RETAIL MANAGEMENT

MODULE -3
RETAILING STRATEGY FOR Setting up A retail
organisation AND PLANNING

02/14/16

Retail Market Strategy

Strategy is a plan, a how, a means
of getting from here to there.
Strategy is a perspective, position,
plan and action
Strategy is a general framework that
provides guidance for actions to be
taken and, at the same time , is
shaped by the actions taken.
02/14/16

Retail Strategies
Important strategic decisions of
a retailer:
Store location
Merchandising
Pricing
Marketing

02/14/16

Steps in Strategy Building:

Define the mission or the purpose of
the organisation
Conduct a situation analyses
Identifying options/strategic
alternatives
Set Objectives
Obtain and allocate resources
Develop the strategic plan
Implement the strategy, evaluate and
control
02/14/16

Financial Strategy:
Financial analysis must be carried out
It enables retailers performance
It helps to monitor performance and to
establish control
Funding Retail Ventures:
Approaching finance companies or
banks
Private equity funding
Franchising
Supplier Credit
02/14/16

Choice of retail locations

Research on store location started after World war
I
Location of the retail outlet is an important factor
Change after locating a store complex
Loss of customers & employees
New location will not benefit as the earlier one
Location is an integral part of the retail strategy

Types of retail locations

Depends on the target audience & kind of
merchandise
E.g. Location of a convenience store will not suit
a specialty store (Jwellery)
1. Free Standing / Isolated Store
2. Part of a business district
3.Part of a shopping center

Free Standing location

Located along a major traffic artery
No competitive retailers around
Rents low
Facilities like parking is ample
Advertisement cost high
Traveling time, Distance, Fuel cost retailer
should consider before selecting location
Catchment area decisions according to the
willingness of the customers to travel.

Part of a business district

Place of commerce/ centre of trade in the city or town
Three types central, secondary, neighborhood business
district
Central main centre of commerce and trade
Secondary evolved over a period of time with the
spread of population in city
Neighborhood Unplanned shopping area to serve the
needs of neighborhood

Part of a shopping center

Group of retail and other commercial
establishments that is planned,
developed, owned and managed as single
property.
Mall or a strip centre
E.g. Brooke fields Coimbatore.

Strip Centre

Mall

Steps involved in choosing a

retail location
May be a non systematic process based on gut
feeling, or environmental observation or an
imitation of competitors
May be Systematic Process based on certain
parameters & steps to be followed.

Identify the Market

Evaluate the demand and supply
Identify the most attractive sites
Select the best sites available

Market Identification
Needs of people differ specially in India
marketer has to identify the markets
attractive to retailing
Characteristics of market of Europe
differs from as that of Asia and Africa.
Various social theorists presented
theories based on the concept of Gravity..

Determining The market

potential
Demographic features of the population
Size, rural, urban population, literacy and education levels

Characteristics of the households in the area

House hold Income low income local bania/grocery store
is enough
Age Factor - Youth population fast food & clothing stores
can be decided accordingly
Understanding of Employment levels and type of
employment

Cont
Competition and Compatibility
Compatibility Where to locate Gift shop near
theatre, Bus stop, departmental store.
Competition competitors store size and the cost they
spend for each square feet and the returns they get
from the same.

Laws and Regulations

Various permissions, hours of operation, minimum
wages, holidays etc.,

Cont
Trade Area Analysis
A geographic area that generates the majority of
the customers for the store
Trade area extends beyond the municipal
boundaries of the town or city
Trade area vary acc to the product type,
services , market segments.
A trade area has 3 parts primary, secondary,
fringe or tertiary

Types of Trading Area

Tertiary

Secondary 15 25%
Primary - 50-80% customers
Retail Store

Determined by studying the frequency of purchases and

average bill size

Cont..
Trading areas are dependent on distance
Two types
Convenience shopping trade area
May be a destination store, where trading area is larger, people
travel a distance to visit the store
May be a parasite store that depend on other stores customers
magazine stand at hotel, Railway station

Comparison shopping trade area

Based on Price selection, quality and style. E.g. Electrical
Appliances , Furniture etc

Identify alternate sites and

select
sites
Factors Influencing Site Location:
Traffic
Refers both pedestrian and vehicular traffic

Accessibility of the market

Bus/ Train/ and connectivity to different parts of the city

Total Number of stores and the type of stores in that

area
Retail saturation index theory
(TheIndexofRetailSaturationTheory) theory of retail
saturation index is calculated to determine the saturation
index of retail shopping district

 Parking Facilities
Real estate costs
HR availability
Occupancy
Other Amenities
Number of stores large high traffic and vice
versa and type of store Area meant for textile
never suits others
02/14/16

SPACE MANAGEMENT
The study of the distribution of space allotted
to particular categories in relationship to their
productivity and their inventory balances
Productive use of space is the key indicator of
buying and merchandising success.
Space constraints appears to all retailers both store and non-store retailing
Better space management creates a visual
consistency customer attraction

Space management process

Measuring the retail space
Dividing the space into selling areas
Determine the layout
Determine the space allocation of
product lines

Cont
Measuring retail space
The total space should be measurable
Store Physical space, width, length,
height
Non- Store target number of pages in a
catalog or website

Cont
Dividing the Space into Selling areas
Usually defined by product category or
department
Determined by the historical estimate of the
forecast category / department performance
Expressed as spatial measure( Sq. meters, Sq. ft)
Sometimes based on the number of fixtures
allotted to each category

Cont..
Determine the Layout
Decision of product adjacencies and the location of
selling areas
In an individual outlet location of entrances, walk
ways around the store, lift, escalators, pillars, divisions
etc will influence the planning and decisions
Catalog product categories at front, middle, back
pages
Relationship between the categories should be
considered

Cont
Determine the space allocation of product
lines:
Allocation of individual fixtures to each product
line and SKUs
The availability & characteristics of fixtures,
individual product performances, features,
compatibility etc influences the decision
Many retailers use sophisticated and
computerized space allocation system.

Significance of Space
Management
A well-planned and properly designed retail
floor achieves a great deal for the store:
It enables a smooth and efficient customer flow
into the store and within it.
It helps the customer reach and access the
merchandise he is looking for, without fail.
It helps create a feeling of comfort in the minds
of customers, enabling them to waltz their way
through without facing any bottlenecks on the
way.
The aesthetics of a well-planned floor are a
visual feast for the customer and trigger the
come-back feeling in him, as he feels a sense of
belonging in the store.
A well laid-out floor, in essence, helps the store
to sell more effectively and retain customers.

Retail Location Research

Techniques:
Herfindahl-Herschman Index
The Index of Retail Saturation
Reillys Law of gravitation
Central Place theory
Huffs model of trading area analysis
Computer Simulation Models
Multiple
Regression
02/14/16

Trading Area
A trading area is a geographic area containing the
customers of a particular firm or group of firms for
specific goods or services.
Trade Area Analysis: It is necessary to estimate
market potential, understand consumer profile,
competition etc. GIS ( Geographical Information
System combine digitized mapping with key
locational data )used for this purpose.

02/14/16

Geographic Information Systems

digitized mapping with key locational
data to graphically depict trading-area
characteristics such as
population demographics
data on customer purchases
listings of current, proposed, and competitor
locations

02/14/16

Herfindahl-Herschman Index:
It is based on the market shares of the competitors.
Sum of the squares of the market shares of the
competitor gives a value.
If it is more than 1800 Highly concentrated
1000-1800 Moderately Concentrated
Less than 1000 Unconcentrated
Index of retail saturation(IRS):
The Index of Retail Saturation is a theory of retail saturation
index is calculated to determine the saturation index of retail
shopping district . If IRS is more then it is highly saturated and
retail success is low and vice versa
Reillys Law
Reillys law of retail gravitation, a traditional means of
trading-area delineation, establishes a point of
02/14/16
indifference between two cities or communities, so the

Huffs law
Huffs law of shopper attraction
delineates trading areas on the
basis of product assortment (of
the items desired by the
consumer) carried at various
shopping locations, travel times
from the shoppers home to
alternative locations, and the
sensitivity of the kind of shopping

02/14/16

Objectives of a good store

design
Totality Retail store must be
considered as a wholesome unit
Consistent with store image
Clear focus
Costs Vs Value
Flexibility
Convenience
Product display
02/14/16

HRM in Retail
Identifying various roles in the
organisation
Recruitment
Selection
Training
Motivation
02/14/16

HR Challenges in Retail
Lack of skilled manpower
Stress
Lack of formal education in retail
Work force attrition
Threat of poaching
02/14/16

Information systems in
Retail
A Retail Information System anticipates the
information needs of retail managers;
collects, organizes and stores relevant data
on a continuous basis; directs the flow of
information to the proper decision makers
02/14/16

Applications of IT in
Retailing
Automating Processes: Electronic Point of
Sales(EPOS), Inventory Planning, Ordering and
Management
Collecting Data AboutCustomers:Purchasing
patterns of customers, segmentation,
personalization, customization of offers, loyalty
programs, store design and product placements
Feedback on Marketing Decisions:EPOS data
to study
effects of promotions, prices, new products and
packaging changes
Communications: With suppliers, customers,
internal

Cont..
Tools to Plan the Business: Software to plan,
budget, forecast. Choose best locations (GIS)
Adding Value to Retail Transactions: ITassisted transactions (ATMs) may be preferred
by some customers, self-scanning, in-store
kiosks for product
and info. search.
Technologically-enabled Shopping: Internet
shopping

Benefits of IT in Retailing

Cost and Productivity Benefits

Efficiency of time/transaction speed increases

Reduced queuing times

Operating cost reductions

Increased accuracy of all aspects of the sales

transaction

Improved inventory management

Reductions in stock outs and stock holdings

Cont
Marketing Benefits
Improved data-effectiveness of
promotions, forecast of sales
Ability to incorporate faster responses
to changing market conditions
Consumer benefits from operational
efficiencies e.g. shorter queues
Can lead to building of loyalty schemes
Additional selling space coz of reduced
stockholdings

A Retail IT System
Electronic Point-of-Sale Systems (EPOS)
Electronic Funds Transfer at Point of
Sale (EFTPOS)
The Universal Product Code (UPC) or
Barcode
Identifies each product down to its SKU
First 3 digits:Country code
Next 4 digits:Company code
Next 5 digits:Product code
Last digit:Check digit

Cont
RFID (Radio Frequency Identification Tags):
Wireless barcodes that provide wireless
communication b/w objects & readers; uses
tags that can store data; tracks products in
real time w/o contact or line of sight

Electronic data Interchange

(EDI)
With EDI, retailers and suppliers
regularly exchange information
through their computers with regard
to inventory levels, delivery time, unit
sales etc of particular items.
Both parties enhance their decisionmaking capabilities, better control
inventory and are more responsive to
demand.

SUPPLY CHAIN
MANAGEMENT
Supply chain management ensures a
smooth and efficient flow from raw
material to finished goods, into the
hands of the consumers
02/14/16

02/14/16

Supply chain management

The retailer have to plan, source and
deliver the products
The supply chain must take into
account
Demand
Life Cycle
Product Variety and lead time
Service requirement of the customers
Push Supply Chain and Pull Supply Chain
02/14/16

Innovations in supply chain

Vendor Managed inventory(VMI)
The inventory managed by vendors/makers

Collaborative planning forecasting and

replenishment
Collaboration with the supplier and retailer

Cross docking (E.g., Walmart)

Receiving products at a central hub, sorting,
stocking and delivering to individual stores
02/14/16

Retail Logistics

Logistics is an integral part of SCM

Objective : To reduce inventory-holding costs,

improve speed, profit
Definition: Part of the supply chain process that
plans, implements, and controls the forward and
reverse flow of goods

02/14/16

Types
Third party logistics
Logistics process outsourced to the third
party
E.g., Fedex, Bluedart

Fourth party logistics

Supply chain design services done by
another party

Reverse logistics
Managing reverse flow like returned products
02/14/16