Beruflich Dokumente
Kultur Dokumente
On
Studying the Merchandising Strategies used by Retail Outlets
of Jaipur
Submitted to:
Prof. Makarand Upadhyay
Submitted by:
Shekhani Mohamed Vasim W.
08BS0001577
By
Shekhani Mohamed Vasim Md. Wahid
08BS0001577
MBA (2008-2010)
In partial fulfillment of the requirement of
MBA Program
IBS-JAIPUR
Faculty Guide:
Prof. Makarand Upadhyay
Faculty, IBS-JAIPUR
I take this opportunity to express my gratitude towards certain key people for their constant
guidance and support, without which the project would not have been a success. This project
would have been difficult to complete without the moral support and the opportunity given by
them to be trained and gather knowledge regarding the subject.
I also like to thank all the employees in the department, my friends, and my parents who helped
me in successful completion of this project.
In today‟s competitive scenario where more and more Retail players are coming into the
picture, there is a need to look into the customer or client behavior to know your client well. The
variety and assortment of merchandise offered by a store play a major role in attracting
customers. Merchandise comes in a variety of sizes, colors, makes and models. So any retailer,
big or small, take many decisions regarding what to purchase and what to made the goods
available to customers. This is called systematic merchandise planning. So basically merchandise
decisions are related to what type of product they are going to offer and assortment planning is
related to the varieties of product and goods offered by them in their outlets.
The main area of the research is to study the Merchandising Strategies used by Retail Outlets
of Jaipur. In this Research Project I will analyze the merchandise planning done by the various
retail stores in Jaipur. Merchandise Planning includes:
The Project is based on Merchandise Planning so we will first understand the importance of
Merchandise planning in retail Industry. We will analyze various aspects to be considered while
doing Merchandise planning in Retail Industry. In this we will cover Assortment, Layout
Planning, In-Store Promotions, Merchandise Buying Decisions, Role of Technology in
Merchandise planning etc.
The Project will be based on Primary as well as secondary Data. The Primary Data will be
collected by interacting with the Store managers, Employees, etc of various Retail stores in
Jaipur while the Secondary data will be collected from Websites, Magazines, Journals, Books
etc.
After collecting the Primary as well as the Secondary Data, it will be compiled in a Proper
Format and inference will be given regarding the merchandising strategies used by the various
retail stores in Jaipur.
1. Introduction ........................................................................................................................................... 6
1.1 Retailing Overview ....................................................................................................................... 6
1.2 Retail in India ............................................................................................................................... 7
1.3 Future of Retail Industry............................................................................................................. 10
2. Merchandise Management .................................................................................................................. 11
2.1 Steps in the Retail Merchandising Process ................................................................................. 11
2.2 Category Management ................................................................................................................ 12
2.3 Assortment Plan.......................................................................................................................... 12
2.4 Retail Assortment Strategies....................................................................................................... 13
2.5 Evaluating Merchandise Performance ........................................................................................ 15
3. Research Purpose and Design process ................................................................................................ 16
3.1. Objective of the research ............................................................................................................ 16
3.2. Benefits ....................................................................................................................................... 16
3.3. Limitations .................................................................................................................................. 16
3.4. Research Methodology ............................................................................................................... 16
3.5 Process Flow of the Research ..................................................................................................... 18
4. Findings after Data Collection and Data Analysis .............................................................................. 19
4.1 Response to Questionnaire ......................................................................................................... 20
Conclusion .................................................................................................................................................. 31
Annexure ..................................................................................................................................................... 32
References ................................................................................................................................................... 33
Glossary ...................................................................................................................................................... 35
It‟s a human tendency to have a comfort, luxurious life and have all facilities. And as there
is a golden period going on now; anybody can enjoy these benefits. Retailing concept is also
from one of these facilities. Retailing simply provides the end product to customer, so retailers
are directly in touch with customers. Retailing is world's largest private industry with annual
sales over $ 6600 billion. Wal-Mart‟s annual sales are over $ 250 billion. It has share of 2.3% of
U.S. G.D.P. There are nine retailers in Fortune 100, which highlights the importance of retailing
as category.
Retailing in India is witnessing a huge revamping exercise. India is rated the fifth most
attractive emerging retail market: a potential goldmine. As per a report by KPMG the annual
growth of department stores is estimated at 24%. Ranked second in a Global Retail Development
Index of 30 developing countries drawn up by AT Kearney.
According to a market estimate after agriculture, retail is the largest single sector, both in
term of turnover or will as employment in India, with market size of $200 billion. The report said
the Indian retail industry is in revolution phase. Organized retailing in India, which account for
less than 4%, is likely to grow four fold in the next five years. That means it will grow from
current size of around $4 billion (Rs. 17,000 Crores) to around $15 billion (Rs. 66000 Crores)
the neighborhoods corner shops estimated at 70 million across the country, and village Melas
characterize the unorganized and fragmented nature of retailing in India.
The retail industry in India is largely unorganized & predominantly consists of small ,
independent, owner-managed shops. Retailing is INDIA‟s largest industry in terms of
contribution to GDP & constitutes 13% of GDP. There are around 5 million retail outlets in
India. There are also an uncounted number of low cost kiosks (tea stalls, snacks centre, barber
shops, etc) & mobile vendors. In India the per capita retailing space is about 2 sq. ft, which is
quite low compared to that of developed economies
Retail Sales in India
The growth of the retail trade in India is associated with the growth in the Indian
economy. Based on the Market Information Survey of Households (MISH) of the National
Council of Applied Economic Research (NCAER), the number of people in the income groups
of “aspirers” and the middle class with annual income ranging from Rs. 90,000 to one million,
more than doubled from 157 million to 327 million during the last decade. The data from the
Central Statistical Organization (CSO) indicate that the growth of real private final consumption
expenditure.
Retail Sector is the most booming sector in the Indian economy. Some of the biggest
players of the world are going to enter the industry soon. It is on the threshold of bringing the
next big revolution after the IT sector. Although organized retail market is not as strong as of
now, it is expected to grow manifolds by the year 2010. The sector contributes 10% of the GDP,
and is estimated to show 20% annual growth rate by the end of the decade as against the current
growth rate of 8.5%. A CRISIL report says that the Indian retail market is the most fragmented
in the world and that only 2% of the entire retailing business is in the organized sector. This
suggests that the potential for growth is immense. There are about 300 new malls, 1500
supermarkets and 325 departmental stores currently being built in the cities across India.
Advantages
- Broad market
- Full selection of items
- High level of customer traffic
- Customer loyalty
- One-stop shopping
- No disappointed customers
Disadvantages
- High inventory investment
- General image
- Many items with low turnover
- Some obsolete merchandise
Advantages
- Broad market
- High level of customer traffic
- Emphasis on convenience customer
- Less costly than wide and deep
Advantages
- Specialist image
- Good customer choice in category(ies)
- Specialized personnel
- Customer loyalty
- No disappointed customers
- Less costly than wide and deep
Disadvantages
- Too much emphasis on one category
- No one-stop shopping
- More susceptible to trends/cycles
- Greater effort needed to enlarge the size of the trading area
Advantages
- Aimed at convenience customers
- Least costly
- High turnover items
Disadvantages
- Little width and depth
- No one-stop shopping
- Some disappointed customer
- Weak image
- Limited customer loyalty
- Small trading area
There are 3 different ways to evaluate the performance of the merchandise for any retailer.
They are:
ABC Analysis
Sell through Analysis and
Multi- attribute method
1. ABC Analysis
In this method merchandise is ranked according to its sales. ABC analysis is based on 80-
20 rule, which says that only 20% of total merchandise bring 80% of the total revenues. In this
method first of all parameters are chosen based on which merchandise is to be categorized or
ranked for e.g. contribution margin, sales etc. After that the next step is to define criteria to place
merchandise in A, B or C category. For e.g. A category consists of only top 5% items which
bring 70% of total revenue, B category consists of 10% of merchandise which contribute 20% of
total revenue and rest are placed in category C.
A sell through analysis helps determine the requirement for early markdowns or the
requirement of more merchandise to fulfill the demand by comparing the actual sales with the
planned sales.
3. Multi-attributes method
In this method the vendors are assigned weighted average scores based on certain parameters.
The vendors are evaluated based on these scores only. The parameters may include Reputation,
Promotional assistance, delivery time, selling history etc.
Merchandising Strategy plays a very important role in success of a retail outlet. It helps to
attract more and more customers as well as retaining the old customers by adopting customer
centric approach so the main Objective of the research is to study the Merchandising Strategies
used by Retail Outlets of Jaipur.
3.2. Benefits
To Self-
Knowledge earning.
Gaining practical exposure to Merchandise Assortment Planning.
To companies-
This report will be beneficial for companies and outlets too because from this report
they get to know what merchandising trends are prevailing in the industry.
From this report they will get the knowledge about required changes in their
strategies.
To customers-
They will get to know about retailer‟s strategies and their work process.
3.3. Limitations
Time constraint
Money constraint
The pace of technological changes.
For this project one has to know each and every aspect of the concept thoroughly. And then
for merchandise assortment planning one has to get updated with the latest trends and all factors
which are continuously affecting these decisions. So acquiring the data regarding this I have
gone through several sources like Books, Magazines, Journals and Web site.
1. Research Design:
The research design will be Descriptive studies. Descriptive studies are well structured,
they tend to be rigid and its approach cannot be changed every now and then. The objective of
this kind of study is to answer the why, who, what, when and how of the subject under
consideration.
2. Research Method
After developing an appropriate research plan, it is important for the researcher to select a
proper research method. For this research, the research methods chosen by the researcher are
secondary data and survey methods.
Secondary data studies: This is concerned with the analysis of already existing data that is
related to the research topic in question.
Surveys: This is a research technique, which is used to gather information from a sample of
respondents by employing a questionnaire.
3. Sampling Procedure
Sampling is generally a part of the research design but is considered separately in the
research process. Sampling is a process that uses a small number of items or a small portion of a
population to draw conclusion regarding the whole population. For this research the sampling
method chosen is simple random sampling and Convenient Sampling.
After preparing a suitable sample, the researcher collects the data from the units in this
sample. As stated above that research method which will be used in the research comprises of
surveys therefore data collected will be of primary in nature and partly secondary since
secondary data will also be taken.
This step includes editing, coding, tabulation and processing of collected data. The
Schedules are required to be edited during the field survey for necessary corrections. After the
survey was complete they are required to be checked again for completeness, accuracy and
uniformity. The data is then arranged in a particular fashion for better understanding.
Design of Questionnaires
Getting Response
Data Entry
Chain stores like More, Reliance Fresh, Lifestyle, Big bazaar etc.
Franchise Stores like Belmonte, Reebok etc.
Single stores owned by local Businessmen like Mansi Fashions, S-mart etc.
Unorganized Retail stores
and various others.
Q.1. Tell me something unique about your outlet and brand and about your vision and
mission?
This was a general question just to start the interview smoothly and also to know what
positioning strategy the retail store managers are adopting and to know the Brand Identity of the
retail stores.
In response to this Question the Managers told various things that they thought are unique
in their retail outlet and which attracts the target customers towards their store instead of their
competitors like:
Brand name
Store location
Store‟s presence in the city
Able to understand customer demands and their need patterns
Store‟s Exterior design
Promotion strategy
Merchandise Assortment
Depth of Products
Customer service
Aesthetics inside the store i.e. store ambience
Store layout
Visual merchandising within the store
Pricing policy
Various loyalty programs
Procedure of handling customer complaints and queries etc.
This Question was to know the target market of various retail stores and the customer bas
they are focusing on. All retailers have their own target markets and their all efforts are focused
on capturing as high market share as possible. They use various tools for the same like Pricing
Strategy, Promotional strategy and more importantly merchandise assortment planning decisions.
Different stores have different target market segments and their basis of segmenting also
differs like let‟s take an example:
Big Bazaar through the introduction of “SABSE SASTE DIN” focuses on the middle
class and the lower class of the society, who is very conscious about the price and decide
on the basis of the value the merchandise provides them.
Retailers like Blackberry, Levis and other brands they focus on the upper middle class
and the upper class of the society whose needs fall in the category of Self-esteem and
Self-actualization. This class don‟t care about the price they have to pay but they want to
buy those merchandise which suites their status and is noticed by everyone.
Let us take another example of apparel retail stores which have different target segment
to focus on which is shown in the table below:
The variety and assortment of merchandise plays an important role in attracting the
customers. There is a difference between variety and assortment of merchandise. Variety means
number of different categories of merchandise within a store while assortment means the number
of stock keeping units within a merchandise category. In short one can say variety means breadth
and assortment means depth of merchandise. So before deciding the amount of merchandise to
be purchased, its variety and its assortment the stores take various factors into consideration like:
Store like single stores, which are owned by a fairly literate businessman, do not use
assortment plan as a tool to plan their merchandise management because they don‟t know the
formal way of making assortment plan as they don‟t have knowledge regarding the same but
they use some layman techniques to organize each category through their experience from the
market.
On the contrary big retail stores like Big-bazaar chain, More, Reliance fresh, Lifestyle
etc. they take due care of preparing their assortment plan and maintaining it by updating and
changing it time to time so that they come to know merchandise belonging to which stock
keeping unit should be ordered in advance so that there is no shortage in its supply similarly they
can also decide on which merchandise should be ordered in less quantity as a result of drop in
sales in that particular stock keeping unit, the reason may be change in the trend, fashion change
etc.
In case of franchise stores and chain stores, they have their own strategic plans for
capturing market and company‟s management also helps these store owners in strategic
planning. As all brands have their own vision and mission so mainly these Retail store owners
are also adopting same strategies for them. While in case of single stores the owner takes all the
purchasing decisions based on the inputs from the store manger regarding purchasing trends and
preferences about the customer for previous month/s. But as all customers have their own
specialties so these retailers also have to change their strategies according to their own localities
and they make some modifications in the plan according to suit the local circumstances.
When asked about whether they use standard tools like Budget plan or open to buy the
retailers gave different responses. In case of single stores owned by fairly literate businessman
they told that some of them have no idea about such tools but then they were told that a budget
plan contains items like:
while Open to Buy system consists of calculating difference between actual and the planned
sales and inventory. On hearing that what actually all this standard tools contain they told that
they also make use of all this items but not in standard for as described by us thus we can say
that this businessmen make use of such standard tool but in their own way.
In case of big retailers like lifestyle, Big-bazaar, More, S-Mart etc. they told that some of
them use this tool while some of them have their own tools which they designed for their store
managers to use and plan their merchandise. Thus we can say every retailer uses proper strategy
while making purchase decisions regarding the merchandise to be offered by the store to the
customers.
In case of Retail chain like Reliance Fresh, More, Spencer etc. they get huge support
from the company in taking decisions regarding the merchandise to be offered to their
consumers. Even in some retail chains like Reliance Fresh all decisions are taken by the
company depending on the sales data of the store which is transferred from the store database to
company database regularly but the store manager has the authority to suggest any
recommendation if any, may be regarding some new merchandise to be offered or to increase the
quantity of old merchandise being offered by the store. Mainly based on the sales data the
company makes an estimate about the inventory required at the store and after consolidating
inventory required by all the stores in a region, the inventory is dispatched to regional warehouse
from where the inventory is arranged in groups to cater to particular retail stores and then the
merchandise is finally unloaded at the retail store.
In single Retail stores like Mansi fashions etc. the decision regarding the merchandise is
entirely taken by the owner in coordination from the store manger if any and from the sales data
regarding the ales of the merchandise in the previous month/s.
While in case of some franchise store they have liberty to prepare their merchandise
strategy through their own, the company only lends the name to the franchisee. In this case the
franchisee along with the store mangers takes the responsibility to carry out the merchandise
purchasing decisions.
Every Retail store whether small or big, whether single store or chain store they all
incorporate some part of category management in their stores like:
Dividing merchandise into separate stock keeping units based on category as perceived
by the customers.
Allotting different shelf space to merchandise belonging to different categories
Designing different promotion schemes for different categories
Deciding price of merchandise belonging to various categories separately etc.
But there are still many other things that the retail stores are not doing in field of category
management like:
Appointing separate category manager for different categories, who takes care of a
particular category of merchandise.
Giving category manger the power to select the merchandise to be offered in the
particular category.
Giving category manager the power to negotiate with the vendors directly regarding the
merchandise purchased from him.
While in case of some big chains like Big-bazaar super market, Lifestyle they even
appoint special category manger for different categories of merchandise but still they don‟t give
all power to the category mangers regarding that particular category . As for example category
manger can decide regarding promotion, shelf space etc. but they can‟t directly negotiate with
the vendors or they can‟t fix the price etc.
Thus we can say that category management is in initial stage in Retail market of not only
Jaipur but the whole of India as it is a new concept and it will take time to flourish in Indian
retail industry.
Every Retail store whether big or small, whether chain stores or a single store; they all
thoroughly analyze the performance of merchandise during previous months and based on that
and certain other criteria they take decision regarding buying merchandise for the coming month.
When further asked about whether they take help of standard tool for analyzing the
merchandise performance like ABC analysis, Sell through analysis, Multi attribute model etc.;
the retailers gave different responses. In case of single stores owned by fairly literate
businessman they told that some of them have no idea about such tools but then they were told
that what actually this various tool contains then they told that they all use such strategies but
only the thing is that they don‟t know this standard tools.
In case of big retailers like Big-bazaar, Reliance Fresh etc. they told that some of them
use this tool while some of them have their own tools which they have designed for their store
managers to use and evaluate the performance of the merchandise.
Every Retail store uses Price mark-up in case of cost of raw material increases and if
merchandise does not sell they even use mark-downs based on the merchandise performance this
is nothing but the Sell-through analysis. Similarly every retailer assign some rating to the vendor
based on certain attribute it possesses like fast delivery, low price etc this is nothing but the Multi
attribute model and so on. So we can say that analyzing of merchandise performance of previous
month/s is a very important aspect for a retailer while purchasing merchandise for coming month
and every retailer whether big or small uses this strategy.
Different retailers use different strategies for fixing their price. The Pricing decision of a
retailer is influenced by:
For retail chains like More, Reliance Store, Big-bazaar etc., the store manager have very
less or even negligible power in pricing decision of the merchandise. All pricing decisions
regarding the price are taken by the mangers at corporate headquarters.
While in case of Small Retailers having single store like Mansi Fashions, S-mart etc., the
pricing decisions are taken by the management with due inputs from the store managers and
based on the discussion the price of the merchandise is fixed in this stores.
The way of handling the logistics for the merchandise differs for every retail store. Some
develop their own logistic system and some use outside logistic service provider‟s facility.
For Big Retailers like Big-bazaar, More etc. they have their own logistic system designed
by the company and these fleet works only for their retail stores. They have their own vehicles,
warehouses etc. even in many cases the company leases the warehouses, vehicles etc. for
particular time period.
In case of small and medium retailers they take use of logistic service providers like Gati,
DHL, TNT express etc. Even for very small retailers they don‟t even have any permanent
logistic service provider they use different services at different time as per the availability of the
logistic service provider.
Small retailers like S-mart, Mansi fashions etc. they also use private labels to increase
market share as well achieving the economies of scale. Many small retailers apart from using
conventional media like TV, Radio, Print etc. they also use unconventional media which suit the
local consumers preferences of Jaipur like Bill board in camel cart, bullock cart, Gas balloon tied
at some point, microphone and loudspeaker in auto rickshaws etc. Because of this innovativeness
and unconventional methods used by the small retailers many a time customer gets attracted
towards them instead of big retailers; this is the main aim of using such media.
For in-store promotions many retailers like big-bazaar, more etc. either they have
category mangers looking for the same or they hire external assistance by service providers. If
they don‟t have category mangers than the store manger along with the assistance from the
company headquarters design the promotions, the store manager has very limited role in such
case i.e. only to give suggestions regarding preference of local community. Even now-a-days
small stores are also hiring external promoters for in-store promotions. Otherwise in case of
small retailers the responsibility of making in-store promotions rests in the hand of store manger
but he has to consult the owner before implementing it.
The scenario has changed totally. Earlier Markets used to be Product-centric but now
market is totally customer-centric and highly competitive. So if any company wants to survive in
this competitive environment then they have to fulfill the changing demands of their customers
whether it is a big giant or a small business unit. That is a reason why in a city like Jaipur also,
which is considered as a historic place, retailers are adopting new techniques to fulfill their
customer‟s need. And hence here also customer can get all those qualities and varieties of
merchandise which earlier were not possible to find.
Although Merchandise management is not a new concept here but the systematic
planning procedure is yet not been adopted by many retailers because of lack of knowledge
about modern merchandise management tools which help to take such decisions more efficiently
and effectively and many other reasons like lack of infrastructure, finance, skilled manpower etc.
The full fledged blooming of Modern Merchandise Management will take some time in Jaipur
but big Retailers like Big-Bazaar, Lifestyle, More etc. have started moving on that path of
success.
We can say that in present Scenario also Darwin‟s Law (on Evaluation Theory) is
applicable on retailers as, “Only the most powerful and quick updating creature, according to the
circumstances will remain alive and others, who couldn‟t adopt themselves according to the
changing environment, will be finished.”
Questionnaire
Q.1. Tell me something unique about your outlet and brand and about your vision and mission?
Q.2. Which is your target market and what you doing to capture it?
Q.3. Before taking decisions about your product varieties and range (Merchandise Assortment
Planning), what factors you considered?
Q.5. Is there any proper strategy you are adopting for these decisions i.e. Do you use standard
tools like budget plan and open to buy for purchasing?
Q.6. Are all decisions related with your outlet‟s merchandise are independently taking by you or
is there any interference or support by company‟s side also?
Q.7. Do you incorporate category management? If yes do you appoint Category manger for the
same or it is done by store manager only?
Q.8. Before buying merchandise for the coming month do you analyze the merchandise
performance of the previous month? If yes , which tool do you use for the same i.e. ABC
analysis, Sell through analysis etc.?
Q.10. How do you handle the logistics for the procurement of the merchandise from vendors?
Q.11. What factors do you consider while opting for in- store advertising, sales promotion etc.?
Do you perform all these promotional activities by yourself or use external assistance for the
same?
Faculty Guide:
Websites:
www.indiainbusiness.nic.in
www.google.com
www.wikipedia.com
www.researchindia.org
www. bigbazaar.futurebazaar.com
www.morestore.com
www.adidas.com
www.priknit.com
www.rbk.com
www.lilliput.com
Gerth, K.C. (2004), “Situational, consumer, and retailer factors affecting Internet, catalog, and
store shopping”, International Journal of Retail & Distribution Management, Vol.32, pp5-18
Mattila, A.S. & Wirtz, J. (2001), “Congruency of scent and music as a driver of in-store
evaluations and behavior”, Journal of Retailing
Paulins, V.A. & Geistfeld, L.V. (2003), “The effect of consumer perceptions of store attributes
on apparel store preference”, Journal of Fashion Marketing and Management, Vol. 7, pp371-
385
Combination Store- A blends of a super market and a general merchandise store, where the
general merchandise contributes more than 40 percent of the sales.
Customer service- A set of activities and programs taken up by a retail organization to offer
their customers a rewarding shopping experience.
Market Positioning- The kind of image the retailer wants to establish among its target group
and the group of firms with which it wishes to compete and coexist.
Market Segment- A group of customers whose needs will be satisfied by the same retail
offering because they have similar needs and go through similar buying processes.