■ Retail Management – Detailed Exam Notes
1. Store Design
Store design is the art and science of planning a retail environment to maximize sales productivity,
influence customer flow, and strengthen brand experience. It combines layout, zoning, visual
merchandising, and atmospherics.
Objectives:
• Maximize sales per sq. ft., smooth customer flow, encourage impulse purchases, create a consistent
brand experience, and reduce shrinkage.
Location & Catchment:
• Reilly’s Law: Customer attraction increases with store size but decreases with square of distance.
• Huff’s Model: Probability of visiting a store depends on its size/appeal and distance.
Layout Types:
• Grid Layout: Straight aisles, efficient, used in supermarkets.
• Free-Flow Layout: Open browsing, boutiques.
• Racetrack/Loop: Forced path, IKEA model.
• Mixed/Angular: Premium, aesthetic appeal.
Zoning & Space Planning:
• Decompression Zone: First 5–15 feet, minimal product placement.
• Power Wall: Right-hand wall at entry – premium/high margin products.
• Planogram: Scientific SKU arrangement (eye-level = buy-level).
Visual Merchandising & Atmospherics:
• Mannequins, signage, window displays.
• Atmospherics: Lighting, music, scent, colors affect mood.
KPIs: Sales per sq. ft., Conversion rate, ABV, Dwell time, Shrinkage %.
2. Logistics & Supply Chain
Supply chain ensures the right product reaches the right place, at the right time, cost, and quantity.
Logistics covers transport, warehousing, and delivery execution.
Demand & Inventory:
• Forecasting uses historical/seasonal models.
• ABC Analysis: A = high value, low qty; C = low value, high qty.
• EOQ balances order vs holding cost.
• Safety Stock protects against demand/supply variability.
• Reorder Point:
ROP = (Average Daily Demand × Lead Time) + Safety Stock
Inventory Productivity:
• Inventory Turnover = COGS ÷ Avg Inventory.
• GMROI = Gross Margin ■ ÷ Avg Inventory ■ (cost).
• OTB = (Planned Sales + Reductions + EOM) − (BOM + On-order).
Network & Distribution:
• Centralized DCs (cost efficient) vs Decentralized DCs (faster).
• Cross-docking: Direct transfer without storage.
• Picking: Zone, Batch, Wave picking.
Omnichannel Fulfilment:
• BOPIS, BORIS, Ship-from-store, Dark stores.
KPIs: Fill Rate, OTIF, Order Cycle Time, Perfect Order %, Logistics Cost % of Sales.
3. Customer Relationship Management (CRM)
CRM is a strategy and system to acquire, retain, and grow customers by maximizing Customer Lifetime
Value (CLV).
Data & Segmentation:
• Collected via loyalty programs, apps, POS, e-commerce.
• RFM Model: Recency, Frequency, Monetary value.
• Segments: High-value loyalists, discount seekers, churn risks.
Personalization:
• Next-Best-Offer, Trigger-based campaigns, Coupon targeting.
Loyalty Programs:
• Points-based, Tiered, Paid (Prime), Coalition programs.
Metrics:
CLV = (Avg margin × Retention Probability) ÷ (1 + Discount Rate − Retention Rate)
Other KPIs: CAC, Retention rate, Churn %, NPS, CSAT.
4. Service Strategy
Service quality is a key differentiator in retail when price and product are similar.
SERVQUAL Dimensions:
1. Reliability 2. Responsiveness 3. Assurance 4. Empathy 5. Tangibles
Blueprinting:
• Front-stage (customer facing) vs Back-stage (support).
Service Recovery:
LEARN = Listen, Empathize, Apologize, Resolve, Notify.
KPIs: Wait Time, First Contact Resolution, AHT, CES, NPS, CSAT.
5. Financial Strategy
Financial planning in retail ensures profitability in a low-margin, high-volume industry.
P&L; Basics:
Net Sales − COGS = Gross Margin → − Opex = Operating Profit → − Tax/Interest = Net Profit.
Margins & Labels:
• National Brands: Customer pull, lower margin.
• Private Labels: Higher margins, retailer control.
Pricing Strategies:
• EDLP, Hi-Lo, Psychological Pricing, Markdown Optimization.
Merchandise Planning:
• Assortment breadth & depth, Stock-to-sales ratio, OTB controls.
Category Management:
• Roles: Destination, Routine, Seasonal, Convenience. KPIs: Sales, GMROI, Market Share.
Key Formulas:
GMROI = GM■ ÷ Avg Inventory (cost)
Inventory Turnover = COGS ÷ Avg Inventory
Reorder Point = Demand × Lead Time + Safety Stock
OTB = (Planned Sales + Reductions + Planned EOM) − (Planned BOM + On-order)
Quick Revision Sheet
• Store Design: Grid, Free-flow, Racetrack, Mixed; Zoning = Decompression Zone, Power Wall,
Planogram.
• SCM: EOQ, ROP = Demand×LT + SS, GMROI, OTB, Inventory Turnover.
• CRM: RFM Segmentation, CLV Formula, Loyalty Programs, NPS, Churn.
• Service: SERVQUAL (RRAET), LEARN recovery, CES, NPS, CSAT.
• Finance: P&L;, Margins (NB vs PL), Pricing (EDLP vs Hi-Lo), Category roles.