UNIT – III

Retail Location - Introduction

Define Store:
“A store is place , where the shoppers comes to buy the
goods & services. The sales transaction occurs at this
junction.”

The location of retail store has for a long time

been considered the most important ‘P’ in
retailing.

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 normal.
Store location is least flexible element of
retailer’s strategic mix due to its fixed nature,
the amount of investment, and the length of
lease agreements
Retail Strategy mix
Store location Personal selling
Merchandise assortments Store image
Customer service Store design
Price Sales incentive
Communication with Process
customers
 What Are the
Three Most Important Things in Retailing?

Location! Location! Location!

 Location
It must be in accordance with the
expectations of target customers.
It requires greater financial outlay
interms of investment and a long term
commitment.
The retail location decision must be
consistent with other aspects of retail mix
strategy.
The location decision is of strategic
significance since it can be a source of
sustainable competitive advantage.
Types of Retail Location
Various options 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 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
surrounding area of the store and therefore
store depends on its own pulling power and
promotion to attracts customers.
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 and easy
parking.
Neighborhood Stores; colony shops serves
small locality.
Highway Stores
Business Associated Location: These are location where
a group of retail outlets offering a variety of
merchandise work together to attract customers
to their retail area, but also compete against
each other for the same customers.
two types includes in ;

1. Part of Business District/Centers (unplanned Business

Districts).

2. Part of a Shopping Center (Planned Shopping Centers)

2. Part of Business District/Centers .
A retail store can also be located as a part
of a business district.
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 Center Business District (CBD) is the
main center of commerce and trade in the
city. (high land rates , intense development)
3. Part of a Shopping Center (Planned Shopping Centers)
A shopping center has been defined as “ a
group of retail and other commercial
establishments that is planned , developed,
owned and managed 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.
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 controlled by two or more
major department stores have enclosed, mall
serve a large trading area and have high rents.
(ansal plaza, spencers plaza, crossroads)
Neighborhood/community/shopping
centers: Neighborhood /community centers
usually have a balanced mix of stores including
a few grocery stores , 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.
2. Determining the market Potential::
 The retailer need to take into consideration various
elements as shown in format. (features of population)
o Demographic features of the population
 The characteristics of the household in the area
(average household income)
 Competition
 Laws & regulations:( good understanding of the
laws)
Elements in Retail Mix

Location Strategy

Customer
Service

Store Display
Merchandise
And Design
Assortment

Communication
Pricing
Mix
 Matching Location to Retail
Strategy
Department Stores  Regional Mall
Specialty Apparel Central Business District,
Regional Malls
Category Specialists  Free Standing
Grocery Stores  Strip Shopping Centers
Drug Stores  Stand Alone
 The Most Expensive Shopping
Streets in the World
Street Location Cost / sq foot / year

Fifth Avenue (48th to New York City $580

58th St.)

57th Street (5th Ave. New York City $500

to Madison Ave.)

Oxford Street London $400

Madison Avenue (57th New York City $375

to 72nd St.)
 There are relative advantages
and disadvantages to consider
with each location.
Rent

Traffic
Retail Positioning
Retail Positioning: Where a store situates itself in
the consumer market. Done by:
Product
Price
Place
Promotion
Examples: Some stores are positioned with the lowest
possible prices and least amount of service. Others
are positioned for the best values for fashion
forward career apparel.
 Product Strategy
Assortment: range of stock or total
selection a retailer carries.
Assortment Breadth (width): refers to
the number of different item
categories or classifications offered by
a store.
Assortment Depth: indicates the
quantity of each item available in the
assortment of goods offered.
Price Strategy
Prestige Pricing: Setting high prices on
items to attract customers who want quality
and status.
Usually in even numbers (ex: $48, not
$47.99)
Price Promoting: Advertising special
price reductions to bring in shoppers.
 Place Strategy
Site Location: Prime location is important to
attracting the right customers.
Types of store clusters:
Central Business Districts: In cities or towns,
stores and offices
Neighborhood Shopping Centers: 5-15 stores
Community Shopping Centers: 25-50 stores, with
1 primary store
Regional Shopping Centers: Malls. Draw
customers from at least a 10 mile radius.
Super-Regional Centers: Largest malls.
 Promotion Strategy
Market Coverage: The amount of concentration a
retailer has in a customer area, such as intensive,
selective, or exclusive.
Facilities Design: Store design to create a strong visual
identity with the right feel for the target market.
Store Exterior: Often creates a customer’s first
impression.
Store Interior: Includes selling areas and sales support
areas. Should be functional and welcoming for customers.
Retail Positioning Strategies
Cost-side positioning
Demand-side positioning
Cost-Side Positioning
Margin goals
Inventory turnover goals
Cost-Side Positioning
Measures of performance
GMROI: Gross Margin Return On Inventory

GMROI = Gross Margin % x Inventory Turnover

GM = Sales – CGS
GM% = GM / Sales
Inventory Turnover:
In units: IT = Units sold / Avg. Inventory in units
Cost method: IT = CGS / Avg. Inventory at cost
Retail method: IT = Sales / Avg. Inventory at retail
Cost-Side Positioning
Using retail method for IT:
GMROI = (GM / Sales) x (Sales / Avg. Inventory retail)
= GM / Avg. Inventory retail
Cost-Side Positioning
GMROI Example: Pet Shop
Sales for year: $1,000
Cost of goods sold: 800
Average inventory at cost: 200
Average inventory at MSRP: 250
GM = 1000 – 800 = 200
GM% =200 / 1000 = 0.20
IT = 1,000 / 250 = 4
GMROI = GM% x IT (or) GM / Avg. Inv
= 0.20 x 4 = 0.80 = 80%
= 200 / 250 = 0.80 = 80%
Cost-Side Positioning
Measures of performance (continued)
Sales per employee
= Sales / FTE
= 40,000 / 100 = 400
GM per full time equivalent employee
= (Sales – CGS) / FTE
= (40,000 – 5,000) / 100
= 0.80
Cost-Side Positioning
Measures of performance
(continued)
Sales per square foot
GM per square foot
Rent expense
Strategic use of space
Demand-Side Positioning
Bulk-breaking
Spatial convenience
Based on product class
Time issues
Waiting and delivery time
Out-of-stocks
Demand-Side Positioning
Product variety
Breadth
Depth

Broad Narrow
Limited assortment of Limited assortment of a
a wide variety of limited variety of goods
Shallow products

Comprehensive Comprehensive
selection of a wide selection of a limited
Deep variety of products variety of goods
Demand-Side Positioning
Customer service
Sales, General, and Administrative expenses
Balance costs and benefits
Pricing Decisions
Pricing Decisions
Interact with other Retail
Decisions
Merchandise
Location
Promotion
Credit
Customer Services
Store image
Legal Constraints
 Retailer’s Pricing Objectives and
Other Retail Decisions

Merchandise
Legal Location
Constraints
A Retailer’s Pricing
Objectives Must
Store Interact with These
Promotion
Other Decisions
Image

Customer Credit
Service
•Retailing, 3rd Edition, Dunne and Lusch Copyright © 1999 by Harcourt Brace &
Company
• All rights reserved.
 Pricing Objectives
Pricing does not equal Value
Value is an interaction of price, quality, service,
functionality, convenience
Ultimately, pricing must be based on profit
Other objectives can be sales - volume or market
share
Objective related to competition
 PRICING OBJECTIVES

Pricing Objectives

Profit-Oriented Sales Oriented Status

Profit
Target Return
Maximization

Skimming Penetration

•Retailing, 3rd Edition, Dunne and Lusch Copyright © 1999 by Harcourt Brace &
Company
• All rights reserved.
Pricing Policies
Above the Market
 Exclusive Merchandising
 Services provided
 Convenient Locations
 Convenient Hours

Market Level
 Prices that meet target markets
expectations
Below the Market
 discount pricing
Pricing Strategies
Customary pricing
 Consistent price over a
period of time
Variable Pricing
 Prices rise and fall
predictably related to
demand
Flexible Pricing
 Discounts given to specific
customers
One-Price Policy
 No Discounting
Pricing Strategies
Price Lining
Series of merchandise at relatively equal
pricing for quality
Odd Pricing
Prices end in digits 5, 7 or 9
Leader Pricing
Sell items at or below cost to bring
customers into store
Private Brand Pricing
Sell own label goods at reduced prices.
Own label becomes its own brand.
Markups
Understanding of basic
markup formulae critical to
ensuring proper pricing
Markup must cover
planned profit
operating expenses
Markdowns
discounts
stock shortages
 Pricing Adjustments
Discounts - e.g., employee, senior citizen
Markdowns -- caused by failure to sell product at
full price
Sales - planned markdown used to simulate
product movement
Coupons - can be manufacturer (cost borne by
manufacturer) or in-store coupons (cost borne by
retailer)
Special purchase, i.e, bonus buy - often tied in to
manufacturer special promotional allowance
Divided into four major parts:

1. Exterior
2. Interior
3. Layout
4. Displays
 1. Elements of Traditional Exterior
Storefront Visibility
Marquee  Uniqueness
Entrances  Surrounding Stores
Display Windows  Surrounding Area
Height of Building  Parking
Size of Building
2. General Interior
 Flooring  Self-Service
 Colors  Merchandise
 Lighting  Prices (Levels and
 Scents Displays)
Sounds  Cash Register Placement
 Fixtures Technology
Modernization
 Temperature
Cleanliness
 Dressing Facilities
3. Store Layout

Allocation of Floor Space

Product Groupings
Traffic Flow
Straight Traffic Flow
Curving Traffic Flow
Straight Floor Plan
The straight floor plan is
an excellent store layout
for most any type of retail
store.
It makes use of the walls
and fixtures to create
small spaces within the
retail store.
 The straight floor plan is
one of the most
economical store designs.
 Diagonal Floor Plan
The diagonal floor plan
is a good store layout for
self-service types of retail
stores.
It offers excellent
visibility for cashiers and
customers.
The diagonal floor plan
invites movement and
traffic flow to the retail
store.
Angular Floor Plan
The angular floor plan
is best used for high-
end specialty stores.
The curves and angles
of fixtures and wall s
makes for a more
expensive store design.
However, the soft
angles create better
traffic flow throughout
the retail store.
Geometric Floor Plan
The geometric floor
plan is a suitable store
design for clothing and
apparel shops.
It uses racks and
fixtures to create an
interesting and out-of-
the-ordinary type of
store design without a
high cost.
Mixed Floor Plan
The mixed floor plan
incorporates the
straight, diagonal and
angular floor plans to
create the most
functional store design.
The layout moves traffic
towards the walls and
back of the store.
4. Interior Displays
Consumer Use
Stocking
Assortment
Theme-Setting
Racks
Posters
Display
A presentation of merchandise to
attract customers so they will examine
merchandise.
Most important element of the store’s
interior visual merchandising.
* help sell merchandise
* reinforce the store’s image
Interior Displays
Generate an idea or theme
Determine which display items
will be used
What is most suitable for the
display
Maintain the display
Display Styles
Open (touch or handle) ex: Body works;
Clothing Store
Closed (glass fronts, cases) designer silk ties in
cases, jewelry)
Room-setting (furniture stores, kitchen settings)
(visualize the room)
Point-of Sale (impulse merchandise) leather
cleaner
Store Decoration (banners, props)
 Building a Retail Image 
Image:  how the retailer is
perceived by customers and others
Positioning:  the firm’s strategy
that projects the image in relation
to its competitors –
Image
The personality of the store…
Types of merchandise or services
Product Quality
Sales associations
Bags and Packaging
Colors of the decorations
Fixtures and Equipment
Music, Lighting, Scent
Value of Brand Image
Brands provide value to both customers and
retailers.
Brands convey information to consumers about
the nature of the shopping experience
Brands also affect the customers’ confidence in
their decisions to buy merchandise from a retailer.
Finally, brands can enhance the customers’
satisfaction with the merchandise and services
they buy.
The value that a brand image offers retailers is
referred to as brand equity.
Building Brand Equity
The activities that a retailer needs to
undertake to build the brand equity for its
firm or its private-label merchandise are
Create a high level of brand awareness
Develop favorable associations with the
brand name and
Consistently reinforce the image of the
brand
1. Brand Awareness
It is the ability of a potential customer to
recognize or recall that the brand name is a
type of retailer or product/service.
Thus, brand awareness is the strength of
the link between the brand name and the
type of merchandise or service in the minds
of customers.
2. Associations
Building awareness is the first step in developing
brand equity, but the value of the brand is largely
based on the associations that customers make
with the brand name.
Brand associations are anything linking to or
connected with the brand name in a consumer’s
memory.
E.g. when a consumer thinks of fast food,
hamburgers, or French fries, they also tend to
think of McDonald’s.
Some common associations that retailers
develop with their brand name are as follows:
Merchandise Category: the most common
association is to link the retailer to a category
of merchandise.
Price/Quality: some retailers, such as
Neiman Marcus, want to be associated with
offering high price and unique, high-fashion
merchandise. Other retailers, such as Wal-
Mart, want associations with low prices and
good value.
Specific attribute or benefit: a retailer can
link its stores to attributes such as
convenience or service.
Lifestyle or activity: some retailers associate
their name with a specific lifestyle or activity.
E.g. the Nature Company, a retailer offering
books and equipment to study nature, is
linked to a lifestyle of interacting with the
environment.
3. Consistent Reinforcement
The retailer’s brand image is developed and
maintained through the retailer’s communication
program and other elements of the
communication mix, such as its merchandise
assortment and pricing, the design of its store and
web site, and the customer service it offers.
To develop a strong set of associations and a
clearly defined brand image, retailers need to be
consistent in portraying the same message to
customers over time and across all of elements of
their retail mix.
Supply Chain Management
Definition:
Supply Chain Management deals with
the management of materials, information,
and financial flows in a network consisting
of suppliers, manufacturers, distributors and
customers.
 Customers,
Field Demand
Centers
Sources: Regional
•Plants Warehouses:
•Ports Warehouses: Stocking
Stocking points
points

Supply

Inventory &
warehousing
costs
Production/
purchase Transportati
on Transportation
costs
costs costs Inventory &
warehousing
costs
Information

Product
Customer
Funds
Cycle View of Supply Chains
Customer
Customer Order Cycle

Retailer
Replenishment Cycle
Distributor

Manufacturing Cycle Manufacturer

Procurement Cycle Supplier

Push/Pull View of Supply Chains
Pull processes: execution is initiated
in response to a customer order
Push processes: execution is initiated
in anticipation of customer orders
Push/Pull View of Supply Chains
Procurement, Customer Order
Manufacturing and Cycle
Replenishment cycles

PUSH PROCESSES PULL PROCESSES

Customer
Order Arrives
 Characteristics of Retail Supply
Chain Management
Short Life Cycle: Many products in these sectors have a
short life cycle. The time period in which it is saleable is
likely to be short and seasonal.
High Volatility: Demand for these products is rarely
stable. It may be influenced by the weather, movies and
advertising.
Low Predictability: Due to the volatility of demand, it
is extremely difficult to forecast with any accuracy.
High impulse purchase: Many buying decisions for
these products are based on impulse and taken at the
point of purchase.
Time-to-Market: In the shorter life cycle markets, being able
to spot trends quickly and to translate them into products in
the shop has become a pre-requisite for success.
Time-to-serve: Traditionally, in retail orders from retailers
had to be placed on suppliers many months in advance. This
gives rise to the risk of obsolescence and high stock-outs, as
well as increased costs of inventory.
Time-to-react: Ideally, in any market, a company would want
to meet a customer’s requirements at the time and place that
the customer needs them.
The lead time gap: The fundamental problem that many
companies face is that the time that it takes to source
materials, convert them into products and move them into
the market place is invariably longer than the time that the
customer is prepared to wait.
Causes of supply chain
Delays in transmitting orders and receiving
merchandise: even when retailers can forecast sales
accurately, there are delays in getting orders to the
vendor and receiving those orders from the vendor.
Overreacting to shortages: when retailers find it
difficult to get the merchandise they want, they begin
to play the shortage game.
 They order more than they need to prevent stock
outs, hoping they will receive a larger partial
shipment.
 These over orders again lead the vendor to think
demand is higher than it really is.
Ordering in batches: rather than
generating a number of small orders,
retailers wait and place larger orders to
reduce order processing and transportation
costs and take advantage of quantity
discounts.
This ordering pattern leads the vendor to
think that sales are more irregular than
they really use.
Innovations in SCM
1. Vendor Managed Inventory (VIM):
In this approach, the vendor undertakes the inventory
management of the stores.
This is also called QRIS or the Quick Response
Inventory System.
It eliminates the need for paper transactions. Using
the mail, overnight deliveries, fax in the quick response
system reduces lead-time.
The vendor’s computer acquires the data
electronically; no manual data entry is required at the
recipient’s end, which helps in reducing the lead-time
and in eliminating the vendor’s recording errors.
2. Collaborative Planning Forecasting and
Replenishment (CPFR):
CPFR is one of the hottest buzzwords in the chain
context.
By aligning the forecasts of a retailer, CPFR offers the
opportunity to increase in-stock positions, gross
margins and sales, while reducing inventory
investments and stock-outs.
CPFR is based on managing forecasts and inventory
levels on an exception basis, altering participating
organizations to potential problems, while allowing
them to concentrate on further developing their
businesses.
3. Cross Docking
Cross docking is the function of warehouse or
distribution centers, which was introduced by
Wal-Mart.
Cross docking is a system in which the vendors
transport merchandise to a distribution centre,
pre-packed in quantities required by each store.
The merchandise is delivered to one side of the
distribution centre, the floor ready merchandise is
then transferred to the other side of the
distribution centre for delivery to a store.
 Retail Service Quality
Management
Providing high-quality service is difficult for retailers.
Good service keeps customers returning to a retailer
and generates positive word-of-mouth
communication, which attracts new customers.
In addition, most service provided by retailers are
intangible - customers can’t see or feel them.
The challenges of providing consistent high-quality
service provides an opportunity for a retailer to
develop a sustainable competitive advantage.
 Customer Evaluation of Service
Quality
Reliability: Accuracy of billing, meeting promised
delivery dates.
Assurance (Trust): Guarantees and warranties,
return policy
Tangibility: Appearance of stores, salespeople
Empathy: Personalized service, recognition by
name.
Responsiveness: Returning calls and e-mails,
giving prompt service.
The Gaps Model for Improving
Retail Service Quality
Service Gap: It means the difference between
the customers’ expectations and perceptions of
customer service).
The gaps model indicates what retailers need
to do to provide high-quality customer service.
Thus, retailers need to reduce the service gap
to improve customers’ satisfaction with their
service.
Four factors of Service Gap
Knowledge Gap: The difference between customer
expectations and the retailer’s perception of customer
expectations.
Standards Gap: The difference between the retailer’s
perceptions of customers’ expectations and the
customer service standards it sets.
Delivery Gap: The difference between the retailer’s
service standards and the actual service provided to
customers.
Communication Gap: The difference between the
actual service provided to customers and the service
promised in the retailer’s promotion program.
 Gaps Model for Improving
Retail Service Quality
Service Gap

Customer Management Standards Actual

specifying Customer
expectations perceptions service
for service service to perception
of customer
quality expectations be delivere of service
delivered d quality

Retailer
Knowledg Standards Delivery communi
e Gap Gap Gap -cation about
Communi service quality
-cation
Gap
Retailer’s objectives on SQM
To understand the level of service customers
expect
To set standards for providing customer service
To implement programs for delivering service
that meets the standards and
To undertake communication programs to
accurately inform customers about the service
offered by the retailer.