Retail Management

Chapter I

Chapter IIntroduction to Retail Management:

1.1 Important Terms in the Area of Retailing: Retailing: According to Philip Kotler Retailing includes all the activities involved in selling goods orservices to the final consumers for personal, non business use. A retailer or retail store is any business enterprise whose sale volume comes primarily from retailing.Department Stores: Retailers that carry a broad variety and deep assortment, offer considerably good customer service, and are organized into separate departments for displaying merchandise.Kiosk: The term kiosk, as related to retailing, refers to a small stand-alone structure used as a point of purchase. This can be either a computer or display screen used to disseminate information to customers; or a free standing, full-service retail location. Kiosks are often found in malls and other high-traffic locations.Inventory: Inventory is the merchandise a retail store has on hand. The term also refers to the act of counting, itemizing and recording in-stock merchandise or supplies.Inventory Turnover: The number of times during a given period that the average inventory on hand is sold and replacedCategory management is an important tool required in your retail business to maximise the sales and profit margins of a category or group of categories. A category is an assortment of SKUs (stock keeping units that the customer sees as reasonable substitutes for each other. Gondola: Primary merchandising fixture consisting of a base, free-standing vertical wall, and a number of four of sections of shelving.First In, First Out: A method of stock rotation in which goods that are received first are sold first. Newly received product is stocked behind the older merchandise.LIFO: Last In, First Out - A method used in rotating inventory. This is where an item that is last received is sold first. Markup: A percentage added to the cost to get the retail selling price.Markdown: A planned reduction in the selling price of an item, usually to take effect either within a certain number of days after seasonal merchandise is received or on a specific date.Key Performance Indicators (KPIs) enable you as a retailer to understand what is happening within your categories and business each day. It is very important to have information collected and summarized across a range of KPIs by category. Examples are Gross margin, Shrinkage, Break-even Sales, Markdowns, Inventory turnover, etc. Point-of-purchase Display: Point-of-purchase displays, or POP displays, are marketing materials or advertising placed next to the merchandise it is promoting. These items are generally located at the checkout area or other location where the purchase decision is made. For example, the checkout counters of many convenience stores are cluttered with cigarette and candy POP displays.Point of Sale (POS): Point of sale (POS) refers to the area of a store where customers can pay for their purchases. The term is normally used to describe systems that record financial transactions such as electric cash registers or an integrated computer system that records the data that comprises a business transaction for the sale of goods or services.Private Label: Products that are generally manufactured or provided by one company under another company's brand.1.2 Theories of Retailing: 1. Wheel of Retailing: 1. Under this theory retailers enter the business as fairly low status, low price and low cost operators2. This will help them compete with existing players as they are able to offer better prices and attract customers.3. Once they are successful they try to expand by adding space and more sophisticated facilities4. They become high cost, high price retailers and as such attract fresh competition

2. Retail Accordion Theory: The retail accordion theory states that retail outlets will move from outlets with smaller number of items to outlets with larger number of items, before going back to an outlet with smaller number of items.1. As per retail accordion theory at play: the mom n pop shopwhich is the in the neighbourhood and serving small section of the people with merchandise that primarily suit the consumers around its location. As the business grows it gets converted into the neighborhood supermarket, then they put up a few more stores around the city with much wider merchandise. 2. However, according to this theory the business starts getting hit because consumers dont want to go to an all-in-one store, they now like the specialized stores to get what they are looking for instead of wasting a day going to a mega mart.3. This results in the business starts breaking up into foods, stationary, clothes stores etc., it goes back to the smaller format as seen in the beginning, serving a restricted number of items to a smaller market segment.

3. Natural Selection Theory:According to this theory, a firm orretail institution should be flexible enough to adapt to the changing environment and should adapts its behaviour (to changes in the environment) to survive in the market.

1. The retail institution that is flexible enough to adapt to changes in the economy will be the most successful. 2. If the store or the retail institution is not willing to change, it would stagnate and may even be forced to exit the market. 3. Thus, according to the natural selection theory, a retail institution will survive in a competitive market only if it is willing to change its product line, price, location andpromotional strategies according to changes taking place in the retail environment. 4. These changes can be social, economic, political, legal or technological in nature.4. 'Melting pot theoryAnother theory explaining the changes that take place in the retail institutions is the Dialectic process or melting pot theory. Accordingto this theory, two institutional forms with different advantages modify their formats till they develop a format that combines the advantages of both formats.Melting Pot Theory

Department Store: High MarginLow TurnoverHigh PriceFull ServiceDowntown LocationPlush FacilitiesDiscount StoreLow MarginHigh TurnoverLow PriceSelf ServiceLow Rent LocationDiscount Department StoreAverage marginAverage TurnoverModest PriceSuburban LocationModel Facilities

1.3 Managerial Decision-Making: Decision-making is similar for all types of businesses. Small and midsize independent retailers implementing high impact marketing campaigns to increase cash flow and customer footfalls have to be careful in identifying the fundamental requirements of a successful business, which are highlighted below: 1. Finance - adequate funding is the key to operate successfully. Like any business retailing also needs health liquidity position that is availability of cash in order to manage the retailing operations. In retailing cash is generated through sales, and there are no credit sales in organised retailing and all transactions with customers are done on cash basis. However, the problem is the matching cash-in-flows and cash-out-flows. Finance is required to buy merchandise, pay salaries, rent and electricity, taxes, store maintenance, and facilities management, to name a few. Majority of finance is taken away by inventory or merchandise. Huge volumes of products are offered to customers and as such needs huge finance. Though credit purchase is common in retailing but with a time limit. The point is whether the business is able to turn the merchandise into cash enough to honor the commitments. Otherwise the retailer has to arrange funds internally (Capital) or externally (Barrowings). The managerial decision making rests in deciding the combination of internal and external funds. 2. Operations Store operations are a major draw for customers. It includes inventory management, man management and customer management. Space management, interior and exterior ambience and design, parking and lighting etc., all have to be properly managed. Most importantly arrangement of merchandise and managing different categories is vital so that the items are always available for the customers, which shall ensure repeat visits and good volume of sales. Added to which is the employee management-HRM. A good manager spends enough time in taking appropriate decisions regard to HR policies that boost the morale of the staff, which shall contribute for the successful retail business. 3. Marketing - Systems have to be in place to not only acquire new customers, but also keep previous customers coming back to buy time and time again. Individual service, green retailing and target marketing are some areas to be considered that shall immensely help boost the footfalls/customer traffic. Effective use of Information technology shall enable implementation of successful CRMCustomer Relationship Management strategies. All the four Ps of marketingProduct, Price, Place and promotion to be carefully decided and forms part of important decision-making area of a retail manager. 4. Merchandising The breadth and depth of inventory is very essential feature of retail success. Planning the right quantity and type of merchandise is essential. The sizes, patterns, varieties of products are all required to suit the needs of wide range of customers taste and preferences. It is also important to display this merchandise; that is visual arrangement of merchandise is key to the success of retail trade. Customers should be attracted and induced to buy the products. Placing the products at appropriate place within the store is another area to be decided with high prominence.

5. Salesmanship: Effective salesmanship is an important element of service marketing. The employees have to be knowledgeable and courteous to the customers. Visiting customers express several doubts and need clarification, guidance and many times motivation to buy. Helpful employees are an asset to the retail business in the sense the information provided by them may result in increased sales.

1.3.1 The Five Principles of Retailing: One: The customer is the most important person in your businessThe customer holds the key to every successful retail operation. It is fundamental that every business is customer-focused, and retailing is no exception to this basic rule. All the operations of retail are to be designed to suit the requirements of a customer; merchandise panning, pricing, promotions and effective salesmanship among employees shall immensely contribute for the success of retail business. Two: Retail is detailOne of the most famous principles in retailing is, of course, retail is detail this is where the challenge lies: understanding retail is to understand the customer well. Certain basics of retailing like, store location and ambience, provision of facilities like parking, fresh rooms, enough shopping space, creating a pleasant shopping experience are all part of understanding the retail. Three: Understand the four PsMarketing is the starting point of any business. Understanding the four Ps of marketing is the key for success in retail business also. The 4 Ps: Product, Price, Place, Promotion. Product: Selection of Products that the customers want to buy and a product range that will satisfy customers needs and desires is an area in which much of the retail manager's time is spent. It is called the product knowledge. Identifying right product with different qualitiesas different quality parameters shall offer different price ranges to suit all classes of people and arranging them in a convenient manner for the customers to pick is the essence of a retail management decision-making. Most importantly there should be no case NISNot In Stock; no item should be out of stock, which needs proper inventory management system in place that ensures continuous availability of all items. Price: Price must be consistent across the marketing mix and meet all requirements of various customers. One has to price the product range at the correct level for the customers to be able to buy the products, and for them to gain value from the products. Again pricing strategies should be set in such a way that they not only generate sales volume and satisfy majority of the target customers but also should leave a healthy profit margins for the business to survive. Place: Modern Retailing is done through several channels. Choosing right channel or a mix of channels is important factor in retail decision-making; be that a physical store, a catalogue or an e-commerce website; Promotion: Once the decisions regard to a product at the right price, in a place where the customer can access it are decided, the promotion strategy has to be designed. This helps the customers to identify the store location and pay a visit.

Four: Location, location, locationThe most important retail principle is Location. History has dictated that this is one of the most important factors in the success of a physical store, and still to this day it will have a major impact on business success. The best location of a store will be decided by brand and product strategies. For example, a supermarket operation needs a car park and a high fashion store needs to be in a high fashion area that attracts the right customers for the store. However, that location has less effect now than previously, due to two main factors: the first being the flexibility of the customers; now they often travel more, and the second being the internet. Still a good location is always a winning strategy and contributes for the successful business. Five: Adapt to Change: Finally any business has to adapt to change in the environment. The internet has changed the shopping habits and will continue to do so. E-commerce websites have opened up the world of non-geographic retail a retail world without the need to visit the physical store. The emergence of e-tail from retail has been the biggest change over the past 20 years.The journey from retail to e-tail has been quick, and we need to embrace the world of e-tail and ensure we understand its effects on our customers. The e-tail world is growing significantly and with new technologies, such as i-Pads and mobile commerce, it will continue to change the opportunities in the world of retail.The challenge for the retail business is to make the shopping more attractive to the customer to withstand the competition of e-tail. It is also not a bad idea to start one's own e-tail website, which shall motivate a customer to visit the store and feel the shopping experience.

1.4 Role of Store Manager: A successful retail manager requires analytical and creative skills. There are two methods for the study and practice ofretailing:

Analytical method Retail manager is a finder and investigator Systematic decision making Standardized set of procedures, success formulas and guidelinesCreative Method The creative retail manager is an idea person The manager must respond to the unforeseen events in the environment Imaginative, proactive and anticipate the problems and solves them or keeps the solutions ready.

Applying a retail strategy: Any retail manager should apply these 6 steps:

1. Define the type of business in terms of the goods or service category and the companys specific orientation2. Set long-run and short-run objectives for sales & profit, market share, image3. Determine the customer market to which to appeal on the basis of its characteristics and needs4. Devise an overall, long-run plan that gives general direction to a firm and its employees5. Implement an integrated strategy that combines such factors as store location, product assortment, pricing, and advertising and displays to achieve the objectives6. Regularly evaluate performance & correct weaknesses orproblems as they are observedReview Questions: 1. What is retailing and explain the wheel of retailing? 2. Compare and analyze the retailing accordion theory and natural selection theory3. Draw a picture showing the melting pot theory of retailing4. Managerial decision-making has some key areas to understand- what are they?5. Discuss in detail the five principles of retailing that help effective retail planning process6. Applying retail strategy needs a store manager to follow some important steps? List

Chapter IIManagement of Retail Environment:

2020what are the major socio-demographic, technological and business trends that will likely impact retailing?

In todays retail environment it is critical that retailers face the facts and start managing their business into the future with a particular focus on retail financial disciplines.Retailing is a fast changing industry in which one must be able to quantify important financial information. Both today and in the future this will help to build a sustainable winning product offer for the customer. The resultbusiness growth and the freedom to pursue new directions and innovations as per customers expectations that will help to counter new competition entering the market.

2.1 Strategic Planning of New Trends: A business firm cannot travel in an unplanned way. To encounter the business challenges in a highly competitive environment and to find out a sustainable growth road map Retailers need to realize the importance of strategic planning. Strategic planning can be viewed as a stream of decisions and activities which lead to effective business strategies/plans, which help the organization to fulfill its objectives.The business environment of retailing can be divided as below: Marketing Mix Factors (controllable): Product, Price, Promotion and PlaceDistribution Environmental Factors (uncontrollable)-PESTEL FrameworkPolitical, Economical, Socio-cultural, Technical, Environmental, and Legal a) Retail landscape is changing rapidly and in this changing economic environment Retailers need to find out the right strategy, which will help them to cope up with the environment and empowers them to take right decisions for the future. Adopting correct strategy will help the Retailers to optimize their resources and also it will give an edge over its competitors. b) Retail business needs to formulate the suitable strategy after considering its strengths and weaknesses. Hence SWOT analysis will be an effective tool in determining the correct strategy for the particular category of retail business.

2.2 SWOT of Modern Retailing: Some of the strengths and weaknesses of the Retail industry are outlined below.

Strengths:These are the areas on which success stories have been built and therefore retailers need to capitalize on that.

i) Supremacy of Discount storeii) Advancement in the area of Information Technologyiii) New sales channels like E-commerce and direct marketingiv) Availability of consumer credit Weakness:i) Slow performance of Chain Storesii) Advent of Category Killers: These are big discount stores that offer a narrow but deep assortment of merchandise. These retailers are basically discount specialty stores. Most category specialists use a self-service approach, but some specialists in consumer durables offer assistance to customers. For, example, office depot stores have a warehouse atmosphere, with cartons of copying paper stacked on pallets plus equipment in boxes on shelves. By offering a complete assortment in a category at low prices, category specialists can kill a category of merchandise for other retailers and thus are frequently called category killers.

Opportunities:i) Brick and click: A combination of traditional store retailing along with non store retailing like Internet and E-commerce.

ii) Premium Priced Store: Premium priced stores are targeting the high income group customers and earning healthy profits. Tiffany and Co is an example of such premium priced store.

iii) Entertainment in Retail: Entertainment Industry and Retail Industry are working hand in hand to attract larger section of consumers. Sony Corporation has opened some huge entertainment complexes in USA and so many retail outlets are also housed in the same building. These two outlets complement each other and hence both are doing are doing well.Threats:i) Demise of Independent small storesii) Demographic Changes

2.3 Strategy to Match the Changes in Environment: 2.3.1 Green retailingArguably the single most important issue for retailers today is the environment. Green retailing has moved from nice to have to must have as both customer and regulatory demands tighten for the industry. And some of the biggest players are leading the charge to more environmentally aware practices. Tesco famously declared their intention of becoming a leader in helping to create a low-carbon economy. To do so, Tesco will transform its business model so that reduction of our carbon footprint becomes a central business lever, according to CEO Terry Leahy. One of many green steps the company has taken:Examples: 1. Tesco is bringing emission-free delivery vans to London and other locations. The battery-powered vehicles save 21 tons of CO2 per year, the equivalent of driving 51,000 miles in a car. The supermarket chain has currently bought 15 of the vehicles, though this is set to rise drastically in the next twelve months.2. Coop, one of the worlds largest grocery chains, is basing its product ranges on green propositions. In fact, the company is working with Bio Suisse, the umbrella association of more than 30 organic farming organizations and about 6300 farms engaging in organic production in Switzerland With the likes of Tesco, Coop as well as Sainsbury,3. Home Depot, Marks & Spencer, Starbucks, Zara and Wal-Mart leading the way, not having a distinct environmental plan built into retail strategies has become the exception, where only a few years ago it was the rule. What to expect then in 2020? Premium payments for enviro-friendly products, more low-energy production, and the creation of newhigherstandards for ethical trading.

2.3.2 Individualized serviceService and in-store experience continue to break out of the one-size-fits-all offering. Both are becoming more individualized and specialized for specific target groups. Todays shoppers are, of course, a highly differentiated demographic that promise to become even more so in the future. Working women, singles, teenagers and even children want products, services and shopping experiences that are as separate and suitable to them as they are. 1. Leading retailers aim to satisfy these requirements by diversifying. Hence the trend to niche stores, like those for tweens (9-12 year olds) has emerged; 2. Footlockers partnership with Nike, its biggest supplier, to launch a network of specialty, House of Hoops basketball stores across the US. 3. The US office supplies retailer, Staples, carefully analyzes its customers purchases, conducts continuous surveys to monitor trends and then uses this data to develop distinctive strategies that target big, frequent shoppers. 4. Similarly, the high-performance UK-based retail grocer, Tesco, uses the data generated by its loyalty Clubcard to identify and keep track of the personal preferences of 13 million individual shoppers. 5. In quarterly mailings to these individuals, Tesco includes vouchers that buy products at no additional cost to the shopper, but which benefit Tesco by boosting sales volumes and getting customers to try new products in new departments where they may continue to shop in the future.

In the future, service will become an even more finely-calibrated proposition between retailer and customer. The service components will evolve increasingly from reactive to predictive as retailers battle to win the loyalty of an ever-elusiveand more fragmented customer base.

Dixons, the largest electronics chain in the United Kingdom, has developed a pricing solution that is designed to predict consumer behavior. So if, for example, Dixons buys 50,000 laptop computers that have an average shelf life of 12 weeks, that gives the electronics retailer 12 weeks to sell those units. Using the markdown clearance capability, Dixons can re-examine the number of units unsold at different intervals during the 12-week time frame. If Dixons decides at any point that there are too many still unsold, the company can consider ways to stimulate demandby further lowering pricing, increasing advertising or offering incentives to computersso that it can sell the quantity it has at the most profitable price.

2.3.3 Implementation of Information Technology:

In todays high tech world there is no excuse for not having up to date information on business performance. Inventory is the biggest asset; however not to understand best sellers, worst sellers, and importantly the future purchase orders will result in reactive management rather than proactive management. Information technology shall immensely help sort these problems on inventory front. Also the other areas that shall get the required help are the, accounts management and HR, both important decision-making areas. The IT field is ever dynamic and changing. Many software programmes are available and will be available for the retailer. Even though it is costly affair, it is important to have a dedicated team of IT professionals so as to make right decisions regard to IT managementacquire and manage the systems.

2.3.4 Going for growthAnother hallmark for the future of successful retailers: growth in terms of the multiplicity of geographic, online and format offerings. Tesco again as a leader of the future for retail has an incredibly aggressive growth agenda. Tescos plans include expansion into the usual suspects of under-penetrated markets like Eastern Europe and China with supermarket formats. The company is also opening convenience store formats in the United States. In November 2007, Tesco opened 100 Fresh & Easy Neighborhood Market stores in the Phoenix, Los Angeles, San Diego and Las Vegas metropolitan areas.

Meticulous research and the ability to understand customers at a local level, then tailor offerings accordingly. For the Fresh & Easy concept, a team of executives and researchers spent two weeks living in the homes of 60 American families so that the company could fine-tune the new stores and innovate according to a deep understanding of the target segment.

Woolworths Australia, like Tesco, has a multi-pronged growth strategy. The retailer is expanding its existing chains, making acquisitions, boosting its presence in New Zealand and establishing a consumer electronics joint venture in India not counting its push into the liquor store business.

Best Buy is another retailer driving a relentless growth agenda that includes the acquisition in 2006 of Five Star, the third largest appliance and consumer electronic retailer in China. Like Tesco, the expansion is being undertaken with the customer at heart, and the company is testing different operating models aimed at improving customer experience and ensuring a local touch from an international player. The company has also developed a strong online presence that is tightly integrated with their bricks and mortar operations. Best Buy notes on their corporate website that they invested in the required technology to allow our customers to define how they did business with us-not the other way around. This customer-centric approach has steered the development of a robust multi-channel interface, with purchasing available in store, online or through call centers.

The environment and the increasingly individualized store experience, growth and diversification of formats. Clearly these are all areas that will impact retailing through the next decade and beyond. Contemplating this increasingly complex, hyper-competitive world, it is somewhat comforting to note that one thing will never change in retail: Companies that can react swiftly to market trends and respond relevantly to new customer behaviors will achieve high performance and growth despite marketplace conditions.Review Questions: 1. What is strategic planning and how it helps retailing in adjusting to future challenges?2. Define retailing environment and how you prepare SWOT?3. What is green retailing? Discuss with examples4. Information technology plays a key role in future retailing? Explain5. Service of customers is the new challenge that remains to be handled with creative minds? Elaborate with examples.

Chapter IIIRetail Location 3.1 Retail Location Strategies The strategy to choose to locate the retail business will have a major impact on everything the shop does. The difference between selecting the wrong location and the right site could be the difference between business failure and success.Before choosing a retail store location, define the business, both now and in the future.1. What the customers look like?2. How the buildings look?3. What is to be soldMerchandize variety 4. How to create an image for the store5. Decision regards to planning the retail space, storage area, or the size of the office?

Without the answers to these basic questions, it will be hard to find the perfect location for generating the maximum amount of profit for the retail store.It requires extensive decision making due to the number of factors considered. The factors include the following1. Population size and traits2. The competition3. Transportation access4. Parking availability5. The nature of nearby stores6. Property costs7. The length of the agreement8. Legal restrictions

Retailers should follow these two steps in choosing a store location: 1. Evaluate the chance of alternate geographic (trading) areas in terms of the characteristics of residents (consumers) and existing retailers (competition)2. Determine whether to locate as an isolated store, in an unplanned business district, or in a planned shopping center within the geographic area.1. An isolated store is freestanding, not adjacent to other stores. It has no competition, low rent, flexibility, road visibility, easy parking, and lower property costs. It also has a lack of traffic, no variety for shoppers, no shared costs, and zoning restrictions2. An unplanned business district is a shopping area with two or more stores located together or nearby. Store composition is not based on planning. There are four categories: central business district, secondary business district, neighborhood business district, and string (A string is an unplanned shopping area comprising a group of retail stores, often with similar or compatible product lines, located along a street or highway). An unplanned district generally has these favorable points: variety of goods, services, and prices; access to public transit; nearness to commercial and social facilities; and pedestrian traffic. Yet, its shortcomings have led to the growth of the planned shopping center: inadequate parking, older facilities, high rents and taxes3. A planned shopping center is centrally owned or managed and well balanced. It usually has one or more anchor stores and many smaller stores. The planned center is popular, due to extensive goods and service offerings, shared strategic planning and costs, attractive locations, parking facilities. Negative aspects include operations inflexibility, restrictions on merchandise carried, and anchor store domination. There are three forms: regional, community, and neighborhood centers

3.2 Trading-Area AnalysisThe first step in the choice of a retail location is to describe and evaluate alternative trading areas and then decide on the most desirable one. A trading area is a geographic area containing the customers of a particular firm or group of firms for specific goods and services. A thorough analysis of trading areas provides the retailer with these benefits: 1. Consumers demographic and socioeconomic characteristics are uncovered.2. The focus of promotional activities is ascertained.3. A retailer learns whether the location of a proposed branch store will service new customers or take away business from its own existing stores in a chain or franchise in the nearby areas. 4. Chains anticipate whether competitors want to open nearby stores if the firm does not expand there itself.5. The best number of stores that can be operated in future by a chain retailer in a geographic region can be calculated.6. Financial institutions, transportation, labor availability, supplier location, legal restrictions, etc can be examined 7. Size and Shape of Trading Areas: Each trading area consists of three parts: primary (50 to 80 percent of customers), secondary (15 to 25 percent of customers), and fringe (all remaining customers). The primary trading area is the area closest to the store and possesses the highest density of customers. The secondary trading area is located outside the primary area, and customers are more widely dispersed. The fringe area has the most dispersed customers.8. The most important criteria should be viewed as knockout factors: If a location does not meet minimum standards on key measures, it should be immediately dropped from further consideration.3.3 Type of Goods of goods sold: Examine what kind of products are to be made available for sale in the proposed store. The type of goods sold also decides on the type of store; a convenience store, a specialty shop or a shopping store?Conveniencegoods require easy access, allowing the customer to quickly make a purchase. A mall would not be a good location for convenience goods. This product type is lower priced and purchased by a wide range of customers.Specialtygoods are more unique than most products and customers generally won't mind travelling out of the way to purchase this type of product. This type of store may also do well near other shopping stores.Ashoppingstore usually sells items at a higher price which are bought infrequently by the customer. Furniture, cars and upscale clothing are examples of goods found at a shopping store. Because the prices of these items are higher, this type of customer will want to compare prices before making a purchase. Therefore, retailers will do well to locate their store near like-wise stores.3.4 Accessibility, Visibility and TrafficA lot of traffic is not a lot of customers. Retailers want to be located where there are many shoppers but only if that shopper meets the definition of their target market; 1. Similar products are sold so that the customers can find alternative shops for their purchases. 2. Small retail stores may benefit from the traffic of nearby larger stores.The following questions to be answered regard to accessibility of a store: 1. How many people walk or drive past the location.2. Is the area served by public transportation?3. Can customers and delivery trucks easily get in and out of the parking lot?4. Is there adequate parking?Depending on the type of business, it would be wise to have somewhere between 5 to 8 parking spaces per 1,000 square feet of retail space. When considering visibility, look at the location from the customer's view point. The store and the signage board have to be clearly visible to the customers/traffic from a reasonable distance. In many cases, the better visibility the retail store has, the less advertising needed. A specialty retail store located six miles out of town in a free standing building will need more marketing than a shopping store located in a mall.3.5 Agreement and PlanningBefore signing a lease, be sure you understand all the rules, policies and procedures related to the retail store location. Contact the local city hall and zoning commission for information on regulations regarding agreement. Ask about any restrictions that may affect the retail operation and any future planning that could change traffic, such as highway construction, etc. 3.6 Competition and NeighboursOther area businesses in the proposed location can actually help or hurt the retail shop. Determine if the types of businesses nearby are compatible to the business of the proposed store. For example, a high-end fashion boutique may not be successful next door to a discount variety store. Place it next to a nail or hair salon and it may do much more business.3.7 Location CostsBesides the base rent, consider all costs involved when choosing a retail store location. 1. Expenses such as lawn care, building maintenance, utilities and security and repairs and maintenance of common facilities.2. If the location is remote, how much additional marketing costs are needed to communicate to the public3. The amount of property taxes It is difficult to estimate sales on a new business, but one way to get help in determining how much rent you can pay is to find out what sales similar retail businesses are making and how much rent they're paying.3.8 Special ConsiderationsMake a list of any unique characteristic of your business that may need to be addressed.a) Will the store require special lighting, fixtures or other hardware installed?b) Are restrooms for staff and customers available?c) Is there adequate fire and police protection for the area?d) Does the parking lot and building exterior have adequate lighting?e) Does the building have a canopy that provides shelter if raining?f) What is the crime rate in the area?

Review Questions: 1. List the factors to consider in deciding a store location?2. What is an isolated store, unplanned district and planned shopping centre? List the benefits and problems of each choice. 3. What is a trading area analysis and how you analyse the trading area for a super market?4. The type of goods sold also decides the location of a retailer? Discuss5. Do you think visibility and accessibility are important for a retailer? Explain

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Chapter IVRetail Marketing Mix4.1 Retail Product:Whether company manufactures or buys products wholesale, it has to have a product marketing strategy to get its products into consumers' hands. Most product marketing strategies begin with an idea or concept, then move into various stages of development that can include market testing, setting pricing, training a sales force and executing promotion. The product marketing strategy is the job of every department in a corporation from engineering and design to distribution and sales. However, if a business is to be classed as a retailer, its core activity, which accounts for almost all of its total revenue has to come from selling finished products or providing personal services to the final consumer. Most retailers do not engage in any other primary business activity, and so the collection of products that they offer to their customers determines the nature of the business and influences all other aspects of their business strategy.4.1.1 Designing a Product Strategy: 1. Target Market: One of the key components of a product marketing strategy is selecting a target market. The target market is usually a specific demographic group that can be defined by a certain age range, socioeconomic status or income. For example, the target market for fashion products is teen age boys and girls. One has to see the number of consumers of each category that are visiting the stores and decide on the product strategy. 2. Strategy Decisions: The product marketing process then typically moves through a series of decisions that must be made, often with the help of market research or focus groups. These decisions include profit goals, pricing, distribution and methods of promotion, such as advertising, coupons and public relations.3. Benefits: The benefits of a well-planned product marketing strategy include greater sales and profits. Companies that target the right customers and offer products at an acceptable price will usually profit more than companies that do things unplanned. A company will also be more successful with its product marketing strategy if it markets using right advertising and promotions that reach its target market.4. PLC Stage (Product Life Cycle): Retailers must also account for the life cycle of the products when developing the product marketing strategy. A product life cycle includes the introduction, growth, maturity and decline stages of a product. Sales for a new product, if accepted by consumers will typically improve the first few years until more competitors enter the market. Over time, sales will level off and decline. Retailers while deciding on the product mix have to seriously study the PLC stages of various products. For example now tablets and smart phones are more preferred than mobile phones. Hence, while planning the products, care has to be taken to order those products which are in growth stage. 5. Branding Retail Products: As a business owner, you may choose to sell your own retail products rather than the retail products of more established companies. This strategy requires you to brand your products to generate interest among consumers. Branding is a retail marketing strategy that seeks to attach an emotion or perception to the products. For example, technology company Apple's branding strategy generates the belief that its retail products are the most innovative in the field, creating a high demand for its products at the product release date. Branding products requires using multiple marketing outlets, including radio, television and social media.6. Co-Pack Retail Strategy: A co-pack retail strategy occurs when one choose to sell another company's retail products in business. This allows using another company's already established product brands to help generate sales. It eliminates the marketing work of generating product interest since the other company has already done that. Selling another company's retail products can be useful in the early days of business to help generate quick revenue and sustain profitability. You can use this revenue to slowly begin the process of introducing your own retail products. 7. Introducing New Products: New retail products often have higher prices than those products already for sale in the market. When the business decides to introduce a new product, its initial price may affect consumer perception of and could drive away potential customers for other product lines. Being sensitive to the demand of higher and lower priced products can help business generate sales and consumer interest. Introducing new products at a lower price can encourage consumers using lower end products to switch to higher end brands. Once consumers are using higher end products, there's a decreased chance that they will switch back to lower end merchandise

4.2 Product Inventory Management:

The retail industry can be extremely competitive and one of the biggest challenges is managing a stores retail inventory. Businesses need to have space to store a wide number of products along with a wide variety. If a retail store does not carry enough of a product, then they are losing potential customers who will shop elsewhere. Retail inventory is different from other forms of inventory because of the quantities needed. Retail chains need warehouses to keep all of their stock and the means to transport it to their stores. Keeping up with such large quantities can be difficult for anyone, even with the help of an automated system. To track a companys products, information technology based retail inventory management system needs to be successfully implemented.Merchandising is any practice which contributes to the sale of products to a retail consumer. At a retail in-store level, merchandising refers to the variety of products available for sale and the display of those products in such a way that it stimulates interest and entices customers to make a purchase.

4.2.2: Nature of Retail Inventory Management:

Retail inventory management is the process and methods used to keep track of the stock in a retail business. These methods control everything from ordering, shipping, receiving, tracking inventory, retail turn-over, and storage.

1. Retail inventory management can help keep a business profits at a steady margin as well as reducing theft and loss of inventory. Many retail businesses lose money every year because they do not have a successful inventory management system in place.2. The process is aimed to Track and manage the entire inventory for the business and includes, products, supplies, equipment and spares. 3. It evaluates the performance for productssales and profitability. Reports can be generated on the sales of product categories on weekly, monthly and quarterly basis to compare with other product categories that will help understand the profitability of each category.4. It also allows one retail branch to compare with other branches.5. The process is aimed to plan the inventory levels and facilitate ordering systems using several control mechanisms.6. Managing retail inventory involves several characteristics and steps. One of the most important steps is to make sure that you always remove products from the system as soon as they are sold. The same is true for receiving shipments of new stock. Make sure you record it as quickly as possible. 7. Physical inspections should be regularly performed to make sure the computerized system is accurate with what is actually in stock. A physical inspection involves manually looking over the stock to see that they numbers match.8. Review sales reports weekly. You want to do this to see what is selling and what is not. Products that spend more time on the shelf should be re-evaluated or discounted to get rid of them.

4.2.3 Inventory Management Tools: Most businesses use some form of computer software to manage their inventory. Unless the retail business is very small, doing it manually would be very impractical, especially for large companies that deal in thousands of individual products.

When dealing with retail inventory management, companies will utilize one of these systems:1. Point-of-sale terminals These are check-out points that automatically update a companys inventory levels. 1. Job costing and inventory systems Another automatic system that updates computerized levels of inventory. 1. Barcodes and readers Every product these days contains a barcode with the items information. Barcodes makes it easy and quick track stock. 1. Electronic Supplier Product catalogs This system can update inventory levels automatically through either the internet or media disk. A distribution center for a set of products is a warehouse or other specialized building, often with refrigeration or air conditioning, which is stocked with products to be re-distributed to retailers, to wholesalers or directly to consumers. It can be a warehouse that Stores goods including raw materials, components, or finished goods.

Cross-docking is a practice of unloading materials from an incoming truck or rail-car and loading these materials directly into outbound trucks, with little or no storage in between. This may be done to change type of conveyance, to sort material intended for different destinations, or to combine material from different origins into transport vehicles (or containers) with the same, or similar destination. This practice is developed by Wal-Mart the world's leading chain stores. Keeping up with retail inventory management should be delegated to several individuals or a department. Supermarkets that have both grocery and non-grocery items have separate departments for each. By delegating inventory into smaller groups, it allows the individuals in charge of their group to have a better understanding of what stock is available and how well it sells.

4.2.4: Managing Theft and Loss

One of the biggest problems in retail inventory is theft and loss of retail products. Every time this happens, it adds up to the costs of the business. Preventing inventory theft can be difficult. But with the right system, one can definitely reduce it:1. Do not share or hand out the same password for every cashier. Having separate passwords and log-ins tells who was manning the register at certain times. 1. Always check out any transactions that were canceled. This is a common way for inventory to disappear from a store. 1. Set up a password-protected security on all computers and systems. Only when employees absolutely must have access should it be granted. 1. Go over inventory reports every day to make sure sales figures match with the current quantities. 1. Make sure the back door has a security alarm system that is activated every time the door is opened without authorization. If employees know the door should not be opened without permission, they shouldnt open it. 1. Inspect the garbage every night before it goes out. Use clear plastic bags so that you can easily see inside the bag and make sure there is no inventory hidden inside. 1. Set up security cameras not only in the store but in the back storage as well. This allows you to keep an eye on items out on the racks as well as in stock4.3 Retail Pricing: There are many outside influences that affect profitability and a retailer's bottom line. Setting the right price is a crucial step toward achieving that profit. Retailers are in business to make a profit, but figuring out what and how to price products may not come easily. Which retail pricing strategy to use in setting the right price, one must know the costs associated with the products. Two key elements in factoring product cost is the cost of goods and the amount of operating expense. a. The cost of goods includes the amount paid for the product, plus any shipping or handling expenses. b. The costs of operating the business, or operating expense, include overhead, payroll, marketing and office supplies.Regardless of the pricing strategy used, the retail price of the products should more than cover the cost of obtaining the goods plus the expenses related to operating the business. A retailer simply cannot succeed in business if they continue to sell their products below cost.4.3.1 Retail Pricing StrategiesOnce it is understood what the products actually cost, one can look at how the competition is pricing their products. Retailers will also need to examine their channels of distribution and research what the market is willing to pay. Many pricing strategies exist and each is used based on particular a set of circumstances. Value-based pricing (VBP) is the most highly recommended pricing technique by consultants and academics. The basic concept is setting a price to capture the majority of what customers are willing to pay.The more popular pricing strategies to consider are listed below:1. Mark-up Pricing: Markup on cost can be calculated by adding a pre-set (often industry standard) profit margin, or percentage, to the cost of the merchandise. Be sure to keep the initial mark-up high enough to cover price reductions, discounts, shrinkage and other anticipated expenses, and still achieve a satisfactory profit. Retailers with a varied product selection can use different mark-ups on each product line.1. Vendor Pricing: Manufacturer suggested retail price (MSRP) is a common strategy used by the smaller retail shops to avoid price wars and still maintain a decent profit. Some suppliers have minimum advertised prices but also suggest the retail pricing. By pricing products with the suggested retail prices supplied by the vendor, the retailer is out of the decision-making process. Another issue with using pre-set prices is that it doesn't allow a retailer to have an advantage over the competition as all are expected to sell at the given price. 1. Competitive Pricing: Consumers have many choices and are generally willing to shop around to receive the best price. Retailers considering a competitive pricing strategy will need to provide outstanding customer service to stand above the competition. a. Pricing below competition simply means pricing products lower than the competitor's price. This strategy works well if the retailer negotiates the best prices, reduces costs and develops a marketing strategy to focus on price specials.b. Prestige pricing, or pricing above competition, may be considered when location, exclusivity or unique customer service can justify higher prices. Retailers that stock high-quality merchandise that is not available at any other location may be quite successful in pricing their products above competitors.4. Psychological Pricing: Psychological pricing is used when prices are set to a certain level where the consumer perceives the price to be fair. The most common method is odd-pricing using figures that end in 5, 7 or 9. It is believed that consumers tend to round down a price of OR 9.95 to 9, rather than OR 10.5. Other Pricing Strategies1. Multiple pricing is a method which involves selling more than one product for one price, such as three items for OR 10.00. Not only is this strategy great for markdowns or sales events, but retailers have noticed consumers tend to purchase in larger amounts where the multiple pricing strategy is used.1. Discount pricing and price reductions are a natural part of retailing. Discounting can include coupons, rebates, seasonal prices and other promotional markdownsmark down is to reduce the profit margin and pass it to the consumer. The term markdown does not apply unless the price is dropped below the original selling price. 1. Merchandise priced below cost is referred to as loss leader pricing. Although retailers make no profit on these discounted items, the hope is consumers will purchase other products at higher margins during their visit to the store.As a retailer develops the best pricing model for the retail business, understand that the ideal pricing strategy will depend on more than costs. It is difficult to say which component of pricing is more important than another. Just keep in mind, the right product price is the price the consumer is willing to pay, while providing a profit to the retailer.4.4 Planning a Retail Promotional StrategyPromotion is one of the marketing mix elements that aim to communicate and motivate the consumer to buy the product. Retail promotion strategy is aimed to encourage the consumer to visit the store and buy the merchandise. Promotional Objectives: The following are the objectives of promotion:1. Increase sales2. Stimulate impulse and reminder buying3. Raise customer traffic4. Get leads for sales personnel-market feedback to plan future orders 5. Reinforce the retailer image6. Inform customers about goods and services7. Popularize new stores and Web sites8. Enhance customer relations9. Maintain customer loyalty10. Have consumers pass along positive information to friends and others4.4.1 Promotion Mix: The following are various types of promotion available to retailer in order to achieve the objectives.

1. Publicity: Publicity Any non-personal form of public relations whereby messages are transmitted through mass media, the time or space provided by the media is not paid for, and there is no identified commercial sponsorAdvantagesa) Image can be presented or enhancedb) More credible sourcec) No costs for messages time or spaced) Mass audience addressede) People pay more attention than to clearly identified advertisements Disadvantages1. Some retailers do not believe in spending on image-related communication1. Little control over publicity message1. More suitable for short run1. Costs for PR staff, planning activities, and events to be considered

2. Advertising: It is a Paid, non-personal communication transmitted through out-of-store mass media by an identified sponsor Advantages Attracts a large audience Gains pass along readership (for print) Many alternatives available-media, TV, Radio and Outdoor-Boards Control over message content; message can be standardized Message study and evaluation possibleDisadvantages Standardized messages lack flexibility Media may require large investments Geographic flexibility limited Some media have high throwaway rate Sometimes media limit the ability to provide detailed information

3. Personal Selling: Oral communication with one or more prospective customers for the purpose of making a saleAdvantages Message can be adapted Many ways to meet customer needs High attention span Less waste Better response Immediate feedbackDisadvantages Limited number of customers handled at one time High costs Does not get customer in store-it is done at customer premises Negative attitudes toward salespeople (aggressive, unhelpful)

4. Sales Promotion: Encompasses the paid communication activities other than advertising, public relations, and personal selling that stimulate consumer purchases and dealer effectiveness

Advantages Eye-catching appeal Distinctive themes and tools Additional value for customer Draws customer traffic Maintains customer loyalty Increases impulse purchasesDisadvantages Difficult to terminate Possible damage to retailers image More stress on frivolous selling points Short-term effects only Used as a supplement

Review Questions:

1. What are the required areas to be noted for designing a retail product strategy?2. The retail industry can be extremely competitive and one of the biggest challenges is managing a stores retail inventoryWhat is the nature of retail inventory 3. Explain in detail the inventory management tools4. One of the biggest problems in retail inventory is theft and loss of retail products-Discuss5. Explain in detail the various types of retail pricing options available6. Compare and analyse the advantages and disadvantages of publicity and advertising as promotion tools7. What is a sales promotion? What are the advantages and disadvantages?

Chapter VStore Layout & Design5.1 Store Layout Designs: A Well-planned retail store layout allows a retailer to maximize the sales for each square foot of the allocated selling space within the store. Store layouts generally show the size and location of each department, any permanent structures, fixture locations and customer traffic patterns. Each floor plan and store layout will depend on the type of products sold, the building location and how much the business can afford to put into the overall store design.1. 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

2. 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.

3. The angular floor plan is best used for high-end specialty stores. The curves and angles of fixtures and walls makes for a more expensive store design. However, the soft angles create better traffic flow throughout the retail store.

4. 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.

5. 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.

5.2 Store Atmosphere/Atmospherics: The physical characteristics and surrounding influence of a retail store that is used to create an image in order to attract customers

Ten ways the store can attract customers:1. In this era of technology, there is no excuse for displaying handwritten signage. It is too simple to print a sign from our computers or use pre-printed signs. Printed signs simply look more professional and signs with hard-to-read handwriting can be a customer turn-off.2. Consumers like a selection but not if it means sacrificing comfort while shopping. Be sure your store is designed to allow adequate space between aisles and keep walkways free of merchandise. Cramped spaces can ruin a shopping experience and turn off a customer.3. Retail store restrooms should always be sparkling clean, whether they are open for public use or not. Make sure to stock the bathrooms with plenty of paper products, soap, trash receptacles and clean it daily.4. Keeping the dressing room area free of discarded hangers, tags and empty packaging goes beyond creating a neat store appearance, it is also a good step towards loss prevention. Take a quick look for out of place items after each customer uses the dressing room.5. Playing music in a retail store can help create a certain atmosphere for our shoppers. Music that is too loud, inappropriate or of poor quality can run a positive shopping experience.6. Dirty carpet, stained flooring and ugly ceiling tiles can turn off many shoppers. Sweeping, vacuuming and mopping should be done on a regular basis. Consider hiring a professional cleaning crew to polish tile floors. Replace stained portions of carpet and ceiling tiles where possible7. Replace any burned out light bulbs as soon as possible. Make sure all customer areas of the store have ample lighting and take into consideration shoppers with aging or less than perfect eyesight. The store should be well illuminated for all customers.8. Certain odors-perfumes-sprays are understandable and may even appeal to the customer's sense of smell, avoid bad smell at all times. 9. POSThis particular area where a customer's financial transaction is taking place should not show any signs of disorganization10. Be sure to have an adequate supply of shopping carts or baskets on hand.

5.3 Store Fixtures &Displays

To attract and keep the attention of shoppers is to create an environment that is conducive to shopping. One key way to do that is to use interchangeable store fixtures and retail display systems to keep the store interesting and appealing. The following are the features of a good design of store fixtures:

Win customers by using retail display systems that are customer friendly: in other words, harness the powerful psychology of shopping. In fact, a great number of people consider shopping a relaxing leisure activity or even their hobby. Retailers in general have an eager audience that is ready and willing to buy its products but, they also have significant competition and so they must win the attention of their potential customers. Do not use out of fashion or out of model store fixtures to capture the attention of today's shoppers Choose retail displays and fixtures that are uniquely suited to target market. Design space using retail display systems that make it easy for customers to keep shopping.

5.3.1 Creating Attractive Display: Creating an attractive product display can draw the customer in, promote a slow-moving item, announce a sale, or welcome a season. If the store front is having one or more windows, then it is the least expensive forms of advertising.Some stores located in a mall or other structure may lack windows; then look for many places throughout the store to build beautiful displays. Take a look at the flow of traffic to the store. Are there any areas that are a focal point for customers?Find out from local community, there may be creative individuals or visual merchandising companies one can hire to dress the windows.

5.3.2 Visual Display Tool BoxBefore designing a product display, put together a visual display tool box to keep on hand. By having all of these items in one location it will save time in actually preparing the display like Scissors, Stapler, Two-Sided Tape, and Pins.Elements of Effective Visual Merchandising Make sure all materials and location (tables, windows, racks) are clean. Choose a slow time of the day or build the display after shopping hours. Balance: Balance is important for arranging a display. All items should be creatively visible to the customer. Size of Objects: Place the largest object into display first. Color: Helps set mood and feelings. Focal Point: Where product and props/signage and background come together. Lighting: Should focus on the display at the main point, if possible. Simplicity: Less is more so know when to stop and don't add too many items.Successful Store Display Strategy: 1. Once the display is finished, add appropriate signage. 2. Take photos of the display and keep record of the product sales during the display's existence. 3. Save the information in a file folder for easy reference. By documenting its success, one can re-create the display next year or if it flops, one can make sure not to repeat the same mistakes or modify the display.4. Like any other aspect of retailing, creating an attractive display takes a little imagination and lots of trial and error. 5. As store changes, so will opportunities for visual displays will change. 6. Keep working at designing eye-catching and innovative ways to make the retail store profitable through visual merchandising.

Review Questions: 1. What is a store layout and explain any two forms of designing the layout of the store2. How to create good store atmospherics? 3. What are the important features of store fixtures?4. List the points to study to have successful store display

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9-1Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice HallTrading-Area Analysis11