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Rakesh Kumar Singh

Name : RAKESH KUMAR SINGH

Roll No. : 510910259

Learning Centre : Systems Domain (2779)

Subject : Retail Marketing

Assignment No. : Set – I (MK0003)

Date of Submission : 2010

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Rakesh Kumar Singh

MBA Semester 3
MK0003 – Retail Marketing
Assignment Set- 1

1 a. List out the various features of retailing and explain its importance. (7 marks)

Ans: The word RETAIL is derived from French word ‘retailer’, meaning ‘to cut a piece off’ or ‘to
break bulk’. Retail trade may be defined as “a trade, which consists of selling to ultimate consumers of a
variety of products in small lots”. It is exactly and literally so and is meaningful that retail trade is that
cuts off smaller portions from large lump of goods. From the bulk of products procured by the
wholesaler, small lots are cut and distributed through retailers. Retailers are the last link in the channel
of the distribution between the manufacture and the ultimate consumer. The retail shop is one of the
oldest and most widely used business establishments in any country.

Retailing is defined as a conclusive set of activities or steps used to sell a product or a service to
consumers for their personal or family use. It includes all activities directly and indirectly related to the
scale of goods or services to the ultimate consumer. Irrespective of who sells, the distinction of retailing
is normally made on the basis of to whom the products are sold. Retailing is subject to constant and
dramatic changes. Many forces like Social, Economical, Technological, Government policies etc.
influence it.
Following points highlights the importance of retailing:
a. Key member in the channel of distribution: Retailer as the link in the chain of distribution
performs good many functions of marketing. The channel of distribution goes incomplete
without his contributions to make the final consumers buy the products. He acts as a catalyst to
both manufacturers as well as to the customers.
b. Buying and assembling: Retailer assembles products from different manufacturers and
wholesalers and stock wide variety of products to meet the varied and small requirements of
large number of customers. This assembling is possible through the process of buying variety of
products from different sellers.
c. Warehousing: Retailer is a safety value for releasing the goods on quantities of different
varieties and price ranges according to the consumer needs, Warehousing makes possible
holding the stocks to match between the consumer demand and supply conditions.
d. Selling: The final aim of a retailer is to sell the products so bought and held by him. Retailer is
rightly called as the buying agent of consumers. He is the means to dispose the goods to the
consumers. Successful retailing needs good deal of salesmanship tactics.
e. Risk Shouldering: Risk Shouldering is the basic responsibility of a retailer arising out of
physical deteriorations and changes in prices. These are unavoidable as he holds sufficient and
variety of inventories from the time they are bought till they sell.
f. Grading and Packing: Retailers undertake second round grading and packing activities left by
the manufacturers and wholesalers. As he sells in loose packs and very odd lots, packing
assumes a particular importance.
g. Financing: In successful marketing, the contribution of retailers is really worth emphasising
with consumer financing. His financing consists of credit granted on liberal terms to the
consumers, investment in stocks, salaries and wages and other trade expenses.
h. Advertising: Retailers are the best agents to advertise the products and ideas. In collaboration
with the wholesaler and producer, retailers do undertake shop display, distribution of sales
literature, introduction of new product etc.
i. Supply of Market Information: As being in close and constant touch with the consumers, he
clearly keenly observes, studies the consumer behaviour, changes in tastes and fashions and
therefore demands. This collected information is passes on to the wholesalers and
manufacturers for their perusal.
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b. Briefly explain the functions of a departmental store. (3 marks)

Ans: Departmental stores are retailers that carry a broad variety and deep assortment, offer
considerable customer service and are organised into separate departments for displaying merchandise.
Each department within the store has a specific selling space allocated to it, a POS terminal to transact
and record sales, and salespeople to assist customers. The major departments are women’s, men’s and
children’s clothing and accessories; home furnishing and furniture, and kitchenware and small
appliances. In some situations, departments in a departmental store or discount store are leased and
operated by an independent company. A leased department is an area in a store is leased or rented to
an independent firm. Retailers lease departments when they lack expertise to efficiently operate the
department. Speciality departmental stores use a department store format but focus primarily on
apparel and soft home furnishings.

2 a. What do you mean by a store layout? How is it useful in retailing? (4 marks)

Ans: Store layout is the term used to refer the interiors and the allocation or the plan in which the
products are displayed in the store. It is quite imperative for the retailers to understand the customer
and prepare a customer friendly layout.

A customer friendly layout gives an impetus to the shopper to spend more time in store hence
increasing the chances of shoppers buying more merchandise. In the case of India many of the
independent retailers do not have or have limited spaces for customer movement. Especially in smaller
stores, one would find cash counter located at the store entrance. This treatment is common with so
called ‘Kinara Stores”.

But on the other hand, many organized retailers provide adequate space within the store for
shoppers and create layouts that facilitate a definite pattern of customer traffic. In other words the
layout creates ‘Aisles’ so that the shopper can move on a predefined path inside the store. Layout
planning caters to decisions about nature of traffic flow, kinds of product, space available and
maintenance of the space on a daily basis.

Store layout is one of the many facets of retail atmospherics and hence it is significant. Store
layout plays a very important part in the cost analysis by the retail firm and also the general brand
communication of the store. Store layouts generally show the size and location of each department, ant
permanent structures, fixture locations and customer traffic patterns. Each floor plan and store layout
will depend on the type of products sold, the building location and how much business can afford to
put into the overall store design.

b. Write a note on sales forecasting. (3 marks)

Ans: A retailer estimates its expected future revenues for a given period by sales forecasting. Forecasts
may be companywide, departmental, and for individual merchandise classifications. Perhaps the most
important step in financial merchandise planning is accurate sales forecasting, because an incorrect
projection of sales throws off the entire process. That is why many retailers have state-of the art
forecasting systems. Longs Drug Stores has dramatically improved its cash flows by using a system from
event. Larger retailers often forecast total and department sales by techniques such as trend analysis,
time series analysis, and multiple regression analysis. Small retailers rely more on guesstimates,
projections based on experience. Even for larger firms, sales forecasting for merchandise classifications
within departments relies on more qualitative methods. One way to forecast sales for narrow categories
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is first to project sales on a company basis and by department, and then to break down figures
judgmentally into merchandise classifications.

External factors, internal company factors, and seasonal trends must be anticipated and taken
into account. Among the external factors that can affect projected sales are consumer trends,
competitors’ actions, the state of the economy, the weather, and new supplier offerings. For example,
Paralytics offers a patent.

Methodology to analyse and forecast the relationship among consumer demand, store traffic,
and the weather. Internal company factors that can impact on future sales include additions and
deletions of merchandise lines, revised promotion and credit policies, and change in hours, new outlets,
and store modelling. With many retailers, seasonality must be considered in setting monthly or
quarterly sales forecasts. Handy’s yearly snow blower sales should not be estimated from December sales
alone.

A sales forecast can be developed by examining past trends and projecting future growth. It is
an estimate, subject to revisions. Various factors may be hard to incorporate when devising forecast,
such as merchandise shortages, consumer reactions to new products, the rate of inflation, and new
government legislation. That is why a financial merchandise plan needs some flexibility.

3. If you need to start a retail outlet or store, what strategic considerations will you take into account,
in order to implement your plans? (10 marks)

Ans: Location is the most important ingredient for any business that relies on customers. It is also
one of the most difficult to plan for completely. Location decisions can be complex, costs can be quite
high, there is often little flexibility once a location has been chosen and attributes of locations have a
strong impact on a retailer’s overall strategy. Choosing the wrong side have a lead to poor results and in
some cases insolvency and closure.

Since more than 90% of the retail sales are made at the stores, the selection of a store location
is one of the most significant strategic decisions in retailing. Although the small store features personal
service and long hours, it cannot match the supermarket’s product selection and prices. A large
supermarket or a discount store can offer lower prices since they get economies of scale in purchasing
and operations. The reasons for locating a store in a certain place vary with the type of business. Hence
retail location and layout plays a vital role in business of the retail outlets.

Retail store management involves paying adequate attention to factors such as expected
movement of the customers visiting the store and space allotted to customers to shop, and making
adequate provision for merchandise display. These concerns are important as they contribute to the
capital cost of the retail firm and also the overall image of the store. There are following other
important factors which should also be taken into account:

a. Kind of product sold: For stores dealing in convenience goods, the quantity of traffic is more
important. The corner of an intersection, which offers two distinct traffic streams and a
large window display area, is usually a better site than the middle of a block. Convenience
goods are often purchased on impulse from easily accessible stores. For stores dealing in
shopping goods, the quality of the traffic is more important. Stores carrying speciality goods
that are complementary to certain other kinds of shopping goods may desire to locate
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closely to the shopping goods stores. In general, the speciality goods retailer should locate
in the type of neighbourhood where the adjacent stores and other establishments are
compatible with retailer’s operations.
b. Cost Factor: Location decision on cost considerations alone is risky. Space cost is a
combination of rent or mortgage payment, utilities, leasehold improvements, general
decoration, security, insurance and all related costs of having a place to conduct business
operations. Traditionally, the retail community placed great importance on owing the place
since this was considered prestigious in the business community. With the emergence of
new forms of retail formats such as franchising, malls and departmental stores, the
dependence on rent or lease is increasing.
c. Competitor’s location: The type and number of competitors is another important factor. The
presence of major retail centres, industrial park, franchise chains, and department stores
should be noted. Intense competition is the area shows that new businesses will have to
divide the market with existing businesses. An excellent location may be next or close to
parallel or complementary businesses that will help to attract customers.
d. Ease of traffic flow and accessibility: These two are the more important factors to some
businesses than others. Retailers selling convenience goods must attract business from the
existing flow of traffic. Studying the flow of traffic, nothing one-way streets, streets width
and parking lots is hence important. The flowing factors like parking availability, distance
from residential areas, side of the street, part of the block etc is to be considered.
e. Parking and major thoroughfares: Parking is another site characteristic that is especially a cause
for concern in densely populated areas. When evaluating the parking that exists at a retail
site, there are two considerations i.e. parking capacity and parking configuration. The ideal
parking ratio for a food store is about 3:1 or 3 sq.ft of the parking space for every square ft
of store.
f. Market trends: Evaluate the community from a broad, futuristic perspective. Local
newspapers are a good source of information. Discussions with business owners and
officials in the area can also help.
g. Visibility: Visibility has a varied impact on a store’s sales potential. It is important when a
shopper is trying to find the store for the first or second time. Once the shopper has
become a regular customer, visibility no longer matters. It follows that of a store readily be
seen, new residents of an area probably will not choose it.