost against expected returns.

4. Regression Modelling: developed around a no. of determinants such as demographics,

accessibility, competitive environment, trade area characteristics, to estimate the potential turnover
of the prospective outlet.

5. Retail Area Development: There are 4 important interest groups that can work individually and
in partnership to overcome challenges and obstacles in the development of new retail markets.

1. Public [Link] 3. The Government 4. Retailers.

Objectives of good store design:

1. Implement the retailers’ strategy

Primary objective: to implement retailers strategy • Design- consistent and reinforce the
retailers strategy by meeting the needs of the target market and building a competitive advantage.

E.g. Sam`s-price sensitive- floor design and racks – metal and concrete to reinforce the brand
image • Flooring and shelving also affect retailer’s image: glass-elegance
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2. Influence the customer buying behavior

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 Store design- should attract customers, enable them to locate merchandise, keep them in
the store for as long time, motivate them to make unplanned, impulse purchase and provide them
with a satisfied customer experience. Buying behavior-influences store design: rise in nuclear
families-limited time.

E.g. P&G: “first moment of truth”- first 3-7 seconds, customer notices an item on the store shelf.
Mkt research – customers do not walk down one aisle and up the next. Park at the end of aisle-
walk partway to pick the product and return to the cart. Hence puts its best selling brands at the
middle of the aisle.

3. Provide flexibility

Dynamic business- what may work today may not be applicable tomorrow- need to change
the merchandise mix- need to change layout, attempt to design stores with max flexibility. Two
forms: ability to physically move and store the components, and the ease with which components
can be modified ex. Book stores

4. Control design and maintenance costs

Cost of implementing the store design and maintain the store appearance, Free form design
– can encourage the customers to explore and increase sales • More lighting- expensive jewellery
and other merchandise • Good lighting- can make the merchandise look better and increase sales
• Store design – affect labour costs- traditional dept stores with diff depts. – comfortable shopping,
but require one person constantly to provide service

5. Meet legal requirements

The store design should fully comply with the standards set by civic authorities.

Human Resource Management:

 HRM includes recruitment and selection of appropriate employees at various levels.

 The main objective of HRM is to help an organization to meet its strategic goals by
attracting, maintaining and managing them.
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  HRM basically is the organizational function that deals with issues related to people such
as compensation, hiring, performance management, organization development, safety,
wellness, benefits, employee motivation, communication, administration, and training.

Objectives of HRM in Retailing

 To serve as standards against which performance is evaluated.

 To promote harmony among human efforts & voluntary co-operation.
 To fulfill the demand of retail industry.
 To boost up survival-integrated activities such as employees’ recruitment,
selection,induction, training and development, supervision and compensation in the
organization.
 Right person at right position

HR Functions in Retailing

1. Job analysis and job design

2. Recruitment and selection of retail employees

3. Employees’ training and development

4. Performance management

5. Compensation and benefits

6. Labor relations

7. Managerial relations

Supply chain management and logistics

 It is a network of retailers, distributors, transporters, storage facilities, and suppliers that

take part in the production, delivery, and sale of a product that convert and move the goods
from raw materials to end users.
 It describes the processes and people involved in converting and conveying the goods
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from raw materials to end consumers.

Prof. Manjunatha S Department of MBA, SVIT

  The activities close to the raw material stage are known as upstream activities and activities
between the manufacturer and end consumer are downstream activities.

Parts of a Supply Chain

1. Supply: It focuses on the raw materials supplied to manufacturing, including how, when, and
from what location.

2. Manufacturing: It focuses on converting these raw materials into finished products.

3. Distribution: It focuses on ensuring these products reach the consumers through an organized
network of distributors, warehouses, and retailers.

Objectives of SCM

 To provide an uninterrupted flow of goods and services.

 To meet quality criteria.
 To reduce the inventory investment to the extent possible.
 To offer high customer service, low inventory management and low unit cost.
 To ensure quick responsiveness to the customer changes.
 To select and maintain competent suppliers.

Components of Retail Supply Chain Management

 Planning
 Source
 Procurement
 Sell
 Return/Exchange

Information systems in retailing:

Radio frequency identification or RFID

Is a new tracking technology that involves small tags that emit distinct signals. Retail business
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owners can use remote scanners to read RFID tags placed on individual products, enabling them
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Prof. Manjunatha S Department of MBA, SVIT

to record a variety of information, including quantities of various stock items and their precise
locations.

Benefits of RFID:

1. Inventory Shrinkage (Shrink) Reduction

• Track retail items between point of manufacture or purchase from supplier and point of
sale.
• Real-time notification of security when RFID tagged items leave area without payment
• Competitive advantage – saving money on theft allows to offer product at lower prices

2. RFID Smart Labelling

• Monitor unattended inventor
• Automatic item identification on mixed pallets
• "Smart Shelf" systems – designed to provide real time tracking and locating of tagged
items on shelves
• Shipping and Receiving applications

3. Shelf Stocking
• Real-time notification of out-of –stock items
• Improvement of product replenishment
• Retention of consumers who may turn to competitors if inventory item is out-ofstock
• Automated charting and tracking for improved product forecasting

4. Check-out Process
• Reduce time spent in line
• Reduce labour/time cost of employees
• Streamline check-out process with ability to scan multiple items and pay for them all at
once
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5. Overhead Reduction
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Prof. Manjunatha S Department of MBA, SVIT

 • Track product shipping and receiving from point-to-point automatically versus manual
tracking to save time and labour cost
• Know how many units of inventory or on-site via automated RFID system versus manual
process, saving labour and time cost
• Efficiency in error reduction reduces manual labour cost.

Store management:

Duties and Responsibilities of store manager:

 Management of employees
 Maintaining the sales environment
 Cost minimization
 Recruitment, Training and Development
 Budgeting and Forecasting
 Implementing Marketing plans
 Team Leadership
 Maintaining Leave and Salary Record
 Holding Inventory
 Extending Customer Services

Store security:

 Appointment of uniformed security

 Thorough check at entry and exit points
 Without uniformed security guards can be located in the store
 Use of TV cameras can be beneficial to catch the stealers
 Cash deposits in banks must be made frequently
 Brighter lighting should be arranged
 Coordination between all security personnel
 Access to storage areas and ware houses should be restricted
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Parking space problem at retail centers

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Prof. Manjunatha S Department of MBA, SVIT

 1. Total quantity of parking
2. Size of the parking area.
3. Parking Area locations
4. Single and multi-level parking
5. Walking distance
6. Parking pattern
7. Employee parking
8. Parking turnover
9. Delivery and Service functions
10. Parking Ratio

Store record and accounting system:

1. Store functions
2. Pricing of purchased material.
3. Pricing of store returned material.
4. Material received account.
5. Issue of material from store.
6. Physical verification of store stock.

1. Store functions:

Store functions will be supervised by different persons and will have separate sphere duties.

 Store Procurement
 Store Keeping
 Store Accounting

2. Pricing of purchased material.

 Local Purchases through Tender / Quotation.

 Purchase through Purchase Committee or through Petty advances.
 Material Transferred in/from other WAPDA formations.
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 Foreign Material Purchase.

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Prof. Manjunatha S Department of MBA, SVIT

3. Pricing of store returned material.

 Un-used Material
(Not needed now to be used in future).
 Defective / Damaged Material
(To be used after repair).
 Scrape for disposal.

Material at site will be kept only for immediate use for the ongoing specific jobs. Otherwise,
material returns to Store at month end through Store Return Warrant

(SRW).

4. Material Received Account.

 1st copy of SMB page attach with commercial invoice and process for making payment by
the Accounts Section.
 2nd copy of SMB page sent to Accounts Section along-with GST invoice for posting in the
Stock Value Ledger and compiling GST input claim of the formation.
 3rd copy of SMB page sent to Store Section for posting of receipt of material in the Stock
Register along-with following documents.
 Purchase order
 Invoice
 Bill of entry.
 Inspection Certificate.
 4th copy of SMB retain for office record. Based upon the office copy procurement Section
will prepare list of all the SMBs recorded during the month and sent it to the Accounts
Section and Store Section.

5. Issue of material from Store.

A. Issue of consumable material.

B. Issue of Spare Parts.
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C. Issue of T&P
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D. Issue of Store to other Formations.

Prof. Manjunatha S Department of MBA, SVIT

 E. Issue of Scrape for disposal.

6. Physical verification of Store Stock.

 The Procurement Section and Accounts Section will jointly carry out physical verification
of the store stock items by classifying the material as follow: -
 The stock item having unit price of Rs.50,001 and above will be physically verified 100%
in the month of June of each financial year as first preference,
 The stock items having unit price of Rs.5 000 to Rs.50,000 will be physically verified 100%
in 2nd preference in June of each financial year,
 In 3rd preference the store items having unit price less than Rs. 5,000 will be physically
verified at random basis during January to May of each financial year.
 The difference identified by the physical verification committee must be investigated by
the authorized officer and adjustment (recovery or write- off) must be made at the end of
financial year with the approval of competent authority as per Rules and Procedure.

Coding system:

A code system should have the following characteristics to be scientific and easily adoptable:

• Simple to use: easy to understand with minimum and /or no need for training,
• Flexible: ease to expand and accommodate more codes,
• Good formulation: adopted system should be able to be used in all functional areas in the
entire organization.

Common Codification Systems

i. Alphabetical – the use of the letter of the alphabet as the basis e.g. Iron ore rep. I-O etc
ii. Numerical – the use of the numbers as the basis of the codes e.g. simple number 01, 02, or
complex systems which combines “/” – strokes or “–“ dashes e.g. 1-100, 2-200 etc
iii. Alpha-numeric – the combination of alphabets and numbers. This is the mixing of numbers
and letters of the alphabets e.g. SP-11 etc 1
iv. Decimal – the use dash or stroke in the coding e.g. Main, Sub I, sub II an sub III e.g. 47.1.1
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etc
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v. Brisch – this is the use of numeric system. It combines numbers and decimals. E.g. 47.002

Prof. Manjunatha S Department of MBA, SVIT

 vi. Kodak – this originated by Eastman Kodak Co. of the USA. This system borrows all the
good points from all other systems. It is much based on the numerical codification system
and in the place of decimals hyphens are used in the Kodak System.

Marking of stores / materials:

This is another method of codification. There are two types of marking of stores:

a. Color marking – this is used to supplement the other codification systems e.g. use
of paint such as blue, red, aluminum etc
b. Secret Marking – expensive stores items are highly susceptible to theft and
pilferage. These are discreetly marked to help detect / identify from where they
have been sold out. The secret marks are not easily visible.

Material handling in stores:

Material handling is an integral part of all retail stores and accounts for 10-20% of the total cost
of the selling price. It is the way by which the goods of greater efficiency can be attained not only
in stores but wherever materials can be moved either manually or with the help of slings, or other
handling instruments. Material can also be moved by people using machines such as forklift trucks,
and other lifting fixtures (mechanical lifting). It does not directly add value to the product but adds
to the final cost.

Thus material handling function includes all types of movements within the retail stores. These
materials are of various types, shapes and size. At each stage of selling materials are loaded and
unloaded are travel widely inside the store moved. It is method for moving material.

Each handling task poses unique demands on the floor staff. However, workplaces can help store
staff to perform these tasks safely and easily by implementing and upholding proper policies and
procedures for minimum and automatic materials handling resulting in reduction in handling costs.

Manual material handling operations are carried out in most retail stores because the goods
comparatively belong to FMCG sector and these are light in weight. But in case of electronics
furniture/luxury retailing, manual lifting can spoil the goods/items meant for sale. As when these
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items collide with each other, they can create hazards that result in injuries.
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Prof. Manjunatha S Department of MBA, SVIT

Management of modern retail:

The more merchandise customers are exposed to that is presented in an orderly manner, the more
they tend to buy. Retailers focusing more attention on in-store marketing – marketing dollars spent
in the store, in the form of store design, merchandise presentation, visual displays, and in-store
promotions, should lead to greater sales and profits (bottom line: it is easier to get a consumer in
your store to buy more merchandise than planned than to get a new consumer to come into your
store)

Types of store layout:

1. Grid (Straight) Design

• Best used in retail environments in which majority of customers shop the entire store
• Can be confusing and frustrating because it is difficult to see over the fixtures to
• other merchandise
• Should be employed carefully; forcing customers to back of large store may frustrate
• and cause them to look elsewhere
• Most familiar examples for supermarkets and drugstores

2. Curving/Loop (Racetrack) Design

• Major customer aisle(s) begins at entrance, loops through the store (usually in shape of
circle, square or rectangle) and returns customer to front of store
• Exposes shoppers to the greatest possible amount of merchandise by encouraging browsing
and cross-shopping

3. Free-Flow Layout

• Fixtures and merchandise grouped into free-flowing patterns on the sales floor – no defined
traffic pattern
• Works best in small stores (under 5,000 square feet) in which customers wish to browse
• Works best when merchandise is of the same type, such as fashion apparel
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• If there is a great variety of merchandise, fails to provide clues as to where one department
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stops and another starts

Prof. Manjunatha S Department of MBA, SVIT

4. Spine Layout

• Variation of grid, loop and free-form layouts

• Based on single main aisle running from the front to the back of the store (transporting
customers in both directions)
• On either side of spine, merchandise departments branch off toward the back or side walls
• Heavily used by medium-sized specialty stores ranging from 2,000 – 10,000 square feet
• In fashion stores the spine is often subtly offset by a change in floor coloring or surface
and is not perceived as an aisle

Layout: external factors

o Size must be adequate to accommodate business needs.

o Appearance must create the proper image or “personality” for the business in the
customer’s eyes.
o Entrances must invite customers to come in.
o Create effective window displays and change them often; they can be powerful sales tools.
o Must comply with Americans with Disabilities Act (ADA).

Pay attention to the business sign, the most direct method of reaching potential customers.

Building interiors

 Ergonomics is an integral part of any design.

 Proper layout and design pays off in higher productivity, efficiency, or sales.
 Proper lighting is measured by what is ideal for the job being done.
 Careful selection of colours can create the desired impressions among customers and
employees.
 Appealing to all of the customer’s senses can boost sales.

Visual merchandising:

The use and manipulation of attractive sales displays and retail floor plans to engage customers
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and boost sales activity. In visual merchandising, the products being sold are typically displayed
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Prof. Manjunatha S Department of MBA, SVIT

in such as way as to attract consumers from the intended market by drawing attention to the
product's best features and benefits.

Feature Areas

The areas within a store designed to get the customer’s attention which include:

 End caps – displays located at the end of the aisles

 Promotional aisle/area
 Freestanding fixtures
 Windows
 Walls
 Point-of-sale (POS) displays/areas

Fixture Types

 Straight Rack – long pipe suspended with supports to the floor or attached to a wall
 Gondola – large base with a vertical spine or wall fitted with sockets or notches into which
a variety of shelves, peg hooks, bins, baskets and other hardware can be inserted.
 Four-way Fixture – two crossbars that sit perpendicular to each other on a pedestal
 Round Rack – round fixture that sits on pedestal
 Other common fixtures: tables, large bins, flat-based decks

Fixture Types

Wall Fixtures: To make store’s wall merchandisable, wall usually covered with a skin that is fitted
with vertical columns of notches similar to those on a gondola, into which a variety of hardware
can be inserted. Can be merchandised much higher than floor fixtures (max of 42” on floor for
round racks on wall can be as high as 72”.

Merchandise Display Planning

 Shelving – flexible, easy to maintain


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Hanging
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Prof. Manjunatha S Department of MBA, SVIT

  Pegging – small rods inserted into gondolas or wall systems – can be labor intensive to
display/maintain but gives neat/orderly appearance
 Folding – for soft lines can be folded and stacked on shelves or tables - creates high fashion
image
 Stacking – for large hardlines can be stacked on shelves, base decks of gondolas or flats –
easy to maintain and gives image of high volume and low price
 Dumping – large quantities of small merchandise can be dumped into baskets or bins –
highly effective for soft lines (socks, wash cloths) or hardlines (batteries, candy, grocery
products) – creates high volume, low cost image

POS Displays

 Assortment display – open and closed assortment

 Theme-setting display
 Ensemble display
 Rack display
 Case display
 Cut case
 Dump bin

Store front Design

Storefronts must:

o Clearly identify the name and general nature of the store

o Give some hint as to the merchandise inside
o Includes all exterior signage
o In many cases includes store windows – an advertising medium for the store – window
displays should be changed often, be fun/exciting, and reflect merchandise offered inside

Atmospherics

The design of an environment via:

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o visual communications

Prof. Manjunatha S Department of MBA, SVIT

 o lighting
o color
o sound
o scent

Visual Communications

o Name, logo and retail identity

o Institutional signage
o Directional, departmental and category signage
o Point-of-Sale (POS) Signage
o Lifestyle Graphics
o Coordinate signs and graphics with store’s image
o Inform the customer
o Use signs and graphics as props
o Keep signs and graphics fresh
o Limit sign copy
o Use appropriate typefaces on signs
o Create theatrical effects

Lighting

Important but often overlooked element in successful store design

o Highlight merchandise
o Capture a mood
o Level of light can make a difference
 Blockbuster
 Fashion Departments

Colour:

 Can influence behavior

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 Warm colors increase blood pressure, respiratory rate and other physiological
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responses – attract customers and gain attention but can also be distracting

Prof. Manjunatha S Department of MBA, SVIT

  Cool colors are relaxing, peaceful, calm and pleasant – effective for retailers selling
anxiety-causing products

Sound & Scent

 Sound
 Music viewed as valuable marketing tool
 Often customized to customer demographics – AIE ([Link]
 Can use volume and tempo for crowd control
 Scent
 Smell has a large impact on our emotions
 Victoria Secret, The Magic Kingdom, The Knot Shop
 Can be administered through time release atomizers or via fragrance-soaked pellets
placed on light fixtures

Controlling cost and reducing inventory loss:

Inventory management simply means the methods you use to organize, store and replace inventory,
to keep an adequate supply of goods while minimizing costs.

 Each location where goods are kept will require different methods of inventory
management.
 Keeping an inventory, or stock of goods, is a necessity in retail.
 Customers often prefer to physically touch what they are considering purchasing, so
you must have items on hand. In addition, most customers prefer to have it now, rather
than wait for something to be ordered from a distributor.
 Every minute that is spent down because the supply of raw materials was interrupted
costs the company unplanned expenses
 Inventory control is the technique of maintaining the size of the inventory at some
desired level keeping in view the best economic interest of an organization.

An Effective Inventory Management Should

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 Ensure a continuous supply of raw materials to facilitate uninterrupted production

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Prof. Manjunatha S Department of MBA, SVIT

  Maintain sufficient stocks of raw materials in periods of short supply and anticipate
price changes
 Maintain sufficient finished goods inventory for smooth sales operation, and efficient
customer service
 Minimize the carrying cost and time.
 Control investment in inventories and keep it at an optimum level

Customer service:

 Integral part of the retail industry.

 Customer service acts as lifeblood
 It is to bring customer back to the store
 Sending customers happily
 Satisfy customers recommend others to visit that store
 It is the word of mouth that multiplies your customer base within a short span of time.
 The strength of good customer service is to develop a long lasting rapport with
customers.

Customers Contact Points

1. Financial Assistance
2. Physical Assistance
3. In-Person Product Support
4. Internet
5. Kiosks
6. Telephone/Help line/Toll free Numbers

Essentials of Good Customer Service

 Answer customers phone

 Doesn’t make fake promises
 Listen to customers.
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 Handle the complaints

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 Be helpful without considering earning profit always

Prof. Manjunatha S Department of MBA, SVIT

  Go one step ahead
 Manage Customers Creatively

Significance of Customer Service

 Builds brand loyalty

 Complaints are less
 Customers are always happy and satisfied
 Drives profitable growth
 Helps retailers create differentiation and value through their experiences
 Increase the image of a store
 Increases client base
 It is a source of mouth advertisement
 Strengthens competitive advantage
 Visitors become customers and customers become loyal to stores

Planning Merchandise Assortment

 It is a technique of developing, securing, pricing, supporting and communicating the

retailer’s offerings.
 This task is done by a retailer who ensures that right product should reach to the
customers at right time, right place and at right price.
 Therefore he devotes most of his time to understand consumers’ needs and selling
merchandise accordingly.
 What to sell and how much to purchase is an important task for every retailer.

Category management:

Category management is the process of managing a retail business with the objective of
maximising the sales and profits of a category rather than the performance of individual brands or
models.

A category is an assortment of items that the customer sees as reasonable substitutes for each other.
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For example, retailers in ready to wear segment consider female and male clothing as one category.
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Prof. Manjunatha S Department of MBA, SVIT

It systemizes grouping of products into strategic units or category so as to better meet consumer
needs and achieve sales and profit goals. Today, the relevance of category management is driven
by the emergence of multiple numbers of brands in each product category. For the success of any
category management, retail business requires changes in the merchandising system and
organizational commitment.

The Essential Elements of Effective Category Management:

[Link] should be arranged as if consumers could stock the shelf themselves

[Link] composition should be on the basis of time, space and product benefit
[Link] management should drive multiple item purchase
[Link] management is a dynamic, proprietary set of decision, not a standard,
universal practice.
[Link] is directed to create value for the consumer rather than facilitating relations between
supplier and retailer.
[Link] management plan should be based on the overall competitive environment in
a specific trading area.

Stock Keeping Unit (SKU)

 It is a unique number (identifier) assigned to an item that describes its features in terms
of size, color, style and quantity.
 Each organization according to its size, level of operations and product categories,
develops its own SKU numbers.
 These numbers are unique and allotted/assigned to a single item. No two items in an
outlet will have identical SKU number and are usually assigned and serialized at an
outlet/merchant level.
 This system allows retailers to track records of merchandise.

Merchandise Buying system:

Retailers throughout the globe usually employ two types of buying systems:
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1. Staple merchandise buying system

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2. Fashion merchandise buying system

Prof. Manjunatha S Department of MBA, SVIT

Buying System for Staple Merchandise

 Staple merchandise consists of the items that are regularly purchased, displayed and sold
by the retailers.
 For a grocery store, staple merchandise will be bread, butter, milk, salt, eggs, and tissues
and so on.
 Similarly, most of the merchandise at sports store and home improvement centers are
staple.
 For a departmental store, staple merchandise is camera rolls, stapler pins, pens,
notebooks, briefcase, gift items and house wares.

Buying System for Fashion Merchandise

 Fashion merchandise consists of the items those usually have unpredictable demand and
limited sales record. Demand forecasting as discussed earlier, in the absence of any sales
history for specific fashion SKU becomes difficult.
 For instance, ‘Yoga and meditation’ that was part and parcel of Indians’ lives before
seventies, was replaced by gym, spa and health centers, has again entered in Indians’ lives
and becoming popular among youths too.

Merchandise Budget Plan (MBP)

 It is a forecast of particular merchandise related activities designed for a particular period

of time, say, one year or six months.
 Under this plan, rather than physical control of items, stress is given towards their
financial planning.
 MBPs usually are made for one season and then broken down into shorter periods like
monthly & weekly plans.
 In an effective merchandise Budget Plan, a retailer forecasts and plans about five
fundamental variables, namely, sales level, stock levels, purchases, reductions
(markdowns) and gross margin.
 The objective of having a MBP is that a retailer would like to have a proper balance
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between:-
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Prof. Manjunatha S Department of MBA, SVIT

 o what will be paid to suppliers for purchase of merchandise and making it available
to customers; and
o The cash inflow that will come in the business from sales to customers.
 Though in practice, there are several accounting practices that allow some flexibility (for
example extended credit terms or easy payment options), this balance is vital to maintain
the firm’s liquidity.
 For the effective accomplishment, the firm’s internal records, past years experience must
be carefully considered instead of relying on historical data alone.

Retail communication mix:

 Communication is the foundation of all business relationships.

 Communication gap can hamper the business relationships
 The communication program intimates the customers about the presence of a store and
its merchandise uniqueness.
 Communication program attracts the customers
 Attract them and lure customers to visit the store
 Retailers adopt both paid & unpaid modes of communication

Role of Communication in Retailing

 To increasing brand awareness

 To develop associations with brands
 Merchandise Uniqueness
 Price policy
 Unique Lifestyle
 Unique properties
 Continuous Recall

Methods of Communication

 Paid Impersonal Communication

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 Sales Promotion
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 Advertising

Prof. Manjunatha S Department of MBA, SVIT

  Store Atmosphere and Visual Merchandising
 Websites
 Paid personal Communication
 Personal Selling
 E-mail
 Unpaid Impersonal Communication
 Publicity
 Unpaid Personal Communication
 Word of Mouth Communication

Retail Communication Process

[Link] the Retail Communication Programme

[Link] Device the Communication Strategy
[Link] the Communication Budget
[Link] of Communication Programme
[Link] the Communication Programme

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Prof. Manjunatha S Department of MBA, SVIT