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Retail Planning

Module II

The Fundamental Question

What is our business ? Where is the Market? Its potential? Who is our customer? Where should be the location? How much should be size? What will our business be? What should our business be?

Purpose And method of Retail Planning

The Retail Strategy

A clear and definite plan that the retailer outlines to tap the market and build a long term relationship with the consumers.

Retail Market Strategy identifies

Target Market

Format of stores

Unique Differentiator

Target Market is a group of consumers with similar needs and buying behavior. These could be serviced by a retail outlets of similar formats

How to focus on customer


Map your customers needs and create a niche based on demand Have a Target Group which you think will respond to your USP Every communication every time should talk about the same positioning

The retail strategy enables

Store location Merchandising Pricing Marketing

Set the mission Vision of the store. Situation Analysis (PEST).Internal & external Analysis Retail Strategy. Analysing and Control.

PEST factors which affect the retail sector

Political

Economic

Social

Technological

Political stability

Rate of economic growth

Income distribution Level of of population technology usages in the sector Size of the population Penetration of internet

Govt policy towards investment in the sector

Monetary policy

Consumer protection

Consumer confidence

Rate of population growth age profile of the population.

Penetration of mobile technology.

Retail Market Strategy Planning for what? For merchandise. Inventory and logistics control. Information systems. Pricing and promotional campaigns. Store location and layout. Expansion plans in short on every functional activity to stay competitive.

Monitor Progress & control

Develop implementation Plan

Obtain & allocate Resources

Set objectives

Steps involved in developing retail strategy

Identity option Analyse situation

Establishing mission

Some Vision
Wall mart to give ordinary folk the chance to buy the
same thing as rich people.

Mc Donald - ( QSCV). Quality, Service, Cleanliness & Value


Shoppers Stop - to be global retailer in India, and to maintain the No 1 position in the Indian market in the department store category.

Retail mix
Its a blend of various retail activities The main element of Retail Mix are Store Location Merchandise assortment Pricing policy Customer service. Visual merchandising Marketing & sales promotion

Retail Brand

Retailer brands are typically more multi-sensory in nature than product brands and can rely on rich consumer experiences to impact their equity. Retailers also create their brand images in different ways, e.g.,by attaching unique associations to the quality of their service, product assortment merchandising, pricing and credit policy, etc.

The brand positioning

By differentiation The best after sales service. By offering the best quotes in prices & offers.

Factors influencing retail brand

Access Store Atmosphere Price & promotion Cross category Assortment. After sale Service

Brands in Retail
There are 3 types Manufacturer Brand/ National brand. Licensed Brand Private label brand

Store brand

Umbrella brand
Common brand name is used across multiple categories eg Bare (pantaloon )

Individual brand

Carries retailer name Westside, Big bazaar

Specific brand name created for specific market segment

PLC of Brand

Merchandise management

Different role in merchandising


Understanding the consumer segment for whom the merchandise is being created. Buyers create basket that is offers to the customers. Offer of products requires planning and selecting the specific merchandise which will form the part of merchandise assortment. The buyer interact with vendor and suppliers and work towards determining who is best suited.

Duties of merchandiser.
Planning Sales forecasting budgeting Directing Guiding training
additional markup and mark down

Coordinating
buyers

and supervising with

Controlling

Assessing the merchandising performance net sales, markup % Gross margin, Stock turnover.

Factors effecting the function of buying The type of retail organisation The type of merchandise to be retailed The quantities to be retailed.

Methods of buying
Cooperative buying. Centralised Vs Decentralised buying. Buying committee. Resident Buying offices.

Definition of merchandising planning

The planning and control of the merchandise inventory of the retail firm in a manner , which balances between the expectations of the target customer and the strategy of the firm.

Principles of Merchandising
Understanding the target market Build merchandise plan , one store at a time. Buy what your customer want not what you want. Build right assortment. Be consistent. Offer value. Understand vendor and negotiate. Share information. Accept mistake. Seek surprise to customer.

Merchandising Strategy

Top down & bottom up Planning

The dimensions of Merchandise planning.

Merchandise hierarchy for

Monitor & Correction

Determine Product Requirement

Allocation of Products

What is Buying cycle ?

Select suppliers

Follow up
Pricing the Product

Vendor Negotiation

Key concept in merchandising


Merchandise mix- Complete range of products. Merchandise line- same end use
Fashion

Fad Basic product

Process of Merchandise buying

1. 2. 3. 4. 5.

Identifying the sources of supply. Contacting and evaluating the sources of supply. Negotiating with the vendors. Establishing vendor relationships. Analyzing vendor performance.

Step 1. Identifying the sources of supply


Identify the sources of supply. Weather sourced from domestic or international market. Visiting locations to Understand trends in market , Evaluate new resources Merchandise offering. Retailers reaching out to farmers and Investing in contract farming Organisation also go for Foreign sources

Step 2.Contacting and evaluating the sources of supply


Criteria in deciding on potential vendors Target market for whom the merchandise is purchased Fit between the product and the image of the organization Merchandise and the price offered. Terms and services offered by the vendor The vendors reliability and reputation

Vendor evaluation
Once sources of supply are identified they need to be evaluated Merchandise itself Price Adaptability of suppliers to the requirements of the retailer Delivery schedules, quantity discounts, recycling and repackaging of products participating in schemes Meet Delivery requirements

Step. 3 Negotiating with the vendors


Need to negotiate on Price Delivery dates Discounts Shipping terms Returns Payment terms Warranties and guarantees

Vendor details
Vendors history Discounts available to the buyer

Eg

Step. 4 Establishing vendor relationships


Shared information right information is shared. To maintain strategic partnership with vendors the buyer need to build on Mutual Trust Open communications Common goals Credible commitments

Step. 5 Analyzing vendor performance


Each retailer has own criteria for selection of vendors Buyer dealing with multiple vendors
Total orders placed on the vendor in a year. Quality of the merchandise. The initial markup on products. Participation of vendors in various schemes Transportation expense if bourn by the retailer. Cash discounts offered by the vendor. The sales performance of the merchandise.

Cont..
Evaluating vendor performances on 4 key criteria

Gross Margin Contribution Adherence to company policy Customer acceptance level Merchandise quality

Negotiation
Purchase negotiation is the last stage prior to the signing of the purchase contract. It is necessary to go for purchase negotiation because in order to get the ideal price and best state of article , which is purchased Negotiation are basically focused on Price, Freight, Delivery dates , Method of shipment and shipping costs, return privileges' and discounts

Assortment

Assortment
The combination of all products made available in a store and a set of products offered within a product category.
The two major components of an assortment planning are the Depth of products offered. Width of the product variety.

Assortment planning involves


The quantities of each product that will be purchased to fit into the overall merchandise plan. Details of color, size, brand, materials, etc. have to be specified. A balanced assortment of merchandise for the customer.

Inventory management.

Inventory Management In Retail


Carry the right inventory Carry the right amount of inventory. Manage cash flows. Earn a profit.

The markup
The difference between the cost of a ggod or service and its selling price Retail price/ sp = Cost + markup Markup = Retail price/sp -cost.

Methods of inventory control


Selective methods are selected to render treatment to different type of retail.

Price Consumption Lead time Procurement difficulties.

EOQ model
Focus on
When to order ? How much to order ? EOQ refers to the optimal order size that will result in the lowest total of order and carrying cost for an item of inventory given its expected usage, carrying cost and ordering cost. By calculating this the firm will be able to determine the minimum order size to control the cost.

ABC Analysis
ABC analysis is rank order merchandise by some performance measure to determine
Which item to be never be stock out, Which item to be Allowed to be stock out. Which item to be deleted from stock selection.

ABC is 80 : 20 principles

The first step in the ABC analysis is to rank order SKU using more or more criteria.

FSN Analysis

F - fast moving. S-Slow moving. N- Non moving.


Objective was to determine the items according to the moments.

VED analysis
Based on criticality of the item inventory is classified.

V- vital E- essential D- desirable.


Objective was to determine the criticality of an item V had large stock. D had minimum stock.

HML Analysis

H- High cost M-Medium cost L-Low cost.

GMROI
It is merchandise planning and decision making tool to assist the buyers in identifying and evaluating whether an adequate gross margin is being earned by the product purchased, compared to the investment in inventory required to generate the gross margin.

GMROI= Gross margin/ Average Inventory cost.


It focus on return on investment rather than sales as a basis for merchandising decision. Focus on SKUs of individual pdt rather than dept total and it helps to identify product winners & core products.

GMROI

Gross Margin is the value of sales less the cost of goods sold. Increasing gross margin entails increasing sales revenue or reducing the cost of the merchandise.

SUPPLY CHAIN MANAGEMENT

Logistics

Distribution

Warehousing

The components of supply chain

CONCEPT OF SCM
Supply chain-network of facilities and distribution options that performs the functions of procurement of materials, transformation of these materials into intermediate and finished products and the distribution of these products to the customers

Objective-right product, place, time, price and profit for the retailer

Objectives of Retail Supply Chain

Right Product at Right place and at Right Time

and

Price& profit(for retailer). Supply Chain Management Ensures a smooth and efficient flow from raw material to finished goods, into hands of the consumers. Integrate activities across the entire merchandise flow. Supply Chain exist in Both Service and Manufacturing organisations.

Need for Supply Chain Management


Supply chain management today , links demand management, resource management and supply management. Demand changes mean a shorter life cycle of companies product.

Need for Supply Chain Management Increased national and international competition Customers have multiple sources from which to satisfy their demand. Increasing pressure on the profit margins earned. The technology driven world today. Information is the key enabler of supply chain management.

Framework for analysing issues in SCM

STRATEGIC LEVEL----In this level the retailer can focus on the service levels required to support the unique value proposition that the retailer has developed. The retailer can then evolve appropriate channels and networks to achieve the uniqueness desired.

Framework for analysing issues in SCM STRUCTURAL LEVEL The next level allows retailers to identify the suppliers, stock points and to develop an appropriate transportation model. The extent of outsourcing is also determined at this level.

Framework for analysing issues in SCM

FUNCTIONAL LEVEL In this level the operational details are worked out. This includes developing policies and procedures around the facilities and equipment to be deployed, implementing the information system to support the operations Ensuring that the right Organisational and training inputs are provided.

Retail Logistics
Functions. 1.Physically moving the goods from one location to another , where location may be a distribution center, warehouse. 2.Stocking the goods at the locations needed in the quantities needed. 3.Management of entire process.

Emerging Concepts in Logistics


3rd Party Logistics povides outsourced or 'third party' logistics
services to companies for part or sometimes all of their supply chain
management function

4th

is an independent, singularly accountable, non-asset based integrator who will assemble the resources, capabilities and technology of its own organisation and other organisations, incuding 3PLs, to design, build and run comprehensive supply chain solutions for clients Deloitte, SCMO (company), BMT Limited and Accenture

. Party Logistics

. Eg

Reverse Logistics

Flow of surplus or un wanted material , goods or equipment back from the firm, through its logistic chain for reuse recycling or disposal.

Supply Chain Integration


Demand management Resource management Supply management

Reasons for SCM Integration


Short life cycles High volatility Low predictability High impulse purchase Time to market Time to serve Time to react

Information Systems used in Retailing

EDI RFID

Principles Of Supply Chain Management

PRINCIPLE 1
Segment customers based on the service needs of distinct groups and adapt the supply chain to serve these segments profitably.

Segmenting customers by their particular needs equips a company to develop a portfolio of services tailored to various segments - surveys, interviews, and industry research. Companies must analyze the profitability of segments,plus the costs and benefits of alternate service packages, to ensure a reasonable return on their investment and the most profitable allocation of resources.

PRINCIPLE 2
Customize the logistics network to the service requirements and profitability of customer segments.

The logistics network has been designed to meet the average service requirements of all customers; for others, to satisfy the toughest requirements of a single customer segment. The network will require more strong logistics planning enabled by real-time decision support tools that can handle flow-through distribution and more time-sensitive approaches to managing transportation.

PRINCIPLE 3
Listen to market signals and align demand planning accordingly across the supply chain, ensuring consistent forecasts and optimal resource allocation.

Excellent supply chain management - calls for sales and operations planning that transcends company boundaries to involve every link of the supply chain in developing forecasts collaboratively and then maintaining the required capacity across the operations.

PRINCIPLE 4
Differentiate product closer to the customer and speed conversion across the supply chain.

Time is important - many manufacturers are focussing on the lead time in the supply chain. They are strengthening their ability to react to market signals by compressing lead times along the supply chain, speeding the conversion from raw materials finished products tailored to customer requirements.

PRINCIPLE 5
Manage sources of supply strategically to reduce the total cost of owning materials and services.

o A sound knowledge of all their commodity costs, not only for direct materials but also for maintenance, repair, and operating supplies, plus the dollars spent on utilities and virtually everything else.

o Manufacturers can then consider how to approach supplierssoliciting short-term competitive bids, entering into long-term contracts and strategic supplier relationships, or integrating vertically.

PRINCIPLE 6
Develop a supply chain-wide technology strategy that supports multiple levels of decision making and gives a clear view of the flow of products, services, and information.

The manager needs to build an IT system that integrates capabilities of three essential kinds.
1. For the short term, the system must be able to handle day-to-day transactions and e-commerce across the supply chain and thus help align supply and demand by sharing information on orders and daily scheduling. 2. From a mid-term perspective, the system must facilitate planning and decision making, supporting the demand and shipment planning needed to allocate resources efficiently.
3. To add long-term value, the system must enable strategic analysis by providing tools, such as an integrated network model to help managers evaluate plants, distribution centre, suppliers, and third-party service alternatives.

PRINCIPLE 7
Adopt channel-spanning performance measures to estimate collective success in reaching the enduser effectively and efficiently.

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