VI Sem. BBA - Marketing Specialisation - Retail Management
VI Sem. BBA - Marketing Specialisation - Retail Management
VI Sem. BBA - Marketing Specialisation - Retail Management
STUDY MATERIAL
BBA
MARKETING SPECIALISATION
VI SEMESTER
(2011 A DMISSION )
UNIVERSITY OF CALICUT
SCHOOL OF DISTANCE EDUCATION
THENJIPALAM, CALICUT UNIVERSITY P.O., MALAPPURAM, KERALA - 673 635
School of Distance Education
UNIVERSITY OF CALICUT
SCHOOL OF DISTANCE EDUCATION
STUDY MATERIAL
BBA
(MARKETING SPECIALISATION)
Prepared by :
Mrs.Ahsanath.M.K.
Assistant Professor,
Department of Commerce
Sullamussalam Science College, Areakod
Scrutinised by :
Dr.K.Venugopalan,
Associate Professor,
Department of Commerce,
Govt. College, Madappally
Module 1
Retailing
The distribution of products begins with the producer and ends at the ultimate
consumer. Between the producer and consumer there is a middle man who is retailer.
Who links the producer and ultimate consumers. The word retail is derived from the
French word retailer which means to cut a piece off or to break bulk.
India has often been called a nation of shopkeepers. Presumably the reason for this is;
that, a large number of retail enterprises exist in India. In 2004, there were 12 million
such units of which 98% are small family businesses, utilizing only household labour.
Even among retail enterprises, which employ hired workers, a majority of them use less
than three workers.
Characteristics
He purchases goods in large quantities from the wholesaler and sell in small
quantity to the consumer.
Functions
The retailer buys a variety of products from the wholesaler or a number of wholesalers.
He thus performs two functions like buying of goods and assembling of goods.
The retailer performs storing function by stocking the goods for a consumer.
He develops personal contact with the consumers and gives them goods on credit.
He bears the risks in connection with Physical Spoilage of goods and fall in price. Besides
he bears risks on account of fire, theft, deterioration in the quality and spoilage of goods.
He resorts to standardization and grading of goods in such a way that these are
accepted by the customers.
He makes arrangement for delivery of goods and supply valuable market information to
both wholesaler and the consumer.
Examples
Department Stores
Discount Stores
Clothing Stores
Specialty retailers
Convenience Stores
Grocery Stores
Drug Stores
Auto Retailers
Retailing in India
Retailing in India is one of the pillars of its economy and accounts for 14 to 15
percent of its GDP. The Indian retail market is estimated to be US$ 500 billion and one
of the top five retail markets in the world by economic value. India is one of the fastest
growing retail markets in the world, with 1.2 billion people.
As of 2013, India's retailing industry was essentially owner manned small shops.
In 2010, larger format convenience stores and supermarkets accounted for about 4
percent of the industry, and these were present only in large urban centers. India's retail
and logistics industry employs about 40 million Indians (3.3% of Indian population). As a
major source of employment retailing offers a wide range of career opportunities
including; store management, merchandising and owning a retail business. Until 2011,
Indian central government denied foreign direct investment (FDI) in multi-brand retail,
forbidding foreign groups from any ownership in supermarkets, convenience stores or
any retail outlets.
As the Indian retailing is getting more and more organized various retail formats
are emerging to capture the potential of the market.
Mega Malls
Multiplexes
Hypermarkets
Departmental stores are a few formats which flourishing in the both big and small
regional markets
As the major cities have made the present retail scenario pleasant, the future of the
Indian Retailing industry lies in the rural regions. Catering to these consumers will bring
tremendous business to brands from every sector. However as the market expands
companies entering India will have to be more cautious with their strategic plans. To tap
into the psyche of consumers with different likes and dislikes and differing budgets a
company has to be well prepared and highly flexible with their product and services.
Retailing formats
1 Form of Ownership
A retail business like any other type of business, can be owned by a sole proprietor,
partners or a corporation. A majority of retail business in India are sole proprietorships
and partnerships.
a. Independent Retailer.
Generally operates one outlet and offers personalized service, a convenient location and
close customer contact. Roughly 98% of all the retail businesses in India, are managed
and run by independents, including barber shops, drycleaners, furniture stores,
bookshops, LPG Gas Agencies and neighborhood stores. This is due to the fact that
entry into retailing is easy and it requires low investment and little technical knowledge.
This obviously results in a high degree of competition. Most independent retailers fail
because of the ease of entry, poor management skills and inadequate resources.
b. Retail Chain
It involves common ownership of multiple units. In such units, the purchasing and
decision making are centralized. Chains often rely on, specialization, standardization and
elaborate control- systems. Consequently chains are able to serve a large dispersed
target market and maintain a well known company name. Chain stores have been
successful, mainly because they have the opportunity to take advantage of "economies
of scale" in buying and selling goods. They can maintain their prices, thus increasing
their margins, or they can cut prices and attract greater sales volume. Unlike smaller,
independent retailers with lesser financial means, they can also take advantage of such
tools as computers and information technology.
c. Retail Franchising
d. Cooperatives
a. Convenience Store: Is generally a well situated, food oriented store with long
operating house and a limited number of items. Consumers use a convenience store; for
fill in items such as bread, milk, eggs, chocolates and candy etc.
b. Super markets: Is a diversified store which sells a broad range of food and non food
items. A supermarket typically carries small house hold appliances, some apparel items,
bakery, film developing, jams, pickles, books, audio/video CD's etc.
c. Department Stores: A department store usually sells a general line of apparel for the
family, household linens, home furnishings and appliances. Large format apparel
department stores include Pantaloon, Ebony and Pyramid. Others in this category are:
Shoppers Stop and Westside.
services, such as Audio equipment, Jewellery, Beauty and Health Care, etc. Consumers
are not confronted with racks of unrelated merchandise. Successful speciality stores in
India include, Music World for audio needs, Tanishq for jewellery and McDonalds, Pizza
Hut and Nirula's for food services.
In non store retailing, customers do not go to a store to buy. This type of retailing is
growing very fast. Among the reasons are; the ability to buy merchandise not available
in local stores, the increasing number of women workers, and the presence of unskilled
retail sales persons who cannot provide information to help shoppers make buying
decisions
b. Telesales/Telephone Retailing: This involves contact between the prospect and the
retailer over the phone, for the purpose of making a sale or purchase. A large number of
mobile phone service providers use this method. Other examples are private insurance
companies, and credit companies etc.
c. Catalog Retailing: This is a type of non store retailing in which the retailers offers the
merchandise in a catalogue, which includes ordering instructions and customer orders by
mail. The basic attraction for shoppers is convenience. The advantages to the retailers
include lover operating costs, lower rents, smaller sales staff and absence of shop lifting.
This trend is catching up fast in India.
d. Direct Response Retailing: Here the marketers advertise these products/ services in
magazines, newspapers, radio and/or television offering an address or telephone number
so that consumers can write or call to place an order. It is also sometimes referred to as
"Direct response advertising." The availability of credit cards and toll free numbers
stimulate direct response by telephone. The goal is to induce the customer to make an
immediate and direct response to the advertisement to "order now." Telebrands is a
classic example of direct response retailing. Times shopping India is another example.
e. Automatic Vending: Although in a very nascent stage in India, is the ultimate in non
personal, non store retailing. Products are sold directly to customers/buyers from
machines. These machines dispense products which enable customers to buy after
closing hours. ATM's dispensing cash at odd hours represent this form of non store
retailing. Apart from all the multinational banks, a large number of Indian banks also
provide ATM services, countrywide.
Wheel of retailing
According to this theory new retailers enter the market as, low margin, low price,
low status institutions. The cycle begins with retailers attracting customers by offering
low price and low service. Over a period of time these retailers want to expand their
markets and begin to stock more merchandise, provide more services, and open more
convenient locations. This trading up process. increases the retailers costs and prices,
creating opportunities for new low price retailers to enter the market. The evolution of
the department store illustrates the "wheel of retailing" theory. In its entry phase, the
department store was a low cost-low service venture. With time it moved up into the
trading-up phase. It upgraded its facilities, stock selection, advertising and service. The
same department store then moves into the vulnerability phase, because it becomes
vulnerable to low cost/low service formats, such as full line discount stores and category
specialists
Wheel of retailing
Retailing decisions
There are many factors for retailers to consider while developing and implementing their
marketing plans. Among the major retailing decisions are these related to
Target Markets: Although retailers normally aim at the mass market, a growing number
are engaging in marketing research and market segmentation, because they are finding
it increasingly difficult to satisfy everyone. Through a careful definition of target markets,
retailers can use their resources and capabilities to position themselves more effectively
and achieve differential advantage. The tremendous growth in number of speciality
stores in recent years is largely due to their ability to define precisely the type of
customers, they want to serve.
Store Location: Location is critical to the success of a retail store. A store's trading-area
is the area surrounding the store from which the outlet draws a majority of its
customers. The extent of this area depends upon the merchandise sold. For example
some people might be willing to travel a longer distance to shop at a speciality store
because of the unique and prestigious merchandise offered. Having decided on the
trading area a specific site must then be selected. Factors affecting the site include,
traffic patterns, accessibility, competitors' location, availability and cost and population
shifts within the area.
Store Image: A store image is the mental picture, or personality of the store, a retailer
likes to project to customers. Image is affected by advertising, services; store layout,
personnel, as well as the quality, depth and breadth of merchandise. Customers tend to
shop in stores that fit their images of themselves. Store Personnel: Sales personnel at a
retail store can help build customer
loyalty and store image. A major complaint in many lanes of retailing, is the
poor attitude of a salesperson. There is a growing trend now, to provide training to,
these sales clerks to convert them from order takers to effective sales associates.
Store Design: A store's exterior and interior design affect its image and profit potential.
The exterior should be attractive and inviting and should blend with the store's general
surroundings. The term "Atmospherics" is used to refer to the retailer's effort at creating
the right ambience. Merchandise display is equally important. An effective layout guides
the customer though the various sections in the store and facilitates purchase.
Promotion: retail promotion includes all communication from retailers to consumers and
between sales people and customers. The objective is to build the stores image, promote
customer traffic, and sell specific products. It includes, both, personal and non personal
promotion. Personal communication is personal selling - the face to face interaction
between the buyer and the seller. Department stores and speciality stores, emphasize
this form of promotion. Non personal promotion is advertising. The media used are TV,
Radio, Newspapers, Outdoor displays and direct mail, other forms of promotion include,
displays, special sales etc.
Credits & Collections: Retailers are generally wary of providing credit, because of
additional costs-financing accounts receivables, processing forms and bad debts etc. But
many customers prefer some form of credit while purchasing. This explains the
popularity of different types of credit cards and debit cards.
Vertical marketing systems can take several forms. In a corporate VMS, one member of
the distribution channel owns the other members. Although they are owned jointly, each
company in the chain continues to perform a separate task. In an administered VMS, one
member of the channel is large and powerful enough to coordinate the activities of the
other members without an ownership stake. Finally, a contractual VMS consists of
independent firms joined together by contract for their mutual benefit. One type of
contractual VMS is a retailer cooperative, in which a group of retailers buy from a jointly
owned wholesaler. Another type of contractual VMS is a franchise organization, in which a
producer licenses a wholesaler to distribute its products.
The concept behind vertical marketing systems is similar to vertical integration. In vertical
integration, a company expands its operations by assuming the activities of the next link
in the chain of distribution. For example, an auto parts supplier might practice forward
integration by purchasing a retail outlet to sell its products. Similarly, the auto parts
supplier might practice backward integration by purchasing a steel plant to obtain the raw
materials needed to manufacture its products. Vertical marketing should not be confused
with horizontal marketing, in which members at the same level in a channel of distribution
band together in strategic alliances or joint ventures to exploit a new marketing
opportunity.
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Module 2
Strategic planning in retailing
Retail Environment
Retail marketing environment consists of the external actors and forces that affect the
retailers to develop and maintain successful transactions and relationships with its target
customers. There are two types of marketing environment. 1. Micro environment and
2.macro environment. The micro environment consists of the actors in the retailers
immediate achievement that affect its ability to serve its market- suppliers,
intermediaries, customers, competitors and public. The macro environment consists of
legal ,social, economic and technological forces.
Micro
1.Suppliers are business firms and individuals who provide resources needed by the
retailer. For example a retail store must obtain various products from different suppliers
so that as and when customers come and ask the product, he will be in a position to sell
them on tome.
2. Intermediaries are firms that aid the retail shop in promoting selling and distribution
goods to final buyers.
3. Customers are the end users of the product or services and they are the last link in
the business process.
Macro
1. Demographic
The first environmental fact of interest to retailers is population because people make up
markets. Retailers are keenly interested in the size of the population, its geographic
distribution, density , mobility trends, age distribution and social ethic and religious
structure.
The implication of socially responsible marketing is that the retail firms should take the
lead in eliminating socially harmful products such as cigarettes and drugs etc. there are
innumerable pressure groups such as consumer forums, ,activists, social workers, mass
media etc.
4. Economic environment
Retail markets consist of purchasing power as well as people. Total purchasing power is
a function of current income, prices, savings and credit availability. Marketers should be
cognizant of major trends in the economic environment.
5. Technology environment
Information and communication technology has been utilized in retail section also. Some
of them are discussed below.
a. Online purchase.
b. Credit Cards
Payment through credit cards has become extremely widespread and enables an easy
payment process. Electronic cheque conversion, a recent development, processes a
cheque electronically by transmitting transaction information to the retailer and. the
customer's bank. The retailer then voids the cheque and hands it back to the customer
along with a receipt.
In today's retailing environment "you are either quick or you are dead". Many vendors
have developed retail specific ERP systems which help to integrate all the function from
warehousing to distribution, front and back office store system and merchandising. Such
an integrated supply chain, Figure helps the retailer in maintaining his stocks, receiving
supplies on time, preventing stock outs and thus reducing his costs and servicing the
customer better. 23 Evolution of Retail Environment
It is a method of remotely storing and retrieving data using devices called RFID tags and
transponders. An RFID tag is a small object, such as an adhesive sticker, that can be
attached to or incorporated into a product. RFID tags contain antennas to enable them
to receive and respond to radio frequency queries from an RFID transceiver.
Consumer Behaviour
In retail marketing sector, marketers are keen to know the consumers shopping
behaviour, which involves an understanding of decision variables like when where, and
what to shop. These decisions variables are the factors to be considered by the retailer.
According to the consumer needs the retailer's evolve the best possible mix to attract
the target consumer. The shopper's response to retail marketing mix has an impact on
the firm's success in the long run. Individual consumers consider each element of retail
marketing mix in relation to their culture, attitude, previous learning and personal
experiences. The consumer is influenced intrinsically by his/her needs, motives,
perceptions, and attitudes and extrinsically such as family social class the culture and
economic factors which affect his behaviour. These elements would help the retailers to
place their retail marketing mix with their respective target segments.
It is important to know what and from where the shoppers shop and the reasons that
prompt their shopping behaviour. Consumers buy products. Successful products are
those that provide the tangible or intangible features necessary to realize the consumer's
expectations of benefits.
1. Demographic factors
2. Psychological Factors
3. Motives
Motivation is prerequisite for any action this includes buying. It stimulates the need. If
you have a headache buying a medicine is a motivation. The need to have the latest
fashion in clothes, mobile phones etc. is also a motivation.
4.Perception
5. Learning
Learning is the process of acquiring knowledge through past experiences. If you visit a
store and the treatment you receive will be the criteria for repeat visits to the store. If
the experience with the sales team was good then you may visit the store even if it is
slightly more expensive than the store where the service was bad. Free sampling/trials
etc. are also ways of making the consumer learn about a product and its attributes. If
the customer sees, hears, feels, tastes or smells a product he/she learns more about the
product and its attributes. A retailer must encourage a consumer to touch and feel the
product so that his visit could turn into a buying experience. By offering customer
satisfaction the retailer can be rest assured of having a loyal customer which is easy to
retail than to generate a new customer.
6.Attitude
People use their attitude to pass judgment whether is it good or bad, right or wrong. If
a customer feels that a store is expensive he/she will avoid going to the store.
Reliability, stability, responsibility, dependability and credibility are the all strong
messages that a retailer is required to project. Emotions are extremely important as this
drives buying.
7. Environmental Factors
Environmental factors are both physical and social factors. This includes physical objects
(goods and outlets), spatial relationship (location of shopping center and merchandising
stores) and social factors (reference groups and opinion leaders). The environmental
factors influence consumer wants, learning, motives etc. which in turn influence affective
and cognitive responses and therefore shopping behaviour of the individual.
8. Social Class
Middle class and higher sections of society prefer to shop for grocery items once a month
from a particular shop. They usually prefer stores offering variety and range of choice.
Lower sections of society usually purchase on a daily basis. They are also not particular
about the shop they purchase from. Social status of an individual plays an important role
even in determining the frequency of purchase. Majority of the middle class consumers
prefer to buy vegetables in the morning for their freshness despite the prices being on
the higher side, on the contrary the lower end sections of the society prefer to buy at
dark to get benefit of low prices. 11 Understanding the Retail Customer
9. Lifestyle
The Retail Information System (RIS) is a flexible tool that enables you to collect,
aggregate and analyze data from retailing activities. The Retail Information System
integrates data from the areas of Purchasing, Sales and Distribution, and Inventory
Management, and also enables you to evaluate data that is particularly significant for
Retail (data relating to retail price change documents or the POS interface, for example).
The Retail Information System is a component of the logistics Information system. The
Logistics Information System is divided into the following information systems:
The Logistics Information System (LIS) also includes the following information systems:
Retail research
Marketing research is the function that links the consumer, customer and public
to the market through information- used to identify and define marketing opportunities
and problems; generate , refine, and evaluate marketing actions ; monitor marketing
performance and improve understanding of marketing as a process. Marketing research
specifies the information required to address these issues, designs the methods for
collecting information , manages and implements the data collection process, analyses
and communicates the findings and their implications.
The qualitative research is used to find out what is in a consumers mind. Through the
qualitative research , the retailer will be able to get oriented to the range and
complexity of consumer activity and concerns. Such data usually helps the retailer to
know more about things ( like feelings, thoughts, intensions, past behavior ) which
cannot be directly observed and measured.
2. Orientation method
3. Clinical
The survey, in its many forms is one of the most widely used and well known method
for acquiring marketing information by communicating with a group of respondents.
Information can be obtained by asking questions or observing the behavior of
consumers. Qualitative survey studies the target demographic groups by mapping the
current market trends according to the need based behavour of the consumers and
thud determine the right profile of the target market. The survey can be used to obtain
information from consumers, retailers, industrial users etc. survey can be done by using
questionnaires or schedules.
Observation method
Observation is another method were the relevant behavior of customers are observed. ,
but it is limited to providing information on current behavior only. The following are the
various observation methods
Direct observation
Contrive observation
Content analysis
Humanistic inquiry
Retail audits
Retail audit helps to ascertain the sales personnels efficiency at the point of sale or to
find out the average time take on a normal day or during week end.
Retail process audit such retail process audits helps to examine a stores
efficiency in terms of its operating processes or reduce the cycle time. For
instance, with the help of retail process audit the retailer can work out ways to
improve customer service deliveries and improve performance.
Retail store audit auditors from well known research firms carry out retail store
audits by counting the inventory on hand and recording deliveries to the store
since the last visit. The sales for a particular period can be obtained by
computing.
This technique uses the advantage of observation and the significant information gained
through self reporting.
Experimentation Method
For Example: Imagine a retailer who has increased his price by Rs10. To see the effect of
this he may conduct a survey to determine the effect it may have on sales, profits soon
where factors like display space, store layout, location, advertising displays are kept
constant.
Demographics: This defines the sex, age and the lifestyle of the customers in focus. The
relevance of this criteria in retailing is that from the store point of view its location,
merchandise will be detennined by the above factors.
Competitive analysis: For a retailer of any category s), it is important that he has a clear
understanding of the competitiveness in his related and complementing categories. This
will help him to placate himself strategically with respect to his contemporaries by
building on his capabilities.
Location of retails
The choice of location is the most vital aspect for any business that relies on
customers of which retailing is the classic example. Deciding on location is the most
complex of the decisions to be taken by a retailer. Firstly the costs are very high and
once a location has been selected there is very little flexibility. choosing a wrong location
can lead to losses and even closure of the store. This makes the selection of the
appropriate location the most critical aspect of retailing.
2) It involves large capital investment (the high cost of land or building if it is being
purchased of recurring cost of rent if it is leased).
4) It has a significant bearing on human resources cost (if the retail store is located
away from central locations i.e. areas where public transport is weak the cost of
employees will be higher as employees will have to be provided with transportation
or paid for transport).
6) It affects the volume of business (if the number of customers visiting the store are
low then the volume of business done by the retail store is obviously affected)
The following factors play a significant role in the location choice of a particular city:
A city's trading area is the area from which customers come to the city for
shopping. A city's trading area could include its suburbs as well as its neighboring
cities and towns.
High growth in the population of an area can also increase the retail potential.
Cities with a large population of affluent and upper middle class customers can be
an attractive location for stores selling high priced products such as designer clothes
or even high value cars which have limited retail outlets.
Distribution Networks
A city may become specialized in certain lines of trade and attract customers from
other city.
This is one of the key factors affecting the attractiveness of a city as a prospective
retail location. If the cost of rental or the cost of land is very high it would be
difficult for a retailer to break even especially if he is dealing in products with lower
margins.
These store have typically no other retail store in the close vicinity. Their location
depends on their pulling power of customers. The advantages of isolated stores are that
there is no competition, the rentals are low as it is not a commercial area, further it will
be able to have better visibility than other stores, constantly upgrade its facilities as per
the requirement.
Unplanned Markets
Unplanned markets are basically the markets that come up with no systematic planning
for example the markets in the older part of the cities or where planned markets over
the time have become unplanned markets due to poor municipal lades and unplanned
growth of the markets. Here you also find that there are multiple stores selling the same
products. The advantages of unplanned markets for the retailer are that the rentals are
very low, good access to public transport and availability of a variety of goods for the
consumer.
Planned Markets
The planned markets on the other hand are the shopping complexes, the Malls Etc The
advantages of planned markets are that there is a well-rounded assortment of stores
making it a one stop shopping experience for the entire family. The malls have very
large anchor stores which are either departmental stores or stores which have the crowd
pulling capacity. Further in these malls you have a variety of stores, restaurants and
services offered. There is high pedestrian traffic in these markets and all the retailers in
the market share the costs like lighting up of the market for festivals or running of joint
promotions to promote the market, which in malls is also supported by mall
management.
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Module 3
Retail operations management
Resource allocation
Effective retail resource management entails having enough resources to leave the
business operating efficiently, but on the other hand, also not having too many so that
resources go unused.
Human Resources
Time management
Time is a finite resource that is easy to waste or underutilize. Learn how to manage your
time effectively to maximize your own productivity as well as that of your employees.
Delegate repetitive tasks, prioritize your daily workload, and set aside time for meetings
and emails at specific times of the day. Include time management in employees'
individual development plans and annual assessments. If necessary, provide time
management training for managers and supervisors.
Retail Budgeting
Step 1
Create a cash flow projection for your retail store. Use a spreadsheet format and label
the columns according to the months of the year, using the far left corner to label the
spreadsheet's horizontal lines. Label the lines on the top half of the sheet according to
the different types of revenue your business takes in, such as sales from clothing,
accessories and books. Label the lines on the bottom half of the spreadsheet according
to the different categories of expenses your business incurs, separating them into fixed
expenses, such as rent and equipment, and variable expenses, such as inventory, which
fluctuate relative to your sales volume.
Step 2
Fill in the fields on your spreadsheet with the amounts that you expect to earn and
spend in each category during each month of the upcoming year. Base your figures on
sales patterns and seasonal fluctuations from previous years, and adjust them relative to
new developments in your company, such as whether you have added retail space or
launched an advertising campaign. Add the revenue streams on the top half of the page,
as well as the outgoing expenses on the bottom half of the page. Subtract the gross
expenses for each month from the gross revenue for that month. If there is a surplus or
deficit for a particular month, carry over that amount to the revenue section of the
following month.
Step 3
Review your cash flow projection to determine when you expect your business to come
up short of being able to meet its expenses. Develop strategies for making it through
these lean periods, such as having credit lines available or negotiating with vendors for
longer payment terms. Look for expenses that you can cut, but always be scrupulous
about having enough inventory on hand to make it through periods when customer
demand is strong, even if you have to borrow money to do so.
Working Capital
Working capital refers to the cash a business requires for day-to-day operations,
or, more specifically, for financing the conversion of raw materials into finished goods,
which the company sells for payment. Among the most important items of working
capital are levels of inventory, accounts receivable and accounts payable.
Exterior atmospherics
store entrance
main board marquee windows
Lightings
Height of the building
Size of the building
Visibility
Sign board
Uniqueness
Surrounding stores
Parking facilities, etc.
In the competitive markets, retailers can use the store front as a strong
differentiating factor and attract and target new customers.
Interior atmospherics
Flooring
Music
Interior design
Level of cleanliness
Lightings
Store layout planning involves decisions about allocation of floor space, product
groupings and nature of traffic flow , which can take the form of straight or gird traffic
flow ,free form flow ( curving ) or racetrack flow. Some of the important types are
mentioned here.
1. Grid
It is a commonly used system followed by conventional grocery stores as
it facilitates planned shopping behavior so that customers can easily
locate products on their shopping list. Kirana and drugs store owners
commonly employ the grid type layout. Grid arrangement is not very
aesthetic, but it ensures smooth shopping trips of shoppers within the
store.
Grid layout
It is the presentation of products in order to sell them. Good display shout to the world
that the retailer cares about his image and merchandise and most importantly, about
entertaining, informing , and educating his customers.
Entertains, informs and educates the customer about the product / service in an
effective and creative way
Encourages a customer to wander about to discover novelties
Re-affirms the store image
Arranges merchandise for easy access
Draw attention of the customers
Highlights merchandise to promote its sale
Introduces and explains new products
Encourages customer to enter the store.
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Module 4
Product assortment
Definition
Retailers need to consider certain factors while devising assortment plans for
their store
While working out the variety , assortment and product availability , certain
factors have to be considered.
Merchandising Forecasting
While developing a sales forecast, the retailer must be able to predict how well
product categories will sell over a period of time. Challenges of retailers in sales
forecasting. There are mainly two types of challenges on sales forecast.
1. Internal factors.
Price changes
Shortages, inventory
Labour problems
2. External factors
Seasons
Holidays
Special events
Competition, direct
Competition, indirect
Productivity changes
Family formations
Fashions or style
Population changes
Customer earnings
Political events
Whether
5. evaluating merchandise;
8. handling merchandise;
Inventory management
Inventory is a term used to describe unsold goods held for sale or raw materials
awaiting manufacture. These items may be on the shelves of a store, in the backroom or
in a warehouse miles away from the point of sale. In the case of manufacturing , they
are typically kept at the factory. Any goods needed to keep things running beyond the
next few hours are considered inventory.
Inventory management simply means the methods you use to organize, store and
replace inventory, to keep an adequate supply of goods while minimizing costs. Each
location where goods are kept will require different methods of inventory management.
Inventory control is the technique of maintaining the size of the inventory at some
desired level keeping in view the best economic interest of an organization.
Types of inventory
1. Based on stage
Raw materials
Working in progress
Finished products
2. Based on purpose
Movement
Buffer
Anticipation
Decoupling
Cycle
3. Based on material
Components
Spare parts
Consumables
Maintain sufficient finished goods inventory for smooth sales operations, and
efficient customer service
Retail Pricing
Price is the monetary value assigned by the seller to something purchased, sold
or offered for sale and on transaction by a buyer , as their willingness to pay for the
benefits the product and channel service delivers.
1) Customers
2) Suppliers
3) Competitors
4) Government
1. Profit-Objective
The retail store may price its product with the objective of maximizing profits in the
short run or long run or both. The objective of profit maximisation must be studied
carefully because: it may lead to unethical practices such as overcharging or deceiving
the customers. This in turn may lead to some form of intervention by either the
government or consumer groups (NGOs). At other times, the marketer may price his
products with the objective of obtaining only a target rate of return on his investment.
This is particularly so with products in the mature stage of the product life cycle.
2. Market Share-Objective
The retailer or marketers may also price his product with the, intention of increasing his
market share, or stabilizing his market share. He can set the price of his product lower
than that of his competitors.
3. Competitor-Oriented Objective
The retailers or marketer may price his product to counter any existing or prospective
move by his competitors. Retailer may deliberately price its merchandise low to:
Discourage potential retailer from entering the market, Advance the exit of the potential
competitors and marginal firms from entering the market, Spoil the market of retail
competitors with the eye on getting future benefits. With a low price, the marketer can
prevent price-cutting by competitors. At other times, the retailers may cooperate with
his competitors by setting a common price. A good example of this type of pricing is very
common among traditional business centres in India where all retailers dealing in similar
merchandise set similar common prices. This practice is common among retailers of
Beauty salons, Garment Retailers and Grocery etc.
4. Buyer-Oriented Objective
Another pricing objective adopted by retailer may be buyer-oriented. The aim of such
pricing is to maintain socially acceptable prices and to be fair to customers. The prices of
goods of super bazaars Margin free (Kerala) and Rythu (Andhra Pradesh) can be
considered buyer-oriented as these retail chains practice the professed pricing objectives
of bypassing intermediaries and sharing savings with the ultimate consumers. Most of
the five star hotels stress on the kind of ambience and services extended by their hotel,
as these are of prime concern to their customers. Tanishq, the jewellery retail chain,
emphasises on the other elements of the marketing mix, such as heavier promotion and
advertising, as well as highlighting the quality and the characteristics of their offerings
primarily to justify the relatively higher prices charged by them.
5. Government-Oriented Objectives
The pricing of some products may be constrained by existing laws or may be influenced
by government action. The prices of petrol, grocery items, vegetables in India are, to a
large extent, controlled and influenced by government action. Consumer Protection Act
1986, Indirect Tax provisions and MRTP has a bearing on the pricing of the merchandise.
6. Product-Oriented Objectives
The retailers or marketers at times make their offerings more "visible" by means of
pricing. Customers are usually attracted by the advertisements in newspapers
highlighting special offers and discounts. With a lower price, the retail store can
therefore catch the attention of buyers and this will help him to introduce new offerings,
increase the sale of weak products etc. Many of the retail stores in India such as Big
Bazaar are using these pricing techniques.
Discount Orientation:
Here low prices are used as the major tool for competitive advantage wherein the
store portrays a low status image while profit margins are kept low to target price-
based customers. The model works on high inventory turnover and lower operating
costs. This is arguably the most common model in India because of the low per
capita income and price consciousness.
At-the-market Orientation:
These kinds of stores normally set average prices. It offers solid service, a nice
atmosphere to the shoppers, margins are average to good, and it stocks moderate
to above quality products. Since this model caters to the middle class, it has a huge
target market. Westside in India focuses on providing value for money merchandise
for the entire family along with an international shopping experience. The private
label of the company gives it the flexibility of a wide range of merchandise and also
has the advantage of generating better margins for the company.
Upscale Orientation:
Here competitive advantage is derived from the prestigious image of the store. The
profit margins per unit are high, but coupled with higher operating costs and lower
inventory turnover. These stores usually stock distinctive product offerings and
provide high quality service, building up customer loyalty. The products stored
generally go with the image of the store. Like such stores would stock Christian Dior
perfumes and Rolex watches. It may be appropriate in situations of inelastic demand
in which an organisation decides to keep its prices high.
EDLP has been popularised by large international retailers like Wal-Mart and Home
Depot. This strategy demands stability of retail prices below MRP (maximum retail
price)-mentioned on the goods i.e. at a level somewhere between the regular price
at which the goods are sold and the deep discount price offered when a sale is held.
In India, many co-operative stores have adopted this strategy. One store that uses
EDLP is Big Bazaar. Here, goods are either sold below their normal prices, or some
sales promotion scheme is available. Subhiksha also possesses the essentials of a
discount store.
In High/Low pricing, retailers offer prices that are sometimes above their competition's
ELDP, but they use advertisements to promote frequent sales. Nowadays, retailers also
use sales to respond to increased competition and a more value-conscious customer.
Leader Pricing :
Retailers sometimes price particular fast moving products at a lower price to attract
customers to the store. For example: A grocery retailer can sell eggs cheaper than
other competing stores so that customers consider him while purchasing foodstuff
Since the customer is also likely to buy milk, bread, flour etc along with eggs, these
products are priced slightly higher. So, the profit foregone on eggs is more than
recovered on other items of groceries.
Skimming Pricing :
Price skimming is a pricing strategy in which a retailer sets a relatively high price for a
product or service at first, and then lowers the price over time. It allows the firm to
recover its sunk costs quickly before competition steps in and lowers the market price.
However positive, there are some potential problems with this strategy such as: The
inventory turn rate can be very low for skimmed products. Skimming encourages the
entry of competitors. When other retailers see the high margins available in the industry,
they may decide to quickly enter. The retailer could gain negative publicity if he lowers
the price too fast and without significant changes in product profile.
Penetration Pricing :
Penetration pricing is the pricing technique of setting a relatively low initial entry
price, a price that is often lower than the eventual market price. The expectation is
that the initial low price will secure market acceptance by breaking down existing
brand loyalties. Penetration pricing is most commonly associated with the marketing
objective of increasing market snare or sales volume, rather than short term profit
maximization. Price Penetration is most appropriate when
Price Lining :
Psychological Pricing :
Prestige Pricing
Reference Pricing
Traditional Pricing
Odd-Even Pricing
Retailers use multiple unit pricing to encourage additional sales and to increase profits.
The gross margin that is sacrificed in a multiple unit sale is more than off-set by its,
,
savings that occur from reduced selling and handling expenses.
Bundle Pricing :
It is the practice of offering two or more different products or services at one price. Price
bundling is used to increase both unit and rupee sales by bringing traffic into the store.
It can also be used to sell less desirable-merchandise by including it in a package with a
product of great demand. Like a hotel can offer a 2 days stay for Rs.5000/- inclusive of
lunch, even though separately these two items (stay and lunch) would cost more than
Rs.5000/-. In many cases a retailer may bundle a set of extra-large T-shirts with large -
size T-shirts to promote the sale of the slow moving item. Same strategy is some times
used for low selling shoe sizes.
Pre-emptive Pricing :
Extinction Pricing :
Extinction pricing has the overall objective of eliminating competition, and involves
setting very low prices in the short term in order to `under-cut' competition, or
alternatively keep away potential new entrants. The extinction price may, in the short
term, be set at a level lower even than the suppliers own cost of production, but once
competition has been extinguished; prices are raised to -profitable levels.
Perceived-value Pricing :
A method of pricing in which the seller attempts to set price at the level that the
intended buyers value the product. It is also called value-in-use pricing or value-oriented
pricing. If the perceived value is high the retailer can charge a premium price for the
product. The example of well-established traditional independent retailers in small
townships can be cited in this respect. They charge a premium price on their offerings
because of quality and variety offered to their customers.
Demand-Oriented Pricing :
A method of pricing in which the seller attempts to set price at the level that the
intended buyers are willing to pay. It is also called value-in-use pricing or value-oriented
pricing.
Most firms use a fixed price policy i.e. they examine the situation, determine an
appropriate price, and leave the price fixed at that amount until the situation changes, at
which point they go through the process again. The alternative has been variable pricing,
a form of first degree price discrimination, characterized by individual bargaining and
negotiation, and typically, used for highly differentiated - items, like real estate,
unbranded garments, fresh vegetables and fruits etc, S.M street in Kozhikode, Kerala,
there are some shops in markets like Sarojini Nagar and Lalpat Nagar in Delhi which
specifically advertise that they do not bargain and have a "Fixed Price"
Labeling in retail
Product name
Ingredient statement
Business name and address
Net contents statement
Price
Expiry date
Manufacturing date
Nutrition facts panel
Safe handling instructions
Points to be noted
- Retailers may repack items that are received in bulk containers and provide
labeling information using a counter card, placard or sign that contains all the
features of the label.
Packaging
The types of packaging materials include; metal, plastic, brick carton, cardboard and
glass. Different products will require varying packaging material and you need to know
what packaging material is suited to which goods or products.
Plastic
This is the most common packaging material and, at the same time, one of the most
difficult to dispose of. The factors common to all plastics are that they are light,
strong cheap to manufacture. It is for these reasons that they are used so much, as
an alternative to cardboard glass packaging materials. Almost 10% of our rubbish
consists of different types of plastic. They are a problem in landfills as they are bulky,
they contaminate degrade slowly.
Metal
Appropriate for packaging foods (canned foods). For drinks, such as soft drinks beers,
aluminum is often used. Tin plate is a solid, heavy steel covered with tin to protect it
against rust. It is used to package canned foods. It can be separated by magnets
should be recycled in all cases. Aluminum is attractive, light strong at the same time,
but requires a lot of raw materials energy to make it. For this reason it must be
recycled. The majority of cans of soft drinks, lids, aluminum foil, etc. are made
aluminium.
Brick carton
A light, strong air-tight packaging material. Ideal for transporting storage. Its
complex composition makes it difficult to recycle. It is becoming the main packaging
material used for basic foodstuffs. Complex packaging material, made up of several
layers of plastic, paper aluminium. It is also difficult to recycle. It is used mainly to
keep drinks such as milk, juice, etc.
Cardboard
Appropriate for packaging materials wrapping, preferable to "white cork". Its use may
prove to be unnecessary when used for products which are already packaged
sufficiently. In all cases, this packaging material is easy to recycle reuse. It is used in
the form of boxes, sheets corrugated cardboard.
Glass
An ideal material for foods, especially liquids. It is inalterable, strong easy to recycle.
It is the traditional vessel in the home (jars, glasses, jugs, etc.). Its weight shape
may involve some difficulties for transport storage.
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Module 5
Retail promotion
Promotional Objectives
Increase sales
Public relation
Advertisement
Personal selling
Sales promotion
Publicity
Public relation
Impersonal personal
Advertising, sales
promotion, store Personal
paid atmosphere, web selling, e-mail
site, SEM marketing
Word of
unpaid publicity, SEM mouth
1. Public Relations
Public Relations - Any communication that fosters a favorable image for the retailer
among its publics
it can be Paid or
Sponsor-controlled or not
Advantages
Key aspects
Paid form
Non personal presentation
Out-of-store mass media
Identified sponsor
Advantages
Disadvantages
It is an Oral communication with one or more prospective customers for the purpose of
making a sale.
Advantages
Less waste
Better response
Immediate feedback
Disadvantages
High costs
Self-service discouraged
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
Disadvantages
Difficult to terminate
Possible damage to retailers image
More stress on frivolous selling points
Short-term effects only
Used as a supplement
Retail store image
A good store design represents value and a positive store image. An aesthetic
presentation of merchandise and creative props entice people to come in and purchase
your products. In addition, the image of your store provides customers the opportunity
to have a delightful shopping experience. Having a poor store image will cause you to
have fewer walk-in customers; remember that fewer costumers result in less income.
Creating and maintaining the proper image, the way a firm is perceived by its
customers, is an essential aspect of the retail strategy mix. The components of a firm's
image are its target-market characteristics, retail positioning, store location,
merchandise assortment, price levels, physical facilities(exterior and interior), customer
services, community service, mass advertising and publicity, personal selling, and sales
promotions.
The store exterior is comprised of the storefront, marquee, entrances, display
windows, building height and size, visibility, uniqueness, surrounding stores and area,
parking, and congestion. It sets a mood or tone before a prospective customer even
enters a store. The general interior of a store encompasses its flooring, colors, lighting,
scents and sounds, fixtures, wall textures, temperature, width of aisles, dressing
facilities, vertical transportation, dead areas, personnel, self-service, merchandise, price
displays, cash register placement, technology/modernization, and cleanliness. The
interior of an upscale retailer is far different from that of a discounter -- portraying the
image desired, as well as the costs of doing business.
In laying out a store's interior, six steps are followed. One, floor space is allocated
among selling, merchandise, personnel, and customers; and adequate space is provided
for each, based on a firm's overall strategy. Two, product groupings are set, based on
function, purchase motivation, market segment, and/or storability. Three, traffic flows
are planned, using a straight or curving pattern. Four, space per product category is
computed via a model stock approach or sales-productivity ratio. Five, departments are
located. Six, individual products are arranged within departments.
The behavior of retailers and their service quality are the two main important
components to increase the images of retailers.
This is the first step in this process. This is a database which would comprise of
all the data, the firm has collected about its customer and will be the foundation
based on which all the future CRM activities are planned and implemented.
Ideally, the customer database must contain the following information.
Transactions a brief history of the purchase made by the customer in
terms of date, price, goods etc
A record of customer interaction with the retailer or retail outlet. This
include the information on how many times the customer had visited the
shop, website, contacted via phone etc.
Customer preferences Information related to what was the customers
choice in terms of colour, brand, material, size etc.
Descriptive information more information about customer especially
demographic and psychographic data.
Feedback on customers response to marketing activities.
The next step in the CRM process is to analyze the customer database and use this
information to help retailers develop programmes for building customer loyalty. Retailers
make use of certain approaches to obtain such information. These include-
Data mining techniques this technique identifies patterns of customer
behavior which the analyst is unaware of prior to searching through the
data.
Market basket analysis this type of analysis focuses on the composition
of basket or bundle of products purchased by the customers or household
during a single shopping occasion.
Identifying the specific market segments.
Usually the retailer will work out programmes to retain their best customers ,
make efforts to convert good customers into high LTV customers and try to get
rid of unprofitable customers. This include
The purpose of having CRM programmes is to increase sales and profit of the
retailer. The effectiveness of CRM programme will depend upon the coordination
of different functional activities in the retailers organization. Thus MIS department
has to collect, analyse and make the relevant information easily accessible for
employees to implement the programmes. Finally successful implementation of
the CRM programmes will depend upon store operations and human resource
management ie hiring, training and motivating employees who will be using the
information to deliver personalized services.
Financial control.
Review financial statements to analyze actual vs. plan metrics and performance,
impacts and operational issues
Analyze performance of retail operation
Develop and Track performance of the business sales forecasts
Develop, track and analyze trends for key performance indicators
Participate in team meetings as it relates to goals and objectives
Achieve project deadlines, goals and overall expectations
Review management reports to identify business impacting trends, including:
a) Scorecards for three sales channels of trade
b) Delivered volume reports
c) Profit margin reports
d) Expense reports
e) Financial Reports
Merchandise control
A retail merchandising analyst helps maximize the profit potential for a retail store or
retail chain. By analyzing inventory risks and opportunities, and implementing inventory
allocation strategies, the merchandising analyst improves cash flow and increases profit
margins.
Any typical retail organisation would commonly need the following human resource
functions:
Performance management
Labour relations
Managerial relations
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Retail Management
1. The word retail has been derived from which word?
a. Latine
b. French
c. Greek
d. Persian
Ans. b
2. Who is the last link in the chain connecting the producer and customer ?
a. wholesaler
b. agent
c. retailer
d. storekeeper
Ans. c
3. Internet marketing and telemarketing are the recent trends in .. business
a. retail
b. wholesale
c. conventional
d. manufacturing
Ans. a
4. In the distribution channel has the direct touch with consumers.
a. producer
b .wholesaler
c. agent
d .retailers
Ans. d
5.MRP stands for.
a. minimum retail price
b. maximum retail price
c. minimum rate of profit
d .maximum rate of profit
Ans. b
6. Multiple shops are also known as
a. self service stores
b. chain stores
c. shopping by post
d. departmental stores
Ans. b
7. Door to door selling is carried out by
a. hawkers and peddlers
b. cheap jacks
c. second shop
d. retailers
Ans. a
8. There is no shop assistants in a
a. super bazaar
b. departmental store
c. multiple shop
d. second shop
Ans. a
17. Person to person interaction between a retailer and a prospective customer is:
a. Direct marketing
b. Automatic selling
c. Direct selling
d. Buying service
Ans. C
18. Independent retailers who use a central buying organization and joint
promotional efforts are called a
a. merchandising conglomerate
b. corporate chain store
c. retailer cooperative
d. voluntary chain
Ans. c
19. A retail firm owned by its customers in which members contribute money to
open their own store, vote on its policies, elect a group to manage it, and
receive dividends is called a
a. corporate chain store.
b. merchandising conglomerate
c. consumer cooperative
d. voluntary chain
Ans.c
20. The oldest and most heavily trafficked city area is called
a. regional shopping center
b. prime location
c. urban district
d. Central business district
Ans. d
21. Giant retailers called concentrate on one product category such as toys or
home improvement
a. Category killers
b. Variety stores
c. supercentres
d. box stores
Ans. a
22. Retailers such as Benetton, The Body Shop, and Marks and Spencer carry
mostly own-brand merchandise. These are called brands
a. creative label
b. private label
c. house
d. retail label
Ans. b
23. A fee is the charge many supermarkets impose for accepting a new brand
to cover the cost of listing and stocking it.
a. inventory
b. slotting
c. initiation
d. stocking
Ans. b
24. Which of the following is not one of the four major decisions that must be
made with regard to market logistics?
a. How should orders be handled?
b. Where should stock be located?
c. How much stock should be held?
d. How should stock be financed?
Ans. d
25. Which statement is not a benefit of formulating a retail strategy?
a. A retailer is forced to study the legal, economic, and competitive market
b. A retailer is shown how it can differentiate itself from competitors.
c. Sales maximization is stressed.
d. Crises are anticipated and often avoided.
Ans. c
26. A retailer's commitment to a type of business and to a distinctive role in the
marketplace is its:
a.. objectives
b. organizational mission
c. retailing concept
d. image
Ans. b
27. Which form of organization is subject to double taxation?
a. sole proprietorship
b. partnership
c. corporation
d. franchise
Ans. c
28. When retailers identify customer segments and develop unique strategies to
meet the desires of these segments, they are using:
a. mass merchandising
b. niche retailing
c. bifurcated retailing
d. middle market retailing
Ans. b
29. Those aspects of business that a retailer can directly affect, such as store
hours and merchandise lines carried, are referred to as:
a. controllable variables
b. demographic statistics
c. lifestyle measures
d. uncontrollable variables
Ans. a
30. Which is not considered one of the elements of "managing a business" in a
retail strategy?
a. the retail organization
b. human resource management
c. operations management
d. merchandise management and pricing
Ans. d
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