MODULE-5

RETAILER IMAGE

Image refers to how a retailer is perceived by customers and others, positioning refers to firms devising its
strategy so as to project an image relative to its retail category and its competitors.

The retailer image is how the consumer interprets that message. It is how the shopper perceives the store in terms
of the products available in store, the store itself and the experience he or she expects when shopping at the store.

It affects:
 The positioning of the store in the mind of the customer.
 The customer’s choice of store.
 How far a customer is willing to travel to the store
 How often a customer will travel to the store
 Customer loyalty- the extent to which a customer uses the store.

The image consists of two major elements:

• The physical characteristics of the merchandise such as their quality and availability.
• The psychological effect of the store’s physical characteristics. These include:
The exterior of the store
The interior design of the store, comprising internal layout of the store, the methods of display,
and atmospherics such as lighting, sound , smell and colors.

SELLING SPACE AND STORAGE

Retailers have to make efficient use of space, measured according to area, i.e. square meters or square feet used.
Floor space is used for access and services such as lifts, entrances, heating and ventilating plant.
The retailer has to divide the effective space into selling areas and non-selling areas.
Selling areas- those areas where merchandise is displayed and customers can buy.
Non-selling areas- include stockrooms, toilets, rest rooms, administrative offices and storage. (Support selling
operation)
The retailer needs to balance the cost of non-selling space against the cost of alternative provision for storage or
offices.
Most retailers have to provide on-site storage for some stock.
 Direct selling storage
 Stock rooms

We can divide store into two aspects:

 External Store
 Internal Store

THE EXTERNAL STORE: STRUCTURE AS A PART OF IMAGE

The external store comprises the exterior of a store and its surrounding area. It has following aspects
 The external environment
 The external architecture of the building
Physical dimensions
 External features
 Car parking, lighting, other external building
 Entrances to the store
 Signage
 Marquee or logo. Other signs and signals.
REQUIREMENTS OF EXTERNAL STORE

The external store is the first part of the store that the customer sees and has a significant impact on customer’s
image of the retailer
Visibility
• The store retains its physical visibility through a location that conforms to the mind set of the
appropriate group of people.
• Visibility can be increased by
• Using features to make the store stand out
• Giving the store a distinct identity by use of materials, texture and color.
• Having a fascia that is distinctive and appealing.
Suitability
The store should adjust its external fabric, shop front and signage according to:
Its situation within a shopping centre, retail park, high street or local shopping parade
The images presented by surrounding stores, such as modern or traditional: high or low price.
The general perception of local shopping area.
Accessibility
Allows customers to get to the store and evaluate the merchandise.
Parking
Congestion
Entrances
Welcoming
The external architecture can be inviting or intimidating. Retailers can design or refurbish their exterior to
make them more inviting.
Use various forms of exterior decoration.
Use materials and colors suitable to the age group that they hope to attract.
Widen entrances and walkways
Security
Internal Store
 Comprises the interior of the store that the customer sees once he or she has entered the store. It consist of:
 Envelope
 Internal layout
 Methods of display
 Signage
 Visual merchandising
Managing the Consumer

 The purpose of internal store is to manage the consumer buying process within the secure environment of
the store.
 Welcoming
 Visibility
 Accessibility
 Suitability
 security

The Envelope
 The envelope is the internal structure of the store and provides the environment within which shopping
takes place.
 Flooring and ceiling are part of the store envelope and have an integral role in conveying the image of the
store.
Components of a Retail Image
Target Market -Firms Positioning
-Customer Service -Store Location
-Merchandise Attributes -Pricing

Attributes of
Target Physical
Market
Firm’s facilities
positioning

Customer
Service Shopping
Experience
Overall
Retail
Community
Store Image Service
Location

Promotion Tools
Merchandise -Advertising
Attributes -Public Relations
Pricing -Personal Selling
-Sales Promotion

FACTORS AFFECTING RETAIL IMAGE

ATMOSPHERE
A retailer’s image heavily depends on its atmosphere, the psychological feeling a customer gets when
visiting the retailer. It is the personality of the store, catalog, vending machine, or website.
-It may influence peoples shopping enjoyment.
KEY ELEMENTS IN STORE ATMOSPHERE
Exterior
General interior
Store Layout
Displays

EXTERIOR
-A store front is the total physical exterior of the store.
It Includes
-Marquee
-Entrances
-Windows
-Lighting
-Construction Material
Marquee-
It is a sign board that displays the stores name.
Entrance-
It requires three major decisions
1. The number of entrances.
2. The type of entrance.
3. Walkways.
Windows
Lot of planning is required to develop good display windows.
-Number
-Size
-Shape
-Color
-Theme
GENERAL INTERIOR
-Floorings
-Lighting
-Colors
-Scents & Sounds
-Staffs
-Stores temperature
Interior Displays
 Assortment Displays- exhibits a wide range of merchandise.
Greeting Cards, Books
 Theme Setting Displays- exhibits a product in a thematic manner.
Valentine’s Day Card
 Ensemble Display- a complete product bundle is displayed.
Apparels Stores
 Rack Display- in which products are neatly hanged or presented.
Apparel Retailers, House wares Retailers
 Cut Case Display- in which the merchandise will be in the original cartons.
Posters

NON STORE BASED RETAILING

 Store Front- the store front for a web retailer is the home page.
 The Home page will contain
-the company name and indicate the positioning of the firm.
-show the product lines carried.
-include the retailers e-mail address, mailing address and phone number .
-Be highlighted on various search engines.
General Interior
 Instructions about how to use the site.
 Information about the company.
 Product icons.
 News items.
 Product search engine.
 Location of physical stores.
Store Layout
 A web retailer’s stores has two components:

 The layout of each individual Web page and the links to move from page to page.
Displays
 Web retailers can display full product assortments. Online firms usually use special themes.
Check out counters/ Drawback
 This will be more complicated to web retailers
 Online shoppers tend to worry more about the security and privacy of purchase transactions than those
who buy in a store.
 Online shoppers often have to work hard to complete transactions.
 How often a customer will travel to the store
 Customer loyality- the extent to which a customer uses the store
STORE LAYOUT
Store layout is the way merchandise is laid out for inspection and accessed by consumers.
 It determines the appearance of the store.
 It limits the way in which customers may negotiate their way round the store, which affects customer
traffic flow or circulation.
  These two aspects affect customer’s impressions of the store and so level of customer spending within the
store

Models of Store Layout

THE GRID
The grid or gridiron pattern usually has main, secondary and tertiary aisles.(narrow passages).it is widely used
today in supermarkets ,variety and discount stores. the purpose of the design was originally to steer the
customer past the whole range of goods, which are displayed on the shelves. this relieves the intimidating
appearance of long rows of shelving and allows customers to shortcut to aisles they want.
The advantages
 It uses space efficiently
 It allows the easy siting of merchandise and the linking of products together throughout the store.
 It allows more customers in store at any one time and increases the rate at which they pass through the
store.
 It allows staff to work easily alongside the customers without disrupting traffic circulation.
 It allows for self-service, reducing the use of staff.
Disadvantages are:
 It makes displays rigid. it also limits effective linking together of different items..
 It deters browsing in order to maximize efficiency gains from the layout, tores limit the width of their
aisles.
 It increases security risks.(shoplifting)
 It may leave customers feeling isolated.

FREEFLOW

The free flow system is widely used in department and specialty stores.

Its advantages are:

 The pattern allows greater flexibility in a layout and reduces fixed areas.
 The retailer can arrange counters to give maximum visual impact and focus customer attention on areas of
merchandise.
 The use of ‘cross aisles’ makes shopping easier by increasing the width of aisles .this method also
increases the number of ‘end caps’(displays at the end of rows) in use.
 It encourages browsing.
  It encourages impulsive buying.

The disadvantages are:

 It is relatively expensive on space requirements.
 It makes stock control more difficult as there is less visual perception of items that need restocking.
 The cost of fixtures is higher
BOUTIQUE
The boutique or concept pattern as its name suggests, is widely used in small shops and in specialty areas in
department stores. a major benefit of this layout allows customers to access various parts conveniently and
with least effort.
Advantages:
 The layout can create a sense of space within a small area and conveys a sense of higher class.
 The customer can easily see the complete range of merchandise.
 There are spill-over benefits between sections as the customer can link items in different categories.
Disadvantages:
 There is increased cost of using space, as the centre space is left empty.
 The boundaries between different categories of goods may become blurred and distract customers from
their planned purchases.

LOOP (RACE TRACK)

It is useful in large stores to guide the customer round the store and increase exposure of the more distant
parts from the entrance. the merchandise areas may be laid out in different ways according to the type of
product sold.
Advantages:
 It guides customer round a large area while presenting a sense of order within the store.
 It exposes large amount of merchandise.
Disadvantages:
 Customers may see too much at once in a large store and not focus effectively on their intended purchases.
 The store may need to use internal walls or island screens in order to help customers focus on the
particular ranges they are near to

SPINE

This layout uses a central walkway to access the various sections of the store, with branch lines, if required ,
leading into the various sections.
 The advantage to the retailer is that the layout can utilize the benefits of free flow, grid and loop systems
as appropriate.
 The disadvantage is that the retailer may need to vary the shape of the central walkway and increase
expenditure on fixtures and fittings in order to break monotony.

CHANGING LAYOUTS

 Store layout models reflect the experiences of retailers in managing customers and merchandise.
Consequently, stores continue to adapt the various models to their own situation as retailers seek to
provide better customer service and stock management.
 The PRINCIPLES behind the different layouts are the same and can be summarized as follows:
 Support store image: the store layout is one of the signals customers receive that tells them whether they
should go into rummage mode to look for bargains or into receptor mode waiting for the retailer to tempt
them.
 The customer does not expect special treatment and is encouraged to move quickly as possible.
 Manage space: increasing exposure of a product is likely to increase sales .space is costly and the retailer
must balance the benefits of extra exposure of the product against extra cost of space. The wider aisles are
more comfortable and improve accessibility, particularly for the elder and reduce stress.
 Manage customer flow: retailer can improve store layout to accommodate higher traffic counts. More
space needs to be allowed at the points where customer tends to concentrate.
 Keep cost down: This covers a number of different aspects, including efficient replenishment of stock on
display.

RETAIL PROMOTION
Retail promotion includes any communication by a retailer that informs, persuades, and/or reminds the target
market about any aspect of that firm. Retailers devote significant sums to promotion. For e.g. a typical
department store spends nearly 4% of sales on ads and 8-10% on personal selling and support services.

ELEMENTS OF RETAIL PROMOTION MIX.

1. ADVERTISING
Advertising is paid, non personal communication transmitted through out of stores mass media by an
identified sponsor.
Four aspects of this definition.

 Paid form: This distinguishes advertisement from publicity.

 Non-personal presentation: A standard message is delivered to the entire audience, and it cannot be
adapted to individual customers.

 Out-of- store mass media: These include news papers, radio, TV, the web, and other mass channels,
rather than personal contacts.

 Identified sponsor: The sponsor’s name is clearly divulged, unlike publicity.

DIFFERENCE BETWEEN RETAILER AND MANUFACTURER ADVERTISING STRATEGIES:

 Retailer usually has more geographically concentrated target markets than manufacturers.
 This means they can adapt better to local needs, habits, and preferences.
 However many retailers are unable to utilize national media as readily as manufacturers.
 Only the retailer chains and franchises can advertise on national TV programs.
 Many retailers stress prices in ads, where as manufacturers usually emphasize key product attributes.
 In addition retailers often display different in one ad, where as manufacturers tend to minimize the
number of products in a single ad.
 Media rates tend to be lower for retailers. Because of this and the desire of many manufactures and
wholesalers for wide distribution, the costs of retail advertising are sometimes shared by or retailers.
 Two or more retailers may also share costs
Objectives
A retailer would select one or more of these goals and base advertising efforts on it:
 Lifting short term sales
 Increasing customer traffic
 Developing and reinforcing a retail image.
 Informing customers about goods and services and company attributes.
 Easing the job for sales personnel.
 Developing demand for private brands.

Advantages

 A large audience is attracted.

 The costs per viewer, reader,or listener is low.
  The retailer has control over message content, graphics, timing, and size, so a standardized message in a
chosen format can be delivered to the entire audience.
 In print media, a message can be studied and restudied by the target market.
 Editorial content often surrounds an ad. This may increase its credibility or the probability it will be read.

Disadvantages:
 Standardized messages lack flexibility. They do not focus on the needs of individual customers.
 Some media require large investments. This may reduce the access of small firms.
 Media may reach large geographic areas, and for retailers this may be wasteful.
 Some media require a long lead time for placing ads.
 Some media have a high throwaway rate. Circulars may be discarded without being read.
 A 30- second TV commercial or small newspaper ad does not have many details.
2. PUBLIC RELATIONS
 Public relations entail any communications that fosters a favorable image for the retailer among its
publics.
 It may be non personal or personal, paid or non paid, and sponsor controlled or not controlled.
 Publicity is any non personal form of public relations whereby messages are transmitted through mass
media, the time or space provided by the media is not paid for, and there is no identified commercial
sponsor.
Pioneer message

Advertising content. Competitive messages

Reminder message

Institutional message

Full payment by retailer

Vertical
Manner of payment
Co-operative advertising Horizontal

Objectives
Public relations seek to accomplish one or more of these goals.
 Increase awareness of the retailer and its strategy mix.
 Maintain or improve the company image.
 Show the retailer as a contributor to the public’s quality of life.
 Demonstrate innovativeness.
 Present a favorable message in a highly believable manner.
 Minimize total promotion costs.
Advantages
 An image can be presented or enhanced.
 A more credible source for presenting the image.
 There are no costs for a message’s time or space.
 A mass audience is addressed.
 Carryover effects are possible.
 People pay more attention to new stories than to clearly identified ads.
Disadvantages
 Some retailers do not believe in spending any funds on image related communication.
 There is little retail control over a publicity message and its timing, placement, and coverage by a given
medium.
 It may be more suitable for short-run, rather than long run planning.

3. PERSONAL SELLING
 Personal communication involves oral communication with one or more prospective customers for the
purpose of making a sale.
 The level of personal selling used by a retailer depends on the image it wants to convey, the products sold,
the amount of self-service, and the interest in long term customer relationships-as well as customer
expectations.
Objectives
 Persuade customers to buy.
 Stimulate sales or impulse items or products related to customer’s basic purchases.
 Complete customer transactions.
 Feed back information to company decision makers.
 Provide proper levels of customer service.
 Improve and maintain customer satisfaction.
 Create awareness of items also marketed through the web, mail, and telemarketing.
Advantages
 A sales person can adapt a message to the needs of an individual customer.
 A sales person can be flexible in offering ways to address customer needs.
 This attention span of the customer is higher than with advertising.
 There is less waste; most people who walk in to a store are potential customers.
 Customers respond more often to the personal selling than to the ads.
 Immediate feedback is provided.

Disadvantages
 Only a limited number of customers can be handled at a given time.
 The cost of interacting with each customer can be high.
 Customers are not initially lured in to a store through personal selling.
 Self service may be discouraged.
 Some customers may view sales people as unhelpful and as too aggressive.

4.SALES PROMOTION
  Sales promotion encompasses the paid communication activities other than advertising, public relations,
and personal selling that stimulates consumer purchases and dealer effectiveness.
It includes
 Displays,
 Contests,
 Sweepstakes,
 Coupons,
 Frequent shopper programs,
 Prizes,
 Samples,
 Demonstrations,
 Referral gifts,
 And other limited- time selling efforts outside of the ordinary promotion routine.
Objectives
Sales promotion goals include the following:
 Increasing short term sales volume.
 Maintaining customer loyalty.
 Emphasizing novelty.
 Complementing other promotion tools.
Advantages
 It often has eye- catching appeal.
 Themes and tools can be distinctive.
 The consumer may receive something of value, such as coupons or free merchandise.
 It helps customer traffic and maintains loyalty to the retailer.
 Impulse purchases are increased.
 Customers can have fun, particularly with contests and demonstrations.
Disadvantages:
 It may be hard to terminate certain promotions without adverse customer reactions.
 The retailer’s image may be hurt if trite promotions are used.
 Frivolous selling points may be stressed rather than the retailer’s product assortment, prices, customer
services, and other factors.
 Many sales promotions have only short-term effects.
 It should be used mostly as a supplement to other promotional forms.

SALES PROMOTION SCEMES

Point of purchases Window, floor, and customer displays that allow retailer to remind
customer and stimulate impulse purchases.

Contests Customers compete for prizes by completing a contest (game), such as

a crossword puzzle, a slogan, or a football lottery. Winning at least
based on a correct answer (skill).
Sweep stakes Similar to a contest, except that participants merely fill out application
forms and the winner is picked at random (chance). No skill is
involved. Direct mail retailers use this tool quite often.
Customers clip coupons from print media or POP displays, and redeem
Coupons them with retailer.
Customers are given points or discounts based on the dollar amounts of
Frequent shopper their purchases. The points are accumulated to acquire goods or
programs services.

Prizes Similar to frequent purchase programs, except that the retailer gives
prizes immediately, such as glasses, silverware, and others.
Usually, one piece of a set is obtained with each purchase.

Samples Free tastes or smells or items are given to customers.

Demonstrations Products are shown cleaning up floors, mixing foods, and so on.
Services are also demonstrated (e.g. judo instructions).

Referral gifts Presents or gifts are given to current customer when they bring in new
customer.

Match books, Items that contain the retailer’s name are given to customer.
pens, calendars,
shopping bags etc.

Special events Include fashion shows, autograph sessions with book authors, art
exhibits, and holiday activities (such as children’s rides).

PLANNING A RETAIL PROMOTIONAL STRATEGY.

1.DETERMINING PROMOTIONAL OBJECTIVES.
A retailer’s broad promotional goals may be drawn from this list:
 Increase sales.
 Stimulate impulse and reminder buying.
 Raise customer traffic.
 Get leads for sales personnel.
 Present and reinforce the retailer’s image.
 Inform customers about goods and services.
 Popularize new stores and websites.
 Capitalize on manufacturer support.
 Enhance customer relations.
 Maintain customer loyalty.
 Have consumers pass along positive informative to friends and others.
2.ESTABLISHING AN OVERALL PROMOTIONAL BUDGET:
There are five main procedures for setting up a retail promotional budget
All-you-can afford method: An this method the retailer first allots funds for each elements of the retail
strategy mix and the remaining funds go to promotion.
Incremental method: It relies on prior promotion budgets to allocate funds. A percentage is either added or
subtracted from one year’s budget to determine the next year’s budget.
Competitive parity method: In this method a retailer’s promotion budget is raised or lowered based on
competitor’s actions. If the competitor raises its budget by 8%, other retailers in the area may follow this.
Percentage-of-sales method:
In this method the retailer ties his promotion budget to revenue. A promotion-to-sales ratio is developed.
Then during succeeding years this ratio remains constant.
Objective-and-task method:
In this method the retailer clearly defines his promotion goals and prepares a budget to satisfy them.
3. Selecting promotion mix
4. Implementing promotion mix
5. Reviewing and revising the promotional plan

INTEGRATING AND CONTROLLING THE RETAIL STRATEGY

 According to Philip Kotler, “ marketing control is the process of taking steps to bring actual results
and desired results closer together”
IMPORTANCE/ NEED/ OBJECTIVES OF CONTROL
 control helps to achieve the desired objectives
 Helps to control cost
 It helps to revise and update the plans
 Helps to verify the quality of various policies
 It helps to identifying their strength and weaknesses.
 Control puts a psychological pressure on the individuals for better performance
ESSENTIALS OF EFFECTIVE CONTROL SYSTEM
 It should reflect organizational needs
 Forward looking
 Promptness in reporting deviation
 It must point out exceptional deviations
 Objectivity
 Flexible
 Economical
 simple

CONTROL PROCESS
 What to
Determining control variables Control?

Establishing standard performance Expected level

And standard cost of performance

Measurement of actual What is

Performance and actual cost Happening?

Comparing actual and Why is it

Standard performance Happening?

Corrective action What should

We do about it?

 By integrating and regularly monitoring their strategies, firms of any size or format can take a proper view
of the retailing concept and create a superior total retail experience.
 Four fundamental factors especially need to be taken in to account in devising and enacting an integrated
retail strategy:
1. Planning procedures and opportunity analysis.
2. Defining productivity
3. Performance measures
4. Scenario analysis

Situation analysis

Objectives

Identification of
Consumers

Overall
Strategy

Specific
Activities

Control
PLANNING PROCEDURES AND OPPORTUNITY ANALYSIS
Planning procedure are enhanced by undertaking three coordinated activates. The process is then more systematic
and reflects input from multiple parties:
 Senior executives outline the firm’s overall direction and goals.
 Top-down plan and bottom- up or horizontal plans are combined
 Specific plans are enacted, including checkpoints and dates.
A useful retailer tool for evaluating opportunities is the sales opportunity grid.
DEFINING PRODUCTIVITY
Productivity refers to the efficiency with which a retail strategy is carried out; it is in any retailer’s interest to
reach sales and profit goals while keeping control over costs. On the one hand, a retailer looks to avoid
unnecessary expenses.
PERFORMANCE MEASURES
By outlining relevant performance measures- the criteria used to assess effectiveness- and setting standards
(goals) for each of them, a retailer can better develop and integrate its strategy.
BENCHMARKING
It means the retailer sets standards and measures its performance based on the achievements of its sector of
retailing, specific competitors, high-performance firms, and/or the prior actions of the firm itself:
Benchmarking can identify good business practices, innovative ideas, effective operating procedures, and winning
strategies to be adopted by a firm to accelerate its own progress by ensuring quality, productivity, and cost gains.
It involves investigating how things are done elsewhere and where they are done differently or better, to see
whether a firm could adapt the processes of another organization to improve its own processes”

GAP ANALYSIS
Through gap analysis, a company compares its actual performance against its potential performance and then
determines the area in which it must improve.
Gap analysis has four main steps.
1. Set performance standards.
2. Measure performance.
3. Determine gaps in performance.
4. Adjust strategy and tactics as needed.

Other firm’s
Performance Better-than
Expected
Performance

1--set 2 3
4
Performance Adjust
Performance Measure Determine
As Strategy&
Standards Performance Gaps in
Performance Expected Tactics as

Worse-than
Company’s own Expected
Performance Performance

To ensure that gaps are minimized in relationship retailing, firms should undertake the following
 Customer insight
 Customer profiling
 Customer life-cycle model
 Extended business model
  Relationship program planning and design
 implementation

SCENARIO ANALYSIS
In scenario analysis, a retailer projects the future by studying factors that affect long-run performance and then
forms contingency (“what if”) plans based on alternate scenarios (such as low, moderate, and high levels of
competition).

RETAIL AUDIT

A vital evaluation tool is the retail audit, which systematically examines and evaluates a firm’s total retailing
effort or a specific aspect of it. The purpose of an audit is to study what a retailer is presently doing,
appraise performance, and make recommendations for the future. An audit investigates a retailer’s
objectives, strategy, implementation, and organization. Goals are reviewed and evaluated for the clarity,
consistency and appropriateness. The strategy and the method for deriving it are analyzed. The application of the
strategy and how it is received by customers are reviewed. The organizational structure is analyzed with regard to
lines of command and other factors.
Good auditing includes these elements: Audits are conducted regularly. In depth analysis is involved. Data are
amassed and analyzed systematically. An open minded, unbiased perspective is maintained. There is a willingness
to uncover weaknesses to be corrected, as well as strength to be exploited. After an audit is completed, decision
makers are responsive to the recommendation made in the audit report.

STEPS IN RETAIL AUDITING

1. Determine who does an audit

2. Decide when and how often an audit is done
3. Establish the areas to be audited
4. Develop audit form
5. Conduct the audit
6. Report to management

DETERMINING WHO DOES THE AUDIT

One or a combination of three parties can be involved

 A company audit specialist is an internal employee whose prime responsibility is the retail audit. The
advantage of this person includes the auditing expertise, thoroughness, level of knowledge about the firm,
and on going nature. The disadvantages include the costs and the auditor’s limited independence.
 A company department manager is an internal employee whose prime job is operations management;
that manager may also be asked to participate in the retail audit. The advantages are that there are no
added expenses and that the manager is knowledgeable about the firm and its operations. The
disadvantages of includes the managers time away from the primary job, the potential lack of objectivity,
time pressure and the complexity of company wide audits.
 An outside auditor is not a retailer’s employee but a paid consultant. Advantages are the auditor’s broad
experience, objectivity and thoroughness. Disadvantages are the high cost per day or hour, the time lag
while a consultant gains familiarity within the firm, the failures of some firms to use some specialists
continuously and the reluctance of some employees to co-operate.
 Determination of When audit is Areas to be
Who does the audit conducted audited

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4. Development of audit forms

1 2 3

5.Conducting the audit

Should Is audit to be Should audit How is the

How long Occur while
Employees Disguised Final report
Should audit Retailer is
Be notified Or To be
Take? Open or
In advance? Nondisguised? Prepared?
Closed?

6.Reporting the results of audit to mgt

Mgt’s response to the audit

DETERMINING WHEN AND HOW OFTEN THE AUDIT IS CONDUCTED

Logical times for auditing are the end of the calendar year, the end of the retailer’s annual reporting year (fiscal
year), or when a complete physical inventory is conducted. Each of these is appropriate for evaluating a retailer’s
operations during the previous period. An audit must be enacted at least annually, although some retailer’s desire
more frequent analysis. It is important that the same period (s), such as January- December, be studied to make
meaningful comparisons, projections and adjustments.

DETERMINING AREAS TO BE AUDITED

A retail audit includes more than financial analysis; it Reviews various aspects of a firm’s strategies and
operations to identify strengths and weaknesses. There are two basic types of audits.

 A Horizontal retail audit analyses a firm’s overall performance, from the organizational mission to goals
to customer satisfaction to the basic retail strategy mix and its implementation in an integrated, consistent
way. It is also known as a “retail strategy audit”.
 A Vertical retail audit analysis in depth a firm’s performance in one area of the strategy mix or
operations, such as the credit function, customer service, merchandise assortment, or interior displays. It is
focused and specialized.

DEVELOPING AUDIT FORMS

An audit form lists the area to be studied and guides data collection. It usually resembles a questionnaire and is
completed by the auditor. Without audit forms, analysis is more haphazard and subjective. Key questions may be
omitted or poorly worded. Auditor biases may appear. Most significantly, questions may differ from one audit
period to another, which limits comparisons.

CONDUCTING THE AUDIT

The audit is undertaken. Management specifies how long the audit will take. Prior notification of employees
depends on management’s perception of two factors the need to compile some data in advance to save time versus
the desire to get an objective picture and not a distorted one. With the disguised audit, employees are unaware that
it is taking place. It is useful if the auditor investigates an area like personal selling and wishes to act as a
customer to elite employee responses. With a non disguised audit, employees know an audit is being conducted.
This is desirable if employees are asked specific operational questions and help in gathering data.
Some audits should be done while retailer is open, such as assessing parking adequacy, in store customer
traffic patterns. Others should be done when the firm is closed, such as analyses of the condition of fixtures,
inventory levels and turnover.
An audit report can be formal or informal, brief or long, oral or written and a statement of findings or a
statement of findings plus recommendations.

REPORTING AUDIT FINDINGS AND RECOMMENDATIONS TO MANAGEMENT

The last auditing step is to present findings and recommendations to management. It is the role of management-
not the auditor- to see what adjustments to make. Decision makers must read the report thoroughly, consider each
point, and enact the needed strategic changes. They should treat each audit seriously and react accordingly. No
matter how well an audit is done, it is not a worth while activity of management, fails to enact recommendations.

POSSIBLE DIFFICULTIES IN CONDUCTING A RETAIL AUDIT

 An audit may be costly

 It may be quit time consuming
 Performance measures may be accurate
 Employees may feel threatened and not cooperate as much desired
 Incorrect data may be collected
 Management may not be responsive to the findings.