RETAIL MANAGEMENT

UNIT1:Introduction to Retailing-Functions of Retailers-Economic Significance of Retailing-Evolutuion of retail in India-Drivers of retail

What is Retailing?
The word retail has its origin in French word retaillier and means to cut a piece or to break bulk. Retailing is the sale of goods and services to the ultimate consumer for personal, family or household use. According to Kotler: Retailing includes all the activities involved in selling goods or services to the final consumers for personal, non business use Retailing includes all the activities involved in selling the goods&services to the final consumer for personal,family, householduse or for nonbusiness purpose . Retail The word retail is derived from a french word retaillier which means to cut off a piece or to break bulk. Examples of Retailers Retailers: -Reliance Retail, KFC, McDonalds, More, Subiksha ,Spencers ,VishalRetail, Bigbazaar etc Firms that are retailers and wholesalers that sell to other business as well as consumers: -Metro,Office Depot(Stationery products). How Retailers Add Value Breaking Bulk -Buy it in quantities customers want Holding Inventory -Buy it at a convenient place when you want it Providing Assortment -Buy other products at the same time Offering Services -See it before you buy, get credit,discount etc. 2

Functions of a retaillier
1. From the customer point of view, the retailer serves him by providing the goods that he needs in the required assortment, at the required place and time. 2. From an economic standpoint, the role of a retailer is to provide real added value or utility to the customer. This comes four different perspectives a) Form: First is utility regarding the form of a product that is acceptable to the customer. The retailer does not supply raw material, but rather offers finished goods and services in a form that the customers want. The retailer performs the function of sorting the goods and providing us with an assortment of product in various categories. B) Time: He cerates Time utility by keeping the store open when the consumers prefer to shop. preferable shopping hours. C) Place: By being available at a convenient location, he creates place utility. D) Ownership: Finally, when the product is sold, ownership utility is created. 3. Arranging Assortment: manufacturers usually make one or a variety of products and would like to sell their entire inventory to few buyers to reduce costs. Final consumers, in contrast prefer a large variety of goods and services to choose from and usually buy them in small units. Retailers are able to balance the demands of both sides, by collecting an assortment of goods from different sources, buying them in sufficiently large quantities and selling them to consumers in small units 4. Breaking Bulk: to reduce transportation costs, manufacturer and wholesalers typically ship large cartons of the products, which are then tailored by the retailers into smaller quantities to meet individual consumption needs 5. Holding stock: Retailers maintain an inventory that allows for instant availability of the product to the consumers. It helps to keep prices stable and enables the manufacture to regulate production. 6. Promotional support: small manufacturers can use retailers to provide assistance with transport, storage, advertising, and pre- payment of merchandise.

Economic Significance of Retailing

Over 1lak cr in sales Employs 7% of population -about the same as manufacturing and growing. Management training opportunities Entrepreneurial opportunities

The Evolution of retail in India

Retail in India has evolved to support the unique needs of our country, given its size and complexity Haats, Mandis and Melas have always been a part of the Indian landscape. They still continue to be present in most parts of the country and form an essential part of life and trade in Various areas. The PDS (Public Distribution System) would easily as the single largest retail chain existing in the country. the evolution of the PDS of Grains in India has its origin in the rationing system introduced by the British during world war II The system was started in 1939 in Bombay and subsequently extended to other cities and towns. the system was abolished post war but however attaining independence India was forced to reintroduce it in 1950. There was rapid increase in the ration shops ( being increasingly called the Fair Price Shop or FPSs) The Canteen Stores Department and the Post Offices in India are also among the largest network of outlets in the country reaching population across the country. The Khadi & Village industries (KVIC) was also set up post independence. The cooperative movement was again championed by the government. In the past decade, the Indian marketplace has transformed dramatically. However from the 1950,s to the 80,s, investment in various industries was limited due to low purchasing power in the hands of the consumer and the governments policies favoring the small scale sector. The first attempts at organized retailing were noticed in the textiles sector. One of the pioneers in this field was Raymonds which set up stores to retail fabric. Raymonds distribution network today comprises 20,000 retailers and over 256 exclusive showrooms in over 120 cities of the country 4

 Other textile manufacturing who set up their own retail chains wee Reliancewhich set up Vimal showrooms and Garden Silk Mills, which set up Garden Vareli showrooms

Traditional Formats Itinerant (Travelling) SalesMan HAATS Haats are periodic markets that form a major part of the rural market system in india. This is a location which witnesses a public gathering of buyers and sellers at fixed times and at fixed locations. MELAS Melas are fairs and they can range from comodity fairs to religious fairs. Virtually every state in india has melas for which it is known.Rajasthan Handicrafts,Khadi Mela. It is estimated that more than 25000 melas are held anually in the country. It is also estimated that the average outlets in every mela would be more than 800 and average sale per mela is Rs.40 50 Laks. MANDIS Mandis are markets set up by the state government for the sale of Agricultural produce directly from the farmers.

Close to 6800 mandis exist in india and are believed to cater to huge population.

Established Formats Kirana Shops : is a retail outlet that is owned and operated by individuals. The range of products are very selective and few in numbers. These stores are seen in local community often are family-run businessesThey typically stock range of goods that range staples to FMCG products .The size of kirana store ranges between 300-500 sq.ft, and it stocks 80% branded products and 20% unbranded products. Department stores : Large stores ranging from 20000-50000 sq. ft, catering to a variety of consumer needs. Further classified into localized departments such as clothing, toys, home, groceries, etc. Company/Multibrand showrooms: PDS/Fairprice shops.: PDS would emerge as the single largest retail chain existing in the country. Introduced by British during the worldwar II.The evolution of PDS has its grains in india and its origin in the rationing system PDS was reintroduced and other essential commodities like sugar and kerosene were added to the commodity basket of PDS. There were also increase in the ration shops now also called as fairprice shops and their number went up from 18000 in 1957 to 51000 in 1961. Cooperative stores: Pan Shops: Exclusive Retailoutlets : Ranging from a size of 500 sq ft to 5,000 sq ft. & above, this format is owned/ managed by the Company or through its franchise. These can offer single brand as well as multiple bands. Hyper Markets: They are typically large, starting from 40,000sq. ft plus are usually located outside the city limits. This format comprises of a multiple division layout, and usually has an" industrial- look" interior. Hypermarkets generally provide daily necessities and grocery like items. Pricing is competitive and they also offer volume discounts. Internal Retail

Emerging Formats:

Malls/Speciality Malls: The largest form of organized retiling today. Malls are located mainly in metro cities, in proximity to urban outskirts, this format ranges from approximately 60,000 sq ft to 7,00,000 sq ft and above. They lend an ideal shopping experience with an amalgamation of product, service and entertainment, all under a common roof

Multiplexes: Rural Oriented Formats: Fastfood Outlets: Service Galleries etc.:

Drivers of Retail change in India

major drivers : 1. Changing Income Profiles: Steady economic growth fuelled the increase in disposable income in India. The average middle class family's disposable income rose by more than 20% between 1999-2003. 2. Diminishing difference between Rural and urban India: Rural India accounts for over 75% of India population and this in itself offers a tremendous opportunity for generating volume driven growth. Tax benefit. In year 2002-03 LIC sold 50% of its policies in rural India. Same BSNL also sold its 50% connection in small towns . 3. Changes in Consumption patterns: Occupational changes and expansion of media have caused a significant change in the way the consumer lives and spends his money. The changes in income brought about changes in the aspirations and the spending patterns of the consumers. the buying basket of the consumer changed 4. The emergence of a young Earning India : Nearly 70% of the Indian population is below the age of 34. taking advantages of employment opportunity in the booming service sector these young Indians are redefining service and consumption patterns

UNIT2:Retail Store Locations-Types of locations-Site Selection-Evaluating specific areas for locations-Evaluating a site for locating a retail store-Trade area charecterstics Define Store: A store is place , real or virtual , where the shoppers comes to buy goods & services. The sales transaction occurs at this junction. Locating the retail store in the right place was considered to be adequate for success. Location becomes a critical decision for a retailer for several reasons. As like; Location is generally one of the most important factors customers consider while choosing a store. A bad location may cause a retailer to fail even if its strategic mix is excellent.. On the other hand , a good location may help a retailer succeed even if its strategic mix is mediocre. Store location is least flexible element of retailers strategic mix due to its fixed nature, the amount of investment, and the length of lease agreements Types of Retail Location Various option are available to the retailer for choosing the location of store. The choice of the location of the store depends on the target audience and the kind of merchandise to be sold. A retailer has to choosing among alternate types of retail locations available . It may locate in an isolated place and pull the customer to the store on its own strength, such as a small grocery store or paan shop in a colony which attracts the customers staying close by Typically a store location may be: 1. Freestanding /Isolated store. 2. Part of Business District/Centers (unplanned Business Districts). 3. Part of a Shopping Center (Planned Shopping Centers) 1. Freestanding /Isolated store Where there are no other outlets in the vicinity of the store and therefore store depends on its own pulling power and promotion to attracts customers. 8

A biggest advantages for freestanding stores is that there is no competition around. This type of location has several advantages including no competition, low rent, often better visibility from the road, easy parking and lower property . Neighborhood Stores; colony shops serves small locality. Highway Stores :Ebony store in Ludhiana .

2. Part of Business District/Centers (unplanned Business Districts). A retail store can also be located as a part of a business district. Or we can refer this as unplanned business centers A business district is place of commerce in a city which developed historically as the center of trade and commerce in the city or town. A business districts can be a central, secondary or a Neighborhood business district. A Central business District CBD is the main center of commerce and trade in the city. (high land rates , intense development) A CBD is the hub of retailing activity in a city. CBD served different sections of population for Examples of Cannaught place in Delhi, Colaba in Mumbai, Commercial Street and market CBDs. CBDs serving the upper and upper middle class customers across these cities like, chandani chowk in Delhi, Kalbadevi-Bhuleswar in Mumbai, Chickpet in Bangalore. Secondary Business District are composed of unplanned cluster of store often located on a major intersection of city they a customers from a large part of the city 3.Part of a Shopping Center (Planned Shopping Centers) A shopping center has been defined as a group as a single property The basic configuration of a shopping centre is a Mall or Strip centre. A mall is typically enclosed and climate controlled. A walkway is provided in front of the stores. A strip centre is a row of stores with parking provided in the front of the stores. 9 of retail and other commercial establishments that is planned , developed, owned and managed in Bangalore are up

In India we can planned shopping centre can categorize in two category Regional shopping centers or Mall: Regional shopping centers or mall are the largest planned shopping centers..

Often they are anchored by two or more major department stores have enclosed mall serve a large trading area and have high rents. (ansal plaza,spencers plaza crossroads, DLF city in Gurgaon)

Neighborhood/community/shopping centers: Neighborhood /community centers usually have a balanced mix of stores including a few grocery stores , a chemist, a verity store and a few other stores selling convenience goods to the residents of the neighborhood.

Step involved in choosing a Retail Location

In order to arrive at the decision on where to locate the retail store a retailer needs to first on the region that he wants to locate the store. After identifying the region the following steps Have to be followed . 1. Identifying the market in which to locate the store. 2. Evaluate the demand and supply within that market. i.e. determine the market potential. 3. Identify the most attractive sites 4. Select the best site available 1. Market Identification: The first step in arriving at a decision on retail location is to identify the market attractiveness to a retailer. This is important that retail needs to understand the market well. The retailer need to take into consideration various elements as shown in format. (features of population) Demographic features of the population The characteristics of the household in the area (average household income) Competition and compatibility (Need to know compatibility & competition in market) Laws & regulations:( good understanding of the laws 2. Determining the market Potential::

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Determining the market Potential

Trade area analysis: A trade area is the geographic area that generates the majority of the customers for the store. Primary trade area: primary trading covers between 50-80% of the stores customers. Secondary Trading Area: this area contains the additional 15- to 25% of the stores customers. Tertiary trading area covers the balance customers These trading areas are dependent on distance and do not always have to be concentric in nature

3 & 4 Identify Alternate sites and select the site: After taking decision on the location and market potential the retailer has to select the site to locate the store based on these Traffic Accessibility of the market is also a key factor The total number of stores and the type of store that exist in the area Amenities To buy or to lease The product mix to be offered by the retailer

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Site Selection
Trade area -- contiguous geographic area that accounts for the majority of a stores sales and customers Primary trade zone -- Usually 3-5 mile radius; generates 60-65% of customers Secondary trade zone -- Usually 3-7mile radius; generates 20% of customers Tertiary trade zone -- Usually 15 50

Steps in selecting a site:

Evaluate alternative geographic areas in terms of the characteristics of residents and existing retailers (trading-area analysis) Determine whether to locate as standalone, unplanned business district or planned shopping center Make a decision about location type Analyze alternate sites

Site Evaluation
Accessibility Locational advantages Terms of occupancy Legal considerations (e.g.environmental considerations, zoning restrictions, building codes, signs, licensing requirements)

Checklist for Site Evaluations

Local Demographics Population and/or household base Population growth potential Lifestyles of consumers Income potential Age makeup Population of nearby special markets,that is, daytime workers, students, and tourists, if applicable Occupation mix Traffic Flow and Accessibility Number and type of vehicles passing location Access of vehicles to location 12

 Number and type of pedestrians passing location Availability of mass transit, if applicable Accessibility of major highway artery Quality of access streets Level of street congestion Presence of physical barriers that affect trade area shape Site Characteristic Number of parking spaces available Distance of parking areas Ease of access for delivery Visibility of site from street History of the site Compatibility of neighboring stores Size and shape of lot Condition of existing building Ease of entrance and exit for traffic Ease of access for handicapped customers Restrictions on sign usage Building safety code restrictions Type of zoning Cost Factors Terms of lease/rent agreement Basic rent payments Length of lease Local taxes Operations and maintenance cost Restrictive clauses in lease Membership in local merchants association required Voluntary regulations by local merchants Evaluating a Site for Locating a Retail Store When evaluating and selecting a specific site, retailers consider: The characteristic of the site The characteristic of the trading area 13

The estimated potential sales that can be generated

Trading area A trading area is the geographic area from which most customers are drawn. Three types of trading areas are important to retailers That of the store itself i.e. primary trading area. That of the shopping centre or area where the store is located i.e. secondary trading area. That of the city or metropolitan area i.e. fringe trading area. Factors Affecting the Size of the Trade Area Accessibility Natural & Physical Barriers Type of Shopping Area Type of Store The nature of merchandise, assortment, location of alternative sources for the merchandise Competition Parasite Stores Trade area charecterstics-Search in T.B (Only this topic)

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UNIT3:Retail Formats-Types of retailers-Store based,Non store based,Services Retailing,Types of Ownership-Multi channel retailing-Retail Life Cycle Classification of retail formats CLASSIFICATION OF RETAIL FORMATS

Store based retailing

Non-store retailing

Service retailing

Form of ownership

Merchandise offered

I)Store based retailing: It is divided in to two types A) form of ownership and B)Merchandise offered The two types are explain clearly as follow
A).

Form of Ownership

A retail business like any other type of business, can be owned by a sole proprietor, partners or a corporation. A majority of retail business in India are sole proprietorships and partnerships. 1. Independent Retailer: Generally operates one outlet and offers personalized service, a convenient location and close customer contact. Roughly 98% of all the retail businesses in India, are managed and run by independents, including barber shops, drycleaners, furniture stores, bookshops, LPG Gas Agencies and neighbourhood stores. This is due to the fact that into retailing is easy and it requires low investment and little technical knowledge. This obviously results in a high degree of competition.. Most independent retailers fail because of the ease of entry, poor management skills and inadequate resources. 2. Retail Chain: It involves common ownership of multiple units. In such units, the purchasing and decision making are centralized. Chains often rely on, specialization, standardization and elaborate control- systems. Consequently chains are able to 15

serve a large dispersed target market and maintain a well known company name. Chain stores have been successful, mainly because they have the opportunity to take advantage of economies of scale in buying and selling goods. They can maintain their prices, thus increasing their margins, or they can cut prices and attract greater sales volume. Unlike smaller, independent retailers with lesser financial means, they can also take advantage of such tools as computers and information technology. Examples of retail chains in India are Shoppers stop; West side and IOC, convenience stores at select petrol filling stations. 3. Retail Franchising: Is a contractual arrangement between a franchiser (which may be a manufacturer, wholesaler, or a service sponsor) and a franchisee or franchisees, which allows the latter to conduct a certain form of business under an established name and according to a specific set of rules. The franchise agreement gives the franchiser much discretion in controlling the operations of small retailers. In exchange for fees, royalties and a share of the profits, the franchiser offers assistance and very often supplies as well. Classic examples of franchising are; McDonalds, Pizza Hut and Nirulas. 4. Cooperatives: A retail cooperative is a group of independent retailers,that have combined their financial resources and their expertise in order to effectively control their wholesaling needs. They share purchases, storage, shopping facilities, advertising planning and other functions. The individual retailers retain their independence, but agree on broad common policies. Amul is a typical example of a cooperative in India. B). Merchandise offered Retailers can be classified by Merchandise offered, which is an integrated combination of hours, location, assortment, service, advertising, and prices etc. The various categories are: 1. Convenience Store: Is generally a well situated, food oriented store with long operating house and a limited number of items. Consumers use a convenience store; for fill in items such as bread, milk, eggs, chocolates and candy etc. 2. Super markets: Is a diversified store which sells a broad range of food and non food items. A supermarket typically carries small house hold appliances, some apparel items, bakery, film developing, jams, pickles, books, audio/video CDs etc. 3. Department Stores: A department store usually sells a general line of apparel for the family, household linens, home furnishings and appliances. Large format 16

apparel department stores include Pantaloon, Ebony and Pyramid. Others in this category are: Shoppers Stop and Westside. 4. Speciality Store: Concentrates on the sale of a single line of products or services, such as Audio equipment, Jewellery, Beauty and Health Care, etc. Consumers are not confronted with racks of unrelated merchandise. Successful speciality stores in India include, Music World for audio needs, Tanishq for jewellery and McDonalds, Pizza Hut and Nirulas for food services. 5. Hyper Markets: Is a special kind of combination store which integrates an economy super market with a discount department store. A hyper market generally has an ambience which attracts the family as whole. Pantaloon Retail India Ltd. (PRIL) through its hypermarket Big Bazar, offers products at prices which are 25% 30% lower than the market price. 6. OFF price retailers :Hear the merchandise is sold at less than retail prices. Off price retailers buy manufacturers seconds, overruns or off seasons at a deep discount .The merchandise may be in odd sizes, unpopular colours or with minor defects. 7. Factory outlets: Owned and operated by the manufacturer

8.

Catalogue showrooms : catalogue retailers usually specialise in hard goods

such as house ware , jewellery and consumuer electronics .A consumer walks into this retail showroom and goes through the catalogue of the product/s that he would like to purchase. II). Non Store Retailing In non store retailing, customers do not go to a store to buy. This type of retailing is growing very fast. Among the reasons are; the ability to buy merchandise not available in local stores, the increasing number of women workers, and the presence of unskilled retail sales persons who can not provide information to help shoppers make buying decisions. The major types of non store retailing are: 1. In Home Retailing: Where, a sales transaction takes place in a home setting including door-door selling. It gives the sales person an opportunity to demonstrate products in a very personal manner. He/She has the prospects attention and there are fewer distractions as compared to a store setting. Examples of in home retailing include, Eureka Forbes vaccum cleaners and water filters. 17

2.

Telesales/Telephone Retailing: This involves contact between the prospect

and the retailer over the phone, for the purpose of making a sale or purchase. A large number of mobile phone service providers use this method. Other examples are private insurance companies, and credit companies etc. 3. Direct Response Retailing: Here the marketers advertise these products/

services in magazines, newspapers, radio and/or television offering an address or telephone number so that consumers can write or call to place an order. It is also sometimes referred to as Direct response advertising. The availability of credit cards and toll free numbers stimulate direct response by telephone. The goal is to induce the customer to make an immediate and direct response to the advertisement to order now. Telebrands is a classic example of direct response retailing. Times shopping India is another example. 4. Automatic Vending: Although in a very nascent stage in India, is the ultimate in non personal, non store retailing. Products are sold directly to customers/buyers from machines. These machines dispense products which enable customers to buy after closing hours. ATMs dispensing cash at odd hours represent this form of non store retailing. 5. Electronic Retailing/E-Tailing: Is a retail format in which retailers communicate with customers and offer products and services for sale, over the internet. The rapid diffusion of internet access and usage, and the perceived low cost of entry has stimulated the creation of thousands of entrepreneurial electronic retailing ventures during the last 10 years or so. Amazon.com, E-bay .etc, are some of the many e-tailers operating today. III)Services retail: Service retail would involve the retail of various services to the end customer .For the purpose of this text, key services have been identified as Retail banking Car rentals Providers of various services like electricity, gas etc. Service contracts which may be entered into for servicing of customer durables like maintenance of water filters, computer systems etc. Types of Retailers Service i)Self-Service Customer is on his/her own 18

1. Food and drug stores (e.g., Kroger, Walgreens) ii)Limited Service Available salesperson 2. Most department stores, some specialty stores (e.g., JCPenney, Gap, Kohls) iii)Full Service Salesperson assists the customer 3. Some department stores and specialty stores (e.g., Nordstrom, Nine West), restaurants, etc.

Types of ownership
Entrepreneurs have many forms of retail business ownership available to them. Eachbusiness model has its own list of pros and cons. Choosing a type of retail business to start will depend on why you want to own a business, as well as your lifestyle, family, personality, basic skills and much more. Here are a few of the main types of retail ownership and the advantages, disadvantages, and support system of each. 1. Independent Retailer In independent retailer is one who builds his/her business from the ground up. From the business planning stage to opening day, the independent retail owner does it all. He/she may hire consultants, staff and others to assist in the business endeavor. The opportunities are endless. Advantages: There are no restrictions on who, how or where an entrepreneur should set up his/her business. The freedom to do what one wants to do is the biggest advantage in this form of business. It can be extremely fulfilling. Disadvantages: Because of the ease and flexibility of getting started, there can be a lot of competition in a particular area for a certain type of customer. Every business decision rests on the owner(s). There is no branding, no preset guidelines and a great deal of risk in this business model. 2. Existing Retail Business Someone who inherits or buys an existing business is taking ownership and responsibility of someone else's hard work. The foundation has already been laid. 19

Advantages: The biggest advantage to buying an existing business or taking ownership of an already-established retail store is time. The time to build a customer base, the time to establish branding, and the time it takes to establish credit are generally all past which means most of the hard part is behind the new owner. Disadvantages: The existing business may have a negative image or reputation that will take a lot of time to undo. Loyal customers may not like the change of ownership. Previous owners have caused problems by opening a competing busines. 3. Franchise Purchasing a franchise is buying the right to use a name, product, concept and business plan. The franchisee will receive a proven business model from an established business Advantages: All of the business operation processes have been established. The franchisee receives help from a network and customers may already familiar with the name. The marketing strategy has already been put in place. Most all of the risk associated with starting a retail business has been reduced. Disadvantages: Franchisees pay a fee, or royalty, based on sales each year. Startup costs relating to the franchise may be high. One of the biggest disadvantages of owning a franchise is the lack of flexibility and freedom. 4. Licensed Dealership Retailers may find the business model of a licensed dealership as a mix of franchise and independent retailer. The licensee has the right (sometimes this is exclusive) to sell a brand of products. Unlike a franchise, the dealer can sell a variety of brands and there generally no fees to the licensor. Dealerships may or may not be identified as an authorized seller or by the company's trademark. Advantages:

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There may be some branding or product name recognition by the customer. The dealership relation is much more flexible than that of a franchise. This may be a good business model for part-time retailers or those just starting in retail. Disadvantages: Because of the ease and flexibility of getting started, there can be a lot of competition in a particular area for a certain type of customer. Like the independent retailer, every business decision rests on the owner(s). There is also great deal of risk in this business model. 5. Network Marketing Multi-level marketing (MLM) or network marketing is a business model where the selling of products depends on the people in the network. Not only is a product being sold, but other salespeople are being recruited to sell that same product or product line. It's probably not a type of business one would initially consider when discussing retail businesses, but Amway used this model quite successfully for many years. Advantages: Generally very little startup funding is needed to operate this type of business. Network marketing provides freedom from conventional retailing businesses and offers a greater interaction with all types of people. For those willing to invest the time, huge profits can be made. Disadvantages: Too many unscrupulous multi-level marketing schemes exist. Some systems require their dealers to be more interested in recruiting new members than in selling the products to consumers. It may be difficult to operate without a storefront.

Multi - Channel
Retailers traditionally maintained a single department, offering sales and support via a single mode of customer interaction like the physical store. Over time this has expanded to include multiple ways of selling to, engaging, and interacting with the customer, primarily via mail, catalogue and telephone. Advancing technology however, has led to a number of new ways of inter-personal interaction like the internet, mobile phones, and interactive TV; and as these embed deeper into social culture, subsequently new channels for offering product and service. Multi-Channel 21

refers to the delivery of customer propositions via multiple channels with at least some degree of cross channel integration in management, information and service, i.e. in a consistent and coordinated way across all channels According to Shop.org, 34% of consumers today use at least three channels when shopping. Research has found them to spend up to 10 times more, to generate 25 to 50% more profit and demonstrate greater loyalty than their singlechannel counterparts. Multi-channel is also driven by strategic competitive advantage and differentiation opportunities, and regulatory pressures around ensuring that all customers are able to access products and services on offer. Benefits Better responsiveness and sensitivity to changing environments Competitive advantage over pure-plays particularly around immediacy, education opportunities for complex products and easy e-merchandise returns. Organisational efficiency and effectiveness opportunities through sharing of processes, technology and information Customer Related benefits Better and wider customer interaction with a greater variety of information available for improved understanding of customers and identification of opportunities for increasing value per customer. Increased customer loyalty through better understanding of customers challenges The 5 main challenges faced by similar retailers entering the multi-channel space are as follows: 1. Evaluating cost of investment in development of cost effective, secure, scalable environments and systems integration against probable short term impact on bottom line 2. Pricing across different channels - Store channels have higher cost structures than web channels for example, and price competition is higher on web, but consumers can be put off by different pricing for the same product 3. Channel synchronisation i.e. ensuring brand, customer experience and customer information consistency across channels while avoiding the 3E trap i.e. trying to provide everything to everyone everywhere 4. Problems in merging and standardising customer data i.e. unifying different systems which may have very different data models

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5. Difficulties in reducing or abolishing organisational boundaries to cope with new channels

Concept of Life Cycle in Retail

The concept of product life cycle is also applicable to retail organizations. This is because retail organizations pass through identifiable stages of innovation, development, maturity and decline. This is what is commonly termed as the retail life cycle. Attributes and strategies change as institutions mature. The Retail Life Cycle is a theory about the change through time of the retailing outlets. It is claimed that the retail institutions show an s-shaped development through their economic life. The sshaped development curve has been classified into four main phases: Innovation: A new organization is born, it improves the convenience or creates other advantages to the final customers that differ sharply from those offered by other retailers. This is the stage of innovation, where the organization has a few competitors. Since it is a new concept, the rate of growth is fairly rapid and the management fine tunes its strategy through experimentation. Levels of profitability are moderate and this stage can last up to five years depending on the organization. Accelerated Growth: The retail organization faces rapid increases in sales. As the organization moves to stage two of growth, which is the stage of development, a few competitors emerge. Since the company has been in the market for a while, it is now in a position to preempt the market by establishing a position of leadership. Since growth is imperative, the investment level is also high, as is the profitability. Investment is largely in systems and processes. This stage can last from five to eight years. However, towards the end of this phase, cost pressures tend to appear.

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Maturity: The organization still grows but competitive pressures are felt acutely from newer forms of retailing that tend to arise. Thus, the growth rate tends to decrease. Gradually as markets, become more competitive and direct competition increases, the rate of growth slows down and profits also start declining. This is the time when the retail organization needs to rethink its strategy and reposition itself in the market. A change may occur not only in the format but also in the merchandise mix offered. Decline: The retail organization looses its competitive edge and there is a decline. In this stage, the organization needs to decide if it is still going to continue in the market. The rate of growth is negative, profitability declines further and overheads are high. The retail business in India has only recently seen the emergence of organized, corporate activity. Traditionally, most of the retail business in India has been small owner managed business. It is difficult to put down a retail organization, which has passed through all the four stages of the retail life cycle. In the private sector, till a few years ago, most cities in India had a few independent retailers. For example, Mumbai had stores like Akbarallys., Premsons, Amarsons and Benzer. Then Shoppers Stop opened its first outlet in Mumbai in 1991.The store initially offered apparel, imitation jewelry cosmetics and perfumes and home fashions. It also had a customer loyalty program in place, which many stores at that time did not offer. The store enjoyed an enviable position for a while. However, with the change in customer expectations and increased competition in the form of other department stores like Globus, Eastside, Lifestyle, etc and the rise of specialty stores, the company has been forced to rethink its product offering. It now not only stocks apparel, jewelry, cosmetics etc that it earlier stocked but has also acquired the book store chain Crosswords.

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Cross words counters have been added to many of the existing stores. The store in Andheri (Mumbai) also houses Planet M, music retail chain and a small coffee shop. In May 2008, the company embarked upon a major exercise in terms of repositioning of the store, which involved among other things, a change in the logo. It is necessary to keep in mind that a retailer need not always move from maturity to decline. By reworking the marketing strategy or by changing the product or service offering, a retailer may succeed in moving back to the growth phase after reaching a stage of maturity with a certain format and a certain mix of products.

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UNIT4:Merchandise Management-Factors affecting Merchandising-Merchandise PlanningBuying Merchandise-Managing the store-SCM in Retail Merchandising Product and merchandising management is key activity in the management of retail business. The primary function of the retailing Is to sell Merchandise. One of the most strategic aspects of the retail business is to decide the merchandise mix and quantity to be purchased . Merchandising can be termed as the planning, buying and the selling of merchandising . Define Merchandising as The analysis, planning, acquisition, handling and control of merchandise investments of a retail operation. Merchandising is the core of retailing. The function of merchandising is an integral part of retailing and also one of the most challenging functions. AMA (American marketing association) define The planning involved in marketing the right merchandise at the right place at the right time in the right quantities at the right price. Achieving these five Right is the key to successful merchandising and many a times, this remains an elusive goal for most retailers. Merchandising management can be termed as Planning, analysis, acquisition, handling and control of the merchandise Analysis: because retailers must be able to correctly identify their customers before they can ascertain consumer desires and their needs/requirements for making a good buying decision. Planning is important because merchandise to be sold in the future must be bought now.

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Acquisitions because the merchandise needs to be procured from others, either distributors or manufactures. Handling involves seeing that the merchandise is where it is needed and in the proper condition to be sold. Control is required since the function of merchandise involves spending money for acquiring products it is necessary to control the amount of money spent on buying

Factors Affecting the Merchandising Function

Merchandising does not function in isolation. It is affected by various factors like the organization structure, the size of the retail organization and the merchandise to be carried. Rarely are any two stores organized in the same way. The function of the merchandising is vary from one organization to another.

Size: The needs of the individual retailers vary from those of large chain store operation.

The merchandiser to be carried by a retailer responsibilities of the merchandiser.

largely determines the

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Merchandise to be carried: The buying for basic merchandise is fairly different from buying fashion merchandise. A merchandisers who I handling fashion products will need to spend more time in the market, and looking for the products which is more suitable for the customers. Organization structure that the retail organization adopts also affects the merchandising function. Some organization may differentiate the role of the buyer and the role of a merchandisers separately. The Merchandises Role & Responsibilities Planning: Thought the merchandising may not be directly involved in the actual purchase of merchandise. They formulate the policies for the areas in which they are responsible. Forecasting sale for the forth coming budget period and can estimate the consumer demand and the impact of changes in the retail environment. Directing: Guiding and training buyers as and when the need arises, is also a function of the merchandiser. The buyers have to be guided to take additional markdowns for products which may not be doing too well in the stores. Co-ordinating: Merchandise managers supervise the work of more than one buyer. They need to coordinate the buying effort in terms of how well it fits in with the store image and with the other products being bought by other buyers. Controlling: assessing the buyers merchandise managers Job. This includes evaluated on the basis of net sale, maintain mark up percentage, gross margin % and stock turn performance , is a also part of the

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The implications of merchandise planning

The following implications on other departments: Finance 29

 Marketing Warehousing and logistics Store operations Finance At the end of the merchandise planning process, when the purchase order (PO) is raised on a particular supplier, the finance department needs to be informed about it as they are finally the ones who will be making the payments. Finance will also look into the evolution of the profitability of the merchandise purchased by the buyer. Marketing The marketing department needs to be aware of the products that are being purchased, as they may want to create campaigns for advertising the products or for sales promotion. Warehousing and Logistics In many retail organizations, these functions may be handled by one department. When orders are placed for new merchandise, this department needs to know as it is the one that actually received the products and the physical verification of the same. The quantities mentioned in the purchase order need to be tailed with the quantities actually received. Store operations The information on the merchandise being purchased needs to be communicated to the retail stores. In case the product is a new product, the features also need to be communicated. information on merchandise to be received in the stores also helps in space planning in the retail store. In case the store has the authority to make purchases at local level, it would help by ensuring that duplication of products does not happen. The process of merchandise planning In these we have four stages to implement the merchandise planning STAGE I: DEVELOPING THE SALES FORECAST STAGE II: DETERMINING THE MERCHANDISE REQUIREMENTS STAGE III: MERCHANDISE CONTROL- THE OPEN TO BUY STAGE IV: ASSORTMENT PLANNING 30

STAGE I: DEVELOPING THE SALES FORECAST The process of developing sales forecasts involves the following steps: 1. Reviewing past sales. 2. Analyzing changes in the economic conditions. 3. Analyzing changes in the sales potential. 4. Analyzing changes in the marketing strategies of the retail organization and the competition. 5. Creating the sales forecast. STAGE II: DETERMINING THE MERCHANDISE REQUIREMENTS Planning in the merchandising is a two levels: 1. The creation of the merchandise budget, and 2. The assortment plan. The merchandise budget usually comprises of five parts 1. The sales plan 2. The stock support plan 3. The planned reductions 4. The planned purchase levels 5. The gross margins The merchandise hierarchy

STAGE III: MERCHANDISE CONTROL- THE OPEN TO BUY The purpose of the concept of open to buy is twofold. Open to buy ensures that the buyer 1. Limits over buying and under buying. 2. Prevents loss of sales due to unavailability of the required stock. 3. Maintains purchases with in the budgeted limits. 4. Reduces markdowns which may arise due to excess buying. 31

STAGE IV: ASSORTMENT PLANNING Assortment planning is both externally important and challenging for retailers. The term assortment can be defined as the combination of all products made available in a store and a set of products offered within a product category. Range plan Good range planning should essentially take care of the following: The number of items/options available to the customers should be sufficient at all times and should be such that it helps customer make choice. The range planning process should ensures that overbuying and under buying is limited. Sufficient quantities of the product should be available, so that all the stores can be serviced and the product should be available at all stores across various locations. The model stock plan After determining the money available for buying, a decision needs to be on what to buy and in what quantity. This results in the creation of the model stock plan.

Buying Merchandise
Role of the Buyer
Buyers plays an important role in the retail industry. they select and order merchandise to be sold. Buyers may be responsible for buying for a department, an entire store, or a chain of stores

Merchandise Sourcing (process of merchandise buying)

The term sourcing means finding or seeking out products from different places, manufacturers or suppliers. The process of merchandise buying is a five step process, which involves the following: 1. Identifying the sources of supply. 2. Contacting and evaluating the sources of supply. 3. Negotiating with the sources of supply. 32

4. Establishing vendor relations. 5. Analyzing vendor performance. Step I: Identifying the sources of supply The first step in the process of sourcing is to identify the sources of supply. It needs to be decided at this time, whether the product will be sourced from the domestic market or from the international market. Costs associated with global sourcing include: 1. Country of origin effects: many a times, where the merchandise has been manufactured makes a difference in the final sale of the product. 2. Cost of carrying inventory: purchase of goods is always at a price. Depending on when this merchandise is finally sold makes a very big difference on the carrying costs. 3. Tariffs: also known as duties, it is a list of taxes placed by a government on imports. matters. Step II: Contacting and evaluating the sources of supply Contacting a source of supply may be as simple as having a representative visit the office and meet with the buyer and showcase a collection of the merchandise. The decision now need to be taken on the potential vendors. The following criteria need to be kept in mind: 1. The target market for whom the merchandise is being purchased. 2. The image of the retail organization and the fit between the product and the image of the retail organization. 3. The merchandise and prices offered. 4. Terms and services offered by the vendor. 5. The vendors reputation and reliability. Step III: Negotiating with the sources of supply The retail buyer then needs to negotiate the price, the delivery dates, the discounts, the shipping terms and possibilities of returns. The following are the types of discounts that could be available to the buyer: 1. Trade discounts 33 Important tariffs shield domestic manufacturers from foreign competition and raise money for the government. GATT & MFA affect such

2. Chain discounts 3. Quantity discounts 4. Seasonal discounts 5. Cash discounts Step IV: Establishing vendor relations Retailers have for long been wary of sharing information with their suppliers. Times have changed, and many retail organizations work with their suppliers as a team, to create a competitive advantage. To maintain strategic partnerships with vendors, the buyers needs to build on: 1. Mutual trust 2. Open communication 3. Common goals 4. Credible commitments Step V: Analyzing vendor performance Buyer can draw conclusions on vendor performance by listing out the following: The total orders placed on the vendor in a year The initial markup on the products The markdowns Transportation expenses if borne by the retailer The sales performance of the merchandise.

Key criteria considered while analyzing vendor performance are: 1. Gross margin contribution 2. Adherence to company policy 3. Customer acceptance level 4. Merchandise quality

Different buying methods

1. The open-to-buy system. 2. The SKU-based system. Open-to-buy system The open to buy method of inventory management is the system primarily used for buying fashion merchandise. The SKU-based system 34

The SKU based system of inventory management is a more mechanical system and is used for staple merchandise.

Merchandise Branding Strategies

Manufacturer (National) Brands Designed, produced, and marketed by a vendor and sold by many retailers Private-Label (Store) Brands Developed by retailer and only sold in retailers outlets Licensed Brand Developed by licensee and right sold to either manufacturer or retailer

Private Label Options

Bargain Branding no-frills product at a discount price Copycat Branding imitates the manufacturer brand in appearance and packaging

Premium Branding private label at a comparable manufacturer-brand quality Parallel Branding private labels that closely imitate the trade dress and product attributes of leading manufacturer brands while avoiding a trade dress infringement suit with an invitation to compare the two products. Strategic Importance of Store Management
Opportunity to Build Strategic Advantage Have Unique, Compelling Merchandise Customer Loyalty Often Based on Customer Service Difficulty of Store Managers Job 35

 Managing Diverse Set of Unskilled People Increasing Empowerment and Responsibility to tailor merchandise and presentation to local community

Store Managers Responsibilities

Varies Dramatically By Type of Retailers Specialty Store vs. Department Store Entrepreneur P & L Responsibility Manage People Responsible for Two Critical Assets People Sales/Employees Space Sales/Square Foot

Retail Store Design & Visual Merchandising

Store design and layout tells a customer what the store is all about and it is very strong tool in the hands of the retailer for communicating and creating the image of the store in the mind of the customers. The design and layout of the store are a means of communicating the image of the retail store. The environment which is creates in the retail store, is a combination of the exterior look of the store, the store interiors, the atmosphere in the store and the events, promotions and the themes. The overall look of a store and the series of mental pictures and feelings it evokes within the beholder. For the retailer, developing a powerful image provides the opportunity to embody a single message, stand out from the competition and be remembered.

Elements of store design

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Exterior Store Design & Interior Design

Exterior Location Parking Ease of access The building architecture Health and safety standards Store windows, lighting Fixtures Flooring & Ceilings Lighting Graphics & Signages Atmospherics 37

Interior

Visual merchandising
Can be termed as the orderly, systematic, logical and intelligent way of putting stock on the floor VM is the art of presentation, which puts the merchandise in focus. It educates the customers, creates desire and finally augments the selling process.

METHODS OF DISPLAYS
Color Dominance Co-ordinated Presentation Presentation by price

SUPPLY CHAIN MANAGEMENT

Definition: Supply Chain Management is primarily concerned with the efficient integration of suppliers, factories, warehouses and stores so that merchandise is produced and distributed in the right quantities, to the right locations and at the right time, and so as to minimize total system cost subject to satisfying customer service requirements.

What is Supply Chain Management? Managing supply chain flows, to maximize supply chain surplus. What is supply chain surplus? Supply chain surplus refers to what the customer has paid - total cost expended by supply chain in filling order Need of SCM in Retail Physical Flows Information Flows Financial Flows LOGISTICS That part of the supply chain that plans, implements, and controls the efficient, effective flow of goods, services, and related information from the point of origin to the point of consumption in order to meet customers requirements LOGISTICS AND SCM 38

 Supply chain management includes logistics, but it is a more comprehensive and strategic concept It includes CRM, inventory management and vendor relations PHYSICAL FLOW OF MERCHANDISE Merchandise flows from vendors to DC(distribution center) Merchandise then goes from DC to stores Or, merchandise can also go from vendors directly to stores DISTRIBUTION CENTER (DC) The DC performs several functions: Management of inbound transportation Receiving and checking Storing and Crossdocking Getting merchandise floor ready Shipping merchandise to stores Management of outbound logistics Reverse logistics Logistics- Outsourcing Third-party logistics companies (3 PL) Transportation Warehousing Public warehouses Freight forwarders companies that purchase transport services. They consolidate small shipments from a number of shippers into large shipments that move at lower freight rate Integrated 3PL services

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UNIT5:Retail Communication-Retail Marketing Mix-STP approach-Retail Communication mixGAP management in retailing Retail management-swapna pradhan Retail marketing mix pg no-418 to 420 Stp approach pg no 421-423 Retail communication pg no 425-435 Gap management in retailing pg no Measuring the gaps in service 402-404 Material attached below

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