Davanagere University

Subject: Retail Management

Module 1: Introduction to Modern Retail Management

Introduction:

The distribution of finished products begins with the producer and ends at the ultimate consumer. Retailing is the business
activity of selling goods and services to the final consumer. Retailing comes at the end of the marketing distributive channel. A
retailer is a person, agent, agency, company or organisation, which is instrumental in reaching the goods, merchandise or
services to the ultimate consumer.

Meaning and definition of Retail, Retailing and Retail Management

Retail: Retail is the final stage of any economic activity. The word retail is derived from the French word “retaillier”, which
means ‘to cut a piece of’ or ‘to break bulk’. It performs all those activities involved in sale of goods and services to final customer
for consumption of the self or others with his consent.

Retail has been defined as the process of selling goods or services to consumers usually in small quantities.

Retailing: Retailing is the final step in the distribution of merchandise for consumption by the end consumers. It consists of all
activities involved in the marketing of goods and services directly to the consumers for their personal, family or household use.

According to Phillip Kotler: "Retailing includes all the activities involved in selling goods or services to the final consumers for
personal and non-business use."

Retailing is defined as “a set of activities or steps used to sell a product or a service to consumers for their personal or family
use”.

In the above definition, set of activities refers to all those activates which a retailer undertakes in order to procure goods and
services from the producer and includes promotion and distribution of those goods and services to consumers.

Retail Management: The various processes which help the consumers to procure the desired merchandise from the retail stores
for their use is called as retail management.

It is defined as “A process of promoting greater sales and customer satisfaction by gaining a better understanding of the
consumers of goods and services produced by a company.

The process of promoting greater sales and customer satisfaction includes, market research, understanding consumer
behaviour, communicating consumer needs to the producer and then procuring required goods and services as merchandise.

Characteristics of Retailing:

1. Direct interaction with end users: As retailers’ sells goods and services to final consumers he has direct interaction with the end
users which helps him to collect feedback about the products or services and communicate it to the suppliers.

2. It provides a platform for promotions: Retailers interaction with end users, display of merchandise, store layout helps in
promoting customers to purchase impulse goods.

3. Sales are generally small in unit sizes: It is one of the major characteristics, where retail itself mean to sell in small quantities.
Many customers buy products in small quantities for household consumption.

4. Location is a critical factor in retailing: In general customers need to visit the retailer place for purchasing activity. Hence,
retailer consider factors such as potential demand, supply of merchandise and store image related factors in locating the retail
store.

5. Services are as important as core products: In retailing the retailer and customer meet together for the purpose of selling or
purchasing goods or services. Hence, there will be a direct contact between these two where customer expect personalised
services from the retailer and not just selling of goods.

6. Larger in Number: Retail stores are larger in number when compared to other members of distribution channels such as
wholesalers, agents, distributors etc. It is because retailer sell goods and services to final consumer in less quantities at the
convenient place.
 Functions of Retailing

1. Sorting: Manufacturers make one single line or multiple product lines and will always prefer to sell their entire output to few
buyers to reduce their costs. Final consumers will prefer to choose from a large variety of goods and services and then usually
buy in smaller quantities. Retailers need to maintain balance between demands of both the sides, by collecting a combination of
goods from different producers, buying them in large quantities and selling them to individual consumers in smaller quantities.
This process is called sorting.

2. Arranging Assortment: An assortment is a retailer’s selection of merchandise from different producers with different brands.
Offering an assortment enables customers to choose from a wide section of brands, designs, sizes, colours, and prices in one
location. Manufacturers specialize in producing specific types of products. Small retailers take assortment decisions on the basis
of their experience and organised retailers depend on a detailed study of past trends and future projections for arranging
assortments.

3. Breaking bulk: Retailers offer the products in smaller quantities tailored to individual consumers and household consumption
patterns. This reduces transportation costs, warehouse costs and inventory costs. This is called breaking bulk.

4. Holding inventory: A major function of retailers is to maintain required level of inventory so that products will be available for
consumers. Thus, consumers can keep a much smaller inventory of products at home because they can easily access more from
the nearby retailers. Retailer’s inventory allows customers instant availability of the products and services.

5. Extending services: Retailers provide various services that make it easier for customers to buy and use products. These services
may be providing credit facilities, after sale services, providing information regarding new products to their customers. They
display products to attract the customers and provide product guarantee from owner’s side, and also deal with consumer
complaints.

6. Channel of communication: Retailers serve as significant communication channels across the value chain. Retailers are the
bridge between the manufacturer or suppliers and the end users. They serve as a two-way channel of communication. The
manufacturer collects customer choice and preference data from retailers and provides information about existing and new
products to consumers through the retailers.

7. Transport and advertising: Retailers help in transport and advertising function. The larger assortments are transported from
wholesaler’s point to retailers point by retailer’s own arrangements and many times, the retailer delivers the goods at final
consumer’s point. During the visit of customer to the store, the retailer advertise the merchandise in stock based on the need of
the consumer.

8. Risk bearing Retailers bear a different kind of risk to the manufacturers and suppliers. Even the customers can come back to the
retail point and return the product. In that case, the risk of product ownership many times rests with the retailers. Many
companies have buy back schemes and return schemes whereby the retailers can always return the unsold items to the
manufacturer.

Importance of Retailing

1. Retailing shapes the lifestyle of the people: Retailing is an integral part of the modern society. It shapes the way of life. In the
past, trading of goods was a part of a traditional society. But in recent times, buying and selling of goods have become a brand
dominated activity.

2. Retailing contributes to the economy: The importance of retail sector is reflected in its contribution to the growth of an
economy. It contributes over 10% of country’s GDP and around 8% employment. Retailing is the driving force of the economy. It
aims at promoting its sustained growth.

3. Retailing dominates the supply chain: Goods and service flow from manufacturers or service providers to consumers. Where
consumers are large in number and are widely distributed, the role of retailers becomes vital. Retailers serve as a connecting link
between the wholesalers and consumers.

4. Retailing is interdisciplinary: The pace of growth within retailing is accelerating. Retailing has emerged from a number of
interrelated disciplines such as geography, economics, management and marketing.

5. Retailing is acknowledged as a subject area in its own right: Potter has described the academic study of retailing as the
“Cinderella of the social sciences“. Retailing is an accepted area of academic debate, such as marketing and management,
developed fully as an area of study. University research centres focus on retailing and professional appointments in retailing
have been made.
6. Retailers enjoy status as major employers: In today’s society, retailers are the major employers. It is estimated in developed
countries that retail industry employs one in nine of the workforce. In India retail industry accounts for around 8% of
employment.

7. Retailers are gatekeepers within the channel of distribution: Retailers are becoming increasingly important in their role as
gatekeepers within the channel of distribution. As retailer is a mediator between the producer or other suppliers and final
consumer, their job is significant in shaping demand for a product or service.

8. Retailing has scope for expanding internationally:

Retailing offers scope for shifting retail operations outside the home market. Retailers who focus on luxury goods markets are
expanding their business internationally. Retailers are moving into more geographically and culturally distant markets.

Evolution of Retailing in India

The retail industry in India is largely unorganised and predominantly consists of small, independent and owner managed shops.
There are around 12-14million retail outlets in India apart from an unaccounted shops and pushcarts/mobile vendors. The
evolution of retailing in India can be understood in the following categorisation.

• Early Eighties: Retailers operated in a highly unstructured and fragmented market. 'Retailing' in India was synonymous with
peddlers, vegetable vendors, neighbourhood kirana stores (small grocery stores) or sole clothing and consumer durable stores in
a nearby town. Very few retailers operated in more than one city.

• Before 1990: Organized retailing in India was led by few manufacturer owned retail outlets mainly from the textile industry, Ex:
Bombay Dyeing, Raymonds, S Kumar's, and Grasim. Later, Titan successfully created an organized retailing concept and
established a series of showrooms for its premium watches

• After 1990: Liberalisation has made way to the growth of retailing. Changing profile of the Indian consumers, increasing wages
of the employees working in Greenfield sectors with higher purchasing power. Setting up of retail chains by domestic retailers
like Cotton World (Mumbai), Nirula's (Delhi) and the Viveks and Nilgiris in the South.

• The latter half of the 1990s saw a fresh wave of entrants with a shift from Manufactures to Pure Retailers. For e.g. Food World,
Subhiksha and Nilgiris in food and FMCG; Planet M and Music World in music; Crossword and Fountain head in books.

• From 1995 onwards saw an emergence of shopping centres, super markets and hyper markets mainly in urban areas.

Growth and development of Retailing in India

• Retailing business in India is undergoing rapid transformation. The retail industry in India is largely unorganised. The organised
retailing is growing at a rate more than 30%. It implies that slowly the unorganised segment is being converted into organised.

• The Indian retail industry is the fifth largest in the world. Comprising of organized and unorganized sectors, India retail industry
is one of the fastest growing industries in India, especially over the last few years.

• Retailing is India’s Largest industry in terms of contribution to GDP and constitutes over 14-15 percent of the GDP and around 8
percent of the workforce in the country.

Factors influencing for the growth of Indian Retailing

• Raising income of the individual and improvements in infrastructure of the country are enlarging consumer markets and
accelerating the convergence of consumer tastes.

• Liberalization of the Indian Economy has given access to multinational retailers

• Increase in spending per capita income of the individual helped in shifting demand from necessity to comfort and luxury goods
and services.

• Advent of dual income families also helps in the growth of retailer sector as there is more scope for changing life style.

• Shift in consumer demand to foreign brands like McDonald, Sony, and Panasonic etc. has given scope for creating global brands.

• Consumer preference for shopping in new environment has made retailers to shift to more organised stores in the form of super
markets, hyper markets or shopping malls.

• The Internet revolution is making the Indian consumer more accessible to the growing influence of domestic and foreign retail
chains.
• Reach of satellite T.V channel is helping in creating awareness about global products for local markets and thereby changing
consumer preferences.

Types of Retail Formats

Introduction:

The format of a retailer is the overall appearance and feels that it presents to customers, primarily its look and layout, the sort of
range it stocks and the approach taken to pricing. In simple, retail format is the store package that the retailer presents to the
customer.

A retailer format is the type of retail mix that the retailer adopts, which includes the following factors:

• The nature of merchandise and service offered by the retailer

• The pricing policy of the merchandise by the retailer

• The retailer’s approach to advertising and promotional programmes

• The retailer’s approach to the design of the store as well as to visual merchandising

• The choice of location preferred by the retailer for the above, and

• The size of the store.

Classification of Retail Formats:

Ownership
Based
Store Based
Merchandise
Based
Retail Non-store
Formats Based

Service
Based

Store Based Retail Formats:

The store based retail formats are the one which primarily operate from a physical brick and mortar environment.

• They can further classified as:

1. Ownership based retail formats

2. Merchandise based retail formats

1. Ownership Based Retail Formats: In this store based retail stores are classified on the basis of form of ownership. On the
basis of form of ownership retail stores are classified as follows:

a. Independent stores:
An independent store is one type of retail store where the retailer owns and operates only one retail outlet. Normally such
outlets have an owner or a proprietor and other working members in the outlet may be from the family.

b. Chain Stores:

It is also called as a corporate retail chain in which two or more outlets are under common ownership, and are usually having the
same merchandise, ambience, promotional schemes etc. These retail chains enjoy the bargaining power and also, cost
effectiveness.
c. Franchises:

A franchise is a contractual agreement between the franchiser and the franchisee, allowing the franchisee to conduct a business
under an established name as per a particular business format in return for a fee or compensation. ‘McDonald’s ,Pizza Hut,
Domino’s and Subway are few franchises operating in India.’

d. Co-operative stores:

Consumer Cooperatives or stores run by government bodies’ aim at providing essential commodities at less costs. As a national
policy, shopper cooperatives are inspired and developed as a democratic establishment, owned, managed and controlled by its
members, for cover of the interest of the common customers. Janatha Bazar, kadhi Bhandar, PDS stores are example for the co-
operative stores.

e. Leased departments:

These are also termed as shop-in-shops. When a part of a department in a retail store is leased / rented to an outside party, it is
termed as a leased department and is a good way to expand the product offering and in India it is specially done for perfumes
and cosmetics. Nowadays it is seen that the high traffic areas like shopping malls, airports, multiplexes etc. are having the
presence of small retail outlets or counters that are a part of larger retail chains.

Merchandise based retail formats

Retail stores are classified on the basis of merchandise mix offered to customers. Within this classification, retailers can be
further classified on the basis of their target market as follows:

1. Convenience stores:
These are relatively small stores (Kirana /Provision stores) located near residential areas. In general they are open for long hours
and all the seven days a week with limited line of convenience products. In simple words, it is a local store selling mainly
groceries and targeted at the customer who want to make their purchase with the convenience of time and place.
2. Super markets:
These are the stores which sell food, groceries and other non-food items at low cost and earn low margin. Compared to
convenience store, these are large in size and offer merchandise at high volume.
3. Hyper markets:
The term ‘hypermarket’ is derived from the French word ‘Hypermarche” which means a combination of a supermarket and a
department store. It is also called as ‘One stop stores’ in which variety of merchandise mix is offered comparatively at less price.
4. Speciality stores:
A store specialising in a particular type of merchandising or a single product of durable goods like furniture, household goods,
consumer electronics, fashion apparels, food or a range of complementary durable goods product categories is termed as a
speciality store.

5. Departmental stores:
A department store is a large scale outlet often multi-leveled that offers fashion clothing, accessories, cosmetics, household
goods etc. from more or less separate departments on different floors.
6. Factory outlets:
Factory outlet is a retail store in which manufacturers sell their stock directly to the public. Traditionally, it is attached to
a factory or warehouse. At factory outlets, the products sold are from one brand only. Manufacturers who sell only
their own products at a reduced price.
7. Catalogue Showrooms:
Catalogue retailers are generally specialise in consumer durables, house ware etc. In these stores customer comes and places
the order through a catalogue of the product/s that he would like to buy and then arrangement is done to bring the product
from the warehouse for purchase by the customer.

Non-Store Based Retail Formats

Non store selling is the absence of the shop and selling on to the client and might take the shape of direct commercialism and
direct response promoting. It is the form of retailing where the retailer is in direct contact with the consumer at the workplace
or at home. The consumer becomes aware of the product via email or phone call from the retailer, or through an ad on the
television, or Internet.

A direct relationship with the consumer is the basis of non-store retail format. Non-Store based retailing includes non-personal
contact based retailing such as:

1. Direct Selling: Direct selling is the marketing of products or services to consumers through sales tactics including
presentations, demonstrations, and phone calls. This is needed where the products value needs more explanation and cannot be
purchased off the shelf. In direct marketing, generally, a data base of customers is maintained.
 2. Mail Order selling / Catalogue selling: This type of retailing doesn’t require personal selling and store operations. This type of
retailing and is sometimes applicable for the specialty merchandise. Catalogue marketing helps companies reduce their cost per
customer and increase their reach significantly.

3. Tele-marketing: In this type of retailing the product is advertised on television, details about the product features, price are
explained. Phone number for each city will be provided, where the buyer can call in and place the order for the product. The
products are then home delivered.

4. E-Marketing: In this form of retailing the customer can purchase the products from the place of his comforts. It is also called
as ‘E-tailing’. It has widened the market to be served and provides national or international presence. Internet retailers depend
on IT integration from their store from to order processing all the way back to their suppliers. This helps to reduce the costs of
acquiring and delivering throughout the value chain.

5. Automated vending/Kiosks: In this form of retailing products or services are placed in a machine and dispensed to customers
when they deposit cash or use plastic money (debit/credit card). Vending machines offer consumers greater convenience 24
hours a day.

Service Based Retail Formats

These retailers provide various services to the end consumer. The success of service based retailer lies in service quality,
customization, differentiation and timeliness of service, technological up gradation, and consumer-oriented pricing. Services are
intangible in nature but the level of intangibility varies from one service to another.

Various Service based retail formats includes:

1. Retail banking

2. Car Rentals

3. Various services like electricity, gas.

4. Service contracts which can be entered into for a couple of durable goods like maintenance of water filters, laptop systems, etc.

Meaning of Franchising

A franchise is a type of license that a party (franchisee) acquires to allow them to have access to a business's (franchisor)
proprietary knowledge, processes, and trademarks in order to allow the party to sell a product or provide a service under the
business's name. In exchange for gaining the franchise, the franchisee usually pays the franchisor an initial start-up and
annual licence fee.

According to International Franchise Association a franchise is the agreement or licence between two legally independent
parties which gives:

● A person or group of people (franchisee) the right to market a product or service using the trademark or trade name of another
business (Franchisor)
● The franchisee have the right to market a product or service using the operating methods of the franchisor
● The franchisee have the obligation to pay the franchisor fees for these rights
● The franchisor have obligation to provide rights and support to franchisees.

Parties to franchise

• Franchisor: - He is the provider of franchise. He owns the trademark/product or service and licenses the trademark to another
party. He may provide support for the running of the franchise, which may be in the form of product/service training,
advertising, marketing etc. In exchange he receives a fee, commonly known as the royalty or franchise fee, which would vary
from industry to industry and from business to business.

• Franchisee: - He is the person who pays for and purchases a franchise and operates a business using the name, product,
business format and other items provided by the franchisor.

Types of Franchising

1. Product or trade name franchise: In this type of franchising , the franchisee concentrates on one manufacturer’s product, and
thereby acquiring the manufacture’s identity to some extent.

Ex: Automobile dealership, Gas service stations

2. Business format franchise: Business format franchising has been defined as the granting of a license for a predetermined
financial return by a franchising company to its franchisees, entitling them to make use of a complete business package,
 including training, support and the corporate name, thus enabling them to operate their own businesses to exactly the same
standards and format as the other units in the franchised [Link]: Adigas, Cafecoffeeday, Dominos, Pizzahut, Bigbazar etc.

3. Territorial franchise: This kind of franchise is for a very specific geographical area with territorial override for the franchisee.
There are 3 sub categories under territorial franchise:

a. Single Unit franchise: Franchise is given to operate one unit or outlet of the franchise business.
b. Master franchise: The franchise is granted to a substantial territory, usually a whole country. The master franchisee then, may
set up unit franchises.
c. Regional Franchise: In case of large geographical area, a franchisor or master franchise may divide the territory with separate
regions and grant a franchise for each separate region. It is called as regional franchise.

Advantages of franchising

• Franchisee can use a recognised brand name and trademarks.

• Franchisee benefit from any advertising or promotion by the franchisor. Advertising costs are greatly reduced because the
advertising cost is shared by the franchises.

• The franchisor gives support in training, help setting up the business, and also gives advice to run the business successfully.

• Franchisee usually have exclusive rights in franchise territory. The franchisor won’t sell any other franchises in the same region.

• Financing the business is easier. Banks are sometimes more likely to lend money to buy a franchise with a good reputation.
Many a times a franchisor may assist the franchisee in obtaining financing for the setting up of the business.

• Risk is reduced and is shared by the franchisor. A franchise business eliminates the risk of learning from a completely new
business.

• Relationships with suppliers have already been established.

Disadvantages of Franchising

• Costs of franchise is higher for the successful business as it includes start-up cost and royalty. The franchise fee is normally paid
only at the time of starting or renewing the franchise agreement. Royalty on the other hand is a recurring cost which has to be
paid to the franchisor at a predefined frequency.

• The franchise agreement usually includes restrictions on how to run the franchise business. The franchisee cannot make changes
to suit the local market. There are also terms that grant the franchisor the right to terminate the franchise agreement, if the
policies and regulations prescribed are not observed.

• The franchisor might go out of business, or change the way they do things. Then it affects the business of the franchisee.

• Other franchisees could give the brand a bad reputation. Poor performance of a few franchisees may affect the goodwill of the
franchiser and his trademark.

• It is difficult to sell franchise - Franchisee can only sell it to someone approved by the franchisor. Hence, the freedom of selling
franchise at the chosen price of the franchisee is not possible.

References:

1. Chethan Bajaj, Rajnish and Nidhi Varma- Retail Management- Oxford University Press.
2. Swapna Pradhan-Retailing Mnaagement-Tata McGraw Hill Publication.
3. Study Material- LPU-EXCEL BOOKS PRIVATE LIMITED
 Module 2: Retail Marketing

Meaning and Definition of Retail Marketing

Retail Marketing includes all the activities involved in selling goods or services directly to final consumes for personal, non-
business use. Any organization selling to final consumers – whether a manufacturer, wholesaler, or retailer – is doing retail
marketing.

• Retail marketing is the application of marketing functions in distribution of goods to the customers. Retail Marketing provides
convenience, comfort in shopping in place or medium that is convenient to the consumer.

• In simple, Retail marketing involves managing marketing activity in the retail sector.

According to Philip Kotler:

• All activities in selling goods or service directly to final consumer for personal or non-business use is retailing or retail marketing.

Retail marketing primarily undertakes following activities:

1. Identify the customer and understand his needs

2. Store the needed merchandise or goods.

3. Attractive presentation of goods for easy identification and convenience.

4. Provide necessary comfort in purchase i.e., location, price, service etc.,

Characteristics of Retail Marketing

1. Sale to Ultimate Customer: Goods or service in a retail transaction are sold to final customer for domestic or household use
or industrial use are classified as retail transaction.
There is no further re-sale of the product or service. It is consumed by the customer or the person for whose benefit he has
purchased.

2. Convenient Form (Quantity): The word retail means cut size ‘small piece’ or break the bulk. Retailers buy in large quantity
from suppliers or manufactures, he breaks the bulk and sells in small quantities to match the need of customers. Goods may be
repacked or delivered in small packs in convenient form which an individual consumer purchases.

3. Convenient Place and Location: Retailers deliver goods from a location that is convenient to the customers. In case of physical
location. It may be a small store, a shop and multiplex. It may also be over the internet, through mobile or mail order business.
Goods/or service are offered to the convenience and comfort of the consumer.

4. Last Link in Chain of Distribution: A retailer is the last link in the chain of distribution. He sells goods to final customer. He
communicate between manufacturer and consumer. Benefits both of them by sharing necessary information that gives profit to
manufacturer by manufacturing goods which satisfies the need of the customers.

5. Marketing not Just Sale: Retailing is not an activity of just a sale. It is a marketing activity. Consumer is offered comfort and
convenience in buying goods of his choice. Marketing functions like transportation, banking, insurance, ware housing are
undertaken to create and deliver goods to satisfy the needs of the customers. Goods are designed and delivered to match the
taste of people and satisfy their desire and thereby ensuring customer delight.

6. Goods and also Service: Retail marketing is not only connected with delivery of physical goods or merchandise like Grocery,
consumer goods, Electronic goods etc., it is also engaged in providing services. Now a days marketing of services is becoming an
important areas like banking, Insurance, Tourism, Hotel, Investment etc.

7. Creation of Utility: Retail marketing creates Form, Place and Time utility. It breaks the large bulk size into small size and
changes the form of product. Place utility is created by bringing goods from place of manufacturer to the place of consumer.
 Goods are stored in advance and delivered when demanded by the customer. A retailer creates these utilities and their by
increases value and utility of goods.

8. Customer Delight: Retail marketing not only satisfies customer’s wants, it ensures their delight. It provides more satisfaction
than what is expected through its retail network. Retailer Communicates need of the customer to manufacturer and thereby
creates value in providing the required product to the customer. Retailer stores and presents such product to the customer
which increases their satisfaction level.

Nature of Retail Marketing

1. Part of marketing: Retailing is a part of marketing activity. It helps the product to reach the final customer which is a goal of
marketing. Thus retailing facilitates marketing activities by targeting a wide variety of customers.

2. Customer centric: The whole concept of retailing revolves around the customer. Due to increased competition, all the
retailers want to attract the customers. Success of retail market depends on satisfying customer needs and maintaining good
customer relationship.

3. Multi- dimensional: Retailing has many dimensions. They vary from local kirana shops and kiosks to super malls selling
multiple branded products. These days there is a manifold increase in the use of internet for buying and selling the goods.

4. Complex management process: Retailing seems like a simple process. But in reality it is a complex management process.
Retailing involves retail stores being located in convenient places, arranging goods according to different price bands, selling
goods in the quantities convenient to the customers, proper after sale services and a wide range of sales promotion measures to
attract the customers. Thereafter, there should also be proper Customer Relationship Management (CRM) programmes to
maintain long healthy relationships with the customers.

5. Assortment of products and services: Retailing involves a combination of goods and services. It is not at all possible for a
retailer to survive in today’s world by offering just a single product. In order to be successful, a retailer needs to offer an
assortment of goods and services to match the demand of the customers.

6. Creation of utilities: A retailer helps in creation of time and place utilities. Time utility is created when goods are made
available at a particular time. The retailer creates time utility by storing the goods with himself and makes them available to the
customers as and when needed. Place utility means making the goods available at different places away from the place of
manufacture. Retailers make the goods available to the customers at various locations away from their manufacturing locations.

Retail Marketing Mix

Introduction and Meaning:

⮚ The marketing tools that a retail organisation uses to pursue its marketing objectives are termed as the Retail Marketing Mix.
⮚ Retail marketing mix refers to the variables that a retailer can use to frame an effective marketing strategy to attract his
prospective customers.
⮚ The variables are the varieties of merchandise and assortment along with the services that are offered, including promotion,
pricing, layout and also store location design and visual merchandising.

Components of Retail Marketing Mix

1. Product (Merchandise): Products are also called as merchandise. The different products that the store offers is termed as the
merchandise mix. The merchandise mix consists of merchandise line which refers to group of products that are closely related
because of its usage.

Ex. For merchandise line- Home fashion, stationery, Men’s wear, footwear etc.

● Breadth of Merchandise Line: It is also called as assortment which refers to the number of merchandise brands in the
merchandise line.
Ex: In Merchandise line of Foot ware: Breadth is different brands of footwear such as- Bata, Liberty, Woodlands, Paragon etc.
● Depth of Merchandise Line: The depth of the merchandise refers to the average number of Stock Keeping Units within each
brand of the merchandise line. SKU’s refers to the varieties of products that the retailer keep for trading with different brand,
size, colour, price, style and pattern.
Ex: In Merchandise line of Footwear: Depth is different sizes, Material,styles in different brands.
2. Price: Price is a highly sensitive and visible part of retail marketing mix and has a bearing on the retailer’s overall profitability.
Further, pricing itself is an essential part of marketing mix and has its own place in the strategic decision-making process. Price
constitutes a barrier to demand when it is too low just as much as when it is too high.
The price at which the product is sold to the end customer is called the retail price of the product. Retail price is the summation
of the manufacturing cost and all the costs that retailers incur at the time of charging the customer.
3. Place: Place refers to the location of the retail store. The location of the retail store is considered as most important element in
the success of the retail store. Location refers to the store and its trading area, from where a majority of its customers
originates.
4. Promotion: Retail promotion refers to all communication that informs, persuades and reminds the target market or the
prospective customers about the marketing mix of the retail store.
This communication between customers and retailer can be achieved through advertising, sales promotion, publicity and public
relation which all together refers to promotion mix.

5. Presentation: The manner in which merchandise is presented in the store is called as presentation. It includes store layout,
ambience of interior and exterior and also visual merchandising.

6. People: Retailing is the human centric industry. Customers come to the store not only because of the ambience or reasonable
price or the quality and range of products. They value the interaction with store people. Moreover it is this human factor which
gives valuable input to the store management about the specific requirements of the customers. The attitude, behaviour,
manners and product knowledge of the people in the store plays a very important role in building long-term relations with the
customers.

7. Service: The support service that the retailer offer to the customer is also an important factor in the success of retailer. The
credit policies, product return policies, after sale services need to be communicated to the customer properly. With a good
customer service a retailer can satisfy the customer and retain the customer.

Retail Consumer Behaviour- Need for studying Consumer Behaviour

Introduction:

⮚ Consumer behaviour is all about understanding how people choose to spend their money and time in buying and consuming
various goods and services that they desire.

⮚ Consumer behaviour can be defined as, “Consumer behaviour refers to the mental and emotional processes and the observable
behaviour of consumers during searching, purchasing, and post consumption of a product or service.”

⮚ Schiffman and Kanuk state that consumer behaviour is “the behaviour that the customers display in searching for, purchasing,
using, evaluating, disposing or products and services that they expect will satisfy their needs”.

⮚ In retail context Consumer behaviour is the process of understanding why a consumer makes a purchase, when he buys it,
where does he buy and the frequency of the purchase.

Need for studying Consumer Behaviour

• To understand consumer needs which helps the retailer to create a product that is likely to be successful in the market.

• Studying consumer behaviour helps in framing suitable retail mix strategies.

• Understanding consumer behaviour helps to determine channels of communication for the purpose of communicating
merchandise mix offered by the retailer.

• To frame product positioning strategies and assess the positioning goals the retailer need to understand the consumer
behaviour.

• To know the perception of consumers towards products and services retailer need to understand the consumer behaviour. If the
perception of consumers about the retailer and his offerings is positive then the positioning strategy can be deemed a success.

• To know the factors influencing consumer buying decisions the retailer has to study the consumer behaviour.

• Retailer need to study consumer behaviour to know the perception of consumers towards competitors’ products and services.
This helps the retailer in analysing the startling facts, which may provide directions for framing differentiation strategies.

• To protect the retailer from taking wrong decisions in marketing the products and services, he has to study consumer behaviour.

Factors Influencing Retail Consumer Buying Behaviour

A retail consumer’s purchase decision tends to be affected by the following four factors:
1. Demographic factors
2. Psychographic factors
3. Environmental factors
4. Lifestyle

1. Demographic Factors: Demographic factors are unique to a particular person. They are objective, quantifiable, and easily
identifiable population data such as gender, age, income, occupation, marital status etc. They also involve identification of who
is making decision of buying and who is the ultimate consumer. Demographic factors includes the following:

• Gender
• Age
• Occupation
• Education
• Family size
• Income
2. Psychological Factors:
Psychological factors refer to the intrinsic or inner aspects of an individual. An understanding of consumer psychology guides the
retailers segmentation strategy. Consumers respond differently towards the same retail marketing mix due to following
psychological factors

⮚ Motives: A motive is an internal energizing force that directs a person’s activity towards satisfying a need or achieving a goal. If
retailers identifies relevant motives behind consumer purchases, then he can develop better retail marketing mix and strategies.

Maslow’s hierarchy of needs has provided following 5 needs as motives for consumer purchases:

a. Physiological need
b. Safety
c. Social
d. Esteem
e. Self-actualisation
Retailers are required to identify the need level of the consumer to frame better promotional strategy to motivate their
preference towards offered retail mix.
⮚ Perception: Perception is the process of selecting, organising and interpreting information inputs to produce meaning. A
stimulus or object may be perceived differently by a different set of customers based on their unique personal and situational
context. Hence, a particular retail mix may be perceived differently by different customers. Therefore, retailer need to customise
the strategies to attract and retain the customers.

⮚ Learning: Learning is the process through which a relatively permanent change in behaviour results from the consequences of
past behaviour. According to various theories of learning, a permanent change in behaviour is caused by information and
experience. Therefore, to change consumers shopping behaviour, retailers need to provide them required information about the
store and merchandise or service.

⮚ Attitude: Attitude is the consumers predisposition to respond favourably or unfavourable to an element of retail mix. It
comprises knowledge and positive or negative feelings about an object or activity.

Consumers’ attitude towards retail store and its merchandise greatly influences the success or failure of a retail outlets
marketing strategy. Consumers’ personality, perception and lifestyle influences attitude.

⮚ Personality: Personality refers to all the internal traits and behaviours that make a person unique. Uniqueness is derived from
heredity and personal experience. In retailing, consumers’ consistent and enduring buying patterns represents a set of
characteristics which is used to target customers. Those characteristics are:

▪ Adaptability
▪ Aggressiveness
▪ Ambitiousness
▪ Authoritarianism
▪ Competitiveness
▪ Extroversion
▪ Introversion
▪ Friendliness
▪ Self-confidence etc.
 Customer traits affect their buying behaviour. Hence, retailer need to match the retail mix with the perceived image of their
customers.

Environmental Factors

Environmental factors cover all the physical and social characteristics of a consumer’s external world, including physical objects,
location and social factors. The environmental factors influences consumers wants, learning, motives etc., which in turn
influences purchase behaviour of individual.

• The environment can be analysed at two levels-

1. Macro level- It includes large scale, general environmental factors such as Economic conditions, Technology, Natural
Environment etc.

Economic Conditions refers to growth rate, Level of employment and income, purchasing power, availability of credit, money
supply, price level etc.

Technology includes research and development in technology in the form of innovative products, store formats, payment
system etc.

Natural environment refers to the ecology which includes climatic changes and differences in climate over regions. Depending
on the condition of the natural environment consumer buying behaviour varies.

These factors influences have common bearing on consumer behaviour.

2. Micro Level- It refers to the more tangible physical and social aspects of an individual’s immediate surroundings.

Physical environment includes nature of the market structure, visual merchandise and display, location and other infrastructural
components.

Social Environment includes all social interactions among people. Consumer learn from social interactions of participation and
observation. Culture, sub-culture, social class along with interaction among family members or any other reference groups are
components of social environment. It influences values, beliefs, attitudes, emotions and behaviour of consumers.

Life Style of Consumers

Lifestyle refers to an individual’s mode of living as identified by his activities, interests and [Link] variables have been
measured by identifying a consumer’s day-to-day activities and interests. Those variables are:

• Activities and interests

• Nature of occupation
• Availability of leisure
Lifestyle is considered to be highly correlated with consumer values and personality.

Retail Consumer Buying Decision Process

Introduction:

When customer buy things, they engage in decision making process. Decision may be defined as the selection of a best option
from two or more alternatives.

Consumer decision making process is the process which consumers undergo when they make up their mind to buy something. It
includes the decision about what, when, where, how and from whom to purchase.

Consumer compare different options for his intended purchase and finally decide to choose a best alternative in the form of
product or service at particular place, at particular time and at a particular quantity.

Customer decide whether to buy a product or not. There are many parameters which are evaluated before such decision is
made. Every consumer goes through a process, which leads to a purchase of a product. Depending on the product type, the
duration of this process varies. It may range from few seconds (Impulse Buying), to days (Groceries), to months (Car, TV, etc.), or
even years (House, Land, etc.). The process consists of five common stages which is depicted in the following figure.

Stages in Consumer Buying Decision Making Process

 Need
Recognitio
n

Post-
Informatio
Purchase
n Search
Evaluation

Evaluation
Purchase of
Decision Alternativ
es

1. Need Recognition: Need recognition is the identifying gap between the present state and some desired state by the consumer.
Different influencing factors creates awareness in the consumers about their specific need. If a customer accept the created
awareness about specific need, then the need will be converted in the form of desire for a particular product or service. To
satisfy the desire, the consumer search for alternatives. Hence, decision about particular product or service, retail store, follows
the awareness of the need.

Needs are classified as Simple needs and Complex needs.

Simple needs are those which occurs frequently or periodically and can be solved through known ways. Ex. Purchase of Grocery,
consumer goods etc.

Complex needs are those which occurs occasionally by the consumer and evolves over time. Ex. Purchase of Consumer durables.

2. Information Search:
Once the customer has identified the need or problem he looks for information to solve the problem. Information search is the
process where the prospective buyers examine their environment for appropriate information to make a best decision.
Information search may be ongoing search of information which can be done by promotional scheme of a retailer or through
window shopping or pre purchase search of information where customer looks for specific information for specific need.

Information can be acquired from internal or external sources. Internal sources are the past experiences where in external
sources are Medias, sales people and other reference groups.

3. Evaluation of Alternatives: After collecting information to fulfil the desire, the customer has to choose a best possible
alternative. For this purpose first he need to evaluate the alternatives evolved at the information stage. General criterias used to
evaluate a particular retail mix are:
Advertising, Ambivalence, Cleanliness, Credit facility, Display, Delivery, Handling customer complaints, after sale services,
Guarantee/warrantee, Bill payment, customer relationship, pricing policies, Operation hours etc.
Once the criteria list for evaluation is prepared, the customer starts rating all those criteria’s and shortlist or choose a best
alternative.

4. Purchase Decision: Once the alternatives are evaluated, the customer can choose a particular store, product category or
merchandise or brand. Later he choose from multiple alternatives which is referred as purchase decision. This involves an
exchange of cash or credit not for the ownership or use of offering.

5. Post Purchase Evaluation: After purchasing a particular product or service, consumer evaluate its performance against the
expected level of satisfaction on account of important attributes. This type of evaluation likely to lead to three possible results
such as:
a. Neutral response: In this actual performance meets expectations.
b. Satisfaction: In this actual performance exceeds the expectations.
c. Dissatisfaction: In this actual performance fall short of the expectations.

Meaning and Definition of Customer Service

Customer Service is a process which provides time and place utilities for the customer and involves pre-transaction, transaction
and post-transaction considerations in relation to the exchange process with the customer.

Customer service has been defined by Levy&Weitz as all activities performed by retailers and their personnel to attract, retain
and enhance a customer’s shopping experience.
 According to Lovelock C H, “Customer service is a task, other than proactive selling, that involves interactions with customers in
person or by telecommunications, mail or automated processes. It is designed, performed and communicated with two goals
such as operational productivity and customer satisfaction.”

In simple words, customer service includes all the functions and activities performed by a retailer in order to satisfy the
customer thereby building customers for life.

Difference between Customer Service and Customer Satisfaction

• Customer service focuses on measurement of how well a firm meets the established performance standards that are viewed as
important to meeting customers’ needs.

• Customer satisfaction is about, how the customers measure externally the service performance of a firm. The aim of customer
satisfaction is to identify the gap between customer perception of service and actual service.

Importance of Customer Service in Retail

Customer service is important because it helps to:

• Increase customer loyalty which helps the retailer to retain the customer for long term.

• Increase the amount of money each customer spends with retailer which in turn helps for profitable growth of the retailer.

• Increase how often a customer buys from the retailer and thereby helps to generate profit.

• Generate positive word-of-mouth about the retailer which ensures increase in customer base.

• By increasing customer base and profitability, it strengthens competitive advantage of the retailer.

Strategies for Ensuring Customer Service

Strategies can include:

• Understanding the customers' needs and wants by identifying and listening the customers.

• Treating customers respectfully in the store creates a positive attitude among customers towards the store.

• Acting on promises made to the customer helps to retain the customers.

• Handling complaints and returns gracefully is very essential to gain customer loyalty.

• Exceeding customer expectations ensures generating positive word of mouth about the retailer.

• Going out of the way to help the customer will ensure competitive advantage to the retailer.

Retail Planning Process

Introduction and Meaning:

A retail plan is fundamental to the existence of the retail organisation. A retail plan can be defined as “a clear and definite plan
that the retailer outlines to tap the market and build a long term relationship with the consumers.”

It is a systematic plan that provides the retailers the overall framework for dealing with competitors as well as technological and
global movements.

In the retail planning process, a retailer decides about the planning strategies of the retail business, learn about the competition
in the market, and create and implement strategies accordingly.

Steps involved in Retail Planning Process

The retail planning process involves the present stage of business, the formulation, lists of available strategic options, and the
implementation of the selected strategies. Various steps involved in retail planning process are as follows:

1. Define the Mission of the retailer: The mission statement is a statement of the long term purpose of the organisation. It
describes what the retailer wishes to accomplish in the markets in which it chooses to compete. A mission statement of the
retailer generally includes the following elements:
● The products and services that will be offered
● The customers who will be served
● The geographic areas that the organisation chooses to operate in and
● The manner in which the firm intends to compete in its chosen markets.
 2. Conduct Situation Analysis- PEST, SWOT and BCG: Once the mission statement has been defined, the retail organisation needs
to analyse and understand its own strengths and weaknesses and also opportunities and threats which may arise in the
environment. The situation analysis can be conducted with the help of following well developed models.
a. PEST Analysis: This model is used to analyse the external environment of the retailer in which he operates. PEST refers to
Political, Economic, Social and Technological factors. By analysing these essential environmental factors, retailer can analyse
prospective opportunities or threats with which he has to deal.
b. SWOT Analysis: In this model Strength, Weaknesses, Opportunities and Threats of the retailer are analysed. Out of these four
factors, strength and weaknesses are internal factors whereas opportunities and threats are posed by external environment.
c. BCG Matrix: It is also known as BCG growth share matrix or product portfolio market which helps the retailer to plan for their
merchandise mix. BCG stands for Boston Consulting Group.
The BCG matrix fits products into one of four categories. The placement is based on market growth and market share. Each
product falls into a different quadrant, which helps your business decide how to deal with different products.
I. Dogs: Dogs are merchandise with low growth and low market share. These products or services are typically viewed as a waste.
Money gets tied up into these products, but they do not produce enough of a profit to justify the investment.
II. Question Marks: Question Marks, also known as “Problem Child,” are products in a high growth market with low market shares.
These products are called question marks because it is unclear which way they will swing. Will they rise into the Stars quadrant,
or go back to Dogs?
III. Stars: Products that are Stars have a high market share in high-growth markets. These products have the potential to become
market leaders. They can eventually become Cash Cows.
IV. Cash Cows: Cash Cows are products that have a high market share in low-growth market. These are products that drive revenue
for your business.

These are the four quadrants of the BCG matrix. This matrix can help the retailer to analyse where his retail mix and
merchandise mix fall and helps to decide how to proceed next. [Link] of alternatives: After analysing the situation with
the help of any of the established models, retailer need to consider various alternatives available to him for tapping a particular
market.

According to Ansoff’s Matrix, the alternatives available to a retailer are:

● Market Penetration: Increasing number of customers, increasing the quantity purchased by the customers etc.
● Market Development: Entering new geographical market, Introducing new products to the existing merchandise mix etc.
● Retail format development: Introducing a new retail format.
● Diversification: Entering to new business by developing new products for new markets.

[Link] objectives: The objectives are translation of the mission statements into operational terms. Objectives give direction and
set standards for measurement of performance. These objectives may be of long term and short term.

5. Obtain and allocate the resources needed to compete: In order to achieve the objectives framed in the previous stage, the
retailer has to arrange for required resources. These resources includes, Human resources, finance and physical facilities.

6. Develop the retail plan- At this stage retailer will develop a retail plan specifying the target market and retail mix.

The target market is the segment of the consumer market that the retailer choose to serve.

Once the retailer has chosen the target market, then he has to determine the retail mix to be offered. It includes determining,
merchandise mix, pricing policies, and location of the store, store presentation, services to be offered and the communication
mix to be adopted by the retailer.

7. Implementation of the retail plan: The success of retail plan lies in its proper implementation. Hence every care must be
taken in implementation of retail plan.

8. Evaluation and control: Once the retail plan is implemented, feedback on the performance of the store has to be collected for
evaluation purpose. This type of evaluation ensures whether the retail plan has been implemented properly or not, and also
provide inputs for modifications if required. In the actual performance is not up to the plan then controlling measures are
undertaken by the retailer.

References:

1. Chethan Bajaj, Rajnish and Nidhi Varma- Retail Management- Oxford University Press.

2. Swapna Pradhan-Retailing Mnaagement-Tata McGraw Hill Publication.

 Module 3: Retail Location & Operations Strategies

Introduction

The location of stores is a key concern to any retail organisation. Retail stores should be located where market opportunities are
best. Location is a broader concept, which denotes the store and its trading area, from where most of its customers originate.
Location decision is important for any business and retail, because it has a direct bearing on the costs as well as revenue of the
entity in several ways.

Many options are available to the retailer for choosing the location of his store. The choice of the location of the store again
depends on the target audience and the kind of merchandise to be sold.

Importance of Retail Locations

Location decision very important because;

a. It involves large capital investment

b. It affects transportation costs
c. It affects human resources cost
d. It affects the amount of customer traffic
e. It affects the volume of business

Hence, it is important that retailers understand the location decision in the context of stores operations and marketing strategy.

Levels of Location Decision and its Determining Factors

Level of Location Decision

Selection of City Area within city Site decisions

-Adequacy & potential of

-Size of the city’s -Availability of access
route passing traffic
trading area
-Nature of zoning -Complementary nature
-Population &growth of adjacent stores
regulations
-Trade potential -Ability to intercept
-Direction of the city’s
-Number, size & quality expansion passing traffic
of competition -Adequacy of parking
-Customer attraction of
-Development cost shopping place

A
retailer must take the location decision based on the following three levels:

a. Selection of City
b. Selection of an area or type of location within a city
c. Identification of a specific site.

Selection of City:
 Retailer must consider the following factors in the selection of a city for starting a retail business.

a. Size of the city’s trading area from which the customer come for shopping.
b. Population or population growth in the trading area.
c. Total purchasing power and its distribution
d. Total retail trade potential for different lines of trade
e. Number, size and quality of competition
f. The cost of land, rental value and other retail developmental costs.

Selection of an Area or Type of Location within a City:

In the selection of an area or type of location within a city the following factors have to be evaluated.

a. Customer attraction power of a shopping district or a store.

b. Quantitative and qualitative nature of competitive stores in the area.
c. Availability of access routes to the store.
d. Nature of zoning regulations in the city regarding the development of shopping centres, residential areas, flyovers etc.
e. Direction of spread of the city.

Selection of a specific site:

The choice of a specific site within a locality is very important. The following factors need to be considered while selecting a
specific site.

a. Adequacy and potential of traffic passing the site.

b. Ability of the site to intercept the traffic flowing past the site.
c. Complementary nature of adjacent stores
d. Adequacy of parking facilities available in the vicinity.
e. Vulnerability of the site to unfriendly competition

Types of Retail Locations

A retailer must choose a suitable retail location among various types of retail locations available. Various types of retail locations
are classified as follows.

Types of
Locations

Business
Free Standing
Associated
Locations
Locations

Unplanned Planned
Business Shopping
Centres Centres

[Link] Standing Locations ( Isolated Locations):

A free-standing location is one where there are no other retail outlets exists nearby location. This type of location can be
classified as follows:

• Neighbourhood stores: These stores are located in residential areas and serve a small locality. They sell convenience products
such as groceries.

• Highway stores: these stores are located along highways or at the intersections of two highways and attract customers passing
through these highways.

Advantages:

● Less competition
 ● Less rent
● Easy parking

Disadvantages:

● Difficulty in attracting customers

● High cost of promotion

2. Business Associated Location

In these locations a group of retail outlets offers a variety of merchandise. Retail outlets located here work together to attract
customers and compete together for each customer. This type of locations can be further classified as following:

i. Unplanned Business Centres:

An unplanned business district is a type of retail location where two or more retail stores locate together on individual
considerations rather than on the basis of any long-range collective planning. There are four kinds of unplanned business
districts in India. They are:
a. Downtown or central business centres
b. Secondary business centres
c. Neighbourhood business centres
d. Suburban business centres

ii. Planned Shopping Centres:

A planned shopping centre consists of a group of owned or managed stores, designed and operated as a unit, based on balanced
tenancy and surrounded by parking facilities. In India, planned shopping canters are classified into four categories viz.,

a. Regional shopping centres or malls

b. Neighbourhood or community shopping centres
c. Specialized markets
d. Periodic markets

Store Design

Introduction

The store design and layout tell a customer what the store is all about. It is a very strong tool in the hands of the retailer, for
communicating and creating the image of the store in the minds of the customers.

It is the creation of store image that is the starting point of all marketing efforts. The importance of store design needs to be
understood form the perspective of the retailer and from the perspective of the consumer.

The concept of retail store design covers all aspects of the design of a store ranging from store frontage, fascia and signage, to
the internal elements of furniture, merchandising, display, lighting, graphics, point of sale and decoration.

Retail store design acts on the conscious and subconscious level and has an effect upon the consumer’s perceptions of a brand
or retailer as the quality of the goods themselves.

Meaning of store design

• Store design covers all aspects of the design of a store: ranging from store frontage, fascia and signage, to the internal elements
of furniture, merchandising, display, lighting, graphics, point of sale and decoration.

• Store design refers to the physical characteristics associated with the store that includes interior and exterior elements, as well
as layout planning and display.

• Store design plays a major role in attracting customers to the store, improving the quality of service experience, creating a brand
positioning for the outlet, and improving customer retention rates.

Principles of Store Design

1. Totality:

The entire store has to be considered as one unit. The entire store right from the store entrance to the type of fixtures used to
display the merchandise has to come across as one entity.
2. Focus:

The primary focus within the store has to be the product or the merchandise. Achieving sales is the primary step towards being
sustainable in the long run.

3. Ease of shopping:

The store must be easy for the customer to navigate, easy to access and simple to understand. Customer doesn’t like
cumbersome or tedious shopping.

4. Change and flexibility:

Store design must be adaptable to the environment. Change and flexibility have to be considered from the point of the ever-
changing consumer needs and store design has to be adaptable to that change.

Elements of Store Design

Store design is a very strong tool in the hands of the retailer for communicating and creating the image of the store in the mind
of the customers. Store design consists of following elements:

Frontage&
Entrance
External
Building
Display
Architecture
space
Health &
Safety

Location Parking
Store Design

Access

Target
Customers
Store Theme
Merchandise
Mix

Exterior Store Design

• Exterior store design refers to all aspects of physical environment found outside the store which includes store entrances, main
board, marquee, windows and lighting etc. It significantly affects store traffic and sales.

• Storefront of every retail store exhibits a specific image such as traditional, up market or discount store to the shopper.

• In competitive markets, retailers can use the storefront as a strong differentiating factor and attract and target new customers.
It is an important decision criterion for the new shoppers in unknown retail markets.

The major influencing aspects of external store design are:

1. Retail Store Entrance: The entrance of retail store has to fulfil two important criteria viz., functional and aesthetic. The entrance
may be an open entrance, closed doors or a semi-opened entrance. The most common store entrance alternatives used by
retailers are as follows:

a. Shutter- covered
b. Modular fabrication
c. Prefabricated structure
d. Prototype storefront
2. Display Windows: Display windows are very common among retailers dealing in fashion and gift items. It is an important factor
in building image of the store. Display window is used as a significant marketing tools to communicate with prospective
shoppers and also to attract new customers to the store.

3. Marquee or Sign Board: A marquee is usually a painted or neon light displaying only the store name or the store name along
with the trademark and other important information of a retail store at the storefront or entrance. The quality of marquee
influences the image of the store perceived by the customers.

4. Parking Facilities: Parking facilities play an important role in the success of the retail firm.

Interior Store Design

• Interior store design refers to all aspects of physical environment found inside the store. Interior store design affects sales, times
pent in the store, and approach or avoidance behaviour of the target segment.

• Interior design involves all components of the store interior, including fixtures, graphics, flooring, ceiling, lighting; and other
visual elements.

• Interior design is a function of the aesthetics within the store, the merchandise sold within and the space used for the same and
the overall layout of the store for selling the merchandise.

• Interior design has an influence on shopping behaviour of customers through mediating emotional states.

The major influencing aspects of Interior store design are:

1. Space planning: Space planning helps a retailer determine the amount of space available for selling and for storage. It also helps
to determine the location of various departments, planograms etc.

2. Atmospherics: Atmospherics is the design of an environment with the help of visual communications, lighting, colour, music and
scent, to stimulate customer’s perceptual and emotional responses and there by influence their buying behaviour.

3. Aesthetics: Aesthetics takes into consideration factors like the actual size of the store, the colours, textures etc used within the
store to create a look and feel for the store.

4. The Layout: The layout is the plan for a store. It is the way merchandise or products have been arranged in a retail store.

Store Interiors are a function of the fixtures, flooring and ceilings, lighting and graphics and signages.

Steps involved in selection of retail location

The selectin of the store site can be a systematic process or a non-systematic process which is based on environmental
observation.

Before selection of the location, retailer has to choose a particular region where he wants to establish the store. The region may
be the country, state or a city. After choosing a region the following steps has to be taken:

1. Market identification: The first step in selection of retail location is to identify the markets attractive to a retailer.

2. Determining the market potential: The retailer needs to take into consider following factors for determining the market
potential.

• Demographic feature of the population

• The characteristics of households in the area

• Competition and compatibility

• Laws and regulations

• Trade area analysis.

[Link] alternate sites: After having determined the market potential the retailer has to identify alternate sites.

• Identification of the country

• Identification of region
• Identification of locality

• Identification of location

4. Selection of best suitable site: After identifying the alternate sites, based on following factors retailer has to choose a suitable
site to establish the retail outlet.

• Traffic

• Accessibility of the market

• Amenities available

• To buy or to lease

• The product mix offered

Trade Area Analysis

A trade area is a contiguous geographic area from which a retailer draws customers who account for the majority of store’s
sales.

A trade area may be a part of the city, or it can extend beyond the city’s boundaries depending on the type of store and the
density of settlements surrounding it.

A thorough analysis of trade area is necessary to estimate market potential, understand customer profile, competition, develop
merchandising plan, and focus on promotional activities.

Types of Trade Areas

1. Primary Trade Area: Primary zone is the geographical area from which the retail outlets or the shopping centre derives 60 – 65%
of its customers. It is the area closest to the store.

2. Secondary Trade Area: Secondary zone is the geographical area of secondary importance in terms of customer sales, generating
about 20% of an entire sale of the outlet.

3. Tertiary Trade Area: Covers the balance customers who occasionally shop at the store or shopping centre.

Rating Plan Method

In rating plan method, the various factors for locating a store are given ratings depending upon the perception of the
management.
Formulating a location strategy typically involves the following factors:
Facilities: facilities planning involves determining what kind of space a company will need given its short- term and long-term
goals.

Feasibility: Feasibility analysis is an assessment of the different operating costs and other factors associated with different
locations.

Logistics: Logistics evaluation is the appraisal of the transportation options and cost for the prospective manufacturing and
warehouse facilities.

Labour: Labour analysis determines whether prospective locations can meet a company’s labour needs given its short -term and
long-term goals.

Community and site: Community and site evaluation involves examining whether a company and a prospective community and
site will be compatible in the long term.

Trade zones: Companies may want to consider the benefits offered by free-trade zones, which are closed facilities monitored by
customer services where goods can be brought without the usual customer requirements.

Political risk: Companies considering expanding into other countries must take political risk into considering when developing a
location strategy.

Governmental regulation: Companies also may face government barriers and heavy restrictions if they intend to expand into
other countries. Therefore, companies must examine government – as well as cultural – obstacles in other countries when
developing location strategies.
 Environmental regulation: Companies should consider the various environmental regulations that might affect their operations
in different locations. Environmental regulation also may have an impact on the relationship between a company and the
community around a prospective location.

Incentives: Incentives negotiation is the process by which a company and a community negotiate property and any benefits the
company will receive, such as tax breaks. Incentives may place a significant role in a company’s selection of a site.

The location which gets the maximum rating, considering all the factors, is chosen for locating the plant.

The process of selecting store location under rating plan method

1. Identify the important location factors.

2. Rate each factor according to its relative importance, i.e., higher the ratings is indicative of prominent factor.

3. Assign each location according to the merits of the location for each factor.

4. Calculate the rating for each location by multiplying factor assigned to each location with basic factors considered.

5. Find the sum of product calculated for each factor and select best location having highest total score.

Store Layout

Introduction

Store layout refers to the interior retail store arrangement of departments or grouping of merchandise. It is the integral to the
interior look of the [Link] layout helps movement of customer within the store.

Store layout is like a plan for the store, which aid movement and flow of customers, so that they move through the entire
[Link] planning the layout, it is important to consider issues related to logical sequencing and a category adjacency. The
merchandise layout plan should be created according to the shopping habits of customers at the store.

Types of Store Layout

Store layout planning involves decisions about allocation of floor space, product groupings, and nature of traffic flow, which can
take any of the following types:

1. Grid or straight flow layout

2. Free form flow layout

3. Racetrack flow layout

4. Storeyed layout

Grid or Straight Flow Layout

• It is commonly used layout followed by conventional grocery stores.

• In this one area of display is along the walls of the store, the other merchandise is displayed in a parallel manner.

• It allows for movement within the area and uses space effectively.

• It is most preferred layout in many retail stores that adopt self-service.

• Grid arrangement is not very aesthetic, but it ensures smooth shopping trips of shoppers within the stores.

• It is considered as cost efficient layout because of space utilisation.

 Free Form Flow Layout

• It is also referred as ‘boutique layout’.

• It provides an informal setting to shoppers facilitating shopping and browsing.

• In this merchandise is arranged in an asymmetrical manner.

• It allows for free movement and is often used in department stores to encourage people to browse and shop.

• This form doesn’t allow for maximum utilisation of retail space available.

The Racetrack Flow Layout

• This layout is also called the loop layout.

• This layout offers an unusual, interesting and entertaining shopping experience.
• It encourages impulse and promotional purchase.
• Retailer with multiple departments opt for this layout to attract shoppers for each department.
 Storeyed Layout

• It is a common layout form among independent and leading organised retailers.

• In this, stores have two or more floors.
• This layout provides the best utilisation of floor area.
• It allows the retailer to set different sections for different product categories.
• This type of layout saves a substantial amount of initial investment of the retailer.

Factors Affecting Store Layout

1. Total space Available.

Does your store have big space? Small space? The area or space allotted for the store will affect the
arrangement of goods, pieces of furniture, equipment, etc.

2. Types of Product/Merchandise offered by the store.

What type of merchandise will the store be selling? Dry goods? Wet goods? Perishable goods? Durables? Electronic goods?
based on the answer to these questions, a layout can be designed.

3. Number of departments in store.

Store layout differs with the number of departments in store.

4. Volume and variety ratio in the product line carried.

Depending on number of product line offered and volume of products, the store layout differs.

5. Mode of Operation

The mode of operation may be store selling, catalogue based or online retail, based on this store layout differs
6. Movement required in the store locating, picking, storing the product.

If the products offered are convenience goods or shopping goods, based on that customer movements in the store differs.
According to the movement required layout will be designed.
7. Target customers and the average no. of customers visiting the store.

Type of target customers and the number of customers visiting the store daily will also influences the store layout.
8. Degree of changes in operation.

If the store is flexible in terms of selling variety of merchandise or mode of operations, then the store layout should also be
flexible to adopt to those changes.
9. Stock/inventory level.

If the store requires maintaining high level of inventory or stock, then the store layout should make provision for that. If less
inventory is required then retailer can utilise this space for other purposes.

Store Facade

Store facade or store front of retail store exhibits a specific image such as traditional, upmarket or discount store to the shopper.

In competitive market, retailers can use the store facade as a strong differentiating factor to attract and target new customers.

The store facade is an important element of store design. It is the reflection of the personality of store.

Types of store facade

1. Straight Front: It runs parallel to the sidewalk.

2. Angled front: It is at a slight angle to the traffic

3. Arcade Front: It is usually spacious. They allow the window merchandise closely.

Store Space Planning

• Space planning is a fundamental element of the interior design process.

• It starts with an in-depth analysis of how the space is to be used. The designer then draws up a plan that defines the zones of the
space and the activities that will take place in those zones.

• The space plan will also define the circulation patterns that show how people will move through the space.

• The plan is finished by adding details of all the furniture, equipment and hardware placement.

• Store space planning is the process of distributing the right amount of space to the right merchandise at the right time according
to a detailed analysis of customer demand.

Importance of space planning

• To determine the location of various departments.

• Helps to create planograms- the location of various products within the department.

• To determine the pros/cons of specific locations, impulse products, destination areas, seasonal products, products with specific
merchandising needs, adjacent departments.

• To determine the relationship of space to profitability.

Retail Operations

Introduction

Retail operations link the merchandise to the customers. Retail operations is a combination of administration tasks,
merchandising duties, and customer management.

Retail operations is the term used to describe all the activities that keep the store functioning well. It includes people
management, supply chain, store layout, cash operations, physical inventory, master data management, promotions and pricing
etc.

Elements of Retail Store Operations

1. Administration operations
2. Merchandising operations
3. Customer related operations

Administration operations

Store administration starts with the opening of the retail store. Store administration deals with various aspects like the
cleanliness of the store premises, maintenance of the store façade and the display windows etc.

It includes:

• Store opening
• Store closing
• Staffing
• Handling payments
• Shrinkage and Theft
• Events and promotions
• Management of premises

Merchandising Operations

The task of allocating the merchandise to various stores usually rests with the merchandise management team or the category
manager. At the store, the store staff does the management of this inventory.

It includes:

• Receive
• Tally
• Order
• Replenish
• Return
• Display
Customer Related Operations

It includes:

• Service
• Advice
• Returns
• Complaints

Efficiency in Retail Store Operations

Clear
Definition
of roles

Efficiency
Effective in Store Clear
Daily Reporting
meeting Operation Structure
s

Following
daily
routines
 5 S’s Model of Retail Operations

• This model is presented by Pal and Byrom.

• This model is a combination of 5 key elements namely System, Standards, Stock, Space and Staff.

• The 5S’smodel attempts to simplify the complexities of retail operations and can be used as a problem-solving technique.

The 5 S’s of retail operations

Systems Standards

Customers
Benefit

Stock Space Staff

The 5 S’s of retail operations

• Systems: It refers to the processes and the procedures that the retailer has in place for ensuring the smooth functioning of the
retail store.

• Standards: It refers to the standards set by the retailer in terms of service within the environment of the store.

• Stock: Stock is an important element to be controlled by the retailer because shortage of stock creates customer dissatisfaction
whereas too much stock leads to more capital investment.

• Space: Space doesn’t refer only to selling space, but also to the non-selling space.

• Staff: It is very essential for customer contact and service.

Responsibilities of Store Manager

1. Managing employees-

● Supervision: Store manager has to establish realistic targets and communicate these to the employees. On achieving these they
should be rewarded.
● Motivation: Store manager should understand the strengths and likes of employees. With this he can motivate employees
properly. He has to involve employees in decision making.
● Retention: By motivating employees and also providing them a sense of security he can retain the employees for longer period.

2. Controlling costs-

● Credit management
● Inventory management
● Minimising Merchandise shrinkages
● Preventing shoplifting
● Insure against all possible contingencies
● Crisis management.

3. Complying with Legislation-

● Registration under required Acts.

● Licencing under specified Act.
● Compliance with Relevant Acts.

4. Store maintenance and upkeep-

● Store maintenance
● Energy management
● safety and security of personal and merchandise
● Housekeeping.

5. Managing merchandise presentation

6. Providing customer service: Ensuring quality of service

7. Communication- Communicate with Head office, employees and customers.

Store Security

• Retail store security generally refers to store and merchandise protection measures and techniques that retailers adopt for a
more secure sales environment. These measures are set in place to protect retail stores from crimes.

• The store manager is responsible for the safety and security of all customers and employees on store premises.

• Store security involves two basic issues:

1. Personal security

2. Merchandise security

• It's important to have a good plan in place to prevent crime and to help keep the employees safe.

• The personal safety of employees should be of vital concern to business owners, including those who operate retail stores.
Teaching employee’s awareness and implementing a few workplace rules can protect staff.

• Employees don't always worry about personal safety, so it is up to business owners to train employees about personal safety
both inside and outside the workplace.

• Training sessions and written policies should include information such as never giving out the personal information of other
employees.

Strategies for improving store security

• Avoid having a lone worker at any given time

• Install a security system like metal detectors through which all customers have to pass.

• Always leave the lights on

• Make regular deposit of sales receipt in banks from where they meet their expenses.

• Train your staff

• Install sensors

Retail store records

Store records are the physical documents required to be maintained by a retailer.

There are three types of records retailer has to maintain are sales records, purchase records, and POS (point-of-sale) records.

1. Sales records

• A journal of non-cash transactions affecting accounts payable

• A journal on cash transactions, including any check transactions

• Sales slips, invoices, receipts, cash register receipts and other comparable documents for original sales

• Memorandum accounts, lists and other documents concerned inventories, fixed assets and prepaid items

• Ledger to which these journals and other records have been posted

2. Purchase records

• Documentation of purchases subject to state and local taxes

• Documentation of purchases for resale, such as inventory and raw materials

• List of purchases exempt from state and local taxes

• Documents substantiating expenses and cost of goods sold

• Records reflecting the business purposes of purchases

• Proof that sales and use taxes have been paid

3. POS records

• Individual items sold or purchased

• Date of sales or purchase

• Sales or purchase prices

• Sales tax due

• Vendor names

• Invoice numbers and amounts

• POS identification numbers or purchase orders

• Methods of payment

Accounting system of Retail Store

1. Inventory Accounting

Inventory is the most important asset of a retail store, and it often comprises the largest investment that store owners make, so
it is crucial to know exactly where the inventory accounts stand at any time.

• Put systems in place to track the flow of inventory into and out of your store every day.

• Track the quantity and cost of all incoming shipments, as well as the quantity and sales price of each item sold.

• Make regular adjustments for spoiled, stolen or damaged goods to keep the records in line with the actual inventory on hand.

2. Income

• Track all the income as it comes in and compare the records to bank statements regularly to spot any discrepancies.

• Sales revenue is the largest driver of income for a store, and add all income that does not flow through the POS.

• Otherwise, keep detailed receipts of all income and transfer the totals into the accounting system as often as possible.

3. Expenses

• Track the expenses the same as the income and compare the records against bank statements regularly.

• Automate as many recurring expenses as possible, including rent and lease payments, and set the accounting system to
automatically record these expenses each period.

• Record all variable expenses in their appropriate double-entry bookkeeping accounts, including cost of goods sold, labour
expenses, fees, taxes and purchases.

• Include large one-time capital investments, such as display cases or lighting fixtures, in their own account so you can easily
separate them to calculate the normal operating profit.

3. Payables and Receivables

• Keep detailed records of money owed to retailer, as well as any debts retailer hold.

• Use the accounting system to remind retailer to pay loans, bills and credit debts on time, as well as to guide retailer collections
activities with credit customers.
• Both of these things are crucial to a small store; managing payables can boost or maintain the credit rating and managing
receivables can maintain a positive cash flow.

5. Owner's Equity and Retained Earnings

• Track all resources put into the business by owners in a separate equity account, even if retailer run the store as a sole
proprietor.

• This information is not as useful over the short term as other bookkeeping items, but it requires continued diligence over the
long term to maintain accurate records, which could come in handy if a partner leaves the business or the company switches to
a corporate structure.

• Think of retained earnings as the store's savings account.

• Keep detailed records of what goes into savings, what comes out and any interest earned in a retained earnings account.

References

1. Chethan Bajaj, Rajnish and Nidhi Varma- Retail Management- Oxford University Press.

2. Swapna Pradhan-Retailing Management-Tata McGraw Hill Publication.

3. Dr. S Hariharaputrian- Study Material- Retail Management- New Horizon college, Bangalore University.

Module 4: Merchandise Management

Introduction

• Merchandise refers to the goods bought and sold in business.

• Merchandising refers to the activities aimed at quick retail sale of goods using bundling, display techniques, free samples, on-
the-spot demonstration, pricing, shelf talkers, special offers, and other point-of sale methods.

• Retail Merchandising refers to the various activities which contribute to the sale of products to the consumers for their end use.

Definition

According to American Marketing Association: Merchandising encompasses “planning involved in marketing the right
merchandise or service at the right place, at the right time, in the right quantities, and at the right price.”

Merchandise Management

• Merchandise Management is termed as the analysis, planning, acquisition, handling and control of the merchandise investments
of a retail operation.
• Merchandise Management is the process by which a retailer attempts to offer the right quantity of the right product at the right
place and time while meeting the retail firm’s financial goals.

• The merchandise management process allows the retail buyer to forecast with some degree of accuracy what to purchase and
when to have it delivered. This will greatly assist the company in attaining its sales and gross margin goals.

Benefits of Merchandising

• The display of the merchandise plays an important role in attracting the customers into the store and prompting them to
purchase as well.

• Merchandising helps in the attractive display of the products at the store in order to increase their sale and generate revenues
for the retail store.

• Merchandising helps in the sensible presentation of the products available for sale to entice the customers and make them a
brand loyalist.

Factors Influencing Merchandising

1. Size of the Retail Operations: This includes:

• Issues such as how large is the retail business?

• What is the demographic scope of business: local, national, or international?

• What is the scope of operations: direct, online with multilingual option, television, telephonic?

• How large is the storage space?

• What is the daily number of customers the business is required to serve?

2. Shopping Options: Today’s customers have various shopping channels such as in store, via electronic media such as Internet,
television, or telephone, catalogue reference, to name a few. Every option demands different sets of merchandising tasks and
experts.

3. Separation of Portfolios: Depending on the size of retail business, there are workforces for handling each stage of
merchandising from planning, buying, and selling the product or service. The small retailers might employ a couple of persons to
execute all duties of merchandising.

Components of Merchandise Management

1. Merchandise Analysis: Target Market Analysis & Competitor Analysis

2. Merchandise Planning: Establishing objectives &Devising plans

3. Merchandise Control: Designing policies and procedures

4. Merchandise Acquisition: Physical purchase of goods and services

5. Merchandise Handling: Processing, receiving and storing merchandise, pricing & marking inventory, arranging displays,
customer transactions, delivering goods, handling returns, controlling and monitoring losses.

Process of Merchandising

Introduction

The process of merchandising involves understanding consumer needs, identifying & sourcing of right merchandise, deciding the
right assortment, planning distribution of merchandise to different locations in the right quantities, deciding on the pricing,
communicating merchandise offerings to the target customers, and taking feedback of consumers.
 Understandin
g consumer
needs
Taking
feedback Identifying & sourcing of
from Right merchandise
consumers

Communicating Planning the

offerings to target right
consumers assortment

Deciding the Planning

pricing distribution
Providing
right
quantities

1. Understanding consumer needs: The merchandiser should understand the different ways in which the consumer presently
satisfies the need.

2. Identifying and sourcing of right merchandise: Further, the merchandiser may need to identify the right merchandise based on
the study of consumer needs.

3. Planning the right assortment: Merchandiser has to plan for the different product sub-categorization. The sub-categorization
can be made, based on the consumer need.

4. Planning distribution to different locations: Once the assortment is cleared then the merchandiser needs to work out the
quantities to be dispatched to different distribution centres. The quantity dispatched should be based on the number of outlets
in each location, the minimum stocks to be maintained, turnover ratio, the replenishment time, etc. The logistics for delivery of
goods should also be taken into account.

5. Providing right quantities: Thus, for each store its requirement in terms of different assortment is worked out and the goods are
dispatched.

6. Deciding the price: Once the goods reach the store, the merchandiser needs to decide on the pricing of each of the
products/items. The prices are decided based on the gross margin policy for each of the products.

7. Communicating offerings to target consumers: The merchandiser may provide certain props and signage to each of the store to
communication right messages and offerings to consumers. There could be advertisements in print media or TV or radio or
hoardings etc., for giving mass publicity to the offerings.

8. Taking/understanding feedback of consumers: The merchandising team may decide to take feedback on different brands/items
to know consumers reaction to pricing, quality, availability, display, after use effect etc.

The feedback acts as a guideline for improving sourcing and assortment, so as to provide maximum satisfaction to consumers.

Functions of merchandising manager

The basic functions of a merchandise manager can be divided into four areas viz., Planning, directing, co-ordinating and
controlling.

1. Planning:

• Merchandiser has to prepare purchase budget. Purchase of merchandise is based on estimated sales, objectives of organisation
and expected returns.

• Merchandise plan is prepared for the entire organization i.e., store wise, department and also product wise.
• Plan also determines new products to be added and old products to be deleted based on prospects of sales.

2. Directing:

• Merchandise manager has to prepare and give guidelines and directions to buying department regarding quantity and budget of
purchase.

• He may also direct the terms of purchase.

• As per the broad guidelines and directions, buyers make timely purchase of merchandise to match the needs of organisation.

[Link]-ordinating:

• Merchandise manager undertakes balancing, timing and synchronizing the activities of buying and selling.

• He takes periodic stock report from each stores, monitors stock level, and determines purchases to be made.

• He also co-ordinates buying efforts of different buyers of the organisation.

4. Controlling:

• He controls entire operations of merchandising i.e., (a) buying (b) issue of merchandise to stores, (c) visual display (d) pricing of
sale, (e) sales promotion activities.

• He periodically takes stock reports determine financial implication of investment on merchandise.

• Ascertains return on investment store wise, category wise and product wise to determine which product contributing to the
profits of the organisation.

• Cost cutting measures are adopted to increase profitable lines.

• He controls the entire functioning to ensure that merchandising operations are profitable.

Sources of Merchandise

Introduction

• The term sourcing or procurement means finding or seeking out products from different places, manufacturers or suppliers.

• Sourcing of merchandise is a key element of cost in retailing.

• It is a specialised function accomplished within the parameters of the merchandise plan.

• It enables the retailer to have winning products.

Process of Merchandise Sourcing

1. Identifying the sources of supply

2. Contacting and evaluating the sources of supply

3. Negotiating with the sources of supply

4. Establishing vendor relations

5. Analysing vendor performance

Sources of Merchandise

Sources of merchandise refers to the various types of suppliers from whom a retailer can buy the required merchandise.
Retailers has to choose an effective source of merchandise from various existing alternatives.
 Manufacturers

Other
Wholesalers
Retailers
Sources of
Merchandis
e

Govt. Bodies Agents

1. Manufacturers: Large Retailers regularly deal directly with a product manufacturer.

2. Wholesalers: Wholesalers acts as an agent between manufacturers and retailers and supply goods to retailers.

3. Agents: Agents act as a mediator between manufacturer and retailer And supply merchandise to retailers against negotiated
commissions on the percentage of the total value of goods purchased.

4. Government & Semi-Government bodies: Retailers may purchase from central and state government bodies such as the food
corporation of India, Mother Dairy etc.

5. Other Retailers: Small retailers may purchase from large retailers.

Merchandise Planning

Introduction

• Merchandise planning can be defined as, the planning and control of the merchandise inventory of the retail firm, in a manner,
which balances between the expectations of the target customers and the strategy of the firm.

• Merchandise planning is beneficial to both retailer and customer.

• Merchandise strategy influences the planning of merchandise in terms of product, price, the range and then the assortment.

Process of Merchandise Planning

Developing the sales forecast

Determining the merchandise

requirements

Merchandise control

Assortment planning

Stage-1: Developing the Sales Forecast

• Forecasting involves predicting what the consumer may do under given set of conditions.
• A Sales forecast is the first step in determining inventory needs of the product or category.

The process of developing sales forecast

1. Reviewing past sales

2. Analysing the changes in the economic conditions

3. Analysing the changes in the sales potential

4. Analysing the changes in the marketing strategies of the retail organisations and the competition.

5. Creating the sales forecast.

Stage 2: Determining the merchandise requirements

• In this stage, inventory levels are planned.

• For this merchandise budget is prepared.

• Merchandise budget is a financial plan which gives an indication of how much to invest in product inventories, stated in
monetary terms.

• The process of merchandise planning may be ‘top-down’ or ‘bottom-up’.

Parts of Merchandise Budget

1. The sales plan

2. The stock support plan (Inventory plan)

3. The planned reductions

4. The planned purchase levels

5. The gross margins

Inventory Plan

• Inventory management plan provides information regarding sales velocity, inventory availability, ordered quantity, inventory
turnover, sales forecast and the quantity to order for a specific Stock Keeping Unit (SKU).

• An SKU is a unique identifier assigned to a product by a retailer for identification and inventory control.

Stage 3: Merchandise Control

Merchandise control includes:

1. Limits overbuying and under buying

2. Prevents loss of sales due to unavailability of the requires stock

3. Maintain purchases within the budgeted limits

4. Reduce markdowns, which may arise due to excess buying

Stage 4: Assortment Planning

• Assortment planning can be defined as ‘the combination of all products made available in a store and a set of products offered
within a product category’.

• Assortment planning involves determining the quantities of each product that will be purchased to fit into the overall
merchandise plan.

Factors influencing assortment planning

• Type of Merchandise: Basic/Staple, fashion, convenience, or speciality

• Retailers policies towards type of brands

• Product line

• Finance available for investment

• Availability of space within store

• Merchandise turnover targets

Analysis and Evaluation of Merchandise performance

Measuring the performance of merchandise is necessary in order to gain an understanding of the products which have
performed well, and which have not performed as per the target.

Some of the commonly used measures of merchandise performance are:

1. Inventory Turnover

2. Gross Margin Return on Investment

3. ABC Analysis

4. Sell Through Analysis

5. Multiple Attribute Method

Inventory Turnover

• Inventory turnover is a key to merchandise performance.

• It measures how long inventory is on hand before it is sold.

• Products that are on hand for a short time, have a high turnover, and those that are on hand longer, have a low turnover.

• Turnover is a key to high performance, which means profits in retailing.

Gross Margin Return on Investment

• GMROI is a merchandise planning and decision making tool that assists the buyer in identifying and evaluating whether an
adequate gross margin is being earned by the products purchased, compared to the investment in inventory required to
generate the gross margin.

• Gross margin is the value of sales less the cost of goods sold.

Increasing gross margin ensures increasing sales revenue or reducing the cost of the merchandise

ABC Analysis

• This method entails classifying inventory into categories designated, A,B and C or high, medium and low rotation, proportional
to the inventory’s total cost.

• This analysis helps the management to rank order merchandise using some performance measure to determine which set of
items should never be out of stock, which could be allowed to be out of stock occasionally, and which set of items could be
dropped from list.

• This method uses the Pareto Principle of 80-20, where approximately 80% of the store’s sales or profits are derived from 20% of
the products.

Analysing Merchandising Performance

Sell Through Analysis

• It is a comparison between the actual and expected sales to determine whether early markdowns should be introduced or
whether a review of merchandise stock is called for to meet the existing demand.

• It is most suitable measurement for fashion-oriented products or new offerings.

• There is no rule, which can determine when a markdown is necessary.

 Multiple Attribute Method

This method uses a weighted average score for each vendor. It follows the following steps:

a. Develop a list of attributes to consider for decision making: Vendor reputation, service, merchandise quality, selling history etc.

b. Give importance weights to each attribute.

c. Make judgements about each individual brand’s performance on each issue.

d. Combine the importance and performance scores.

e. Add all to arrive at the brand scores.

REFERENCES:

1. Chethan Bajaj, Rajnish and Nidhi Varma- Retail Management- Oxford University Press.

2. Swapna Pradhan-Retailing Management-Tata McGraw Hill Publication.

3. Study Material- LPU-EXCEL BOOKS PRIVATE LIMITED

4. Study Material-Mr. [Link]-CHADALAWADA RAMANAMMA ENGINEERING COLLEGE

Module 5: Pricing and Promotion in Retailing

Introduction
• Price is an integral element of the retail marketing mix.

• It is the factor, which is the source of revenue for the retailer.

• It communicates the image of the retail store to the customers.

• The price at which the product is sold to the end customer is called the retail price of the product.

• Retail price is the summation of the manufacturing cost and all the costs that retailers incur at the time of charging the
customer.

Elements of Retail Price

1. Cost of Merchandise

2. Mark up of the retailer

Cost of Merchandise

• The cost of merchandise is the total of fixed and variable expenses to the retailer.

• Fixed cost: These are the cost which do not vary according to sale of merchandise, such as rent for retail store, storage space,
office equipment and expenses etc.

• Variable cost: These are the cost which vary with the amount of merchandise purchased and sold or services provided such as,
cost of purchase of merchandise, buying commission, cost of managing inventory etc.

Mark Up

• The profit to be earned from the merchandise is planned before fixing the retail price. This profit figure is called as Mark Up.

• Hence, Retail Price= Cost + Mark Up

Factors Influencing
Retail Price

Internal Factors External Factors

- Retailer Objectives
- Competitors
-Cost of Merchandise
-Consumers
-Image of the retailer
-Suppliers
-Product life cycle
-Government
-Promotional
Activity -Market conditions
Fac
tors Influencing Retail Pricing

• The price fixed by a retailer is influenced by a number of external and internal factors.

• These factors have to be considered while determining the pricing strategy.

• The extent of influence may vary from industry to industry.

Internal Factors

1. Retailer Objectives:

• 1. Profit Objectives 2. Market share Objectives [Link] oriented Objective

2. Cost of Merchandise:

• Variable Cost
• Fixed Cost
3. Image of the Retailer:

• Prestige Image
• Penetration Image
4. Product Life Cycle

• Stages in which the merchandise lies

5. Promotional Activity

• High promotional activity

• Low Promotional activity

External Factors

1. Competitors:

• High Competition
• Low Competition
2 .Consumers:

• Economic
• Image oriented
• Convenience oriented
• Variety oriented
• Loyalty oriented
3. Suppliers:

• Number of suppliers
• The switching costs from one supplier to another
4. Government:

• Government policies
• Legal Issues
5. Market Conditions:

• Economic condition

Controlling Costs for Determination of Price

Introduction

Cost control is the practice of identifying and reducing business expenses to increase profits, and it starts with the budgeting
process.

A retailer has to compare the stores actual financial results with the budgeted expectations, and if actual costs are higher than
planned, he has to take action to control the cost.

Running a retail business requires a lot of operating costs such as, employees’ salaries, rent, maintenance, inventory,
advertising, and many more. Retailer can’t eliminate these expenses, but he can reduce them. There are several methods to
control costs without sacrificing the product quality.

Cost controlling strategies

1. Cut unnecessary operating costs:

Most of the expenses of retailer may be spent on inventory. In an effort to save on operating costs, retailer can first figure out
the inventory costs and compare them to the profits he gain from them. From there, retailer can find out which items are
profitable and which ones don’t contribute to the business profits.

2. Retain customer than acquisition: For many retailers, customer acquisition is one of their biggest marketing goals. But turning
efforts to customer retention could reap more financial rewards, and more importantly, be a more cost-efficient means of
boosting sales.
3.

4. Rent unused retail space

 Take advantage of the empty space by renting it to someone else. In addition to increasing the income, they may also increase
the sales by bringing new customers to the store.

5. Open an online store

In addition to helping to reduce operating costs, opening an online store will also help increase the sales.

6. Reduce Packaging cost

Although attractive packaging is important, doesn’t mean retailer have to spend a lot of money on it. Retailer can still make the
product packaging look good by reducing excess materials.

7. Reduce manual task by making automation

Using an automated system such as ERP can help to eliminate manual tasks that spend a lot of time and effort. This means
retailer won’t have to increase the number of employees as the retail business grows.

8. Outsource logistics

outsource the logistics and supply channel instead of maintaining the own distribution centre.

9. Track employee productivity

Measure the effectiveness of the workers and manage them accordingly.

10. Negotiate with suppliers for better deals

Retailer can try asking for discounts or free shipping costs. Offer bulk purchases, since most suppliers give special rates to the
customers who make purchases in bulk. Bulk orders can also help to reduce the monthly supply costs.

11. Hire outsourced employees whenever need more employees for a short period.

Controlling costs in pricing

• As cost is one of the major determining factors in retail pricing decisions, by reducing or controlling costs, retailer can plan for
higher margin or reduced price which helps to attract more customers and achieve higher profit.

Retail Pricing Strategies

Introduction

• Pricing strategies affect both the profit margins and the positioning of a retailer.

• Different pricing strategies can be followed by the retailer depending on their business objectives, the influence of other
external factors, and the impact of the pricing strategy on other aspects of the marketing mix.

Retail Pricing Strategies

1. Everyday Low Pricing (EDLP): Retail price is below the MRP mentioned on the goods.

2. High-Low Pricing: Price is higher than the competitors EDLP

3. Loss- Leader Pricing: pricing FMCG at a lower price to attract customers to the store.

4. Skimming Pricing: Charging relatively high price for a product or service at first, then lowers the price over time.

5. Penetration Pricing: It is the technique of setting a relatively low initial entry price to attract customers.

6. Price Lining: The offering of merchandise at a number of specific but predetermined prices.

7. Psychological Pricing: It is a method of setting prices intended to have special appeal on consumers. It may be:-

• Prestige pricing
• Reference pricing
• Traditional pricing and Odd-Even pricing
8. Multiple Unit Pricing: Setting Lowest price for purchase of more products when bought together.
9. Bundled Pricing: Offering two or more different products or services at one price.
10. Pre-emptive Pricing: Setting low prices to discourage or deter potential new entrants to the retailer’s market.
11. Extinction Pricing: Setting very low prices in the short term to undercut competition.
12. Perceived Value Pricing: Set the price at the level that the intended buyers value the product.
13. Fixed and Variable Pricing: Charging a fixed price for relatively longer duration and charging a discriminatory price based on
individual bargaining and negotiation.

Retail Promotion and Promotion Mix

• Retail promotion is broadly defined as all communication that informs, persuades, and /or reminds the target market or the
prospective customers about the marketing mix of the retail firm.

• Retail promotion is simply the way the retailers communicate with their publics. They exchange meanings with them through
the messages they create and the media they use.

Retail Promotion Mix

• The communication between the customers and retailers is achieved through various means such as advertising, sales
promotion, publicity and personal selling. All these are collectively called as the “Promotion Mix”.

• In case of multi-chain department stores or company owned retail chains, the promotion mix is mostly managed by the
marketing and advertising department of the retail firm.

• For small independent retailers, the promotion mix is largely organised with the support of the manufacturer or supplier in
terms of material, ideas and funds.

Advertising

Retail
Personal Sales
Selling Promotion Promotion
Mix

Publicity

Advertising

• Advertising has been defined as the dissemination of information concerning an idea, product or service to induce action in
accordance with the intent of an advertiser.

• It not only provides limited product details, but also information about its attributes, place of availability, and the price range.

• It is a very important link between the sellers and buyers.

Sales Promotion

• It refers to communication strategies designed to act as a direct inducement, an added value or incentive for the product to
customers.

• It is helpful for immediate increase in product sales for short-term.

• It involves activities that may shape buying patterns, attract new customers or increase sales.

• It is useful in increasing the number of transactions as well as increasing the size of the average sale.

Publicity

• It refers to any communication that fosters a favourable image for the retailer among its public or clients.
• It can be non-personal or personal, paid or non-paid and sponsor controlled or non-sponsor controlled.

• The main objectives of publicity is to increase the awareness of the retailers and their marketing mix and thereby improve
company’s image.

Types of Publicity

• It is broadly classified as positive and negative publicity. And further classified as:

1. Planned publicity
2. Unexpected publicity
3. Complimentary publicity
Personal Selling

• It involves oral communication with one or more prospective customers for the purpose of marketing and sales.

• It plays a major role of building relationship and trust with the customers.

• Major objectives of personal selling are:

a. Provide information
b. Persuade customers to purchase
c. Provide feedback and information
d. Provide customer service and maintain customer satisfaction.
Sales Promotion Strategies

Introduction

• American Marketing Association defines advertising as “any paid form of non-personal presentation of ideas, goods and services
by an identified sponsor”.

• Significance of advertising are:

❑ It helps in creating awareness among the customers about the existence, prices, and availability of products at different
locations.
❑ It educates customers about new products and their diverse uses
❑ It increases the utility of existing products

Major objectives of advertising are:

❑ Promote a new product

❑ Support the personal selling programme
❑ Reach out to people not accessible to salesmen
❑ Enter a new market for attracting customers
❑ Manage competition in the market by stimulating sales
❑ Enhance the goodwill of the retail organisation
❑ Improve dealer relations
❑ Warn the public against imitation of the retailers products

Types of Advertising

1. Persuasive/Consumer-oriented advertising: It provided stimulus to purchase various products or services.

2. Informative advertising: Provides essential information about retailer products and services.

3. Corporate advertising: It helps to build corporate image.

4. Financial advertising: These are advertisements by financial institutions.

5. Classified advertising: These are messages placed under specific heading in magazines and newspapers.

Steps involved in Retail Advertisement Campaign

 Selecting advertisement objective

Allocating advertising budget

Designing advertisement message

Selection of advertising media

Running an ad campaign

Measuring advertisement effectiveness

Media vehicles for retail advertising

1. Leaflets or flyers
2. Posters or calendars
3. Booklets
4. Direct mail
5. Magazines
6. Local cable channels
7. Billboards
8. Wall painting
9. Banners
10. Mobile phones
Sales Promotion

• Sales promotion refers to communication strategies designed to act as a direct inducement, an added value, or incentive for the
product to customers.

• It is traditionally designed for immediate increase in product sales.

• Sales promotion provide extensive tactical measure to retailers to manage internal or external impediments to sales or profits.

• It assists other promotional activities undertaken by a store.

Objectives of Sales Promotion Strategies

1. Stop and Shop

2. Shop and Buy
3. Buy bigger
4. Repeat purchase
5. Increasing the number of transactions
6. Increasing the size of the average sale

Sales Promotion Strategies

1. Price-off pack: Product is sold at a reduced price from its normal selling price.

2. Premiums: These are in the from of small gifts that a customer gets on purchasing a product.

3. Self-liquidating premiums: Customer has to write to the supplier for the gift, enclosing proof.

4. Personality promotions: Business personalities endorse the product or services.

5. Competitions/contests: The customer need to follow the instructions and compete in the contest.
6. Co-operative promotions: Promoting two or more products jointly.
7. Sampling: Customers are given product samples for free.

8. Coupons: Customers are provided with coupons which can be used on their next purchase of the same brand.

9. Buy one get one free: The customer can get two units of the product at the price of one

10. Multi-packs: Two or more packs are attached and sold for a better and attractive price than the price of the items singly.

11. Premium packages: Reserved parking, welcome drink, complimentary services etc.

12. Membership schemes: Frequent shopper programmes with special prices and privileges.

13. Discount packages: Price offs, volume sales, group booking etc.

14. Incentives: Gifts, calendars, diaries etc.

15. Lifestyle packages: Babysitting, Home delivery service etc.

Relationship Marketing Strategies

Introduction

• Customer Relationship Management (CRM) is a tool for servicing the customer.

• Relationship Marketing strategies refer to any effort that is actively made by a seller towards a buyer and is intended to
contribute to the buyer’s customer value above and beyond the core product and or service efforts received, and can only be
perceived by the buyer after continued exchange with the seller.

• It is a business strategy which provides systematic approach to the customer life cycle management.

Components of CRM/ RM strategies

1. Personalization
2. Special treatment
3. Rewards
4. Communication

Components of CRM/ RM strategies

• Retailers efforts for personalization, communication and special treatment benefits are implemented through various customer
service strategies.

• Communication benefits, special treatment benefits and rewards are implemented through loyalty programmes.

Personalization

• It describes the social content of the interaction between service employees and their customers.

• It refers to the way in which employees relate to customers as people.

• It can be regarded as a means of showing recognition and respect for the customer.

• It leads to positive impact in terms of increasing trust in the retailer, customer satisfaction with the relationship and repeat
purchases.

Special Treatment

• Customer generally perceive customised, personalised services a preferential treatment or special treatment which is not
normally provided to the other customers.

• Before providing special treatment as a RM strategy, retailer need to classify customers as loyal and non-loyal.

Communication
• Communication is considered as a essential pre-requisite for the existence of a relationship.

• It may be in the form of direct mail, e-mail, telephone, and SMS to interact with loyal customers.

Rewards

• Rewards are money savings or incentives provided to loyal customers based on purchasing performance.

• It includes customer loyalty bonuses, free gifts, personalised discount coupons and other point for benefit clubs etc.

• Rewards should be designed to promote long-term behaviour and discourage short-term deal-seeking behaviour.

Retail Human Resource Management (RHRM)

Introduction

• Retailing is the human centric industry. Customers come to the store not only because of the ambience or reasonable price or
the quality and range of products. They value the interaction with store personnel.

• A proper human resource planning saves vital financial resources in the form of prevention of embezzlement, fraud and also
shoplifting.

• The success of retail greatly depends on having a skilled and motivated workforce.

Tasks to be performed by H R in retailing

1. Buying and Merchandising

2. Store operations
3. Administration
4. Managing Human resources
5. Finance and Accounts
6. Marketing, Advertising and CRM

Human Resource Functions in Retailing

1. Job Design and Job Analysis

2. Human Resource Planning
3. Recruitment and Selection
4. Orientation and Training
5. Motivation
6. Performance appraisal
7. Compensation

Job Design and Job Analysis

• Job design is defined as the process of deciding on the content of a job in terms of duties and responsibilities of the jobholders,
on the methods to be used in carrying out the job, in terms of techniques, systems and procedures and on the relationships that
should exist between the job holders and his superiors, subordinates and colleagues.

• Job Analysis is defined as “the process of determining, by observation and study and reporting pertinent information relating to
the nature of a specific job.

• The aspects of job analysis include: Job Description and Job Specification.

Human Resource Planning

• Human Resource Planning ensures availability of human resources by facilitating the recruiting, training, and allocation
processes.

• Human Resource Planning is the process of determining HR requirements and the means for meeting these requirements in
order to carry out the integrated plans of the organisation.
 Stages in Human Resource Planning

1. Organisational objectives for the whole retail chain are derived along with specific objectives for different departments and
stores.

2. The roles, responsibilities and accountability of each employee is specified as desired to ensure achievement of organisational
objectives.

3. The skill sets of existing human resource is analysed to identify gaps in skills required.

4. The action plan is drawn for acquisition of additional skills and hiring of additional human resources.

Recruitment and Selection

• Recruitment is the process of seeking and attracting a pool of people from which qualified and suitable candidates can be
selected.

• Recruitment of employees can be done through both internal and external sources.

• Internal sources comprises employees from within the retail organisation who can be suitable for another job in the
organisation.

• External recruitment can be done by seeking applications through advertising, seeking help from placement consultants and
employment agencies, walk-in interviews an campus placement.

Selection process

• The selection process involves a number of steps including screening of application forms, selection tests, interviews, reference
checking and medical examination in some cases.

Orientation and Training

• After recruitment and selection, people are subjected to an induction and orientation programme to familiarize them with the
organisation.

• Orientation includes introduction of new employees to the retailer, the department, and the specific job.

• Training is a learning process that involves the acquisition of knowledge, skills and attitudes to enhance the performance of
employees.

• Training can be in the classroom or on the job.

• In general, both classroom and on the job training is done by most retailers.

Motivation

• Motivation is the process that initiates, guides and maintains goal oriented behaviours. It is derived from the word motive which
is defined as a need that requires satisfaction.

• Motivation may be positive or negative.

• Positive motivation includes rewards, social recognition etc.

• Negative motivation includes, punishments in the form of transfer, removal or demotions.

Performance Appraisal

• It is the process of determining and communicating to an employee how he/she is performing the allocated job and planning for
improvement in future on the basis of this appraisal.

• It is used for administrative decisions related to promotions, firing and pay hikes.

• It is also used for planning and communicating expectations to an employee and specifying output targets.
 Compensation

• Compensation is the process of providing adequate, equitable and fair remuneration to the employees. It includes job
evaluation, wage and salary administration, incentives, bonus, fringe benefits, social security measures etc.

• Job evaluation is defined as a process of determining the relative worth of jobs, ranking and grading them by comparing the
duties, responsibilities, requirements like skill, knowledge of a job with other jobs with ta view to fix compensation payable to
the concerned job holder.

GAP’s Model

Introduction

• Customer service is largely a function of perception, customer expectations and the service actually provided.

• Gap is a difference between the expectations about service quality by the customer and the actual service provided.

• If retailer fails to provide expected service, then customer perceive it as poor and it leads to dissatisfaction.

Customer Expectations
Knowledge Gap

Management perception of
customer expectations

Standards Gap
Service Gap
Standards specifying service to Retailer communications about
be delivered services

Delivery Gap

communication Gap

Actual service delivered

Customer perception of service

Gap 1: Knowledge Gap

• It is the difference between consumer expectations and the retailers perception of customer expectations.

• To develop better understanding of customer expectations and avoid the knowledge gap the retailer need to-

⮚ Undertake customer research

⮚ Increase interaction between retail managers and customers

⮚ Improve communication between managers and employees who provide customer service.

Gap 2: Service Standards Gap

• It is the difference between the retailers perceptions of customer expectations and the customer service standards it sets.

• Service standards should be based on customers perceptions rather than internal operations.

• The retailers in order to establish service standards, need to incorporate the following aspects;

⮚ Committing their store to providing high-quality service

⮚ Developing innovative solutions to service problems

⮚ Defining the role of service providers

⮚ Setting service goals

⮚ Measuring service performance

Gap 3: Performance Delivery Gap

• It is the difference between the retailer’s service standards and the actual service provided to customers.

• The retailer must try to deliver in excess of what is expected by the customers to earn their loyalty and consequently profits.

• In order to deliver goods and services as promised and expected by customers, retailers need to take the following steps:

⮚ Impart service providers the necessary knowledge and skills

⮚ Provide instrumental and emotional support

⮚ Improve internal communication and reduce conflicts

⮚ Empower employees to act in the customer’s and firm’s best interests

Gap 4: Communication Gap

• It is the difference between the actual service provided to customer and the service communicated in the retailer’s promotional
campaigns.

• Raising expectations too high through promotions might bring in more customers initially, but it can also create dissatisfaction
and reduce repeat business if the expected level of service is not maintained.

Lifetime Value of Customer (LVC)

• Lifetime value of customer (LVC) is the net present value of the profit that retailer will realize on the average new customer
during a given number of years.

• Lifetime value can be used in the development of marketing strategy and tactics.

• At any given time it is a specific number, but it will change from month to month.

• There are many different things that cause lifetime value to change, some of which are under retailer control, many of which are
not.

Importance of LVC

• LVC informs how much retailer should spend on customer acquisition.

• LVC allows retailer to segment the customers based on value

• Focusing on LVC is key for long-term company-wide growth

• This approach helps organizations demonstrate the future value they can generate from their marketing initiatives.

• It helps for customer retention.

• It helps define specific marketing goals along with sales strategies to lower acquisition costs and keep retention high.

Calculation of LVC

• There are many ways to calculate LVC. Out of those two frequently used LVC calculations are;

1. Historic LVC and

2. Predictive LVC
• To measure LVC, retailer need to take into account following details:

❖ Customer lifespan
❖ Retention rate
❖ Customer churn rate
❖ Average profit margins (per customer)

Historic LVC

• It is the sum of all the gross profit from a customer’s past purchases.

• To calculate it retailer need to add up all the gross profit values up to the last transaction (N) a customer made.

• This involves costs of service, return, marketing, acquisition, and so on.

• The drawback is that retailer might have to do some complicated math at the individual level to get the most up-to-date data.

Predictive LVC

• Its aim is to model the transactional behaviors of the customers to predict what actions they will take in the future.

• This method is a great indicator of customer lifetime value, better than historic LVC.

• It works using algorithms that try to generate precise CLV while predicting a customer’s total value.

Retail Branding

• Retail branding occurs when a retailer sells products under the retail organisations house brand name.

• A Brand that is owned and marketed by a retailer business involved in selling goods or services directly to final consumers for
their personal, non-business use is called Retail Store Brand.

Meaning and Definition

• The American Marketing Association defines 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 and to differentiate them from those of the competitors.”

• Retail branding is a strategy based on the brand concept and which transfers it to a retail company.

• Retail brand is a group of the retailer’s outlets, which carry a unique name, symbol, logo or combination thereof.

Elements of Retail Brand

Visual
Merchandising

Format Location

Retail
Brand
Service Price

Product
Experience
Assortment
 Branding Strategies

1. Umbrella Brand Strategy: In this all the stores of the company carry the same brand, in most cases differentiated by a sub-
brand.

2. Family Brand Strategy: In this group of stores of the retail company carry different brands, that is, the brands are strictly
separated.

3. Mixed Brand Strategy: In this, umbrella brand is applied for some store formats and separates others by using different brand
names.

4. Retail Co-branding Strategy: It combines two or more well-known brands into a single product or offering.

Advantages of Retail Branding

1. It strengthens brand awareness and differentiation from the competition, because it can serve as an anchor for associations with
the brand.

2. Strong retail brand simplify the purchase process, reduce perceived purchasing risk and price sensitivity of consumers.

3. Strong brands exert halo-effects.

4. Strong brands serve as symbolic drivers, in terms of projecting certain values and traits.

5. Cannibalization is easier to avoid and each retail brand can develop its own image.

REFERENCES:

1. Chethan Bajaj, Rajnish and Nidhi Varma- Retail Management- Oxford University Press.

2. Swapna Pradhan-Retailing Management-Tata McGraw Hill Publication.

3. Study Material- LPU-EXCEL BOOKS PRIVATE LIMITED

4. Study Material-Mr. [Link]-CHADALAWADA RAMANAMMA ENGINEERING COLLEGE

 Module 6: Emerging Trends in Retail Management and Skills

E-Retailing

Introduction

• The Electronic Retailing also called as e-tailing or internet retailing, is the process of selling the goods and services through
electronic media, particularly the internet for personal or household use by consumers.

• Simply, the sale of retail goods and services online is called as electronic retailing.

• E-tailing is synonymous with business-to-consumer (B2C) transaction.

Types of E-retailers

• Pure Play e-retailers: such as Amazon, flipkart, that emerged as the online retailer. It is present only online and do not have any
physical outlet for the customers.

• Brick and click e-retailers such as Samsung, that sells mobiles through the internet as well as has the physical store front for the
customers.

Advantages

• No Real Estate Cost

• Easy and Comfortable
• web search capabilities
• User Friendly
• Effective Price Discrimination
• Customized Product Placement
• Global Reach

Disadvantages

• Security issues
• Customer retention
• Unsuitable for certain product categories
• Shopping is still a touch-feel-hear experience
• Complicated medium
• Navigation hiccups
• Website design flaws
• Limited access to the Internet
• Lack of customer interaction

E-retail marketing mix

Convenienc
e

E-Retail Mix

Speed of
Delivery Cost
 Impact of IT on Retailing

Introduction

• The retail business has been an early adapter of Information technology.

• The use of IT in retail has become possible as a result of the specialization of the IT sector in the area of retail- oriented
solutions, involving the latest developments, radio frequency technologies, computer systems and the Internet.

• The importance of IT in retail stems from the importance of data.

Need for Information Technology in Retailing

IT in retailing is to provide the following key information areas:

1. Product information – catalogue, availability, new releases, promotion, supply and demand etc.

2. Customer information – profile, behaviour, activities, preferences, distribution etc.

3. Operations information – logistics, allocation, procurement, schedule, inventory, shelf space.

Significance of IT in Retailing

1. Help in Labour Saving

2. Help in making Easy Price changes

3. Help in making better inventory management

4. Helps in monitoring of checkout operations

5. Helps in providing better merchandise management

6. Helps in providing a competitive edge

7. Helps in recognizing loyal customers

8. Helps in enabling data on customer buying behavior

9. Helps in gathering information with wide in scope

10. Data are regularly gathered and stored

11. It helps in foreseeing the opportunities and avoiding the crisis

12. Helps in co-coordinating among elements of strategy

13. New Strategies can be devised more quickly

14. Helps in taking right decisions.

limitations of IT in Retailing

1. Cost occurred on Retail Information System is high

2. Which technology driven will be beneficial

3. A huge bunch of data to evaluate

4. Difficulty in classify the data for future use

5. How should the data be disseminated throughout the firm

EDI- Electronic Data Interchange

• EDI is the computer to computer exchange of business documents.

• EDI is defined as the exchange of business information through standard interfaces by using computers.

• It allows orders, invoices and other commercial information to be relayed directly between different firms computer networks.

• It enables exchange information among channel intermediaries, the retailers, and suppliers.

Advantages of EDI

• Saves time
• Avoids manual error
• Reduces cost
• Strategic benefits

Bar Code

• Bar coding is a proven technology for automated data collection needs of the business.

• In general terms, “a barcode actually contains any given alpha numeric information encoded in the form of bars and spaces
using international symbolizes which are like language of the barcode.”

• On retail products, the barcode normally contains the product ID (e.g. item code, product code etc.) which is required to be
entered into the computer system to update the data at the time of billing, receiving or dispatch.

• With the barcode in place, the data is fed into the system automatically by scanning the barcode using a bar code scanner
instead of punching the same through a keyboard.

Advantages of Bar code

• 100% accuracy
• Reduces queues in retail shop for billing
• Time saving

Digital Wallets

• A digital wallet (or e-wallet) is a software-based system that securely stores users‘ payment information and passwords for
numerous payment methods and websites.

• By using a digital wallet, users can complete purchases easily and quickly with near-field communications technology. They can
also create stronger passwords without worrying about whether they will be able to remember them later.

• Digital wallets can be used in conjunction with mobile payment systems, which allow customers to pay for purchases with their
smartphones.

Digital Wallet

• A digital wallet can also be used to store loyalty card information and digital coupons.

• And customer can also link digital wallet with their mobile phone number.

Example for digital wallets are:

❑ PayTM
❑ Google Pay
❑ Amazon pay
❑ Phonepe
❑ BHIM

FDI in retailing and its impact

Introduction
• In the Indian context, ‘FDI’ means investment by non-resident entity/person resident outside India including Non-Resident
Indian (NRI) or Person of Indian Origin (PIO) in the capital of the Indian company under Schedule 1 of Foreign Exchange
Management (Transfer or Issue of Security by a Person Resident outside India) Regulations 2000.

FDI Norms in Retailing

• The FDI policy is framed by the Department of Industrial Policy and Promotion (DIPP) and implemented by the RBI for automatic
route where prior government approval is not required.

• For other areas where prior government approval is required, approval is granted by the Foreign Investment Promotion
Board(FIPB).

FDI policy for Single Brand Products

• FDI in single brand product retail trading is allowed at 100% in the following manner:

-Automatic route FDI up to 49% and

-Government route FDI beyond 49%

Conditions for single brand FDI:

• Products to be sold should be single brand only

• Single brand covers only products which are branded during manufacturing.

FDI policy related to Multi Brand Retail Trading

• FDI in Multi Brand Retail Trading is allowed up to 51% through Government route as per DIPP policy.

Conditions for FDI in Multi Brand Retail are:

• The FDI must be a minimum of US$100 million.

• At least 50% of the investment bought should be invested in ‘back-end infrastructure’ within 3 years.

• At least 30% of the products purchased must be sourced from Indian MSME.

• Government possess the first right of procurement on agriculture produce.

Advantages of FDI in Retail in India

• Growth in Economy

• Job Opportunities

• Benefits to Farmers

• Benefits to consumers

• Lack of Infrastructure

• Cheaper Production facilities

• Availability of new technology

• Long term cash liquidity

• Conducive for the country’s economic growth

• FDI opens up a new avenue for Franchising

Disadvantages of FDI in Retail in India

• Impact on Local Markets ( Kirana Shops)

• Limited Employment Generation

• Fear of Lowering Prices

• Negative Impact on Indian Economy

• Negative Impact on Indian Domestic Market

Consumerism

Introduction

• The term Consumerism refers to a “set of policies and activities aimed at protecting consumer rights and promoting consumer
welfare”. It appears to rise when there is consumer’s discontent, ignorance and unfavourable economic condition.”

• Consumerism is a process of creating awareness of consumer rights as envisaged in the consumer protection Act 1986 and
guarantees right standards for the goods and services for which one makes payment.

Forms of consumer exploitation in Retailing

• Sale of Sub-Standard quality

• Sale of expiry dated products

• Sale at high Prices

• Sale of Duplicate Articles

• Sale of Adulterated and Impure product

• Creating Artificial Scarcity

• False or Incomplete Information

• Unsatisfactory after-sale Service

• Compulsion to purchase

• False advertisement or offer

Consumer Protection Act 1986

• The Consumer Protection act 1986 was amended in 1993 and 2019 to remove its lacunae and make it more comprehensive. Its
purpose is to protect consumers against defective goods and unsatisfactory services, unfair trade practices etc. The Act provides
for three-tier machinery consisting of District Forum, State Commission and National Commission with a time-frame for disposal
of cases. It also provides for Consumer Protection Councils in every state. The consumer can appeal before these forums if their
rights are exploited. They are not required to pay any court fee or engage a counsel to present their case before these forums.
They can present their case themselves.

Responsibilities of the consumer to avoid exploitation

• Study the price range and the quality of the product.

• Purchase products / services from the right place.

• Obtain the whole information about the details of the products / services.

• Get and preserve bill for each purchase.

• Check the price and expiry date printed on the packing before buying anything

Ethical and Legal Issues in Retailing

Introduction

• Ethics means conscience, moral code, principles, moral values. Work place or company ethics are a set of rules for human moral
behaviour.
• Every retail business is customer centred, but customers wants and needs can lead to often conflict with society's long-term
interest. Every business needs to follow ethical practices to survive and thrive in the long run. The customer should not be
cheated by providing wrong information or taking advantage of temporary scarcities. The employee should be treated in a fair
manner.

Ethical Practices in Retailing Functions

1. Product Development:

• Ensure disclosure of all substantial risks associated with the product or service usage to the customer.

• Identification of any component substitution that might materially change the product.

• Identification of extra-cost added features.

2. Promotions

• Retailers should avoid false and misleading advertising.

• Reject high pressure manipulation or misleading sales tactics.

• Avoid sales promotions that use deception or manipulations.

[Link]

• Retailers should not manipulate the availability of a product for purpose of exploitation.

• Retailers should not use coercion or force in negotiations with the channel partners.

4. Pricing

• Retailer should not fix artificially high prices.

• He should not indulge in predatory pricing .

• Retailer should disclose the full price associated with any purchase.

Ethical practices of Retailer towards stakeholders

[Link]:

• Recognize the rights of customers to safety, information, freedom of choice, handling grievances.

2. Community and General Public:

• Performance of Social Responsibility

3. Employees

• Following fair employment policies and procedures

• Trusting relationship with employees with set guidelines

4. Business partners:

• Follow fair policies with various business partners viz., suppliers, distributors, banks, advertisers etc.

Legal Issues in Retailing

• Every industry or sector has certain laws which are applicable to it and retail is in no way any different.

• Retail Industry has to consider different Laws relating to licencing, operations, employees, consumers and taxation.

Licences or permissions required to start retail store

1. Trade Licence
2. Health and Sanitary Licence
3. Signboard Licence
4. Licence under the Drugs and Cosmetics Act
5. Fire Department NOC
6. Sales tax registration (GST)
7. Service Tax registration(GST)
8. Food Licences

The Law Applicable to Retail Industry

• The Shops and Establishment Act

• Sales Tax Act (GST)

• The Consumer Protection Act, 1986

• The prevention of Food Adulteration Act, 1954

• The standard of Weights and Measures Act, 1976

• The Sale of Goods Act, 1930

• The Essential Commodities Act 1955

• Employees’ State Insurance Act

• The Minimum wages Act, 1948

• The contract of Labour Act,1970

• Equal Remuneration Act,1976

• Workmen’s Compensation Act,1923

• The Payment of Wages Act,1936

• The Industrial Disputes Act,1947

• Essential certifications such as, BIS, Hallmarking of gold, Agmark

International Retail Structures

Introduction

• International retailing is an essential ingredient for the global economy. International retailing satisfies the increasingly complex
and demanding needs of global consumers.

• International Retailing has been in existence and has gained ground in the past two to three decades.

• The economic boom in several countries, coupled with globalization have given way to Organisations looking at setting up
retailing across borders.

• The advent of internet and multimedia has further changed the dimensions as far as International Retailing is concerned.

Steps in International Retailing

1. Financial Investment/Cross Border Shopping

2. Transfer of Know-how

3. Retail Strategy

4. Internationalisation of Sourcing

5. Internationalisation of Retail Operation

Classification of International Retail business

International Retail business consists of two groups of businesses.

1. The biggest value and volume business happens to be the International Multi brand grocery Retailers like Wal-Mart, Tesco,
Metro and Carrefour etc.

2. The second group of international retail business refers to the fashion brands mainly in fashion, luxury brands and personal
product category of businesses.

Modes of Market Entry for International Retailers

1. Non-Controlling Interest

2. Setting up International stores as a part of internal expansion

3. Merger or Takeover

4. Franchise Model

5. Joint Venture

Future of Retailing

Introduction

• The retail industry is transforming through a period of unprecedented change. Emerging Technologies continue to drive digital
disruption, and customer experience is fast becoming the new currency.

• India is expected to become the world’s fastest growing E-commerce market, driven by robust investment in the sector and
rapid increase in the number of internet users. Various agencies have high expectations about growth of India’s E-commerce
market.

Future of Retailing

• Artificial intelligence (AI) and automation technologies have vastly altered every stage of the retail journey, from inventory
management to customer service.

• Retailers are also integrating data analytics into every touch point of their business, including sales predictions, store
optimization and product recommendations.

• The ability of retailers to effectively use AI, data analytics and other emerging technologies to meet changing customer
expectations will be a key determinant of success in the new decade.

• Global retailers will establish robot resource organizations to manage nonhuman workers.

• Retailers will leverage AI to drive more-accurate demand forecasting, create tailored market assortments and forward-deploy
inventory to localized fulfilment centres to maintain inventory flexibility.

• Global retailers will create a sharing economy service for store-level associates to address workforce challenges.

• Retailers globally will leverage AI to facilitate prescriptive product recommendations, transactions and forward deployment of
inventory for immediate delivery to consumers.

• In India it is projected that by 2021, traditional retail will hold a major share of 75%, organised retail share will reach 18% and E-
commerce retail share will reach 7% of the total retail market.

• E-commerce is expanding steadily in India. Customers have the ever-increasing choice of products at the lowest rates. E-
commerce is probably creating the biggest revolution in retail industry, and this trend is likely to continue in the years to come.

• Retailers should leverage digital retail channels (E-commerce), which would enable them to spend less money on real estate
while reaching out to more customers in tier II and tier III cities.

• Nevertheless, long-term outlook for the industry looks positive, supported by rising income, favourable demographics, entry of
foreign players, and increasing urbanisation.
 REFERENCES:

1. Chethan Bajaj, Rajnish and Nidhi Varma- Retail Management- Oxford University Press.

2. Swapna Pradhan-Retailing Management-Tata McGraw Hill Publication.

3. Study Material- LPU-Excel Books Private Limited