retail management Strategy & Locations

8/19/2019 retail management Strategy & Locations

1/46

Retail

S.Shriram

The Road less traveled…


2/46

My Retail Journey.com• Started scooping Ice-Cream at Basin Ro!!ins" #st outlet in Chennai $ #%%&

• 'ursued B.com( MB) in Mareting( '*+ International Business• ,ecutive ,ducation rom IIM Bangalore

• R'* Retail $ Music/orld and 0ood/orld

• The 0uture *roup $ Central Malls

• 1nited Colors o Benetton

• Bangalore International )irport 2td.

• Ca3 Coee +ay $ Set up over #45 caes

• Indiapla6a.com

• Royal ,nield $ Set up over #75 retail stores

• 8isiting 0aculty at B-Schools since 955:

• Smiling Ba!y $ Retail store or ne/ !orn !a!ies

• ;yeThere.com $


3/46

=elcome to the =orld o Retail

>S/im upstream. *o the other /ay. Ignore the conventional /isdom.

I every!ody is doing it one /ay( there?s a good chance you can ind

your niche !y going eactly in the opposite direction.@

- Sam =alton A#%#-#%%9


4/46

+einitionRetailing includes all the activities involved in selling goods or services

directly to inal consumers or their personal( non-!usiness use. ) R,T)I2,R or R,T)I2 ST;R, is any !usiness enterprise /hose sales volume comes

primarily rom Retailing.


5/46

;rgani6ed Retail


6/46

Some Important 0acts

SD1 - Stoc Deeping 1nit

=al-ins E 0ootalls

Fo. o Bills

Conversion Rate

)verage Bill 8alue

Topline ASales

Bottomline A'BIT


7/46

Retail Strategy


8/46

StrategyThe /ord Strategy comes rom the *ree /ord meaning the >art o the

general@. In Retail( the term Strategy is used so oten that it is otenconused /ith decision maing. ) Retail Strategy is a statement identiying

•The Retailer"s Target Maret

•The 0ormatAs the Retailer plans to use to satisy the target maret"s needs

•The !ases upon /hich the Retailer plans to !uild a sustaina!le Competitive

advantage


9/46

Target SegmentThe Target Maret is the maret segmentAs to/ard /hich the Retailer plans to

ocus its resources and retail mi. Successul Retailers satisy the needs ocustomers in the target maret !etter than the competition does. The

selection o the target maret ocuses the Retailer on a group o consumers

/hose needs it /ill attempt to satisy.

The selection o a Retail ormat outlines the Retail Mi to !e used to satisy

the needs o those customers. The Retail Strategy determines the marets in

/hich the Retailer /ill compete.

Retail Maret is not a speciic place /here !uyers and sellers meet Alie in

ormer times $ a Ba6aar !ut a group o consumers /ith similar needs and a

group o Retailers using a similar retail ormat to satisy those consumer

needs.


10/46

Competitive )dvantage

and *ro/th Strategies


11/46

Competitive )dvantage)s the name implies( the Retailers need to !uild an advantage over their

Competitors. Most oten( success can !e replicated( as its is Guite simple toollo/ the leader. )nd over a period o time( smaller Retailers /ho ollo/

larger !rands( simply co-eist in the same maret( !ut operating across

dierent segments. To avoid competition eating up into its maret share(

Retailers must !uild a strong layer or itsel. The layer must !e so strong thatit /ould !e diicult or competition to !rea-in.

)nd even i they do( its strategies must !e so dierent that the successul

Retailer al/ays remains one-up. It is important hence to ensure that the

Retailer"s strategies are short-( medium- and long-term.


12/46

The ollo/ing are opportunities !y /hich Retailers can !uild a sustaina!le

competitive advantage over rivals in the maret.•2ocation

•Merchandise

•Customer Service

•Customer 2oyalty

•8endor Relations

•+istri!ution 2ogistics

•


13/46

*ro/th StrategiesMaret gro/th should !e continuous and sustained( or the Retailer"s success.

This happens mainly through a ocused approach and many other actorsalling in place. *ro/th is( and must !e !uilt over a period o time( so its

roots are strong to /ither any ind o /ind.

There are our main /ays o pursuing gro/th in any maret. They areK

•Maret 'enetration

•Maret ,pansion

•0ormat +evelopment

•+iversiication


14/46

Maret 'enetration

This involves directing eorts to/ards eisting customers !y using the presentretailing ormats. The Retailer can achieve this !y attracting customers in its

current target maret /ho don"t shop at its outlets or !y devising strategies

that induce current customers to visit a store more oten or to !uy more

merchandise on each visit.This could !e done through opening more stores in the Target maret and

eeping the stores open or longer hours. )nother approach inside the store

could !e through cross-selling or through aggressive in-store promotions.

Maret penetration is usually a planned strategy and is normally undertaen

!y Retailers /ho preer to consolidate in a particular region( rather than

spreading all over at once.

,amples Supermarets

*ro/th Strategies


15/46

Maret ,pansion

This involves the Retailer spreading its stores across geographical locations(due to limited eposure and opportunity in a Target Maret. This is usually

done !y Mono Brands /ho /ould preer a presence all across a region Aor

country than ocusing on Lust one city.

The main !eneit o epanding the maret is that the Brand is present in

more placesEareas that !rings in higher visi!ility. )lso( /hen Fational

campaigns are undertaen( the cost advantages could !e derived.

The disadvantage ho/ever( is that the Brand /ould never !e a!le to

consolidate its position in any one maret. Sooner than later( they have to

penetrate ey marets.

*ro/th Strategies


16/46

0ormat +evelopment

This involves oering a ne/ ormat $ /ith a dierent retail mi to the sametarget segment. It could !e /ithin the same location or else/here( !ut the

idea is to capitali6e on the eisting customer !ase and sell more products or

services under one roo. The span o managerial control is also another

reason that necessitates developmentEintroduction o Fe/ 0ormats.

0ormats must !e developed in tune /ith the overall Strategy( 8ision and

'urpose o the Retailer. They must complement the eisting !usiness and not

compete. Fe/ ormats must al/ays !e tested in smaller marets( so as to

learn rom the eperience. Trying out ne/ concepts alongside eisting

successul !usinesses could prove to !e challenging.

*ro/th Strategies


17/46

+iversiication

Many Retailers /orld/ide as /ell as in India have diversiied either into oroutside mainline Retail. =hile ITC and Reliance diversiied into Retail( +u!ai

!ased 2andmar *roup and India"s very o/n 0uture *roup diversiied outside

mainline Retail. Most oten( the purpose o diversiication could !eK

•Spreading the overall Ris element•Better usage o eisting resources

)t times( Retailers tend to lose ocus and get into unrelated diversiication(

that may divert the attention o the Senior Management( although the

venture may !e proita!le. Care must !e taen to ensure this doesn"t occur.

Many large ;rgani6ations that undertoo this have /ould up /ithout success.

*ro/th Strategies


18/46

Retail Mi


19/46

Retail MiRetail Mi is the com!ination o actors Retailers use to satisy customer

needs and inluence their purchase decisions. ,lements in the Retail miinclude the types o merchandise and services oered( merchandise pricing(

advertising and promotional programs( store design( merchandise display(

assistance to customers provided !y sales people( and convenience o the

store"s location.


20/46

Retail Mi


21/46

The three most important actors

in Retail are2ocation( 2ocation 2ocation.


22/46

Retail Store 2ocations=ell !egun is hal-done( it is said. Similarly( the right location /ill reap rich

!eneits to the Retailer. The choice o the Retail outlet"s location /ill have an

impact on everything the Retailer does. The dierence !et/een selecting the

/rong location and the right site could !e the dierence !et/een !usiness

ailure and success.

Retailers /or tirelessly to procure !est locations or their !usinesses. =hile

conventional /isdom is the !ase( modern Retailers are /illing to tae higher

riss( that may result in higher returns. In India( ho/ever( Retailers are

!etting heavily on popular high-street locations and Malls( given the act that

there are only a very e/ o them in maLor cities.


23/46

0actors $ Retail 2ocationRetailers must consider a e/ actors !eore deciding to venture into a ne/

location. Some o them are discussed !elo/K$8ision o the Retailer

$Span o Managerial Control

$Type o goods to !e traded

$Target SegmentAs

$Competition

$'ricing strategy

$+irect and Indirect Costs - Rent( Salary( )dvertising

$Retail ;utlets" eterior and interiors

$)rea ReGuired or various activities $ Sales( Storage( ;ice space

$2ogistics( Transportation o goods and people

$8ia!ility o conducting !usiness


24/46


25/46

Span of Managerial Control

Retailers tend to ocus geographically( rather than nationally( /hile initiating

and epanding their !usiness. Most oten( the !iggest cities o the country

and test-marets or in some cases( it could !e cities /here the Company is

headGuartered. In India( +elhi( Mum!ai and Bangalore are the most avorite

launch cities or Retailers.

Reliance Retail( ho/ever( /ent the unconventional /ay( !y choosing


26/46

Types of Goods to be traded

2arge ormat stores need large !ac-end operations and hence( citiesEareas

/ith !est connectivity and inrastructure are relatively important or the

Retailer /hile choosing the location. India has one o the largest net/or o

rail/ays and road/ays in the /orld( and yet( more than :5 o our villages do

not have direct connectivity to maLor metro cities.

Reliance Retail /ill move its supplies and produce through its o/n 2ogistics

net/or /hereas The 0uture *roup( /hich /as until recently using eternal

logistics management companies( has no/ created 0uture 2ogistics to tae

care o its o/n as /ell as eternal logistics management.

0actors $ Retail 2ocation


27/46

Target Segment

This is one o the most important actors( on the !asis o /hich Retail

2ocations are chosen. 1ltimately( the !usiness needs consumers and hence(

Retailers 6ero-in on such locations /here there already eists a considera!le

target segment. ,sta!lished Retailers such as the =al-Mart or Metro

internationally and our o/n 0uture *roup and Reliance Retail( ho/ever

create maret segments.

) classic eample in the recent years is the consumer dura!le maret. Both

operators( have created a ne/ identity /here-in the >emerging middle class@has !een targeted. )lso( these Retailers are indeed eperimenting ne/er

ormats in ne/er locations( there!y creating ne/ segments.



28/46

Competition

In Retail( there are only t/o /ays o managing Competition $ either let the

Competitors ollo/ you or you ollo/ the Competition. It taes a lot to lead

competition.


29/46

Pricing Strategy

'ossi!ly one o the most interesting actors( 'ricing is !ecoming moreimportant and relevant these days in Retail India. Retailers are ocusing on

'ricing aspects !y carving niche ormats and models or their !usiness. ) lot

also depends on other parallel actors such as 8ision( Competition( Target

Segment( etc.

=ith various Retailers adapting 'ricing techniGues to pull more customers(

it /ill get !etter or customers /ho shop at these retail stores. ) note o

caution is the eiciency o the Retailer to manage !ottom lines more

eectively.



30/46

Direct and Indirect Costs - Rent, Salary, d!ertising

)ssociated +irect and Indirect costs /ill have an impact on the Retailer/hile choosing the right location. These may vary rom time to time and

could also !e seasonal. 0or eample( in India( /e still do not have the !est

inrastructure and connectivity or commuting or the employees and sta.

In the short run( transport costs may !e higher !ut /ith !etter roads andcommuting systems such as the Metro( these may come do/n.



31/46

Retail "#tlets$ e%terior and interiors

The Retailer"s image is very important /hile communicating to itscustomers. +iscount Retailers such as )uchan have gone or a very ra/

version o the store interiors /hereas ashion retailers such as 2iestyle

Shoppers Stop go or chic and modern interiors designs and concepts.

)lso( the /ay the Retailers proLects its presence shall spea a lot in the

Retail districts. 0or eample( =)2-M)RT and BI* B)O))R have !old onts

and huge cut-outs that is very diicult to miss.



32/46

rea Reired for !ario#s acti!ities ' Sales, Storage, "ffice space

The Retailer must include space or other ancillary and related activities

/hile calculating the Retail space or its outlets. This is orgotten most

times and that is /hy a space constraint is al/ays elt even among large

retailers.

(ogistics, Transportation of goods and people

Retailers must consider the movement o goods and people in the medium

term( /hich choosing the right locations. 0or eample( the transportation

costs are higher or moving goods in hill cities such as Manali or Dodaianal.



33/46

Types o 2ocation


34/46


35/46


36/46

Shopping Centers and Malls


37/46

Shopping Centers and Malls) Shopping Centre or a Mall is characteri6ed !y similar looing outlets under a

common roo( sharing common /al/ays( acilities such as paring lots andrest rooms. )nalysts also reer them as 8ertical )nchor Stores@ and a num!er o smaller retail

outlets also no/n as 8anilla Stores. The anchor store /ould !e spread over

more than #5-#: o the total Mall si6e and hence /ould !e dominating themind space o visitors. The smaller outlets typically !eneit rom the ootalls

that are !rought into the Mall !y the )nchors.


38/46

0ree Standing 2ocations

S d


39/46

0ree Standing 2ocationsThis type o retail location is !asically any stand-alone !uilding. It can !e tuced a/ay in

a neigh!orhood location or right o a !usy high/ay. Retailers /ould al/ays have a valid

reason to have chosen such a location( the most common !eing the rent paid and loating

traic. The lipside could !e traic $ ootalls and there!y conversions( to ensure a steady

!usiness in the short- and medium term.

Big-!o Retail ormats such as


40/46

;ice Complees and CB+It"s a common sight these days to see more and more Retailers( especially

Conveniencestores and 0ast 0ood ;perators( ind a place or themselves at CB+s and

;ices. The reason is o!vious ) captive audience and an inherent need that

eists among consumers( lac o time to go shopping and a positive intention

to spend. Many large Retailers have started to set-up their outlets here(al!eit /ith a !it o modiication to suit the contet that prevails.

)s the ,mployers see the shopping acility as an >etended service@ provided

to their employees( they do not charge very high rentals to the Retailers and

hence( the operator can manage to eectively mae more proits and also

pass on some to its consumers.

' !li 'l


41/46

'u!lic 'lacesRetailing at 'u!lic places has !een /itnessing a phenomenal gro/th all over the /orld

in the past t/o decades. Increased travel is one o the most important actors or this

ledgling Industry. By pu!ic places( /e mean Bus and Rail/ay Stations( )irports(

Seaports( etc. )lthough a retail presence in these places has eisted or a very long

time( ;rgani6ed Retail has !een uelled in the past e/ decades.

0rom Convenience goods to 2uury( 0ast ood to 0ull Service Restaurants( one can indall o them at these places. 'eople shop not Lust on impulse goods( !ut also plan /hat

they need to !uy /hen they travel to dierent citiesE countries. 0or eample( one

/ould enLoy the !eneits o >duty ree@ goods in the International +eparture areas at

airports( as they have already emigrated rom the country o travel. Similarly( 2uury

cruises also oer shopping on !oard( /hich could ill !oredom or passengers.

In India( ;rgani6ed Travel Retail is a very small percentage compared to the overall

Retail Industry. But it is gro/ing at a very healthy rate and /ould play an important

role in main line Retail in the coming years.

)i


42/46

)irports

C l l ti R t il S lli S


43/46

Calculating Retail Selling Space

=hen planning a Retail store( the amount o selling space /ill !e one o the

most important actors in selecting a location. It can also !e one o the most

diicult to determine.

)s /ith any ne/ !usiness( most o your assumptions /ill !e !ased on industry

research and comparing similar stores operating in similar locations.

To get an estimate on ho/ much selling space your store must have( divide

the planned sales volume !y your industry?s sales per sGuare oot.


44/46

Calculating Retail Selling Space;ne o the most important yet diicult tass or a Retailer is to determine

ho/ much o area is reGuired to carry out its operations. Feedless to say( this/ould depend on the vision and purpose o the ;rgani6ation in the Retail

!usiness. Most oten( Retailers !egin /ith one ormat and later venture into

dierent ones. This is natural and one o the most preerred and successul

options or Retailers /orld/ide.=hile determining space( The Retailer must thin o the ollo/ingK

•+isplay and Sale o 'roducts

•Customer ServiceE Complaints handlingP

•Billing and Chec-out

•Storage and sorting o 'roducts

•;ice Room

•)dditional space or uture needs or epansion


45/46

The Right 2ocationCon!enience goods reGuire easy access( allo/ing the customer to Guicly

mae a purchase. ) mall /ould not !e a good location or convenience goods.

This product type is lo/er priced and purchased !y a /ide range o customers.

Specialty goods are more uniGue than most products and customers generally

/on?t mind traveling out o the /ay to purchase this type o product. This

type o store may also do /ell near other shopping stores.

) Department Store must !e located in a high-traic area so that as many

people are a!le to use them. )lso( other amenities such as 'romotions(

'aring etc.( /ould !e needed and hence such areas reGuire larger space.

H R t ili


46/46

Happy Retailing…www.myretailjourney.com

Twitter: @shri611

Faceboo.com!TheShriram
http://www.myretailjourney.com/http://www.myretailjourney.com/

retail management Strategy & Locations

Documents