1 Retail Management Retail Management ISB&M Retail Management Retailing encompasses the business activities involved in selling goods & services to consumers for their personal, family, or household use. It includes every sale to the final consumer – ranging from cars to apparel to meals at restaurants to movie tickets. What is Retail Management? Key issues that retailer must resolve: How can we best serve our customer while earning a fair profit? How can we stand out in a highly competitive environment where customers have so many choices? How can we grow our business while retailing a core of loyal customers? ISB&M Retail Management Retail Functions in Distribution A Typical Channel of Distribution Manufacturer Wholesaler Retailer Final consumer Manufacturer Brand A Manufacturer Brand B Manufacturer Brand C Manufacturer Brand D Wholesaler Wholesaler Retailer Brand A customers Brand B customers Brand C customers Brand D customers Retailers role in sorting process ISB&M Retail Management Retailers often act as the contact between manufacturers, wholesalers, & customers. Retailers collect an assortment (variety) from various sources, buy in large quantity, & sell in small amount. This is sorting process. Retailers communicate with customers & wholesalers & manufacturers. Shoppers learn about the availability & characteristics of goods & services, store hours, sales etc., from retailers advt., sales people & displays. Manufacturers & wholesalers are informed by their retailers with regard to sales forecast, delivery delays, customer complaints, defective items, inventory turnover and so on.. Many goods & services have been modified due to retailer feedback. For small suppliers, retailers provide assistance by transporting, sorting, marketing, advertising, & pre-paying for the products. Retailers also complete transactions with customers i.e., having convenient locations, filling order promptly & accurately, & processing credit purchase. Some retailers also provide customer services such as gifts wrapping, delivery, & installation. To be more appealing, many firms engage in multi-channel retailing i.e., multiple point of contact like physical stores, websites, mail-order catalogs etc. Retail Functions in Distribution contd.. ISB&M Retail Management Benefits Reach more customers Reduce costs Improve cash flow Increase sales more rapidly Focus on area of expertise Retail Functions in Distribution contd.. Manufacturers also do operate retail facilities (besides selling at conventional retailers). In running their stores, these firms compete the full range of retailing functions & compete with conventional retailers. ISB&M Retail Management Retailers are part of distribution channel, so manufacturers (wholesalers) are concerned about: Caliber of displays Customer service Store hours Retailer’s reliability as business partners Retailers are also major customers of goods & services for resale, store fixtures, computers, management consulting ,& insurance. Retailer-Supplier Relationship Retailers and supplier have different priorities on: Control over distribution channel Profit allocation No. of competing retailers handling supplier’s products Product display Promotion support Payment terms Operating flexibility
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Transcript
1
Retail
Management
Retail
Management
ISB&M Retail Management
Retailing encompasses the business activities involved in selling goods & services
to consumers for their personal, family, or household use.
It includes every sale to the final consumer – ranging from cars to apparel to
meals at restaurants to movie tickets.
What is Retail Management?
Key issues that retailer must resolve:
How can we best serve our customer while earning a fair profit?
How can we stand out in a highly competitive environment where customers have so many choices?
How can we grow our business while retailing a core of loyal customers?
ISB&M Retail Management
Retail Functions in Distribution
A Typical Channel of Distribution
Manufacturer WholesalerRetailer
Final
consumer
Manufacturer
Brand A
Manufacturer
Brand B
Manufacturer
Brand C
Manufacturer
Brand D
Wholesaler
Wholesaler
Retailer
Brand A
customers
Brand B
customers
Brand C
customers
Brand D
customers
Retailers role in sorting process
ISB&M Retail Management
Retailers often act as the contact between manufacturers, wholesalers, & customers.
Retailers collect an assortment (variety) from various sources, buy in large quantity, &
sell in small amount. This is sorting process.
Retailers communicate with customers & wholesalers & manufacturers.
Shoppers learn about the availability & characteristics of goods & services, store hours,
sales etc., from retailers advt., sales people & displays.
Manufacturers & wholesalers are informed by their retailers with regard to sales forecast,
delivery delays, customer complaints, defective items, inventory turnover and so on..
Many goods & services have been modified due to retailer feedback.
For small suppliers, retailers provide assistance by transporting, sorting, marketing,
advertising, & pre-paying for the products.
Retailers also complete transactions with customers i.e., having convenient locations,
filling order promptly & accurately, & processing credit purchase.
Some retailers also provide customer services such as gifts wrapping, delivery, &
installation.
To be more appealing, many firms engage in multi-channel retailing i.e., multiple point
of contact like physical stores, websites, mail-order catalogs etc.
Retail Functions in Distribution
contd..
ISB&M Retail Management
Benefits
Reach more customers
Reduce costs
Improve cash flow
Increase sales more rapidly
Focus on area of expertise
Retail Functions in Distribution
contd..
Manufacturers also do operate retail
facilities (besides selling at conventional retailers). In running their
stores, these firms compete the full range of retailing functions & compete
with conventional retailers.
ISB&M Retail Management
Retailers are part of distribution channel, so manufacturers (wholesalers) are concerned
about:
Caliber of displays
Customer service
Store hours
Retailer’s reliability as business partners
Retailers are also major customers of goods & services for resale, store fixtures,
computers, management consulting ,& insurance.
Retailer-Supplier Relationship
Retailers and supplier have different priorities on:
Control over distribution channel
Profit allocation
No. of competing retailers handling supplier’s products
Product display
Promotion support
Payment terms
Operating flexibility
2
ISB&M Retail Management
Channel Relations
Exclusive Distribution
Suppliers make agreements with one or a few retailers that designates them the only one
to carry certain brands/products in a specific geographic region.
Both parties work together to maintain an image, assign self space, allot profits & costs,
& advertise.
This is the smoothest channel relationship.
Retailer-Supplier Relationship
contd..
Intensive Distribution
Suppliers sell through as many retailers as possible.
This maximizes suppliers’ sales & lets retailers offer many brands & product versions.
Retailers may assign little self space to specific brands, set high price on them, & not
advertise them.
This is most volatile channel relationship.
Selective Distribution
Suppliers sell through a moderate no. of retailers carrying some competing brands.
This combines aspects of Exclusive & Intensive Distribution
ISB&M Retail Management
The average amount of a sales transaction for retailers is much less than
manufacturers.
This low amount creates the need to tightly control the cost associated with each
transaction like sales personnel, credit verification, & bagging.
To maximize the no. of customer the retailer has to emphasize more on ads & special
promotions.
Increase impulse sales by more aggressive selling.
The Special Characteristics of
Retailing
Final consumers make many unplanned or impulse purchases.
Large %age of consumers do not look at ads before shopping.
They do not prepare shopping list.
Make fully unplanned purchases.
This indicates the value of in-store displays, attractive store layouts, & well organized
stores, catalogs, & website.
Retailer’s ability to forecast, budget, order merchandise, & sufficient personnel on the
selling floor becomes difficult.
ISB&M Retail Management
Retail customers usually visit a store, even though mail, phone, & web sales has
increased.
Most retail transactions happen in stores & will continue in future.
Many people like to shop in person, want to touch, smell, and/or try on products.
Many people to browse for unplanned purchases.
They feel more comfortable talking a purchase home with them than waiting for a
delivery.
Desire privacy while at home.
Retailers must work to attract shoppers to stores & consider such factors such as store
location, transportation, store hours, proximity (nearness) of competitors, product
selection, parking & ads.
The Special Characteristics of
Retailing
ISB&M Retail Management
Retail strategy is the overall plan guiding a retail firm. It influences the firm’s business
activities & its response to market forces, such as competition & economy.
Six steps in strategic planning
Define the type of business in terms of the goods or services & company’s specific
orientation.
Set long-run & short-run objectives for sales & profit, market share, image etc.
Determine the customer market to target on the basis of its characteristics (like gender
& income level) & needs (like product & brand preferences).
Devise an overall, long-run plan that gives general direction to the firms & its employees.
Implement an integrated strategy that combines factors like store location,
transportation, product variety, pricing, and advertising & display to achieve objectives.
Regularly evaluate performance & correct weaknesses or problems when observed.
Importance of Retail Strategy
ISB&M Retail Management
Growth-oriented objectives
Appeal to prime market
Distinctive company image
Focus
Strong customer service for its retail category
Multiple points of contact
Employee relations
Innovation
Commitment to technology
Community involvement
Constantly monitoring performance
Key to success
ISB&M Retail Management
Customer orientation - The retailer determines the attributes & needs of its customers
& endeavors (take action) to satisfy these needs.
Coordinated effort - The retailers integrates all plans & activities to maximize efficiency.
Value-driven - The retailer offers good value to the customers, whether it be upscale (expensive) or discount i.e., “appropriate pricing” for goods & customer service.
Goal oriented - The retailer sets goal & uses its strategy to attain them.
The Retailing Concept
Customer
orientation
Coordinated effort
Value- driven
Goal orientation
Retailing
concept Retail Strategy
3
ISB&M Retail Management
Classification of Retail Institutions
OwnershipStore-based retail
strategy mix
Nonstore-based
retail strategy mix
& nontraditional
retailing
• Independent
• Chain
• Franchise
• Leased department
• Vertical marketing system
• Consumer cooperative
• Convenience store
• Conventional supermarket
• Food-based supermarket
• Combination store
• Box (limited line) store
• Warehouse store
• Specialty store
• Variety store
• Traditional department store
• Full-line department store
• Off-price chain
• Factory outlet
• Membership club
• Flea (louse) market
• Direct marketing
• Direct selling
• Vending machine
• World wide web (WWW)
ISB&M Retail Management
Ownership format serves a marketplace niche.
Independent retailers capitalize on a very small targeted customer base & please
shoppers in a friendly, folksy (simple) way. Word-of mouth communication is important.
These retailers should not try to serve too many customer & enter into price wars.
Chain retailers benefit from widely known image, economies of scales (i.e. cost advantages that a business obtains due to expansion), & mass promotion possibilities.
They should maintain their image chain wide & not be inflexible in adapting changes in
the marketplace.
Franchisors have strong geographic coverage & motivation of the franchisees as owner-
operators. They should not get bogged down in policy disputes with franchisees or charge
excessive royalty fees.
Leased departments enable store operators & outside parties to join forces & enhance
the shopping experience, while sharing expertise & expenses. They should not hurt the
image of the store or place too much pressure on the lessee to bring in store traffic.
A vertically integrated channel gives a firm greater control over sources of supply, but it
should not provide consumers with too little choice of products or too few outlets.
Cooperatives provide members with price savings. They should not expect too much
involvement by members or add facilities that raise costs too much.
Retail Institution by Ownership
ISB&M Retail Management
An independent retailer owns one retail unit.
Independent Retailer
Advantages
There is flexibility in choosing retail formats, location, assortment (variety), prices, hours etc.,
& devising strategy based on the target customers.
Investment costs for leases, fixtures, workers, & merchandise can be brought down. There is no
duplication of stock or personnel function. Responsibilities are clearly delineated (defined) within the store.
Independents frequently act as specialist in a niche of the particular goods/services category.
They are then more efficient & can lure (attract) shoppers interested in specialized retailers.
Independents exert strong control over their strategies, & the owner-operator is typically on
the premises. Decision making is centralized & layers of management personnel are minimized.
There are certain image attached to independents, particularly small ones, that chains cannot readily capture.
Independents can easily sustain consistency in their efforts because only one store is operated.
Independents have “Independence”. No meetings, union, stockholders & labor unrest etc.
Entrepreneurial drive.
ISB&M Retail Management
Independent Retailer
Disadvantages
Less bargaining power with the suppliers as they buy less quantity.
Cannot gain economies of scale (i.e. cost advantages that a business obtains due to expansion) in
They are limited to certain media for advt. because of financial constraints.
Family-run independents is overdependence on the owner. It is difficult to keep it up & running.
Limited time allotted to long-run planning, since owner is intimately involved in day-to day
operations.
ISB&M Retail Management
Chain retailer operates multiple outlets (store units) under common ownership. It
usually involves in some level of centralized purchasing & decision making.
Chain Retailer
Advantages
Many chains have bargaining power due to their purchase volume. They receive new items
when introduced, have orders promptly filled, get sales support, & obtain volume discounts.
Chains achieve cost efficiencies when they buy directly from the manufacturers & in large
volumes, ship and store goods, & attend trade shows sponsored by the suppliers to learn about new offerings. They can sometimes bypass wholesalers.
Efficiency is gained by sharing warehouse facilities; purchasing standardized store fixtures;
centralized buying & decision making etc. Headquarters have broad authority for personnel policies & for buying, pricing, & advt. decisions.
Computerized ordering merchandise, inventory, forecasting, sales, & bookkeeping. This reduces
overall costs.
Take advantage of variety of media from print to electronic.
Detailed & clear responsibility for employees with available substitute incase any employee is
retiring or quitting.
Spend considerable time in strategic planning. Opportunity & threat are closely monitored.
ISB&M Retail Management
Chain Retailer
Disadvantages
Flexibility may be limited. Consistent strategies on pricing, promotions, & product variety must
be followed throughout all units which may be difficult to adapt to local diverse market.
Investment is high due to infrastructure & store as multiple store has to be stocked.
Managerial control is complex due to geographically dispersed branches.
Limited independence to the personnel.
4
ISB&M Retail Management
Franchising involves a contractual arrangement between a franchisor (a
manufacturer, wholesaler, or service sponsor) & a retail franchisee, which allows the franchisee to conduct business under a established name & according to a given pattern of business.
The franchisee pays an initial fees & a monthly %age of the gross sales in exchange
for the rights to sell goods & services in an area.
A franchisee operates autonomously in setting store hours, chooses a location, & determines facilities & displays.
Franchising
Three structural arrangements dominate retail franchising
Manufacturer-retailer – A manufacturer gives independent franchisees the right to sell goods & related services through licensing agreement. (Eg., Auto/truck dealers like GM, Petroleum
products dealers like IOC).
Wholesaler-retailer
Voluntary - A wholesaler sets up a franchise system & grants franchises to individual retailer. (Eg., Auto accessories stores, Consumer electronics stores).
Cooperative – A group of retailers sets up a franchise system & shares the ownership & operations of a wholesaling organization. (Eg., Food stores).
Service sponsor-retailer –A service firm licenses individual retailers so they can offer specific service packages to customers. (Eg., McDoland’s).
ISB&M Retail Management
Advantages of Franchisees
They own a retail enterprise with a relatively small capital.
They acquire well-known names & goods/services lines.
Standard operating procedures & management skills may be taught to them.
Cooperative marketing efforts (like national advt.) are facilitated.
They obtain exclusive selling rights for specified geographical territories.
Their purchases may be less costly per unit due to the volume of the overall franchise.
Franchising contd..
Disadvantages of Franchisees
Oversaturation could occur if too many franchisees are there in one geographical area.
Due to overzealous selling by some franchisors, franchisees’ income potential, required
managerial ability, & investment may be incorrectly stated.
They may be locked into contracts requiring purchases from franchisors or certain vendors.
Cancellation clauses may give franchisors the right to void agreement if provisions are not
satisfied.
In some industries, franchise agreements are of short duration.
Royalties are often a %age of gross sales, regardless of franchisee profits.
ISB&M Retail Management
Advantages of Franchisors
A national & global presence is developed more quickly & with less franchisor investment.
Franchisee qualification for ownership are set & enforced.
Agreement require franchisees to abide by stringent operating rules set by franchisors.
Money is obtained when goods are delivered rather than when goods are sold.
Because franchisees are owners & not employees, they have greater initiative to work hard.
Even after franchisees have paid for their outlets, franchisors receive royalties & may sell products to the individual proprietors.
Franchising contd..
Disadvantages of Franchisors
Franchisees harm the overall reputation if they do not adhere to company standards.
Lack of uniformity among outlets adversely affects customer loyalty.
Intra-franchise competition is not desirable.
The resale value of individual units is injured if franchisees perform poorly.
Ineffective franchised units directly injure franchisors’ profitability.
Franchisees, in greater number, are seeking to limit franchisors’ rules & regulations.
ISB&M Retail Management
A leased department is a department in a retail store – usually a department,
discount, or specialty store – that is rented to outside party.
The leased department proprietor is responsible for all aspects of its business & normally pays a %age of sales as rent.
The store sets operating restrictions for the leased department to ensure overall consistency & coordination.
Leased Department
Advantages (from the stores’ prespective)
The market is enlarged by providing one-stop customer shopping.
Personnel management, merchandise displays, & reordering items are undertaken by lessees.
Regular store personnel do not have to be involved.
Leased department operators pay for some expenses, thus reducing store costs.
A %age of revenue is received regularly.
Disadvantages (from the stores’ prespective)
Leased department operating procedures may conflict with store procedures.
Lessees may adversely affect the stores’ image.
Customers may blame problems on the store rather than on the lessees.
ISB&M Retail Management
Leased Department
Advantages for Leased department operators
Stores are known, have steady customers, & generate immediate sales for leased departments.
Some costs are reduced through shared facilities like security equipment & display windows.
Their image is enhanced by the relationships with popular stores.
Disadvantages for Leased department operators
There may be inflexibility as to the store hours they must be open & the operating style.
The goods / services lines are usually restricted.
If they are successful, the store may raise rent or not renew leases when they expire.
In-store locations may not generate the sales expected.
ISB&M Retail Management
A vertical marketing system consists of all the levels of independently owned businesses along a channel of distribution.
Vertical Marketing System
Type of channel Channel Functions Ownership
Independent system• Manufacturers or retailers are small
• Intensive distribution is sought
• Customers are widely dispersed
• Unit sales are high
• Company resources are low
• Channel members share costs & risk
• Task specialization is desirable
Manufacturing
Wholesaling
Retailing
Independent manufacturer
Independent wholesaler
Independent retailer
Partially integrated system• Manufacturers & retailers are large
• Selective or exclusive distribution
• Unit sales are moderate
• Company resources are high
• Greater channel control is desired
• Existing wholesalers are too expensive or
unavailable
Manufacturing
Wholesaling
Retailing
Two channel members own all
facilities & perform all functions.
Fully integrated system• Firm has total control over its strategy
• Direct customer contact
• Exclusive offerings
• System is costly & requires lot of
expertise
Manufacturing
Wholesaling
Retailing
All production & distribution
functions are performed by one
channel member.
5
ISB&M Retail Management
A consumer cooperative is a retail firm owned by its customer members.
A group of customers invests, elects officers, manages operations & share profits.
They account for tiny piece of retail sales.
Cooperatives are formed because they think they can do retailing function,
traditional retailers are inadequate & prices are high.
They have not grown because consumer initiative is required, expertise may be lacking, expectations have frequently not been met, & boredom occurs.
Consumer Cooperative
ISB&M Retail Management
Retail Location Strategies &
Decisions
ISB&M Retail Management
There are three most important aspects in Retailing – location, location & location.
Locating the retail store in the right place was considered to be adequate for success.
It is a important part of the retail strategy as it conveys a fair amount
of image.
It influences the merchandise mix & interior layout of the store.
It is difficult to change the location once the store comes into existence.
Change of location may result in loss of customer & employees.
Why Location is Important?
ISB&M Retail Management
The choice of the location of the store depends on the target audience & kind of merchandise to be sold.
Types of Retail Location
Types:
Freestanding/Isolated store
Store located along major traffic artery
No competitive retailers around
Rents are usually low
Advertising cost are high
Customers may not prefer to travel long distance to visit only one store
Part of a business district
A business district (primary, secondary or neighborhood) is a place of commerce in
the city
Rent is high; parking is cumbersome
It has good accessibility in terms of transport
Customers are more
ISB&M Retail Management
Types of Retail Location contd..
Types:
Part of a shopping centre
Shopping centre - A group of retail & other commercial establishments that is
planned, developed, owned & managed as single property
Parking is available
Basic configuration – mall or strip centre with walkway
Ideally enclosed & climate control
ISB&M Retail Management
Steps involved in choosing a retail
location1. Identify the market in which to locate the store
2. Evaluate the demand & supply within that market i.e., determine the market potential
1. Demographic features of the population
2. The characteristics of the households in the area
3. Competition & compatibility
4. Laws & regulations
5. Trade area analysis
3. Identify the most attractive sites
1. Traffic
2. Accessibility of the market
3. The no. & types of stores in the area
4. Amenities available
5. To buy or to lease
6. The product mix offered
4. Select the best site available
6
ISB&M Retail Management
The Spread of Organized Retail in
India
Mumbai
Delhi
Kolkata
Pune
Chandigarh
Hyderabad
Indore
Gurgaon
Noida
Jaipur
Bhopal
Bhubaneshwar
Nagpur
Udaipur
Bangalore
Chennai
ISB&M Retail Management
Retail Merchandising
ISB&M Retail Management
What is Merchandising?
Merchandising is planning, buying & selling of merchandise (product).
The American Marketing Association defined merchandising as “the planning involved in
marketing the right merchandise at the right place at the right time in the right quantity
at the right price”.
Merchandising can be termed as the analysis, planning, acquisition, handling & control of
the merchandise investments of a retail operation.
Factors affecting the merchandising function
Merchandising
function
Size of organization
Types of stores
Org
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ISB&M Retail Management
Merchandise Planning
Merchandise planning can be defined as the planning & control of the merchandise
inventory of the retail firm, in a manner which balances between the expectations of the
target customers & the strategy of the firm.
Implication of Merchandise Planning
Merchandise
Planning
FinancePayments to suppliers
Profitability measurements
Store OperationsSpace planning
Communication about newproducts & their features
Ma
rke
ting
Ne
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trod
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De
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De
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catio
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ISB&M Retail Management
Merchandise Planning Process
Stage I: Developing the Sales Forecast
1. Reviewing past sales
2. Analyzing the changes in the economic conditions
3. Analyzing the changes in the sales potential
4. Analyzing the changes in the marketing strategies & the competition
5. Create the sales forecast
Stage II: Determining the Merchandise Requirements
Planning in merchandising is at two levels:
1. The creation of the Merchandise Budget (5 parts)
2. The Assortment Plan
Merchandise Budget
Sales PlanStock
support planPlanned
reductionPlanned Purchase
Gross Margins
ISB&M Retail Management
Merchandise Planning Process
Stage II: Determining the Merchandise Requirements
Planning in merchandising is at two levels:
1. The creation of the Merchandise Budget (5 parts)
2. The Assortment Plan
Company DepartmentMerchandise Classification
Merchandise Category
Merchandise Sub Category
Style Price point
SKU (Stock Keeping Unit)
The Merchandise Hierarchy
7
ISB&M Retail Management
Merchandise Planning Process
Some key merchandising terms
Staple/basic merchandising – products always in demand (basic necessities)
Fashion merchandising – products has high demand for a relatively short period of time
Seasonal merchandising – seasonal products
Fad merchandising – enjoy popularity for a limited period of time; generated high sales for
a short time
Style – unique shape or form of any product (taste in music)
Assortment – variety of merchandise mix
The width/breadth of assortment – refers to the number of brandsThe depth of assortment – variety in one goods/services category
Points to be kept in mind while creating a plan -
The merchandise budget should be prepared in advance of selling season.
The language of the budget should be easy to understand.
Merchandise budget must be planned for a short period – 6 months is the normal norm.
Budget should be flexible.
ISB&M Retail Management
Key Components of Merchandise
Planning
Planned sales – Planned sales are projected sales for a period that is planned.
Month %age increase Planned sales (Rs)
Feb 12% 35,000 X 12% + 35,000 = 39,200
April 25% 43,750
June 21% 42,350
Example:Last year’s sale for the same period = 35,000
Planned purchase – Planned purchases represent the merchandise that is to be purchased
Projected EOM Stock = Actual BOM Stock + Actual Additions to stock + Actual on
order – Planned monthly sale – Planned reductions for the
month
ISB&M Retail Management
Merchandise Planning Process
Stage IV: Assortment Planning
Assortment Planning involves determining 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.
To create a balanced assortment merchandise for the customer.
Depth
Breadth
Product Line
Department Menswear
Shirts
Zodiac
Styles Color ……
Van HeusenLouis
PhilippeArrow
Trousers Accessories
8
ISB&M Retail Management
Merchandise Planning Process
Stage IV: Assortment Planning
The Range Plan:
The aim of the range plan is to create a balanced range for each category of products that
the retailer choose to offer.
Range planning should take care of -
The no. of items/options available to the customer should be sufficient at all times &
should be such that it helps the customer make a choice.
The overbuying & under buying is limited.
Sufficient quantities of the product are available, so that all the stores can be serviced
& the product is available at all the stores across various locations.
The lower limit of the range width is often called aesthetic minimum
ISB&M Retail Management
Merchandise Planning Process
Stage IV: Assortment Planning
The Model Stock Plan:
After determining the money available for buying, a decision needs to be taken on what to
buy? & in what quantity?
Steps -
1. Identify the attributes that the customer would consider while buying the product.
2. Identify the number of levels under each attribute.
3. Allocate the total units to the respective item category.
The process of merchandise planning may be top down or bottom up.
Top down planning occurs when the corporate objectives dictate the company’s financial objectives
in terms of sales, profit & working capital.
In Bottom up planning, individual department managers work on the estimated sales projections
ISB&M Retail Management
The Model Stock Plan
Men’s shirt
100% (1000)
Casual
40% (400)
Small
25% (100)
Medium
40% (160)
Full Sleeve
30% (48)
Half Sleeve
70% (112)
Button
Down
40% (45)
White
40% (18)
Cotton
25% (4)
Cotton
Blend
75% (14)
Blue
30% (14)
Cream
20% (9)
Grey
10% (4)
Other
60% (67)
Large
25% (100)
Extra large
10% (100)
Dress
10% (100)
Formal
20% (200)
Sport
30% (300)
ISB&M Retail Management
Branding & Private Labels
ISB&M Retail Management
Branding
BrandThe American Marketing Association defined a brand as “a name, term, design, symbol or a combination of them, intended to identify the goods or services of
one seller or group of sellers & to differentiate them from those of the competitors”.
Branding existed from the time man felt the need to differentiate his products from that
being offered by others.
Branding gradually became a guarantee of the source of the product & ultimately its use
as a form of legal protection against copying grew.
With the development of shops, shopkeepers hung pictures above their shops indicating
the types of goods they sold.
With industrial revolution mass production came into existence but the distance between
the manufacturers & customers increased.
This eventually led to the evolution of the role of the brands as tools by which consumers
identified the products.
ISB&M Retail Management
Building a Retail Brand
Key questions for retail brands –
Can the brand be identified with the lifestyles of its target customers?
Is there a perceptible difference between the brand & the products offering by the
retailer & other retailers?
Can a story be woven around the brand?
A retail brand is a combination of the company’s heritage, the merchandise mix, the
store environment, the service strategy, the advertising & promotion.
Successful retail branding starts with a clear definition of what retailers stand for – an
identification of what the customers associate it with, leading customers to think: “This
brand is a reflection of me.. This brand is meaningful to me..”
The retailer needs to determine the specific value proposition for the end customers.
Playing on emotional benefits can also be a branding exercise of the retailer.
Retail branding does not sell a specific product. It is about customer service.
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ISB&M Retail Management
The Retail Value Chain
SuppliersThird Party
Logistics
Retail
Operations
Customer
Mgmt.Customers
Support Functions
Systems
ISB&M Retail Management
Private Label
When the retailer decides to sell products or a line of merchandise which is owned,
controlled, merchandised & sold by the retailer in his own store/chain of stores, he is said
to be Selling Own Label / Brand or Private Label merchandise.
A private label can be classified as:
Store Brand – which carries the retailer’s name, such as Westside, Food World, Big Bazaar
etc.
An Umbrella Brand – where a common brand name is used across multiple categories –
example Splash (Lifestyle), Bare (Pantaloon) etc.
Individual Brands – where specific brand names are created for specific market segments and/or categories.
The Private Label Marketing Association defines store products as “all merchandise sold
under a retail store’s private label. That label can be stores name or a name created
exclusively by that store. In some cases, a store may belong to a wholesale buying group
that owns labels, which are available to the members of the group. These whole-sale
owned labels are referred to as controlled labels”
ISB&M Retail Management
Private Label - Evolution
Private labels were traditionally defined as generic product offerings that competed with
national brands on the basis of value proposition.
They were often seen as the lower priced alternative to the “real” thing.
Private label carried the stigma of inferior quality & therefore inspired less confidence.
Generics, which were products distinguishable by their plain & basic packaging were the
first type of private labels.
With the increase in retail stores, the need to earn higher profit & the desire to service
the gaps in consumer requirements gave rise to private labels, both in apparel & the food
& grocery sector.
Today, most of the large department stores have their own private labels which cater to a
specific audience.
Private labels rely on in-store advertisements.
In order to compete with national brands, private labels need to focus on quality.
The average quality of one product compared to other
Consistency in quality over a period of time
Private label goods become more successful where the no. of competing products is
lower.
ISB&M Retail Management
Why Private Label?
Retailer can fill in the need gaps that may exist in the market place.
Private label gives the retailer an advantage of offering the customer another option.
A private label allows the retailer to offer a unique product in the marketplace.
Private label allows a retailer to earn a higher margin than other brands he chooses to retail because designing, merchandising, sourcing & distribution is
done by the retailer. Also, advertisement is in-store.
Make or
Buy
Placing
the order
&
Allocating
the goods
MarketingIdentification of
the needPerformance
Measurement
Private Label Creation Process
ISB&M Retail Management
Merchandise Procurement / Sourcing
The term sourcing means finding or seeking out products from different places,
manufacturers or suppliers.
Method of Procuring Merchandise
1. Identifying the sources of supply
Costs associated with global sourcing:
Country of origin effects – Many a times, where the merchandise has been
manufactured makes a difference in the final sale of the product.
Foreign currency fluctuations – Effects the buying price of the products.
Tariffs – Taxes placed by the govt. on imports.
Foreign trade zones – These are special areas within the country that can be
used for warehousing, packaging, inspection, labeling, exhibition, assembly,
fabrication etc., of imports, without becoming subject to the country’s
tariffs.
Cost of carrying inventory
Transportation cost
ISB&M Retail Management
Merchandise Procurement / Sourcing
2. Contacting & Evaluating the sources of supply
Contacting can be vendor initiated contact or retailer initiated contact
Points to be kept in mind
The target market for whom the merchandise is being purchased.
The image of the retail organization & the fit between the product & the
image of the retail organization.
The merchandise & the prices offered.
Terms & service offered by the vendor.
The vendor’s reputation & reliability.
3. Negotiating with the sources of supply
The types of discounts that could be made available to the buyer
Trade discounts
Chain discounts
Quantity discounts
Seasonal discounts
Cash discounts
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ISB&M Retail Management
Merchandise Procurement / Sourcing
4. Establishing Vendor Relations
To build & maintain strategic partnership with vendors, the buyer needs to build on:
Mutual trust
Open communication
Common goals
Credible commitments
5. Analyzing Vendor Performance
The total orders placed on the vendor in a year
The total returns to the vendor, the quality of the merchandise
The initial markup on the products
The markdowns (if any)
Vendor’s participation in various schemes & promotions
Transportation expenses if borne by the retailer
Cash discounts offered by the vendor
The sales performance of the merchandise
ISB&M Retail Management
Category Management - A Method of Merchandise Management
ISB&M Retail Management
Category Management
Category Management can be defined as “the distributor/supplier process of managing
categories as SBUs, producing enhanced business results by focusing on delivering customer
value”.
A category is an assortment of items that a customer sees as reasonable substitutes
of each other.
A category management concept is a focus on a better understanding of consumer
needs as the basis for retailers’ & suppliers’ strategies, goal, & work processes.
The need to reduce costs, control inventory levels & replenish (refill) stock
efficiently led to the concept of Efficient Consumer Response (ECR).
Category management provides renewed opportunities for meeting consumer needs
& at the same time, for achieving competitive advantage as well as lower costs
through greater work process efficiencies.
ISB&M Retail Management
Category Management contd..
Category Management is now considered as the “new science of retailing”
because -
1. It involves a systematic process.
2. It emphasizes decision-making based on complex analysis of consumer
data & market level syndicate data.
3. It replaces the brand bias that stems from suppliers’ interest & encourages
objective view based on consumers’ desires.
Why Category Management?
Consumer changes
Competitive pressures
Economic & efficiency considerations
Advances in IT
ISB&M Retail Management
Components Category Management
Strategy
Business Process
Performance Measurement
Organizational Capabilities
Information Technology
Trading Partner
Relationships
ISB&M Retail Management
The Category Management Business
Process
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ISB&M Retail Management
Step 1: Category Definition
A distinct, manageable group of products/services that consumers perceive to be
interrelated/substitutable in meeting a consumer need.
The category definition should be based on how the customer buys, & not on how
the retailer buy.
This step decides the products that represent a category, sub-category & major
segmentation.
At this step, the retailer assigns products to the various categories based on factors
such as consumer usage & packaging.
The Category Management Business
Process
Step 2: Category Role
It determines the priority & importance of each category in the overall business.