Principles of

Retail Management

Dr. Yajnya Dutta Nayak

(M.Com, M.Phil, PGDMM, PH.D)

LIISPRING, ODISHA, INDIA-760001

www.liispring.com
All rights reserved. Neither this book nor any part may be reproduced or
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Academic Press is an imprint of Liispring

This book is printed on acid-free paper

First Edition 2021

ISBN: 978-93-91196-39-4

Price: US$ 20

LIISPRING
BERHAMPUR, ODISHA, INDIA
www.liispring.com
 About the Authors

Dr. Yajnya Dutta Nayak is currently working as Assistant Professor in the

Post Graduate Department of Commerce, Khallikote Unitary University,
Berhampur, Odisha. He has completed M.Com., M.Phil., PGDMM and
Ph.D. To his credit, Dr. Nayak has 17 books, 15 book chapters and more
than 50 research papers published in leading research journals and
periodicals. He has also the editor of 38 national and international journals.
He has completed a number of research assignments with various Govt.
sponsored projects, including Covid-19, CSR, Urban Development, MSME,
NIRD, Water Technology, ICT, CRC, NRGES etc. His areas of research
interest include Marketing, Business Management, Rural & Urban
Development, E-commerce and Research Methodology.
 Principles of
Retail Management
Title Page No

CHAPTER 1 : INTRODUCTION TO RETAILING 1

CHAPTER 2 : RETAIL CONSUMER BEHAVIOUR 22

CHAPTER 3 : STORE MANAGEMENT & VISUAL 50

MERCHANDISING
CHAPTER 4 : RETAIL MARKETING MIX 73

CHAPTER 5 : RETAIL COMMUNICATION MIX 109

CHAPTER 6 : RETAIL LOCATION STRATEGY 129

CHAPTER 7 : RELATIONSHIP MARKETING IN 141

RETAIL SECTOR
CHAPTER 8 : HUMAN RESOURCE MANAGEMENT 165
IN RETAILING
CHAPTER 9 : ELECTRONIC RETAILING 186
(E-RETAILING)
CHAPTER 10 : RETAIL AUDIT AND ETHICS IN 213
RETAILING
 ABOUT THE BOOK

Retail is the sale of goods and services to consumers, in contrast to

wholesaling, which is sale to business or institutional customers. A retailer

purchases goods in large quantities from manufacturers, directly or through

a wholesaler, and then sells in smaller quantities to consumers for a profit.

Retail Management is the process which helps the customers to procure

the desired merchandise form the retail stores for their personal use. It

includes all the steps required to bring the customers into the store and

fulfill their buying needs. Retail management is necessary to be informed

and updated. Retail management is an ongoing process of market and

marketing. It is important for laying out the foundation for development and

growth of business in retail sector.

The present book uses specific approaches to help Business Management

students/ scholars develop and enhance their capabilities as Green

Retailing. This book will be an asset for the researchers, academicians,

retailers, and business professionals of Indian and other countries.

 INTRODUCTION TO RETAILING

The distribution of finished products begins with the producer and

ends at the ultimate consumer. Between the two of them, there is a
middle person—the retailer. Retailing is defined as a set of activities
or steps used to sell a product or a service to consumers for their
personal or family use. It is responsible for matching individual
demands of the consumer with supplies of all the manufacturers.
The word ‘retail’ is derived from the French word retailer, meaning ‘to
cut a piece of’ or ‘to break bulk’. Retailing has become such an
intrinsic part of our everyday lives that it is often taken for granted.
The nations that have enjoyed the greatest economic and social
progress have been those with a strong retail sector. Why has
retailing become such a popular method of conducting business? The
answer lies in the benefits that a vibrant retailing sector offers—an
easy access to a variety of products, freedom of choice, and high
levels of customer service.

A retailer is a person, agent, agency, company, or organization, which

is instrumental in reaching the goods, merchandise, or services to the
ultimate consumer. Retailers perform specific activities, such as
anticipating customers’ wants, developing assortments of products,
acquiring market information, and financing. A common perception is
that retailing involves only the sale of products in stores. However, it
also includes the sale of services such as those offered at a
restaurant, parlour, or by car rental agencies. The selling need not
necessarily take place through a store.

Retailing encompasses selling through the mail, the Internet, door-

to-door visits—any channel that could be used to approach the

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consumer. When manufacturers like Dell Computers sell directly to
the consumer, they too become retailers.

Retailing Concepts- Introduction

Retailing is a convenient, convincing and comfortable method of
selling goods and services. Retailing, though as old as business, trade
and commerce has now taken new forms and shapes. This is because
of new management techniques, marketing techniques and also due to
ever changing and dynamic consumer psychology.

Meaning of Retailing:
Retailing is one area of the broader term, e-commerce. Retailing is
buying and selling both goods and consumer services. With more
number of educated and literate consumers entering the economy and
market, the need for reading the pulse of the consumers has become
very essential.

Retail marketing is undergoing radical restructuring. This is because of

increase in gross domestic product, increase in per capita income, and
increase in purchasing power and also the ever changing tastes and
preferences of the people. The entry of plastic money, ATMs, credit
cards and debit cards and all other consumer finances, the taste for
the branded goods also added for the evolution of retail marketing.

Retail marketing is not just buying and selling but also rendering all
other personalized consumer services. With the RM picking up it has
given a new look for various fast moving capital goods (FMCG) goods.
This not only increased the demand for various goods in the market
but also made retail marketing the second largest employment area,
the first being agriculture.

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Definition and Scope of Retailing:
Retail Industry, one of the fastest changing and vibrant industries in
the world, has contributed to the economic growth of many
countries. The term 'retail' is derived from the French word retailer
which means 'to cut a piece off or to break bulk'. In simple terms, it
implies a first-hand transaction with the customer.

Retailing can be defined as the buying and selling of goods and

services. It can also be defined as the timely delivery of goods and
services demanded by consumers at prices that are competitive and
affordable.

Retailing involves a direct interface with the customer and the

coordination of business activities from end to end- right from the
concept or design stage of a product or offering, to its delivery and
post-delivery service to the customer. The industry has contributed to
the economic growth of many countries and is undoubtedly one of the
fastest changing and dynamic industries in the world today.

Types of Retail Operations:

Retail operations enable a store to function smoothly without any

hindrances. The significant types of retail operations consist of:

Department store
Specialty store

Discount/Mass Merchandisers Warehouse/Wholesale clubs Factory

outlet Retail Management System targets small and midsize retailers
seeking to automate their stores. The package runs on personal

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computers to manage a range of store operations and customer
marketing tasks, including point of sale; operations; inventory control
and tracking; pricing; sales and promotions; customer management
and marketing; employee management; customized reports; and
information security.

The Emerging Sectors in Retailing:

Retailing, one of the largest sectors in the global economy, is going
through a transition phase not only in India but the world over. For
a long time, the corner grocery store was the only choice available to
the consumer, especially in the urban areas. This is slowly giving way
to international formats of retailing. The traditional food and grocery
segment has seen the emergence of supermarkets/grocery chains
(Food World, Nilgiris, Apna Bazaar), convenience stores and fast-food
chains.

It is the non-food segment, however that foray has been made into
a variety of new sectors. These include lifestyle/fashion segments
(Shoppers' Stop, Globus, LifeStyle, Westside), apparel/accessories
(Pantaloon, Levis, Reebok), books/music/gifts (Archies, MusicWorld,
Crosswords, Landmark), appliances and consumer durables (Viveks,
Jainsons, Vasant & Co.), drugs and pharmacy (Health and Glow,
Apollo).

The emergence of new sectors has been accompanied by changes in

existing formats as well as the beginning of new formats:

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Hypermarts
Large supermarkets, typically 3,500-5,000 sq. ft. Mini
supermarkets, typically 1,000-2,000 sq. ft.

Convenience stores, typically 750-1,000sq. ft.

Discount/shopping list grocer

The traditional grocers, by introducing self-service formats as well as

value-added services such as credit and home delivery, have tried to
redefine themselves. However, the boom in retailing has been confined
primarily to the urban markets in the country. Even there, large
chunks are yet to feel the impact of organised retailing. There are two
primary reasons for this. First, the modern retailer is yet to feel the
saturation' effect in the urban market and has, therefore, probably
not looked at the other markets as seriously. Second, the modern
retailing trend, despite its cost- effectiveness, has come to be identified
with lifestyles.

In order to appeal to all classes of the society, retail stores would have
to identify with different lifestyles. In a sense, this trend is already
visible with the emergence of stores with an essentially
`value for money' image. The attractiveness of the other stores
actually appeals to the existing affluent class as well as those who
aspire for to be part of this class. Hence, one can assume that the
retailing revolution is emerging along the lines of the economic
evolution of society

Theories of structural changes of retailing:

The evolution of RM has taken a fantastic transition from traditional
methods to modern thinking. Starting as primary or traditional
retailing with melas, fairs, jataras, weekly bazaars, rural fairs to

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mom and pop shop kirana stores the journey further reached to public
distribution systems ( PDS) Khadi outlets, co- operative stores and
finally reached the level of shopping malls , bazaars, super bazaars
and special bazaars.

Traditional- melas, Fairs, weekly Bazaars, Rural fairs. Indegenous-

mom and pop, kirana stores Neighbor stores. Contemporary- PDS,
Khadi outlets, co-operative stores Modern Retailing- shopping malls,
Bazaars, Super Bazaars, Special bazaars.

Retail store operations:

When retail-marketing space is a best shopping zone for the

consumers, it is quite challenging to the businessman. It has to
ensure not only product availability but also make the shopping more
creative and pleasurable. RM has to take care of various areas like,

Store administration and management Inventory and stock

management Managing of receipts
Theft management

Customer service

Sales promotion

Employee morale

RM is once again a wonderful economic activity that creates a win win

situation. It brings not only the success of the businessman but also
the success of both consumer and the employees. This is possible only
if there is product and price satisfaction.

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1. Store administration and management- this involves cleanliness,
discipline, proper documentation, no objection certification for various
products and skilful management of products and personnel.

Inventory management- it becomes the duty of the retail manager to

check day to day and time to time the stock so as to ensure the
product is made available at the counters. Not only the expected
product availability has to be maintained but also the quality and
shelf life has to be guaranteed. Inventory has to be evaluated
correctly and receipts have to be properly maintained. With retail
marketing shopping has taken a trendy and pleasurable affair. With
all these changes customer service has become the most important
service to be rendered in the marketing field. The customer has to be
given maximum possible choice with a blend of perfect sales
promotion from the side of the retailer. So the overall picture of retail
stores promotion has become a exclusive area of management.

All other 5 points to be detailed

Characteristics of Retailers
1. A retailer is the link between a wholesaler and the ultimate
consumer and he is the last intermediary in distribution.

2. A retailer buys goods from wholesaler in bulk and resells them to

consumers in small quantities.

3. A retailer maintains a personal contact with his customers.

4. A retailer makes sufficient shop display of his wares to attract

customers.

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5. Retailers perform all the marketing functions which a wholesaler
performs and in addition emphasizes on advertisement.

6. Retailers deal in a variety of merchandise and are often known as

general merchants.

7. Usually retailers are classified into two major groups, viz., small
scale retailers and large scale retailers.

8. Retailers aim at providing maximum satisfaction to their customers

in limited area.

9. Direct interaction with customers/end customers.

10. Sale volume large in quantities but less in monetary value

11. Customer service plays a vital role

12. Sales promotions are offered at this point only

13. Retail outlets are more than any other form of business

14. Location and layout are critical factors in retail business.

15. It offers employment opportunity to all age

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Functions of Retailers

(i) Buying

A retailer deals in a variety of merchandise and so he buys collects

large number of goods his stocks from a variety of wholesalers. He
selects the best from each store them and bears wholesaler and also
pays the most economical price. He brings all the goods marketing
risks, under one roof and then displays them in shop. Thus he
performs the twin functions of buying and assembling of goods.

(ii) Storage
After assembling the goods, the retailer stores them in his godown so
that they are held as reserve stocks for the future. Storage of goods in
ready stock is also necessary.

(iii) Selling
The ultimate aim of every retailer is to sell the goods he buys. So he
employs efficient methods of selling to dispose off his products at a
faster rate so that he can increase his turnover in a period of time.

(iv) Risk-bearing
The retailer bears the risk of physical damage of goods and also that of
price fluctuations. Moreover, risk of fire, theft, deterioration and
spoilage of goods has also to be borne by him. Changes in fashions,
tastes and demand of his customers also have an adverse effect on his
sales; nevertheless a retailer does not lose heart. He bears all these
trade risks which come in his way during the normal course of
business.

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(v) Grading and Packing
A retailer may have to perform the marketing functions of branding,
grading and packaging when lie deals with ungraded goods received
from producers.

(vi) Grant of Credit

Credit sales offer a lot of convenience to salaried and wage-earning
people. A credit sale is a sales promotion device, for it encourages
permanent and regular customers to deal with one retailer. People who
“run an account” with the retailer go to one shop. For the sale of
durable and costly goods to consumers, a hire-purchase or an
installment sale facility is offered. In its absence, the sale of costly
consumer durable goods may not be possible on a large scale. Many
people buy goods on hire-purchase or HP.

(vii) Guide to Wholesaler or Producer

Manufacturers and wholesalers can secure first-hand information of
the wants of con- sumers from retailers, because retailers have
personal contacts with their consumers. They can guide
manufacturers to produce those articles which are likely to be in great
demand in the near future due to changes in the tastes and habits of
consumers.
The retailer is the best source for the determination of the pulse of
demand, e.g., changing consumer preferences and tastes, and changes
in fashions. Marketing plans are based on probable consumer
demand.

(viii) Last Outlet in the Chain of Distribution

In relation to producers and wholesalers, retailers act as the last
outlet for the distribution of goods within the country. A retailer is

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the connecting link between the wholesaler and the consumers.
Individual sales in small quantities are the responsibility of the
retailer. In the absence of retailers, it would be impossible to
distribute goods to ultimate consumers, and most of our wants will
remain unsatisfied. In short, the entire trade will be paralyzed.

(ix) Advertising, Salesmanship and Sales Promotion

Manufactured goods are worthless unless they pass the acid test of
retail distribution. The retailer must employ efficient methods of
promotion, i.e., salesmanship, advertising and sales promotion.
Nothing can be sold without the means of promotion or means of
marketing communication.

History of Retail Management:

Retail marketing started from Mediterranean regions and spread to

Egypt and Babylonia. For over 2000 years Retail marketing
flourished in Rome. After the destruction of Roman Empire retailing
spread across the globe and Romans are the first ones to conduct
sophisticated retailing. As sophistication and human relations go
hand in hand Retail marketing has got lot to do with the psychology
of human behaviour. So retail marketing can be conveniently called
has psychology of marketing.

Trends in retailing: Retail Marketing is largely based on three Vs-

Value, Volume and Variety. Though the Retail marketing had the
quantitative development across the globe, the quality is no doubt
being compromised with the Globalization.International quality
products are competing with indiginised products. This variation in
size, quality and competition has made Indian market face ridiculous
growth. As the competition is between international and indiginised

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products, its taking a great toll on both the sectors.

With the big giants entering the market, there is a grave competition
in the Indian Economy. After 1995 the great companies like Food
world, Reliance, Planet M, Music World and many others also
entered the retail market. The visibility and the craze to remain in
the forefront of business has made many of the giant companies to
move from manufacturing to front line retailing. With this Retailing
has become prominent giving world class shopping experience to the
customers under one roof.

Indian retailing, thus enjoys many unique features, is still done in a

primitive way. Barring a few exceptions, Indian retailers, particularly
FMCG retailers, are not in a position to implement world-class
practices of supply chain management. The concepts of Quick
Response or Efficient Consumer Response are unheard of in Indian
retailing. The two bases of modern retailing management, the
Electronic Data Interface and a mutually respectable partnership
among retailers and suppliers (the manufacturers) are missing to a
great extent in Indian context. Also, Indian marketing channel
members are performing some unnecessary tasks, which makes the
channel structure heavy and inefficient. Though these inefficiencies
are observed in all retailing irrespective of industry, the symptoms are
more evident in Indian FMCG retailing. Inefficiency in retailing leads
to lower profitability of the retailers and lower service outputs for the
consumers.

Ways and means to strengthen the position of the retailing industry,

doing away with the causes for the inefficiencies, therefore, are to be
taken up in an urgent manner. Such measures may include

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establishment of retailers co-operatives, merger and buy-out, use of
technology to the greatest possible extent, setting up of nonstore
retailing centers and increase in franchisee network.

Definition, Types, and Examples of Retailing

Retail is the sale of goods to end users, not for resale, but for use and
consumption by the purchaser.

Retail involves the sale of merchandise from a single point of

purchase directly to a customer who intends to use that product. The
single point of purchase could be a brick-and-mortar retail store, an
Internet shopping website, a catalog, or even a mobile phone.

The retail transaction is at the end of the chain.

Manufacturers sell large quantities of products to retailers, and

retailers attempt to sell those same quantities of products to
consumers.

Why Is Retailing Is Important?

Retailers are the final link in the supply chain between
manufacturers and consumers. Retailing is important because it
allows manufacturers to focus on producing goods without having to
be distracted by the enormous amount of effort that it takes to
interact with the end-user customers who want to purchase those
goods.

Retailers should make the purchase of goods easy for the consumer.
That's why retail stores have salespeople, why Internet shopping
websites have customer service instant chat popups, and why catalogs

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have descriptions, photos, and toll-free phone numbers.

Retailing is about displaying products, describing the features and

benefits of products, stocking products, processing payments and
doing whatever it takes to get the right products at the right price to
the right customers at the right time.

Some retailers offer additional services to the retail transaction like

personal shopping consultations, and gift wrapping to add something
extra to the retail customer experience and exceed the retail customer
experience.

What's the Difference between Retail and Wholesale?

Wholesalers sell in large bulk quantities, without worrying about many

of the aspects of retailing that consumers expect like visual
merchandising.

Wholesalers do not want to deal with a large number of end-user

customers. Rather, their goal is to sell large quantities to a small
number of retailing companies.

It is rare for a wholesaler to sell goods directly to consumers. The

exception to that would be membership warehouse clubs like Costco,
Sam's and Bj's Wholesale. These members-only retail stores are a
hybrid of wholesaling and retailing in that they sell directly to
consumers, but they sell in large quantities, which often allows them
to sell at prices that are lower than other retailers that sell in small
quantities from impeccably merchandised stores in high-rent shopping
districts.

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The big difference between wholesale and retail is in the price. The
retail price is always more than the wholesale price. The reason for
this is because the added cost of selling merchandise to end-user
customers - labor, rent, advertising, etc. - is factored into the pricing of
the merchandise. The wholesaler doesn’t have to deal with such
expenses, which allows him to sell goods at a lower cost.

How Does The Retail Supply Chain Work?

The retail supply chain consists of manufacturers, wholesalers,
retailers and the consumer (end user). The wholesaler is directly
connected to the manufacturer, while the retailer is connected to the
wholesaler, and not to the manufacturer.

Here are the roles of the key players in a typical retail supply chain:

Manufacturers – Produce the goods, using machines, raw materials,

and labor

Wholesalers – Purchase finished goods from the manufacturers and

sell those goods to retailers in large bulk quantities

Retailers – Sell the goods in small quantities to the end-user at a

higher price, theoretically at the
MSRP (Manufacturers Suggested Retail Price).

Consumer – End user who buys the goods (or “shops”) from the
retailer for personal use.

There are exceptions to this traditional supply chain, however. Some of

the world's largest retail companies like Walmart, and Amazon.com, for

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example, are large enough to deal directly with manufacturers, without
the need for a wholesaler in the middle of the transaction.

What are Different Types of Retail Stores?

Here are some examples of the different types of brick-and-mortar
retail stores where consumers can purchase products for immediate
use or consumption.

Department Stores
Sell a wide range of merchandise that is arranged by category into
different sections of the physical retail space. Some department store
categories include shoes, clothing, beauty products, jewelry,
housewares, etc. Examples of department store retailers include
Macy's, Nordstrom,
and jcpenney, to name just a few.

Grocery Stores and Supermarkets

Sell all types of food and beverage products, and sometimes also home
products, clothing, and consumer electronics as well.

Warehouse Retailers
Large no-frills warehouse-type facilities stocked wth a large variety of
products packaged in large quantities and sold at lower-than-retail
prices

Specialty Retailers
Specialize in a specific category of products. Toys ‘R’ Us, Victoria's
Secret, and Nike are examples of specialty retailers.

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Convenience Retailer
Usually part of a retail location which sells gasoline primarily, but also
sell a limited range of grocery merchandise and auto care products at a
premium "convenience" price from a brick-and- mortar store

Discount Retailer – Sell a wide variety of products are often private

labeled or generic brands at below-retail prices, Discount retailers like
Family Dollar, Dollar General , and Big Lots will often source closeout
and discontinued merchandise at lower-than-wholesale prices and
pass the savings onto their customers.

Mobile Retailer - Uses a smartphone platform to process retail

transactions and then ships the products that were purchased directly
to the customer.

Internet E-tailer –Sell from an Internet shopping website and ship the
purchases directly to customers at their homes or workplaces and
without all the expenses of a traditional brick-and- mortar retailer,
usually sell merchandise for a lower-than-retail price

RETAIL MANAGEMENT
Retail Management is the process which helps the customers to
procure the desired merchandise form the retail stores for their
personal use. It includes all the steps required to bring the customers
into the store and fulfill their buying needs. Retail management saves
time and ensures the customers easily locate their desired
merchandise and return home satisfied. Fashion Retail Management
gives insight into the principles of fashion marketing, retail buying
and merchandising and imparts basic fabric knowledge - from fiber to

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fabric and fabric to garment. It gives an overview of the concept of
visual merchandising and lays emphasis on customer relationship
management, brand management and sales management.

RETAIL MARKETING
Retail is the sale of goods and services from businesses to an end user
(called a customer). Retail marketing is the process by which retailers
promote awareness and interest of their goods and services in an effort
to generate sales from their consumers. There are many different
approaches and strategies retailers can use to market their goods and
services.

Retail marketing is the range of activities undertaken by a retailer to

promote awareness and sales of the company’s products. This is
different from other types of marketing because of the components of
the retail trade, such as selling finished goods in small quantities to
the consumer or end user, usually from a fixed location. Retail
marketing makes use of the common principles of the marketing mix,
such as product, price, place and promotion. A study of retail
marketing at university level includes effective merchandising
strategies, shopping and consumer behavior, branding and
advertising. Retail marketing is especially important to small
retailers trying to compete against large chain stores.

RETAILING AS CAREER
Retail industry is one of the fastest evolving industries in Industry. The
Indian retail industry is undergone drastic changes with the
consumers looking at convenience with multiplicity of choices under
one roof. It generates huge employment opportunities. This has
changed the face of retailing in India. As the sector is booming in India,

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a career in retail sector is promising a growth potential for the
ambitious youngsters.

The candidates are trained in supply chain management, finance

management, marketing information, electronic retailing, marketing
and business communication, customer relationship etc. With rapidly
expanding departmental stores and huge shopping malls, plenty of job
opportunities are opening all over India.

Career in retail sector can be developed as store manager, retail

managers, retail buyers, retail designers, visual merchandisers,
merchandise planning and product developers.

Some of the career options in retailing are

1. Sales and related jobs
Sales are the main aspect of retail industry. It is an important part of
store operations. The important duty of the sales staff is to sell the
products to the customers. Other than sales, the related job involves,
sales associate, cashier for receiving payments by cash, check, debit
card, or credit card and operating cash registers etc., The retail staff
also discharges duties like preparing displays, making deposits at
cash office, taking inventory etc. depending upon their working hours.
The retail staff should be well equipped with excellent communication
skill. In a very short span of time retail revolution has taken place.

2. Store manager
A store manager is the person ultimately responsible for the day- to-
day operations or management of a retail store. All employees working
in the store report to the store manager. Store manager is responsible
for managing human resource, hiring team, indulging training and

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development programmes, managing profit and loss of the store,
banking, and handling customer complaints.

3. Visual merchandiser
Visual merchandising is the activity of promoting the sale of goods.
Visual merchandising is an art intended to increase sales. It is a tool
to achieve sales target. It is the art of displaying merchandise in such
a manner that appeals to the eyes of the customer. Visual
merchandiser is responsible for merchandising. Creativity is essential
to be a good visual merchandiser. Visual merchandising includes
window displays, signs, interior displays etc. A combination of colour
and theme plays an important role in visual merchandising.

4. Regional Sales Manager

A regional sales manager reports to national sales manager. A regional
sales manager requires excellent interpersonal and communication
skill. A Retail Sales Manager is responsible for the day-to-day
operations of a retail store. They also must have computer skills and
be patient with both employees and customers. Retail Sales Managers
must be able to motivate and organize their employees. A retail sales
manager must have obtained a degree in marketing, business or
communication. Regional managers are responsible for a group of
retail stores. They visit stores to observe performance and to help
solve problems. Regional managers report store performance to
company headquarters and make important decisions concerning
employees.

5. Finance and Accounting

A retail store requires well run financial department. A financial
manager is responsible for keeping the records of accounts of income,

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paying expenses, maintaining financial records, cash flow control,
banking etc. The financial manager must be efficient enough to handle
the risk of debts.

6. Human resources
Human resource is one of the most important aspects in retail
industry. This aspect focus on recruiting right people for a particular
job, because the success of retail depends upon right sales force. The
HR function includes recruitment, selection, training and development
programmes, compensation and benefits etc. proper knowledge is
require on the part of HR manager to understand qualification and
qualities to hire efficient staff. HR function is in dealing with staff
grievances and any disciplinary matters.

7. Logistic
The logistics process consists of the process of integration of several
aspects such as material handling, warehousing, information,
transportation, packaging and inventory. The logistics department is
entrusted with the responsibilities of ensuring that the entire process
of logistics is maintained and developed in accordance with the goals
of the business at an economical cost.

8. Marketing
Marketing .department includes functions like advertising, sales
promotion and public relation. People with specialized knowledge,
creativity etc are required. Advertising managers direct a firm’s
advertising and promotional campaign. Marketing managers work with
advertising and promotion managers to promote the firm’s products
and services.

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 RETAIL CONSUMER BEHAVIOUR

Customers are the most important people for any

organization. The success of any organization is dependent on its
satisfied customers. Consumers can be made happy only if their
needs are met. Therefore, one of the primary goals of any
marketing strategy should be to identify and meet the needs of the
consumers. When consumers disappear, the organization should
also disappear from the market. Hence, every organization should
treat consumer with respect and dignity. In this direction, the
organizations should treat customer service as an investment and
not a cost.

The expectations of modern consumers are changing

dramatically. Consumers are becoming more informed. Social
networks and information technology have made them acquire
information more quickly than before. They can get the feedback
of various products through social networks. Consumers do not
buy products or services, they buy benefits. It means, consumers
purchase products to solve problems or to increase the
opportunities.

Modern consumers demand total benefits from a product.

Total benefit includes tangible as well as intangible benefits.
Tangible benefits are measurable whereas intangible benefits are
associated with feelings that a consumer experiences when owning
and using product or a service. For example, a watch keeps
accurate time (tangible) its brand name speaks about the
reputation of the manufacturer (intangible).

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 Therefore, every marketer is competing to serve customers in
a better way to establish long – term relationship with them.

Meaning of Consumer Behaviour :

The consumer behaviour is a decision – making process. It
includes the behaviour that the consumers display in searching,
collecting the information, evaluating, purchasing, using, post
purchase evaluation and disposing of products and services. They
put their efforts in order to satisfy their needs, wants and desire.

In focuses on how individuals make decisions to spend their

available resources (time, money, effort) on consumption – related
items that includes what they buy, why they buy, when they buy it,
where they buy it, how often they buy it, how often they use it,
how they evaluate it after the purchase, and the impact of such
evaluations on future purchases, and how do they dispose it.

Definitions of Consumer Behaviour :

According to Kotler –
“Consumer behaviour is the study of how people buy, what they
buy, when they buy and why they buy.”

According to Solomon –

Consumer behaviour is the study “of the processes involved when

individuals or groups select, purchase, use, or dispose of
products, services, ideas, or experiences to satisfy needs and
desires.”

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According to Schiffman –

“The behaviour that consumers display in searching for,

purchasing, using, evaluating, and disposing of products and
services that they expect will satisfy their needs.”

According to Engel –

Consumer behaviour involves “Those acts of individuals

directly involved in obtaining, using, and disposing of economic
goods and services, including the decision processes that precede
and determine these acts.”

Buying Decision Process:

The buying decision process is the decision-making process used
by consumers regarding market transactions before, during, and
after the purchase of a good or service. It can be seen as a
particular form of a cost–benefit analysis in the presence of
multiple alternatives.

Common examples include shopping and deciding what to eat.

Decision-making is a psychological construct. This means that
although a decision can not be "seen", we can infer from
observable behaviour that a decision has been made. Therefore, we
conclude that a psychological "decision-making" event has
occurred. It is a construction that imputes commitment to action.
That is, based on observable actions, we assume that people have
made a commitment to effect the action.

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There are six stages to the consumer buying process, and as a
marketer:

1.Problem Recognition
Put simply, before a purchase can ever take place, the customer
must have a reason to believe that what they want, where they
want to be or how they perceive themselves or a situation is
different from where they actually are. The desire is different from
the reality – this presents a problem for the customer.

However, for the marketer, this creates an opportunity. By taking

the time to “create a problem” for the customer, whether they
recognize that it exists already or not, you’re starting the buying
process. To do this, start with content marketing. Share facts and
testimonials of what your product or service can provide. Ask
questions to pull the potential customer into the buying process.
Doing this helps a potential customer realize that they have a need
that should be solved.

2. Information Search
Once a problem is recognized, the customer search process begins.
They know there is an issue and they’re looking for a solution. If it’s
a new makeup foundation, they look for foundation; if it’s a new
refrigerator with all the newest technology thrown in, they start
looking at refrigerators– it’s fairly straight forward.

As a marketer, the best way to market to this need is to establish

your brand or the brand of your clients as an industry leader or
expert in a specific field. Methods to consider include becoming a
Google Trusted Store or by advertising partnerships and sponsors

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prominently on all web materials and collaterals.

Becoming a Google Trusted Store, like CJ Pony Parts – a leading

dealer of Ford Mustang parts – allows you to increase search
rankings and to provide a sense of customer security by displaying
your status on your website.

Increasing your credibility markets to the information search

process by keeps you in front of the customer and ahead of the
competition.

3. Evaluation of Alternatives
Just because you stand out among the competition doesn’t mean a
customer will absolutely purchase your product or service. In fact,
now more than ever, customers want to be sure they’ve done
thorough research prior to making a purchase. Because of this,
even though they may be sure of what they want, they’ll still want
to compare other options to ensure their decision is the right one.

Marketing to this couldn’t be easier. Keep them on your site for

the evaluation of alternatives stage. Leading insurance provider
Geico allows customers to compare rates with other insurance
providers all under their own website – even if the competition
can offer a cheaper price. This not only simplifies the process, it
establishes a trusting customer relationship, especially during the
evaluation of alternatives stage.

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4. Purchase Decision
Somewhat surprisingly, the purchase decision falls near the
middle of the six stages of the consumer buying process. At this
point, the customer has explored multiple options, they understand
pricing and payment options and they are deciding whether to
move forward with the purchase or not. That’s right, at this point
they could still decide to walk away.

This means it’s time to step up the game in the marketing

process by providing a sense of security while reminding
customers of why they wanted to make the purchase in the first
time. At this stage, giving as much information relating to the need
that was created in step one along with why your brand, is the best
provider to fulfill this need is essential.

If a customer walks away from the purchase, this is the time to

bring them back. Retargeting or simple email reminders that
speak to the need for the product in question can enforce the
purchase decision, even if the opportunity seems lost. Step four is
by far the most important one in the consumer buying process.
This is where profits are either made or lost.

5. Purchase
A need has been created, research has been completed and the
customer has decided to make a purchase. All the stages that lead
to a conversion have been finished. However, this doesn’t mean it’s
a sure thing. A consumer could still be lost. Marketing is just as
important during this stage as during the previous.

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Marketing to this stage is straightforward: keep it simple. Test
your brand’s purchase process online. Is it complicated? Are there
too many steps? Is the load time too slow? Can a purchase be
completed just as simply on a mobile device as on a desktop
computer? Ask these critical questions and make adjustments. If
the purchase process is too difficult, customers, and therefore
revenue, can be easily lost.

6. Post-Purchase Evaluation
Just because a purchase has been made, the process has not
ended. In fact, revenues and customer loyalty can be easily lost.
After a purchase is made, it’s inevitable that the customer must
decide whether they are satisfied with the decision that was made
or not. They evaluate.

If a customer feels as though an incorrect decision was made, a

return could take place. This can be mitigated by identifying the
source of dissonance, and offering an exchange that is simple and
straightforward. However, even if the customer is satisfied with his
or her decision to make the purchase, whether a future purchase
is made from your brand is still in question. Because of this,
sending follow-up surveys and emails that thank the customer for
making a purchase are critical.

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Implication of Consumer Buying Process on Retailing

The retailer must focus on the customer’s buying experience.

To manage a customer’s experience, retailers should understand
what “customer experience” actually means. Customer Experience
Management is a strategy that focuses the operations and
processes of a business around he needs of the individual
customer. It represents a strategy that results in a win – win value
exchange between the retailer and its customers. The goal of
customer experience management is to move customers from
satisfied to loyal and then from loyal to advocate. This paper
focuses on the role of macro factors in the retail environment and
how they can shape customer experience and behaviors.

The major factors influencing consumer buying decision process are

as follows :

01. Brand Experience –

The customer comes to a retailing environment with

perceptions about two types of brands: the retail brand and the
manufacturer or service brand that is sold in the retail stores.
Here, the discussion is about the retail brand customer experience,
although the ideas put forth below could be investigated in relation
to the manufacturer or service brand as well. The customer brand
perceptions of the retailer, when primed prior to shopping
experience, might significantly influence the customer’s experience.
It is also important to consider the reinforcing effects of the
customer’s experience and the brand over time.

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02. Price Experience –

A lot rides on how a retailer sets its prices. The three other P‟s
create value for the seller the fourth P of price captures value. In
addition, this is the only P that earns revenue for the retailer.
When retailers price a product or service too high, consumers view
it as a poor value and will not buy. A price set too low may signal
low quality, poor performance or other negative attributes about the
product or service.

The consumer’s store price image likely results from a greater

the number of low priced products at a store, the lower price image
among knowledgeable consumers. Research suggests that retailers
therefore should carry some high – priced merchandise to extract
rents from loyal customers and some low – priced merchandise to
attract new ones, but more work is need in this area.

03. Promotion Experience –

Consumer promotions also take several forms, including

price promotions, loss leaders, and in – store displays. Meta
analyses show that the immediate increase in sales of a promoted
item is substantial. The accounting records pertaining to trade
promotions remain inadequate for deriving a definite answer.

04. Supply Chain Management Experience –

Most of the researchers‟ centers on what happen at the front –

end of the retail store, supply chain management occurs at the
back end. For decades, retail supply chain and logistics issues

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seemed somehow less important than other activities such as
promotion, pricing or customer service. But this erroneous
perception no long exists. Supply chain issues, from both the
more managerial partnering side and technical operations side,
have proven important sources of competitive advantage for any
retailers.

05. Location Experience –

Retailing academics and practitioners seem always to emphasize

“location, location, location” as the key to success. An important
research advance considers the role of travel time on consumers‟
choice of retail formats and the related retailing implications
because consumers value their time. The location decision likely
has major ramification for price, promotion and merchandising
decisions.

06. Advertising Experience –

During the growth process, marketers recognized that the

internet was a medium for reaching millions of potential
customers. Since then, marketers have adapted value based
advertising strategies to the internet. Traditional consumers
behaviour literature would suggests that intense product
information is vital for high involvement product web sites, while
entertainment content may be fit for low involvement product sites.
There are various types of online advertising, including “emails,
newsletters, screensavers, e- sponsoring, asynchronous and
synchronous chat groups, infomercials, online games and web sites.”

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07. Packaging and Labeling Experience –

Packaging plays a major role when products are purchased.

As a fifth ‘P’ of marketing, packaging refers to the activities of
designing and producing the container or wrapper for a product. It
may be primary, secondary and shipping to perform the objectives
as containment, protection, identification, communication,
promotion and product differentiation.

Good packaging also provides information based on truth, it

must be economical, attractive, convenient, protective and
transparent. Packaging is integral to boosting perceptions of
safety and will therefore be an important part of more concerted
efforts to regain consumer trust going forward.

08. Service Mix Experience –

Customer service is the ability of an organization to

constantly and consistently give the customer what they want and
need. Customer satisfaction is a key consequence of service quality
and can determine the long – term success of a service
organization. When translated to services, a distinction between
service quality and customer satisfaction needs to be made.

Furthermore, one must differentiate between service

expectations and service perceptions. While service expectations are
a combination of customer’s predictions about what is likely to
happen during a service transaction as well as the wants and
desires of that customer, service perceptions can be defined as a
customer’s global judgments or attitudes, which relate to the

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superiority of a service.

In general, customer satisfaction is affected by customer

expectation or anticipation prior to receiving a service and can be
approximated by the following equation.

Customer Satisfaction = Perception of Performance – Expectations

09. Atmosphere Experience –

Consumer spending behaviour can be significantly influenced by

the store atmosphere and the customer mood. Customers require
a store layout that maximizes the number of products seen within
the context of a customers’ need for the product. Customers who
experience a form of personal control, whether in orienting
themselves to the store section they need to go to or in finding
the products they want, generally feel good about the store. Good
feelings lead to more purchases, especially if products are
presented within a display that shows the potential usefulness of
the product for them.

Influence of Group and Individual Factors on Customer are - :

I. Cultural Factors
II. Psychological Factors
III. Social Factors
IV. Situational Factors
V. Personal Factors

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I. Cultural Factors –

Cultural factors comprise of set of values and ideologies of a

particular community or group of individuals. It is the culture of an
individual which decides the way he / she behaves. Culture factors
have a significant effect on an individual‟s buying decision. Every
individual has different sets of habits, beliefs and principles which he
/ she develop from his family status and background. What they
see from their childhood becomes their culture.

II. Psychological Factors –

Although marketers can influence purchase decisions, a host of

psychological factors affect the
way people receive marketer‟s message. Among them are attitudes,
perception, learning and lifestyle.

1. Attitude : An attitudes is a person‟s enduring evaluation of his

or her feelings about and behavioral tendencies toward an object
or idea. Attitudes are learned and long lasting, and they might
develop over a long period of time, though they can also abruptly
change. For instance, we like this class, but we don‟t like the
instructor. We like where we live, but we don‟t like the weather.
2. Perception : Perception is the process by which we select,
organize, and interpret information to
form a meaningful picture of the world. Perception in marketing
influences our acquisition and consumption of goods and services
through our tendency to assign meaning to such things as color,
symbols, taste and packaging.

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 3. Learning : Learning refers to a change in a person‟s thought
process or behaviour that arises from
experience and takes place throughout the consumer decision
process.

4. Lifestyle : Lifestyle refers to the way consumers spend their

time and money to live. For many consumers, the question of
whether the product or service fits with their actual lifestyle,
which may be fairly sedentary or their perceived lifestyle, which
might be outdoorsy, is an important one.

III. Social Factors –

The consumer decision process is influenced from within by

psychological factors, but also by the
external, social environment, which consists of the customer‟s family,
reference groups and culture.

1. Family : Many purchase decisions are made about products or

services that the entire family will consume or use. When families
make purchase decisions, they often consider the needs of all the
family members. In choosing a restaurant, for example, all the
family members may participate in the decision making.
2. Reference Groups : A reference group is one or more persons
whom an individual uses as a basis for comparison regarding
beliefs, feelings, and behaviors. A consumer might have various
reference groups, including family, friends, co-workers or famous
people the consumer would like to emulate. Reference groups provide
information to consumer‟s directly through conversation or
indirectly through observation. These reference groups affect buying

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 decisions by

a. Offering information.
b. Providing rewards for specific purchasing behaviors.
c. Enhancing a consumer’s self-image.

IV. Situational Factors –

Psychological and social factors typically influence the

consumer decision process the same way each time. For example,
your motivation to quench your thirst usually drives you to drink a
Coke or a Pepsi and your reference group at the workplace coerce
you to wear appropriate attire. But sometimes, situational factors
or factors specific to the situation, override, or at least influence,
psychological and social issues. These situational factors are :

1. Purchase Situation : Customers may be predisposed to purchase

certain products or services because of some underlying
psychological trait or social factor, but these factors may change in
certain purchase situations.

2. Shopping Situation : Consumers might be ready to purchase a

product or service but be completely derailed once they arrive in
the store. Marketers use several techniques to influence consumers
at this choice stage of the decision process.

3. Store Atmosphere : Some retailers and service providers have

developed unique images that are based at least in part on their
internal environment, also known as their atmospherics. Research
has show that, if used in concert with other aspects of a retailer‟s

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 strategy, music, scent, lighting and even color can positively
influence the decision process.

4. Sales People : Well – trained sales personnel can influence the

sale at the point of purchase by education consumers about
product attributes, pointing out the advantages of one item over
another and encouraging multiple purchases.

5. Crowding : Customers can feel crowded because there are too

many people, too much merchandise, or lines that are too long. If
there are too many people become distracted and may even leave.
Others have difficulty purchasing if the merchandise is packed too
closely together.
6. Promotion : Retailers employ various promotional vehicles to
influence customers once they have
arrived in the store. An unadvertised promotion can alter a person‟s
preconceived buying plan.

7.Packaging : It is difficult to make a product stand out in the

crowd when it competes for shelf space with several other brands.
This problem is particularly difficult for consumer packaged
goods, such as groceries and health and beauty products.
Marketers therefore spend millions of dollars designing and
updating their packages to be more appealing and eye catching.

V. Personal Factors – Decisions and buying behaviour are

obviously also influenced by the characteristics of each consumer.

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1. Age : A consumer does not buy the same products or services
at 20 or 70 years. His lifestyle, values, environment, activities,
hobbies and consumer habits evolve throughout his life. For
example : during his life, a consumer could change his diet from
unhealthy products (fast food, ready meals etc.) to a healthier diet,
during mid-life with family before needing to follow a little later a
low cholesterol diet to avoid health problems.
2. Purchasing Power : The purchasing power of an individual
will have, of course, a decisive influence on his behaviour and
purchasing decisions based on his income and his capital. This
obviously affects what he can afford, his perspective on money
and the level of importance of price in his purchasing decisions.
3. Lifestyle : The lifestyle of an individual includes all of its
activities, interests, values and opinions. The lifestyle of a
consumer will influence on his behaviour and purchasing
decisions. For example, a consumer who does jogging regularly will
buy shoes, clothes and specific products etc.

4. Personality and Self – Concept : Personality is the set of traits

and specific characteristics of each individual. It is the product of
the interaction of psychological and physiological characteristics of
the individual and results in constant behaviors. It materializes
into some traits such as confidence, sociability, autonomy,
charisma, ambition, shyness, curiosity, adaptability etc.

Customer Shopping Behaviour - :

Store attributes are important to consumers when they
make the decision where to shop. Store attributes are presented
by retailers according to their specific functional strategies. Store

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attributes must be offered that are desired by the targeted
consumer. The challenge to retailers is to determine which store
attributes are relatively more important to the targeted consumer.
Providing appropriate store attributes is not enough to satisfy
consumers and guarantee store loyalty.

Maintaining the quality of these attributes is the hardest task

and critical to survival in the competitive nature of fashion
retailing. The present study is identifying the store attributes which
influence the customers for shopping behaviour. The retail
segments selected for this study were food and grocery, apparels,
jewelry and consumer durables and home appliances.

Types of Shoppers -:

01. The Mall Linger –

These shoppers take their time going through a store before
purchasing goods. Some of the studies conducted in America have
shown that shoppers who spend 30 to 60 minutes in a mall spend
an average of $72.70. If they linger three or more hours, the figure
jumps to $200.40. There floor plans are designed to keep
customers in the shop for hours, so that he will buy more.

02. Guerrilla Shopper –

It is the opposite of the mall lingerer. These shoppers‟ waits
until the last minute, especially around the holiday season and
then runs around desperately, trying to get all the shopping done
in one shot.

03. The Touchy – Feely Shopper –

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 He is a type of shoppers who would like to touch, pick and
feel the product before he buys it. Research shows that if a
customer touches or picks up merchandise he is more likely to buy
it.

04. The Sales Junkie –

These shoppers are subjected to a spillover effect. If they see

one bargain, they think everything in the store is a bargain, making
them appropriate to spend more money.

05. The Social Shopper –

This type of shopper enjoys shopping with friends and

almost never shops alone, they tend to make a lot of impulsive
purchases.

Factors Influence of Customer Shopping Behaviour - :

01. Retailer Product Mix Design -
Many retailers are looking for ways to “fine-tune” their
product mix while maintaining variety and differentiation.
Understanding which types of products have a higher likelihood of
being bought on impulse can aid retailers in making strategic
decisions about which products to add to or remove from store
shelves in order to increase sales.

02. Retailer Promotion Design –

Retailers must decide whether and what type of promotions
to run. Are consumers more likely to spontaneously add a product

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to their carts if the price has been cut or if the product is on
special display? Our study provides information on the
responsiveness of consumers to specific types of retail promotions
within an impulse buying context.

03. Overall Retail Performance –

Consumers make in-store purchase decisions in a complex
environment where a multiplicity of interrelated elements may
impel in impulse. Our findings inform retailers as to the relative
contribution of product – related factors versus of the store related
factors to an impulse purchase decision, providing them with a
better understanding.

04. Manufacturer Product Development –

Retail space is limited and manufacturers introduce
hundreds of new products each year. A growing number of
retailers are taking steps to better optimize their product portfolios
by weed out redundant or laggard SKUs (Stock-keeping units).

05. Understanding Consumer Buying Behaviour –

Both practitioners and academics are interested in learning
more about impulsive buying behaviour. While the literature is
rich with studies examining individual factors that lead to
impulsive buying behaviour, few studies attempt a comprehensive
approach to understanding the concurrent influences on a
consumer’s impulse buying decision as it occurs during a
shopping experience.

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06. Impulse Buying Behaviour –
Impulsive purchase decision as a purchase decision made in
the store for which there is no prior recognition of need. Impulse
purchases occur when a consumer sees a product in the store and
due to a strong urge to possess the item purchases it with little or
no deliberation. This type of buying behaviour consists of “relatively
rapid decision – making and a subjective bias in favor of immediate
possession”. It occurs without a lot of reflection.

Customer Service and Customer Satisfaction - :

Customer Service –
Customer service is a key competitive differentiator and
should be seen as a long-term commitment and will not succeed if
it is viewed only as a short term tactic. Ownership of the customer
service offer and the need for continuous improvement has to be
driven from the top of the organization whether the owner –
manager or the board.

Customer knowledge has to be updated constantly as their

view and behaviors change and that knowledge should be used to
drive retail customer service levels.

Determinants of Successful Customer Service : –

01. Define Service –

After you have determined that there are solid reasons to be
in field, the next step is to define the elements of great service. This
requires responses to the questions :

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What do your customers think is great service?
What do your customers want?
What creates loyalty?

02. Recognize Customers Want –

Pleasing customers, in whatever terminology you choose to
use, has been and continuous to be the overall goal of great
service. Delight is achieved when :

 Customers receive service beyond their normal expectations.

 Customers are “surprised” with pleasurable experience
leading to positive word of mouth.

03. Create Customer Loyalty –

Actions that produce customer loyalty are :

 Proactively providing information.

 Notifying the customer of new opportunities.
 Avoiding unpleasant surprises.
 Providing consistently good service.
 Creating person relationships.

04. Staples –
Staples are focal points for service. While they may be
simple and often overlooked, applying these staples regularly and
consistently will make the difference between mediocre and
excellent service. It includes :

 Be friendly.
 Establish rapport.

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  Listen to what a customer wants to tell you.
 Be especially kind when someone has experienced a loss.
 Provide information.
 Continually provide good service even in the tough times.
 Ignore customer mistakes.
 Bend the rules if you can.
 Tell the customer about a sale coming up or a new product or
service.

05. Demonstrate Personal Effectiveness –

Personal effectiveness creates a foundation for building
customer loyalty. The forum corporation, another top-notch
research firm, identifies the following areas for personal
effectiveness :

 Effective communication,
 Service attitude.
 Problem solving.
 Continuous learning.
 Integrity

06. Understand Customer Expectations – It includes,

Reliability : It means delivering what is promised.

Responsiveness : Doing it promptly.
Assurance : Knowing how to do it.
Empathy : Doing it with respect and understanding.
Tangibles : Ensuring that buildings, surroundings and materials
are attractive.

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07. Good First Impression –

The retailers must ensure that every frontline associates is

capable of making a good first impression. First opinions are
formed within the first 10 seconds. You never have a second
opportunity to make a warm and welcoming first impression.

08. Appreciate Customers –

Show appreciation to customers. Thanking customers in a

meaningful and thoughtful manner on every encounter. Make
customers feel important and appreciated.

09. Create a Working Culture –

Create a working culture whereby your associates are treated
as family and neighbors and they will, in turn, treat your
customers the same way. Customers notice and appreciate when a
company appreciates their associates.

10. Respond to Customers –

Answer questions from customers by direct inquiry and providing
them with additional useful information. Customers often enjoy
learning more about a potential purchase than what‟s written on a
tag or in a brochure.

11. Help Customers –

Understand that the underlying ingredient of customer
service is helping people. Make sure that every frontline associate
has a history of helping people. It will almost guarantee a great
customer service experience.

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12. Leverage the Return Counter –
Leverage the return counter in a retail store environment to
make customers feel comfortable about returning an item and
offering special attention to help them find what they need.
Customers don‟t like making returns. Make the return process an
enjoyable and non – defensive process. Customers will really
appreciate it.

Customer Satisfaction : -

Customer satisfaction is a marketing term that measures

how products or services supplied by a company meet or exceeds a
customer’s expectation.

According to Philip Kotler –

“If the product matches expectations, the consumer is

satisfied; if it exceeds them, the consumer is highly satisfied, if it
falls short, the consumer is dissatisfied”. Therefore, satisfaction is
measured based on two key variables viz., (i) Customer expectation
& (ii) Product performance.

Customer satisfaction, or dissatisfaction, is the feeling a

customer has about the extent to which their experiences with the
product have met their needs.

It is anticipated that higher satisfaction levels increase

customer loyalty, reduce price elasticity, protect existing market
share from competitors, lower transaction costs, reduce failure

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costs and the costs of attracting new customers and improve the
firm’s reputation.

Ways of Customer Satisfaction in Retail - :

As Mahatma Gandhi said, customers are the reason for every

business. Without them, there is no meaning in continuing the
business and customer satisfaction is what keeps them coming
back. It takes a tremendous effort to gain a new customer and only
seconds to lose one.

01. Segmentation –

Divide the market into suitable segments on which

organization will focus. It is necessary to develop different strategy
for each market segment. Company should use different marketing
approach, advertising and promotions for each customer segment.

02. Treat every customer as a valuable asset –

Every customer is important for the company. Whether a

customer buys goods worth Rs. 100 or Rs. 10,000, he is still a
customer to the organization. Never the less, company should
provide benefits, bonuses and extra service for the most valuable
customers.

03. Locate distribution centre’s near customers –

Company should ensure that the distribution centre‟s are easily

approachable by good number of

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customers. Location should have facilities like parking for vehicles,
nearness to public transport facility etc.

04. Enhance Customer Satisfaction –

Product quality alone will not help an organization to satisfy

its customers. Companies should also pay attention to service
quality also. This helps customer in enjoying total purchase
experience.

05. Product Design –

Companies should design the product with multiple

functions. Provide user related information like user guide,
warranty, complaint card, satisfaction feedback, etc.

06. Constant Market Research –

Company should conduct preliminary market research,

before the product or service is designed. This will help company to
understand exact customer requirement.

07. Build entry barriers –

Company should build entrance barriers for competitors by

enhancement of product or service advantages. In this direction,
company should be watching the market continuously to know the
changing need of the customer. +

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08. Avoid unnecessary promises –

Companies should not overstate the performance of the

product. This creates dissatisfaction in the minds of customers.

09. Apply integrated approach –

Company should be aware that satisfaction of customer

wants, needs and expectations is a never ending challenge. They
should strive to establish long – term business alliances with
customers. Company should create organization trademark and
preserve brand image.

10. Encourage Customer Feedback –

Company should encourage customers to offer feedback

about the product and service quality. Each feedback should be
viewed as an opportunity for improvement.

11. Customer Relationship Management –

Companies should treat each customer as a valuable asset.

Companies should maintain constant touch with these customers.
Companies should develop a habit of sending communication
frequently to these customers, so that customers will remember the
company.

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 STORE MANAGEMENT & VISUAL MERCHANDISING

Store management:
Duties and Responsibilities of store manager:
 Management of employees
 Maintaining the sales environment
 Cost minimization
 Recruitment, Training and Development
 Budgeting and Forecasting
 Implementing Marketing plans
 Team Leadership
 Maintaining Leave and Salary Record
 Holding Inventory
 Extending Customer Services

Store security:

 Appointment of uniformed security

 Thorough check at entry and exit point s
 Without uniformed security guards can be located in the
store
 Use of TV cameras can be beneficial to catch the stealers
 Cash deposits in banks must be made frequently
 Brighter lighting should be arranged
 Coordination between all security personnel
 Access to storage areas and ware houses should be
restricted

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Store record and accounting system:

1. Store functions
2. Pricing of purchased material.
3. Pricing of store returned material.
4. Material received account.
5. Issue of material from store.
6. Physical verification of store stock.

1. Store functions:
Store functions will be supervised by different persons and will
have separate sphere duties.
 Store Procurement
 Store Keeping
 Store Accounting

2. Pricing of purchased material.

 Local Purchases through Tender / Quotation.
 Purchase through Purchase Committee or through Petty
advances.
 Material Transferred in/from other WAPDA format ions.
 Foreign Material Purchase.

3. Pricing of store returned material.

 Un-used Material (Not needed now to be used in future).
 Defective / Damaged Material (To be used after repair).
 Scrape for disposal.

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Material at site will be kept only for immediate use for the ongoing
specific jobs. Otherwise, material returns to Store at month end
through Store Return Warrant (SRW).

4. Material Received Account.

 1st copy of SMB page attach with commercial invoice and

process for making payment by the Accounts Section.

 2nd copy of SMB page sent to Accounts Section along-wit h

GST invoice for posting in the Stock Value Ledger and
compiling GST input claim of the formation.
 3rd copy of SMB page sent to Store Section for posting of
receipt of material in the Stock Register along-with
following documents.
1. Purchase order
2. Invoice
3. Bill of entry.
4. Inspection Certificate.

 4th copy of SMB retain for office record. Based upon the office
copy procurement Section will prepare list of all the SMBs
recorded during the month and sent it to the Accounts Sect io
n and Store Section.

5. Issue of material from Store.

A. Issue of consumable material.

B. Issue of Spare Parts.
C. Issue of T&P

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D. Issue of Store to other Format ions.
E. Issue of Scrape for disposal.

6. Physical verification of Store Stock.

 The Procurement Section and Accounts Section will jointly

carry out physical verification of the store stock items by
classifying the material as follow: -
The stock item having unit price of Rs.50,001 and above will be
physically verified 100% in the month of June of each financial
year as first preference. The stock items having unit price of Rs.5
000 to Rs.50,000 will be physically verified 100% in 2nd
preference in June of each financial year. In 3rd preference the
store items having unit price less than Rs. 5,000 will be
physically verified at random basis during January to May of
each financial year.
 The difference identified by the physical verification committee
must be investigated by the authorized officer and
adjustment (recovery or write- off) must be made at the end of
financial year with the approval of competent authority as per
Rules and Procedure.

Coding system:
A code system should have the following characteristics to be
scientific and easily adoptable:

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 Simple to use: easy to understand with minimum and /or
no need for training,
 Flexible: ease to expand and accommodate more codes,
 Good formulation: adopted system should be able to be used
in all functional areas in the entire organizat ion.

Common Codification Systems

i. Alphabetical – the use of the letter of the alphabet as the
basis e.g. Iron ore rep. I-O etc
ii. Numerical – the use of the numbers as the basis of the codes
e.g. simple number 01, 02, or complex systems which combines
―/–strokes or―–― dashes e.g. 1-100, 2-200 etc

iii. Alpha-numeric – the combination of alphabets and numbers.

This is the mixing of numbers and letters of the alphabets e.g.
SP-11 etc
iv. Decimal – the use dash or stroke in the coding e.g. Main, Sub
I, sub II an sub III e.g. 47.1.1 etc
v. Brisch – this is the use of numeric system. It combines
numbers and decimals. E.g. 47.002

vi. Kodak – this originated by Eastman Kodak Co. of the USA.

This system borrows all the good points from all other systems. It
is much based on the numerical codification system and in the
place of decimals hyphens are used in the Kodak System.

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Marking of stores / materials:

This is another method of codification. There are two t ypes of

marking of stores:

i. Color marking – this is used to supplement the other

codification systems e.g. use of paint such as blue, red,
aluminum etc.

ii. Secret Marking – expensive stores items are highly susceptible

to theft and pilferage. These are discreetly marked to help
detect / identify from where they have been sold out. The secret
marks are not easily visible.

Material handling in stores:

Material handling is an integral part of all retail stores and
accounts for 10-20% of the total cost of the selling price. It is the
way by which the goods of greater efficiency can be attained not
only in stores but wherever materials can be moved either
manually or with the help of slings, or other handling instruments.
Material can also be moved by people using machines such as
forklift trucks, and other lifting fixtures (mechanical lifting). It does
not directly add value to the product but adds to the final cost.

Thus material handling function includes all types of movements

within the retail stores. These materials are of various types,
shapes and size. At each stage of selling materials are loaded and
unloaded are travel widely inside the store moved. It is method for
moving material.

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Each handling task poses unique demands on the floor staff.
However, workplaces can help store staff to perform these tasks
safely and easily by implementing and upholding proper policies
and procedures for minimum and automatic materials handling
resulting in reduction in handling costs.

Manual material handling operations are carried out in most

retail stores because the goods comparatively belong to FMCG
sector and these are light in weight. But in case of electronics
furniture/luxury retailing, manual lifting can spoil the
goods/items meant for sale. As when these items collide with each
other, they can create hazards that result in injuries.

Management of modern retail:

The more merchandise customers are exposed to that is presented

in an orderly manner, the more they tend to buy. Retailers
focusing more attention on in-store marketing – marketing dollars
spent in the store, in the form of store design, merchandise
presentation, visual displays, and in-store promotions, should lead
to greater sales and profits (bottom line: it is easier to get a
consumer in your store to buy more merchandise than planned
than to get a new consumer to come into your store)

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Types of store layout:
1. Grid (Straight) Design
 Best used in retail environments in which majority of
customers shop the entire store
 Can be confusing and frustrating because it is difficult to see
over the fixtures to other merchandise
 Should be employed carefully; forcing customers to back of
large store may frustrate and cause them to look elsewhere
 Most familiar examples for supermarkets and drugstores

2. Curving/Loop (Racetrack) Design

 Major customer aisle(s) begins at entrance, loops through the

store (usually in shape of circle, square or rectangle) and
returns customer to front of store
 Exposes shoppers to the greatest possible amount of
merchandise by encouraging browsing and cross-shopping

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3. Free-Flow Layout

 Fixtures and merchandise grouped into free-flowing patterns

on the sales floor – no defined traffic pattern
 Works best in small stores (under 5,000 square feet) in which
customers wish to browse
 Works best when merchandise is of the same type, such as
fashion apparel
 If there is a great variety of merchandise, fails to provide cues
as to where one department stops and another starts

4. Spine Layout

 Variation of grid, loop and free-form layouts

 Based on single main aisle running from the front to the back
of the store (transporting customers in both directions)
 On either side of spine, merchandise departments branch off
toward the back or side walls
 Heavily used by medium-sized specialty stores ranging from
2,000 – 10,000 square feet

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  In fashion stores the spine is often subtly offset by a change
in floor coloring or surface and is not perceived as an aisle

Layout: external factors

Size must be adequate to accommodate business needs.

 Appearance must create the proper image or ―personality‖ for

the business in the customer‘s eyes.
 Entrances must invite customers to come in.
 Create effective window displays and change them often; they
can be powerful sales tools.
 Must comply with Americans with Disabilities Act (ADA).

Pay attention to the business sign, the most direct method of

reaching potential customers. Building interiors

 Ergonomics is an integral part of any design.

 Proper layout and design pays off in higher productivity,
efficiency, or sales.
 Proper lighting is measured by what is ideal for the job being
done.
 Careful selection of colours can create the desired
impressions among customers and employees.
 Appealing to all of the customer‘s senses can boost sales.

Visual merchandising:
The use and manipulation of attractive sales displays and retail
floor plans to engage customers and boost sales activity. In visual
merchandising, the products being sold are typically displayed in

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such as way as to attract consumers from the intended market by
drawing attention to the product's best features and benefits.

Feature Areas
The areas within a store designed to get the customer‘s attention
which include:
 End caps – displays located at the end of the aisles
 Promotional aisle/area
 Freestanding fixtures
 Windows
 Walls
 Point-of-sale (POS) displays/areas

Fixture Types

Straight Rack – long pipe suspended with supports to the floor or

attached to a wall

 Gondola – large base with a vertical spine or wall fitted with

sockets or notches into which a variety of shelves, peg hooks,
bins, baskets and other hardware can be inserted.
 Four-way Fixture – two crossbars that sit perpendicular to
each other on a pedestal
 Round Rack – round fixture that sits on pedestal
 Other common fixtures: tables, large bins, flat-based decks

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Fixture Types

 Wall Fixtures: To make store‘s wall merchandisable, wall

usually covered with a skin that is fitted with vertical
columns of notches similar to those on a gondola, into
which a variety of hardware can be inserted. Can be
merchandised much higher than floor fixtures (max of 42” on
floor for round racks on wall can be as high as 72”.

Merchandise Display Planning

 Shelving – flexible, easy to maintain
 Handling
 Pegging – small rods inserted into gondolas or wall systems –
can be labor intensive to display/maintain but gives
neat/orderly appearance
 Folding – for soft lines can be folded and stacked on shelves
or tables - creates high fashion image
 Stacking – for large hardlines can be stacked on shelves, base
decks of gondolas or flats – easy to maintain and gives image
of high volume and low price
 Dumping – large quantities of small merchandise can be
dumped into baskets or bins– highly effective for soft lines
(socks, wash cloths) or hardlines (batteries, candy, grocery
products) – creates high volume, low cost image

POS Displays

 Assortment display – open and closed assortment

 Theme-setting display Ensemble display Rack display
 Case display Cut case Dump bin

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Store front Design

Storefronts must:
 Clearly identify the name and general nature of the store
 Give some hint as to the merchandise inside
 Includes all exterior signage
 In many cases includes store windows – an advertising
medium for the store – window displays should be changed
often, be fun/exciting, and reflect merchandise offered inside

Atmospherics

The design of an environment via:

 visual communications
 lighting
 color
 sound
 scent

Visual Communications

 Name, logo and retail identity

 Institutional signage
 Directional, departmental and category signage
 Point-of-Sale (POS) Signage
 Lifestyle Graphics
 Coordinate signs and graphics with store‘s image
 Inform the customer

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  Use signs and graphics as props Keep signs and graphics
fresh

 Use Limit sign copy

 Use appropriate typefaces on signs
 Create theatrical effects

Lighting

 Important but often overlooked element in successful store

design
1. Highlight merchandise
2. Capture a mood
3. Level of light can make a difference
 Blockbuster
 Fashion Departments

Colour:
Can influence behavior

 Warm colors increase blood pressure, respiratory rate and other

physiological responses – attract customers and gain attention
but can also be distracting
 Cool colors are relaxing, peaceful, calm and pleasant – effective
for retailers selling anxiety-causing products

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Sound & Scent
Sound

 Music viewed as valuable marketing tool

 Often customizedto customer demographics - AIE
(http://www.aeimusic.com)
 Can use volume and tempo for crowd control

Scent
 Smell has a large impact on our emotions
 Victoria Secret, The Magic Kingdom, The Knot Shop
 Can be administered through time release atomizers or via
fragrance-soaked pellets placed on light fixtures

Controlling cost and reducing inventory loss:

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.
Keeping an inventory, or stock of goods, is a necessity in retail.

Customers often prefer to physically touch what they are

considering purchasing, so you must have items on hand. In
addition, most customers prefer to have it now, rather than wait
for something to be ordered from a distributor.

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Every minute that is spent down because the supply of raw
materials was interrupted costs the company unplanned expenses

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.

An Effective Inventory Management Should

 Ensure a continuous supply of raw materials to facilitate

uninterrupted production
 Maintain sufficient stocks of raw materials in periods of short
supply and anticipate price changes
 Maintain sufficient finished goods inventory for smooth sales
operation, and efficient customer service
 Minimize the carrying cost and time.
 Control investment in inventories and keep it at an optimum
level

Customer service:

 Integral part of the retail industry.

 Customer service acts as lifeblood
 It is to bring customer back to the store
 Sending customers happily
 Satisfy customers recommend others to visit that store

It is the word of mouth that multiplies your customer base within a

short span of time.

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The strength of good customer service is to develop a long lasting
rapport with customers.

Customers Contact Points

1. Financial Assistance
2. Physical Assistance
3. In-Person Product Support
4. Internet
5. Kiosks
6. Telephone/Help line/Toll free Numbers

Essentials of Good Customer Service

 Answer customers phone
 Doesn‘t make fake promises
 Listen to customers.
 Handle the complaints
 Be helpful without considering earning profit always
 Go one step ahead
 Manage Customers Creatively

Significance of Customer Service

 Builds brand loyalty
 Complaints are less
 Customers are always happy and satisfied
 Drives profitable growth
 Helps retailers create differentiation and value through their
experiences
 Increase the image of a store
 Increases client base

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  It is a source of mouth advertisement
 Strengthens competitive advantage
 Visitors become customers and customers become loyal to
stores

Planning Merchandise Assortment

 It is a technique of developing, securing, pricing, supporting
and communicating the retailer‘s offerings.
 This task is done by a retailer who ensures that right product
should reach to the customers at right time, right place and
at right price.
 Therefore he devotes most of his time to understand
consumers’ needs and selling merchandise accordingly.
 What to sell and how much to purchase is an important task
for every retailer.

Category management:
Category management is the process of managing a retail business
with the objective of maximising the sales and profits of a
category rather than the performance of individual brands or
models.

A category is an assortment of items that the customer sees as

reasonable substitutes for each other. For example, retailers in
ready to wear segment consider female and male clothing as one
category.

It systemizes grouping of products into strategic units or category

so as to better meet consumer needs and achieve sales and profit
goals. Today, the relevance of category management is driven by

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the emergence of multiple numbers of brands in each product
category. For the success of any category management, retail
business requires changes in the merchandising system and
organizational commitment.

The Essential Elements of Effective Category Management:

1. Category should be arranged as if consumers could stock the

shelf themselves
2. Category composition should be on the basis of time, space and
product benefit
3. Category management should drive multiple item purchase
4. Category management is a dynamic, proprietary set of decision,
not a standard, universal practice.
5. It is directed to create value for the consumer rather than
facilitating relations between supplier and retailer.
6. Category management plan should be based on the overall
competitive environment in a specific trading area.

Stock Keeping Unit (SKU)

 It is a unique number (identifier) assigned to an item that

describes its features in terms of size, color, style and
quantity.
 Each organization according to its size, level of operations and
product categories, develops its own SKU numbers.
 These numbers are unique and allotted/assigned to a single
item. No two items in an outlet will have identical SKU
number and are usually assigned and serialized at an
outlet/merchant level.

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  This system allows retailers to track records of merchandise.

Merchandise Buying system:

Retailers throughout the globe usually employ two types of buying
systems:
I. Staple merchandise buying system
II. Fashion merchandise buying system

Buying System for Staple Merchandise

Staple merchandise consists of the items that are regularly
purchased, displayed and sold by the retailers.

For a grocery store, staple merchandise will be bread, butter, milk,

salt, eggs, and tissues and so on.

Similarly, most of the merchandise at sports store and home

improvement centers are staple.
For a departmental store, staple merchandise is camera rolls,
stapler pins, pens, notebooks, briefcase, gift items and house wares

Buying System for Fashion Merchandise

Fashion merchandise consists of the items those usually have
unpredictable demand and limited sales record. Demand
forecasting as discussed earlier, in the absence of any sales history
for specific fashion SKU becomes difficult.
For instance, “Yoga and meditation” that was part and parcel of
Indians‘ lives before seventies, was replaced by gym, spa and health
centers, has again entered in Indians’ lives and becoming popular
among youths too.

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 Merchandise Budget Plan (MBP)

It is a forecast of particular merchandise related activities

designed for a particular period of time, say, one year or six
months.

Under this plan, rather than physical control of items, stress is

given towards their financial planning.

MBPs usually are made for one season and then broken down
into shorter periods like monthly & weekly plans.

In an effective merchandise Budget Plan, a retailer forecasts and

plans about five fundamental variables, namely, sales level, stock
levels, purchases, reductions (markdowns) and gross margin.

The objective of having a MBP is that a retailer would like to have a

proper balance between:-
(a) what will be paid to suppliers for purchase of merchandise and
making it available to customers; and
(b) The cash inflow that will come in the business from sales to
customers.

Though in practice, there are several accounting practices that

allow some flexibility (for example extended credit terms or easy
payment options), this balance is vital to maintain the firm‘s
liquidity.

For the effective accomplishment, the firm‘s internal records, past

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years’ experience must be carefully considered instead of relying on
historical data alone.

Retail communication mix:

Communication is the foundation of all business relationships

Communication gap can hamper the business relationships

The communication program intimates the customers about the

presence of a store and its merchandise uniqueness.

Communication program attracts the customers

Attract them and lure customers to visit the store

Retailers adopt both paid & unpaid modes of communication

Role of Communication in Retailing

 To increasing brand awareness
 To develop associations with brands
 Merchandise Uniqueness
 Price policy
 Unique Lifestyle
 Unique properties
 Continuous Recall

Methods of Communication

1. Paid Impersonal Communication

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 Sales Promotion
 Advertising
 Store Atmosphere and Visual Merchandising
 Websites, online, social media

2. Paid personal Communication

 Personal Selling
 E-mail

3. Unpaid Impersonal Communication

Publicity

4. Unpaid Personal Communication

Word of Mouth Communication

Retail Communication Process

1. Planning the Retail Communication Programme
2. To Device the Communication Strategy
3. Preparing the Communication Budget
4. Implementation of Communication Programme
5. Evaluating the Communication Programme

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 RETAIL MARKETING MIX

Retail marketing Mix

Introduction
Product – Decisions related to selection of goods (Merchandise
Management revisited) – Decisions related to delivery of service.

Pricing – Influencing factors – approaches to pricing – price

sensitivity - Value pricing – Markdown pricing.

Place – Supply channel – SCM principles – Retail logistics –

computerized replenishment system – corporate replenishment
policies.

Promotion – Setting objectives – communication effects -

promotional mix. Human Resource

Management in Retailing – Manpower planning – recruitment and

training – compensation – performance appraisal.

The retail marketing mix

Marketing is an underlying philosophy that guides business

activities, but how does a retailer do marketing? A retailer must
engage in planning, research and analysis before implementing a
marketing strategy. At the core of any retail marketing plan is the
mix consisting of the four Ps (Product, Price, Place and Promotion)
of marketing. The following images show retail examples of each of

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the elements of the mix and the next activity describes each
element of the mix further.

Retail Marketing Mix: The Four Ps of Retail Marketing

Retailers use various advertising and communication tools to grow

awareness and considerations with future customers. Finding the
right marketing mix can lead to a profitable growth and a higher
return on investment. By considering the right advertising strategy
retailers can persuade consumers to choose to do business with
their retail brand. The fundamental approach used my modern
retailers in marketing their products is the Four Ps of Retail
Marketing.

Product: There are two primary types of merchandise. Hard or

durable goods like appliances, electronics, and sporting
equipment. And soft goods like clothing, household items,
cosmetics, and paper products. Some retailers carry a range of
hard and soft items like a supermarket or a major retail chain
while many smaller retailers only carry one category of goods, like
a boutique clothing store.

Price: Pricing is a key element to any retail strategy. The retail

price needs to cover the cost of goods as well as additional
overhead costs. There are four primary pricing strategies used by
retailers:

1. Everyday low pricing: The retailer operates in thin margins

and attracts customers interested in the lowest possible price. This
strategy is used by big box retailers like Wal- Mart and Target.

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2. High/low pricing: The retailer starts with a high price and
later reduces the price when the item’s popularity fades. This
strategy is mainly used by small to mid-sized retailers.
3. Competitive pricing: The retailer bases the price on what
their competition is charging.
This strategy is often used after the retailer has exhausted the
higher pricing strategy
(high/low pricing).
4. Psychological pricing: The retailer sets the price of items with
odd numbers that consumers perceive as being lower than they
actually are. For example, a list price of
$1.95 is associated with spending $1 rather than $2 in the
customers mind. This strategy is also called pricing ending or
charm pricing.

Place: The place is where the retailer conducts business with its
customers. The place can be a physical retail location or a non-
physical space like a catalog company or an e-store. While most
retailers are small, independently owned operations (over 90%),
over 50% of retail sales are generated by major retailers often
called “big box retailers” (see the list of the top 20 big box
retailers below).

Promotion: Promotion is the final marketing mix elements.

Promotions include personal selling, advertising, sales promotion,
direct marketing, and publicity. A promotional mix specifies how
much attention to pay to each tactic, and how much money to
budget for each. A promotion can have a wide range of objectives,
including increasing sales, new product acceptance, creation of
brand equity, positioning, competitive retaliations, or the creation

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of a corporate image.

Product

Products are also termed as Merchandise. Product refers to the

bundle of tangible & intangible attributes that a seller offers to a
buyer in return of a particular predefined amount of payment in a
particular mode. The different products that the store offers are
termed as the Merchandise Mix. Therefore the Product Mix is the
total variety of products a firm sells.

Product mix

It is a combination of product lines within a company. A company

like HUL has a numerous products like shampoos, detergents,
soaps etc. the combination of all these products lines is the
product mix.

Product lines

It generally refers to a type of product within an organisation. As

the organisation can have a number of different types products, it
will have similar number of product lines. Thus, in Nestle, there
are milk based products like milkmaid, food products like Maggi,
chocolate products like kitkat & other such products lines.

Length of the product mix

If a company has 4 product lines & 10 products within product

lines than the length of the product mix is 40. Thus, the total

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number of products against the total number of product lines
forms the length of the product mix. This equation is also
known as product line length.

Width of the product mix

Where product line length refers to the total number of product

lines & the products within the product lines, the width of the
products mix is equal to number of products lines within a
company. Thus, taking the above example if there are four product
lines within the company & ten products within each product line
then the product line is four only.

Depth of the product mix

It is fairly easy to understand what depth of the product mix will

mean where length & width were a function of the number of
product lines, the depth of the product mix is the total number of
products within a number line.

Product line consistency

The lesser the variations between the products, the more is the
product line consistency.

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DECISION RELATED TO SELECTION OF GOODS
(MERCHANDISE MANAGEMENT)

Inventory & Merchandise manager is required to train, coach &

direct customer service associates in customers service, receiving
processes, product merchandising & labelling compliances,
housekeeping & other tasks for efficient store operations.

Merchandise plan should:

Develop better merchandise assortment plans at Store. Increase

store promotion profitability & increase turns. Make better pricing
decisions for improved margins.

Determining cost & profitability of each category of product. Setting

merchandise budgets & plans considerations & methods.

Definition & assessment of control techniques break even

analysis, EOQ, re-order levels JIT, cyclical provision, stock control
procedures, rate of stock –turn, DPP.

Appraisal of stock-holdings methods & stock taking methods-

analysis & control of stock loss. Principles of stock presentations-
product positioning, management. Application of information
technology to merchandise management. Control & evaluation of
branches, departments-profitability.

Assessment & Selection of suppliers merchandise & location.

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Evaluation & selection of distribution channels; supply chain
management; negotiations and considerations.

Selection of suppliers-methods & consideration.

Selection of merchandise, determination of order quantity-

influences & considerations.
Applications of information technology to the selection &
ordering process. Own brand merchandise-strategies &
considerations.

Pricing – Influencing factors – approaches to pricing – price

sensitivity - Value pricing – Markdown pricing.

One of the four major elements of the marketing mix is price. It is

one of the four P's. Price, Product, Promotion and Place, or where
the product is distributed.

The price is a very significant factor in determining the other

elements of the marketing mix. Price determines the consumer
group that will be targeted, as well as the advertising and
promotion and distribution.

Method adopted by a firm to set its selling price. It usually depends

on the firm's average costs, and on the customer's perceived value
of the product in comparison to his or her perceived value of the
competing products. Different pricing methods place varying degree
of emphasis on selection, estimation, and evaluation of costs,
comparative analysis, and market situation. See also pricing

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strategy.

Pricing is one of the most important elements of the marketing mix,

as it is the only element of the marketing mix, which generates a
turnover for the organisation. The other 3 elements of the
marketing mix are the variable cost for the organisation;

Product - It costs to design and produce your products. Place - It costs

to distribute your products.
Promotion - It costs to promote your products.

Price must support the other elements of the marketing mix.

Pricing is difficult and must reflect supply and demand
relationship. Pricing a product too high or too low could mean lost
sales for the organisation.

Pricing Factors

Pricing should take the following factors into account:

• Fixed and variable costs

• Competition
• Company objectives
• Proposed positioning strategies
• Target group and willingness to pay

An organisation can adopt a number of pricing strategies, the

pricing strategy will usually be based on corporate objectives.

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Types Of Pricing Strategies

The table below explains different pricing methods and price

strategies with an example of each pricing strategy.

Pricing
Strategy Definition Example

Here the organisation sets A television satellite company

Penetratio a low price to increase sets a low price to get
n sales and market share. subscribers then increases
Pricing Once market share has the price as their customer
been captured the firm base increases.
may well then increase
their price.

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 The organisation sets an A games console company
initial high price and then reduces the price of their
Skimming slowly lowers the price to console over 5 years,
Pricing make the product charging a premium at
available to a wider launch and lowest price near
market. The objective is to the end of its life cycle.
skim profits of the market
layer by layer.

Setting a price in Some firms offer a price

comparison with matching service to match
Competitio competitors. In reality a what their competitors are
n firm has three options and offering. Others will go
Pricing these are to price lower, further and refund back to
price the same or price the customer more money
higher than competitors. than the difference between
their price and the
competitor's price.

Pricing
Strategy Definition Example

An example would be a DVD

manufacturer offering different
DVD recorders with different
features at different prices e.g.
Product Pricing different products A HD and non HD version.. The
Line within the same product greater the features and the
Pricing range at different price benefit obtained the greater the
points. consumer will pay. This form of
price discrimination assists the
company in maximising
turnover and profits.

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 The organisation bundles a
group of products at a
reduced price. Common
methods are buy one and
Bundle get one free promotions or This strategy is very popular
Pricing BOGOFs as they are now with supermarkets who often
known. Within the UK offer BOGOF strategies.
some firms are now moving
into the realms of buy one
get two free can we call this
BOGTF I wonder?

Premium The price is set high to Examples of products and

Pricing indicate that the product is services using this strategy
"exclusive" include Harrods, first class
airline services, and Porsche.
The seller will charge 99p
instead £1 or $199 instead of
The seller here will consider $200. The reason why this
Psychologi the psychology of price and methods work, is because
cal the positioning of price buyers will still say they
Pricing within the market place. purchased their product under
£200 pounds or dollars, even
thought it was a pound or
dollar away. My favourite
pricing strategy.

Pricing
Strategy Definition Example

Optional The organisation sells optional This strategy is used

Pricing extras along with the product to commonly within the
maximise its turnover. car industry as I
found out when
purchasing my car.

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 The price of the product is For example a
Cost Plus production costs plus a set product may cost
Pricing amount ("mark up") based on £100 to produce and
how much profit (return) that as the firm has
the company wants to make. decided that their
Although this method ensures profit will be twenty
the price covers production costs percent they decide to
it does not take consumer sell the product for
demand or competitive pricing £120 i.e. £100
into account

Factors Influencing Pricing Decisions

1. Price-quality relationship:

Customers use price as an indicator of quality, particularly for

products where objective measurement of quality is not possible,
such as drinks and perfumes. Price strongly influences quality
perceptions of such products.

If a product is priced higher, the instinctive judgment of the

customer is that the quality of the product must be higher, unless
he can objectively justify otherwise.

2. Product line pricing:

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A company extends its product line rather than reduce price of its
existing brand, when a competitor launches a low price brand that
threatens to eat into its market share. It launches a low price
fighter brand to compete with low price competitor brands.

The company is able to protect the image of its premium brand,

which continues to be sold at a higher price. At a later stage, it
produces a range of brands at different price points, which serve
segments of varying price sensitivities.

And when a customer shows the inclination to trade up, it

persuades him to buy one of its own premium brands. Similarly, if
a customer of one of its premium brands wants to trade down, it
encourages him to buy one of its value brands.

But, it is not easy to maintain a portfolio of brands in the same

product category. The company needs to endow each of its brands
with an independent personality, and identify it with a segment.

A company’s brands should not be floating around, willing to grab

any customer that they can, but they should be specifically
targeted at segments—customers of the target segment should like
the brand, but customers of other segments should not like it
enough to buy it.

3. Explicability:
The company should be able to justify the price it is charging,
especially if it is on the higher side. Consumer product companies
have to send cues to the customers about the high quality and the

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superiority of the product.

A superior finish, fine aesthetics or superior packaging can give

positive cues to the customers when they cannot objectively
measure the quality of the offering. A company should be aware of
the features of the product that the customers can objectively
evaluate and should ensure superior performance of those features.

In industrial markets, the capability of salespeople to explain a

high price to customers may allow them to charge higher prices.
Where customers demand economic justifications of prices, the
inability to produce cost arguments may mean that high price
cannot be charged.

A customer may reject a price that does not seem to reflect the cost
of producing the product. Sometimes it may have to be explained
that premium price was needed to cover R&D expenditure, the
benefits of which the customer is going to enjoy.

4. Competition:

A company should be able to anticipate reactions of competitors to

its pricing policies and moves. Competitors can negate the
advantages that a company might be hoping to make with its
pricing policies. A company reduces its price to gain market share.

One or more competitors can decide to match the cut, thwarting

the ambitions of the company to gamer market share. But all
competitors are not same and their approaches and reactions to
pricing moves of the company are different.

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The company has to take care while defining competition. The first
level of competitors offers technically similar products. There is
direct competition between brands which define their businesses
and customers in similar way.

Reactions of such competitors are very swift and the company will
have to study each of its major competitors and find out their
business objectives and cash positions. Competitors who have
similar ambitions to increase their market share and have deep
pockets will swiftly reduce price if any one of them reduces prices.
A telephone company offering landline services has all telephone
companies offering landline services as its first level of competitors.

The second level of competition is dissimilar products serving the

same need in a similar way. Such competitors’ initial belief is that
they are not being affected by the pricing moves of the company.

But once it sinks in that they are being affected adversely by the
pricing moves of a company that seemingly belongs to another
industry, they will take swift retaliatory actions. The telephone
company has the mobile phone operators as its second level of
competitors.

The third level of competition would come from products serving

the problem in a dissimilar way. Again such competitors do not
believe that they will be affected. But once convinced that they are
being affected adversely, swift retaliation should be expected.

The retaliation of third level is difficult to comprehend as their

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business premises and cost structures are very different from the
company in question. Companies offering e-mail service are
competitors at the third level of the telephone company. A company
must take into account all three levels of competition.

5. Negotiating margins:
A customer may expect its supplier to reduce price, and in such
situations the price that the customer pays is different from the
list price. Such discounts are pervasive in business markets, and
take the form of order-size discounts, competitive discounts, fast
payment discounts, annual volume bonus and promotions
allowance.

Negotiating margins should be built, which allow price to fall from

list price levels but still permit profitable transactions. It is
important that the company anticipates the discounts that it will
have to grant to gain and retain business and adjust its list price
accordingly. If the company does not build potential discounts into
its list price, the discounts will have to come from the company’s
profits.

6. Effect on distributors and retailers:

When products are sold through intermediaries like retailers, the
list price to customers must reflect the margins required by them
Sometimes list prices will be high because middlemen want higher
margins.

But some retailers can afford to sell below the list price to
customers. They run low-cost operations and can manage with
lower margins. They pass on some part of their own margins to
customers.

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7. Political factors:
Where price is out of line with manufacturing costs, political
pressure may act to force down prices. Exploitation of a monopoly
position may bring short term profits but incurs backlash of a
public enquiry into pricing policies. It may also invite customer
wrath and cause switching upon the introduction of suitable
alternatives.

8. Earning very high profits:

It is never wise to earn extraordinarily profits, even if current
circumstances allow the company to charge high prices. The
pioneer companies are able to charge high prices, due to lack of
alternatives available to the customers.

The company’s high profits lure competitors who are enticed by

the possibility of making profits. The entry of competitors in
hordes puts tremendous pressure on price and the pioneer
company is forced to reduce its price. But if the pioneer had been
satisfied with lesser profits, the competitors would have kept away
for a longer time, and it would have got sufficient time to
consolidate its position.

9. Charging very low prices:

It may not help a company’s cause if it charges low prices when its
major competitors are charging much higher prices. Customers
come to believe that adequate quality can be provided only at the
prices being charged by the major companies.

If a company introduces very low prices, customers suspect its

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quality and do not buy the product in spite of the low price. If the
cost structure of the company allows, it should stay in business at
the low price. Slowly, as some customers buy the product, they
spread the news of its adequate quality.

The customers’ belief about the quality-price equation starts

changing. They start believing that adequate quality can be
provided at lower prices. The companies which have been
charging higher prices come under fire from customers. They either
have to reduce their prices or quit.

APPROACHES TO PRICING

Types of Pricing Approaches

• Cost-Based Pricing Approaches

• Buyer-Based Pricing Approaches
• Competition-Based pricing Approaches

1. Cost Based Pricing Approach:

These pricing approaches are the simplest one in which the cost of
product or service is added with a certain proportion of markup as
profit to ascertain a certain price. Examples include construction
businesses that estimate the cost of any project and submit their
bid by adding a certain portion of profit to their estimated cost.
Moreover Accountants, Lawyers and other professionals charge a
price of their services by adding the cost of work with a certain
proportion of markup.

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 Markup pricing is not regarded as an effective pricing model as it
ignores both demand and the pricing of competitors. Therefore, it is
almost impossible for a business to keep its price as best one by
adopting this category of pricing. But still Cost based pricing is
popular due to the following reasons.

• It makes pricing simpler so the marketers do not change the

price of their product or service with the changing demand.
• When the majority of businesses in the market adopt this pricing
model, there would be minimum price competition due to similarity
in prices.
• Generally cost based pricing looks fairer for both buyers and
sellers as buyers are not exploited under condition of higher
demand and also the seller can earn a reasonable profit in such
pricing.

Target Profit Pricing and Break-Even Analysis

Target profit pricing is also called break-even analysis in which
the total cost and total revenue are forecasted at different levels of
sales. In this way a reasonable profit can be availed at a
reasonable price. The fixed cost remains unchanged even at zero
level of production and sales. On the other hand variable cost
changes with the level of production and sales. Both of these
costs are combined to ascertain the expected total cost at certain
sales volumes. When the sales volume increases the total cost
decreases and the total revenue increases. Break-even is that point
of sales volume where cost is equalized by the revenue and the
profit is zero. The estimated demands, break -even points and
profits are compared with different prices by the management of
business.

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2. Buyer Based Pricing Approach:
This pricing approach is extensively applied by many organizations
in which the perceived value of buyer is regarded as a base for
Setting Price for a product or service. In this pricing model the
value of product or service is perceived by customers that give the
guideline for the price of that product or service. In other words the
price is not set after the production of product, but before the
production. This means that the organization considers the
customers along with their perception about certain product or
service. On this basis, the business sets a certain price and then
starts manufacturing that product. The expected value and price
provide guideline for the cost and design of the product so that it
can match the perceptions of the customers.

It is difficult for a business organization to ascertain the different

perceived value by the customers on different products. For this
purpose these organizations conduct surveys and experiments. If a
business keeps the price of its product higher than the perceived
value of customers, then its sales are affected. On the other hand,
if a business keeps its product’s price lower, then maybe its sales
increase, but the profit does not increase accordingly. Therefore,
those organizations, which want to adopt this value-based pricing
strategy, should keep the price of their products in accordance
with their perceived value by customers. But more effective
strategy is that the businesses should try to deliver more value to
the customers than they perceived in order to retain them as loyal
customers.

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3. Competition-Based Pricing Approach:

In this pricing model, businesses keep the price of their products

or services on the basis of the prices of their competitors. Also,
customers in the market perceived value to any product or service
in relation to prices of similar products of competitors. So there is
some sort of going rate pricing in which the prices of products are
altered according to changes in the prices of competitors. For
example, steel or fertilizer manufacturing businesses face
oligopolistic competition in which they charge almost similar prices
in the market same like the competitors. There is a market leader
whose price is followed by all other smaller competitors. When
the price of market leader is changed, other competitors in the
market also adjust their prices accordingly. Some smaller business
may keep a slight difference in their price as compared to the
market leader, but this slight difference remains constant in
different conditions.

There is one big advantage of adopting this ongoing rate of

competition based pricing, which is the prevention of price wars in
the market among competitors.

Price sensitivity

Price sensitivity can be defined as the degree to which

consumers' behaviors are affected by the price of the product or
service. Price sensitivity is also known as price elasticity of
demand and this means the extent to which sale of a particular
product or service is affected.

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Meaning and definition of Price Sensitivity
Price sensitivity can be defined as the degree to which
consumers’ behaviors are affected by the price of the product or
service. Price sensitivity is also known as price elasticity of
demand and this means the extent to which sale of a particular
product or service is affected. Another way of explaining price
sensitivity is, “the consumer demand for a product is changed by
the cost of the product. It basically helps the manufacturers study
the consumer behavior and assists them in making good decisions
about the products.The level of price sensitivity varies depending
on various products and consumers. Price sensitivity, in
economics, is generally quantified through the price elasticity of
demand.

As explained by Investopedia, homogenous good which are widely

available are more prone to show evidence of price sensitivity. For
instance, very often the consumers are not agreeable to pay even
a few cents per gallon for gasoline, especially if a lower priced
station is located nearby. Besides, some consumers are more price
sensitive as compared to others. Consumers having fixed income or
who are more frugal have a tendency to pinch pennies and look
around for lesser prices. In the meantime, some consumers with a
higher income might feel that searching for better deals many a
times might not be worth their time thus being less price sensitive.

Explaining the concept of price sensitivity

In the past, many trade companies relied on two most common

pricing strategies:

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• “Cost plus” pricing which requires companies to make regular
adjustments as their costs increase. Some cost charges like rent
hike or collective bargaining agreement can, however, impact
market participants in different ways thus forcing some
companies to heave their prices more than the competitors.
• “Competitive pricing” is the second common pricing
strategy. This strategy involves setting prices on the basis of price
set by the competitors. This approach can, however, be problematic
if the pricing does not reflect imperative differences in what is
being proffered. Moreover, this approach presumes the
competition creates the most effective price for a product or
service.

Both of the aforesaid pricing approaches, however, share common

failings. The most important one is the lack of critical information
on what is willingly being paid by the consumers. Secondly, these
pricing strategies depend largely on subjective judgment of the
management instead of depending on data-driven empirical
evidence determining the impact of distinctive pricing levels on
demand.

Wrapping up, analyzing price sensitivity is highly useful in

attempts to determine the impact created by the actual outcome
of a specific variable if it is different from what ghas been
assumed previously.

Price sensitivity can be measured by dividing the percentage in

the quantity purchased of the product or service with the
percentage change in the price.

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Formula

The standardized formula for measuring price sensitivity is:

Price Sensitivity = (Change in Quantity Purchased / Change in
Price)*% Example:
In order to observe the price sensitivity, let us consider that,
when Nestle apple nectar prices increase by 60%, the juice
purchases fall with the figure of 25%. Using the mentioned
formula we can easily calculate the price sensitivity for nestle apple
nectar:
Price Sensitivity = -25% / 60% = -0.42

Therefore, we can conclude that for every of the percentage with

which the Nestle apple nectar price increases; it affects the
purchase by almost more than half percentage. Likewise, all the
products can be studied by taking into account the changes in
price and increase or decrease in the demand.

Those products are said to be price sensitive in which the change

in price is not much but the demand is affected on the large scale.
This is the case usually with the convenience products or the
products which have a huge range of alternatives. Those
products which are not much reactive to change in price are
called price inelastic. Such products are usually daily used
products and are a necessity of life and consumers do not have any
other option other than purchasing them.

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There are ten factors affecting the price segmentation and
sensitivity strategies:

1. Perceived substitutes effect

This effect states that buyers are more price sensitive the higher
the product's price relative to its perceived substitutes and new
customers to a market may be unaware of substitutes, and thus
pay higher prices than more experienced buyers.

2. Unique value effect

Buyers are less price sensitive the more they value the unique
attributes of the offering from competing products. This is
precisely why marketers expend so much energy and creativity
trying to differentiate their offering from that of their competitors.

3. Switching cost effect

Buyers will be less price sensitive the higher the costs (monetary
and nonmonetary) of switching vendors .e.g. airline industry

4. Difficult comparison effect

Customers are less price sensitive with a known or reputable
supplier when they have difficulty in comparing alternatives. E.g.
Cellular phone companies

5. Price quality effect

Buyers are less sensitive to a product's price to the extent a
higher price signals better quality. E.g. image products, exclusive

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products.

6. Expenditure effect

Buyers are more price sensitive when the expenditure is larger,

either in dollar terms or as a percentage of household income. E.g.
accounting firm

7. End-benefit effect

The larger the end-benefit, the less price sensitive the buyer. This
effect is especially important when selling to other businesses.
What is the end-benefit they are seeking? Is it cost minimization,
maximum output, quality improvement? The fulfillment of the end-
benefit is often gauged by its share of the total cost. E.g. steel
suppliers

8. Shared-cost effect

when you spend someone else's money on yourself, you are not
prone to be price conscious. This is one reason airlines, hotels, and
rental car companies can all price discriminate against business
travelers, because most of them are not paying their own way.

9. Fairness effect

Notions of fairness can certainly affect customers, even when they

are not economically (or mathematically) rational. E.g. a gas station

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10. Inventory effect

The ability of buyers to carry an inventory also affects their price

sensitivity. E.g. Amateur cooks with large pantries

Value pricing

Definition of value-based pricing. The term is used when prices

are based on the value of a product as perceived from the
customer's perspective. The perceived value determines the
customer's willingness to pay and thus the maximum price a
company can charge for its product.

The term is used when prices are based on the value of a

product as perceived from the customer's perspective. The
perceived value determines the customer's willingness to pay and
thus the maximum price a company can charge for its product.

An essential component of value-based pricing is the necessity to

determine the value for the customer. In order to define the value
a customer associates with a product, the customer value model
can be applied. This concept evaluates the economic benefits a
product can offer to the customer.

Example
If business consultants determine their rates as a percentage of
costs saved for their clients due to their work, they apply value-
based pricing. In this case they calculate their rates depending on
the benefits they generate for their clients

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Markdown pricing:

Temporary reduction in the selling price of an item to stimulate its

demand or to drive a competitor out of the market. Permanent
markdowns are created to remove a slow-selling item from the
inventory.

A simple definition of markdowns is the difference between the

original retail price and the actual selling price. Markdown
dollars are calculated by subtracting the Actual Selling Price
from the Original Selling Price. Markdown percent is Markdown
dollars divided by Sales.

The National Retail Merchants Association adds a bit more to the

definition. They define a markdown as "a reduction in the
originally marked retail price of merchandise, primarily taken for
clearance of poor selections, broken assortments, prior stock, for
special sales events, and to meet competition." Markdowns may be
permanent or temporary. Generally, a temporary markdown is
called a Point of Sale markdown and handled at the point of sale.
It is only taken when there is a sale. These would include 4th of
July or Back to School "sales". If, however, the retailer made a
mistake and bought too large of an assortment of umbrellas and
raingear and the area suffered a drought, these items might receive
a permanent markdown as the value is reduced permanently that
season and the goal is to turn the merchandise into cash and get
it out of the store as quickly as possible. If the permanent
markdown is removed or cancelled at some later date, the retail
price reverts to original selling price, the resulting amount is called
a markdown cancellation, not a markup.

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In the retail world, markdowns may not be liked but they cannot
be avoided. They are a fact of doing business. Colors or styles
unpopular with your customers will only move with significant
markdowns. Of course, any time you take a "deal" and purchase
three year's inventory of socks you are taking a huge chance.
What if a new fiber is introduced or a new color or design
becomes all the rage and all of your sock budget is tied up in what
was bought last year. If you really want to know if you have made a
poor buying choice, study your markdown racks.

Over-buying is the #1 cause of excessive markdowns. Stores

don't go out of business due to high markdowns. They go out of
business because they can't move the merchandise quickly enough
to bring in the required cash to meet their obligations. Stores
suffering from cash flow problems may have difficulty paying their
vendors on time. And how many employees will work without
receiving their paycheck in a timely manner?

Also, keep in mind, the price paid for an item has nothing to do
with the markdown price. Customers do not care how much the
buyer paid for the merchandise. When it comes to sales and
merchandise choices, a professional buyer's only concern should
be how quickly the inventory will convert to cash. Sometimes
mistakes are made and those "really cute hats" that the buyers
knew would sell like hot cakes just don't. Sometimes, the only
person who just loves those hats is the buyer and vendor who sold
them . . . especially the vendor who knows they will not have to
take them back.

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From time to time, stores are reluctant to take large markdowns,
and in some cases even refuse, to mark anything down below
cost. The idea is that money may be lost when in reality much
more is at stake by not getting cash out of slow selling stock and
replacing it with new product. The only thing worse is storing
merchandise year after year just to bring items out next season.
Your regular customers know when you bring out the same
merchandise over and over.

Generally, those markdowns relating to the customer-education

factor (or just over-buying . . . again) will be permanent
markdowns. These markdowns may be referred to as "backroom"
markdowns, "bulk" markdowns or "permanent" markdowns. These
markdowns serve to devalue the inventory for reporting purposes
decreasing both insurance and taxes (if applicable). Remember, the
markdown can be reversed if the circumstances change.

On the other hand, markdowns intended to stimulate sales

throughout the store are usually called temporary markdowns or
point of sales markdowns. These are taken when the item sells and
do not devalue all inventory in that class.

Markdowns from Overbuying

 Failing to plan sales by class
 Failing to buy in small experimental quantities prior to
placing large orders
 Buying more goods than needed in view of stock on hand and
planned sales
 Buying the wrong styles, colors, fabrics or sizes
 Poor scheduling of deliveries

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  Overdependence on a few "pet" resources
 Failure to examine incoming merchandise for quality control

Markdowns from Poor Pricing

 Setting initial mark-up too high
 Setting initial markup too low so customers are suspicious of
the value
 Failure to check competitors prices for same or similar
merchandise
 Deferring price reductions too long
 Making first markdown too small-a 10% or 15% markdown
does not mean much today

Selling Errors leading to Markdowns

 Poor display of merchandise on the sales floor
 Failure to educate sales staff about merchandise
 Careless handling of merchandise
 High pressure selling leading to high returns

Sales policies Leading to Markdowns

 Meeting price competition
 Having special sales of regular stock
 Using special sales of promotional merchandise leading to
promotional remainders
 Maintaining complete assortment through most of the season
 Having large markups coupled with large markdowns to
exploit the comparative price appeal
 Taking premature markdowns
 Policy of carry-over
 Giving away free samples to customers

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Place – Supply channel – SCM principles – Retail logistics –
computerized replenishment system – corporate replenishment
policies.

Place

Retail Location is considered to be one of the most important

elements in retail decision. The right location is often critical to the
success of a business.

Factors to be considered while selecting a Place

 Density of Target Market
 Uniqueness of retail offering
 Legal Considerations
 Environmental Issues

Local Competitions Traffic Density

 Cost of location
 Proximity to other business
 Adequate space for parking

Retail Supply Chain

A supply chain is a system of organizations, people, activities,

information, and resources involved in moving a product or service
from supplier to customer. Supply chain activities transform
natural resources, raw materials and components into a finished

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product that is delivered to the end customer.

Supply Chain Management is concerned with the management of

the flow of goods, flow of cash, and flow of information internally
and externally of a company or a group of companies that share
the same value chain.

It includes the movement and storage of raw materials, wok-in-

process inventory and finished goods from origin to point of
consumption. Supply chain management has been defined as the “
design, planning, execution, control and monitoring of supply
chain activities with the objective of creating value to customers,
building a competitive infrastructure, leveraging logistics,
synchronizing supply with demand and measuring performance.

1. Planning: A plan or strategy must be developed to address how

a given good or service will meet the needs of the customers.

2. Sourcing: This component involves building a strong

relationship with suppliers of the raw materials needed to make
the product the company delivers.

3. Making: This is the manufacturing section of Supply Chain

Management. The product is manufactured, tested, packaged and
scheduled for delivery.

4. Delivering: This component in Supply Chain Management is

logistical and involves the company creating warehouse networks,
coordinating the receipt of orders from customers, deciding on the
transportation and shipment methods, and setting up invoices to

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receive payment.

5. Returning: This is the final, service oriented part of the supply

chain. In this component, the company tries to create a network
that is responsible for receiving defective products or excessive
amounts of them, as well as maintaining the original products
sent to the customer.
Logistics management is the function of managing the total flow of
materials which includes movement of raw materials from
suppliers, in process within the firm and movement of finished
goods to the customer.

1. Order Processing
2. Transport Management
3. Inventory Management
4. Ware Housing
5. Materials Handling
6. Packaging
7. Production Scheduling
8. Information System

Retail Promotional Strategies

Sales promotion strategies are powerful tools to give marketing
campaigns an extra edge in attracting new customers. Sales
promotions rely on consumers’ price sensitivity to encourage them
to try new products. Retail promotion is simply the way the
retailers communicate with their publics. They exchange meanings
with them through the messages they create and the media they
use.

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Setting Promotional Strategies
Building Awareness
Create Interest
Provide Information Stimulate Demand Reinforce the brand

Promotional Mix

The communication or promotion mix includes the following four

ingredients

Advertising: It is defined as any paid form of non-personal

presentation and promote of ideas, goods and services by an
identified sponsor. It is impersonal salesmanship of mass selling, a
means of mass communication.

Publicity: It is non-personal stimulation of demand for a product,

service or a business unit by placing commercial significant news
about it in a publication or obtaining favourable presentation of it
upon radio, television, or stage that is not paid for the sponsor.

Personal Selling: It is the best means of oral and face-to-face

communication and presentation with the prospects for the
purpose of making sales. There may be one prospect or a number
of prospects in the personal conversation.

Sales Promotion: It covers those marketing activities other than

advertising, publicity and personal selling that stimulate consumer
purchasing and dealer effectiveness. Such activities are displays,

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shows, exhibitions, demonstrations and many other non-routine
selling efforts at the point of purchase.

Nature of Promotion

It is Informative process
It is persuasive process It is motivating process Brand Switching
Promotion is an investment
Promotion is directed towards a target group
Promotion calls for economics

It is an intelligence process
1. It attracts more customer to the product
2. It encourages the middlemen to buy and store more
3. It encourages the sales force by offering incentives to salesmen
4. It boosts sales in the short and long term
5. It reinforces the brand image with the customer.

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 RETAIL COMMUNICATION MIX

INTRODUCTION
From times unknown, retailers have tried to attract the customers
towards their products and services and more importantly their
store through novel methods. At one point of time, few decades
back the retailer seems to know the names of the customers as
well as their nature of purchase. On the other hand customers
used to associate themselves with the specific store based on the
relationship they had, with the retailer. That was an era which
was marked by lesser number of stores as well as, equally lesser
number of customers. Over a period of time things have changed
drastically to make the customers more demanding. To make
things grimmer, there has been a quantum jump in the number
of stores as well as individual sizes of major stores. All these
factors have led to a situation whereby, the customers are on the
lookout for the best bargain. The purchase decision is just not
based on relationship but on hardcore monetary gain and the
experience quotient derived out of the shopping transaction. All
this has made marketing communication a significantly critical
area from the source point of view. This is because, customer
visits are perception based in the first instance and there onwards
it is based on their own experience. Whether it is a matter of
perception for a first-time visit or a satisfying experience within the
store and a sense of happiness for transacting with the store, all
depends upon the marketing communications strategy of the
store.

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REASONS GOVERNING THE CHANGED CUSTOMER ATTITUDE

Scarcity of time: Majority of the families are dual earning and

have various commitments to attend. They thus face paucity of
time to invest in purchase transactions. With increasing distances
a major part of the consumer time is consumed in commuting.
This leads to an increase in time cost for the customer. Thus,
they have become very conscious about the time factor.

Lifestyle and Status: Customers in general have developed 'a

great sense of individualism. People follow distinct lifestyles and
would not like to compromise there. This leads to an intensive
search by the customer for specific product types and styles.
Thus the customers would like to confirm whether the retail
outlet has a perception amongst the customers which matches
their preference.

The retailer should take this scenario in his stead and sincerely
work to establish a positive image. At the same time it should be
his endeavour to communicate to the customer about the range
of products and services which can satisfy the customers at
prices which suit the customers.

RETAIL MARKETING COMMUNICATION

All means adopted by a retail store to communicate a store
specific message to the customers constitute the retail marketing
communication. Therefore we can say, whatever, a store does to
communicate to the target audience regarding the visit worthiness
of the store can come under the broad heading of retail marketing
communication.

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BASIC TASKS OF COMMUNICATION

1) Intimate the customers about the presence of a store or outlet.

2) Invite them to visit the store and make it really an attractive
proposition to do so.
3) Amidst all the media clutter make a consistent effort to remind
them to do so.

It has often been experienced that some promotional schemes

have been introduced in the market by manufacturer's brand. This
is backed by heavy advertising and publicity. However when the
customer goes to purchase the same brand he either does not
find it available or more surprisingly, the store is not aware of
the scheme being offered. This anomaly or inconsistency can be
minimised by the integration of the communication strategy.

The primary function of any marketing communication strategy is

to increase footfalls in the store. This footfall can be increased by
informing the customer about the store and motivating him to do
so. Differentiation from competitors is also a major function or
marketing communication„ Here it is worth mentioning that
marketing communication strategy will be very different for large
retail chains vis-a- vis single unit retail stores. A large retail chain
based on multiple geographical locations has diverse audiences to
address to. Thus the communication strategy can be fine tuned
as per need of the store. However it is very important to
remember that even in case of fine tuning of communication
strategy the identity of the store remains the same. Strategy has
to be such that the image and identity of the chain remains the

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same.

Integrated Marketing Communication Program

Integrated marketing communication consists of a quiver of
communications tools. It includes:

Advertising
It would include all paid forms of nonpersonal presentation of
ideas to promote the store. Advertising gives a reason to buy
from the specific store to the customers. Here, we can include
all the advertisements in the press, television and all other forms
of media. The latest type of advertisement in the press is known as
advertorial. In this case a detailed report is prepared and
presented in the form of a press report in the newspaper, which is
actually not so. These reports or other promotional material are
presented in an innovative manner so that, the customer (reader)
takes it as a genuinely covered press, report.

Sales Promotion
It includes off-season discounts, off-season sales, free gifts, most
valued customer schemes etc. Sales promotion gives• an
incentive to buy from that store as against the mission of
advertising to give a reason to buy. It has been seen over the
years that sales promotions have been successful in boosting sales
even if, for the promotion period only. Retailers must be cautious
while introducing such schemes as, it leads to counter schemes
by competitors towards as well as a sharp dip in sales after the
promotion is over.

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Publicity
All activities which give some sort of positive or negative image on
the basis of activities done by the store come under the broad
heading of publicity. For instance, if a big retail store (foes some
charitable activity to help some underprivileged cross- section of
society and, it generates media interest, which leads to media
coverage then, we can term it as publicity. It has been
experienced that publicity is more effective in tone for promotion
than advertising. However, stores should refrain from getting into
controversial areas to avoid any negative publicity which may
adversely affect its image amongst the target audience.

Direct Marketing
All forms of store promotion through brochures, catalogues and
Internet can be categorised under the broad heading of direct
marketing. Direct marketing has been very popular in Western
countries but not so in India. It has been seen that, transactions
through the net have not been that popular in India. Reasons can
be attributed to problems related to product delivery and payment
while transacting through net. However, we must bear this in
mind that in comparison to advertising, direct marketing proves
to be a cheaper and effective medium for store promotion. The
greatest advantage of direct marketing is that, it not only draws
attention of customers for visiting the store but, also presents an
opportunity to buy products over the phone or through the
Internet

Personal Selling
Personal selling is an integral part of integrated marketing
communication. When a store uses its sales force to give personal

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attention to the customers and follow-up in a personalised
manner it becomes an effective tool for store promotion. At times
store personnel do visit customers at their residences to develop
an intimacy and obviously, promote the store.

Public Relations
The image a store develops through its public dealings like
interaction with the customers, enthusiasm amongst the store
employees and customer's grievance handling mechanism
constitutes public relations or PR.

The concept of integrated marketing communication (IMC) as it is

popularly known simply states that all the tools of marketing
communication mentioned above should be used in tandem to
achieve the organisational goals. Further, you should appreciate
that all these tools have their own unique characteristics to
communicate the specific message in a distinct manner. You
should understand that all these tools when applied together or in
short intervals should never deliver a different message or image
of the store. For example if a particular retail store hires top
notch models to inaugurate the store backed up with a jazzy
advertising campaign, it definitely carves out an image in the
minds of the customer. However, if the customers perceive through
word-of-mouth communication that the store does not offer such
premium products as was expected in line with the image formed,
it may result in a sharp decline in footfalls in the store. Similarly
after such an advertising campaign if the publicity generated by
the activities of the store is unable to match the image, even
then it will lead to a fiasco for the store. The bottom line there is
all the tools of marketing communication have to perform in a co-

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ordinated manner as instruments in an orchestra.

We can put the retail store at the core of this mix at the time of
need arousal, the customer has several questions. These
questions can be

 Which product to buy that satisfies the present need?

 Which brand of the product buy?
 Which store to purchase from?
 Whether to purchase from a single store or compare the
offerings at various stores?

Many communication variables influence the decision to do

shopping at a particular retail outlet. Given the fact that there that
multiple retailers and multiple products trying to convince the
customers with the messages, the role of marketing
communication becomes very critical.

STEPS FOR DESIGNING AN EFFECTIVE IMC STRATEGY

For developing a proper IMC strategy a retailer must follow the
following steps:
1) Design the marketing objectives
2) Devise the communication objectives to achieve the marketing
objectives
3) Situation analysis
4) Design the marketing communication strategy
5) Prepare the budget
6) Implement the marketing communication strategy
7) Review the results and compare with targeted results
8) Corrective measures

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Design the marketing objectives
Each retail store understands what it requires, to not only survive
in the competitive market but also earn profits. In this context
what sort of marketing objectives the store should have is to be
decided as the first stage. Marketing objectives may change as per
the market situation and level of establishment of the retailer. A
well established retail store would not concentrate on spreading
awareness amongst the consumer segments where as a new and
upcoming store would like to do so.

Objectives of a Retail Communication Strategy

Communication strategy of any retailer is based on his
marketing objectives. It would depend on the retailer whether he is
interested in getting a big footfall and many customers visiting the
outlet or interested in very specific preference customers visiting
and also buying from their store. More importantly some retailers
initially aim for a big footfall so that the store gets the maximum
visibility; thereon they try to focus on their target segment with
specific communication signals.

Communication objectives can be both Long term as well

short term
Long term Communication objectives: These are those
communication objectives which any retail entity would not like to
change in the short run. These goals are not achievable overnight.
At the same time it is worth mentioning that once achieved
these goals cannot be won over by competitors in the short run
until and unless some thing drastic happens. Long term
objectives can be creating a strong brand image for the retailer or
creating brand loyalty.

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Short term Communication objectives:
These objectives keep on changing as per the changing market
scenario. Such objectives are necessary from a promotion as well
as competition perspective. Supposedly the retailer wants to
increase footfalls he can design a communication which can
attract traffic to his outlet. During the festivals or monsoons one
can design strategic communication aimed at specifically
increasing the sales.

Devising communication objectives

The first step in the strategy of designing communication and
promotion strategy is to have the marketing strategy in place.
Marketing objectives can be designed out of the marketing
strategy. A retail store new to the market may like to have a
strategy to have a good penetration in the market. For this his
objectives can be maximisation of footfalls as well as increasing
awareness about his store among the audience. However on the
other hand in case of an established retail store the strategy can
be well very different from the small store. A well established
large store can think about having an up market image in the
target segment and therefore go for premium pricing as well as
premium branding. Test case can be of a retail store dealing in
seasonal goods like garments. Such a store has to have a very
different strategy since, his dealing and transactions will be
limited to a specific duration of the year. Marketing objectives
can be for instance, an increase in sale by increasing footfalls, it
can also be, restriction on footfalls by having premium pricing of
the products available in the store. More communicate the same
to the customers in the most convincing and persuasive manner.

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Once the marketing objectives are in-place, the retailer has to
concentrate on 'what to communicate to the customer so as to
the marketing objectives which in turn will finally make his
marketing strategy successful. Most important part of
communication strategy is the fact that, what message is to be
given to the customers so that they think in a way, the retailer
wants them to. For instance, you must have seen big
advertisements of sale given by various retail stores as well as
showrooms. However, at the very first instance when you see
that advertisement, you have a feeling that this is a false
statement. This is due to the fact that over a period of time
customers have been exposed to various advertisements and
promotion schemes where they have not been benefited to an
extent they would like

Therefore with that sort of experience curve the customers would

never like to get into such a net. The onus therefore lies on the
retailer to communicate to the customer in such a way that they
are convinced about the origin as well as authenticity of the
message.

Situation analysis
Once the marketing objectives as well as communication
objectives are in place next step is to study the market situation.
After conducting situation analysis a retailer may come to know
that he has to fine-tune his message and change the media vehicle
to achieve the communication objectives. It can be possible that,
before launching any promotional scheme a retailer comes to
know that a competitor is already launching 4 much more
aggressive as well as valuable scheme from the customers point of

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view. If the retailer would have launched his scheme he would
have been a big loser after the counter scheme launched by the
competitor. Moreover situation analysis also gives vital information
to the customer regarding customers propensity to consume,
existing retail scenario, entry of new players, as well as exit of old
players.

Designing a marketing communication strategy

Marketing communication comprises of various constituents like
advertising, sales promotion, personal selling, direct marketing,
event management etc. On the basis of situation analysis the
retailer is very well aware about the market situation. Thereon on
the basis of marketing objectives as well as communication
objectives a retail marketing communication strategy is designed.
The marketing communication strategy contains a blueprint of
what to do so as to achieve the communication objectives in a way
that the marketing objectives are achieved which in turn, fulfils
the marketing strategy. All the target segments cannot be
communicated with just one mode of communication. Therefore it
is an endeavor of the retailer to allocate budget and strategically
plan the roles for those communication tools which are required.
For instance, in case a retailer is based in a downtown area with
middle income and lower middle income population then it
presents a unique scenario. Here customers would expect to have
the best bargaining in the form of lower prices. Basically they
would like to have a value for money. Here the retailer will have
to communicate about availability of products at their (affordable)
price range in the most convincing manner through a creditable
channel of communication. On the other hand in case of an up
market store based in one of the posh localities the scenario will

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be very different. Any retail store where such situations exists
will, have to plan for a strategy of maintaining an up market
image and delivering goods and services which justifies that
image.

Preparing the Budget

All strategies and objectives of the retailer can go flat for want of
funds. Any strategy or marketing objective design should be
undertaken in line with available resources. it is of prime
importance communication and promotion. Depending upon the
turnover of the company as well as the affordability a budget can
be designed in consultation with the concerned personnels of the
organisation. While planning the budget a retailer has to be very
cautious about the short-term and long-term implications of
investment. For instance, if a retail store invests excess funds in
the fixed assets like building, air conditioning plant etc then
availability of working capital will really come under pressure
affecting overall sales performance of the store.

Implementation of the Communication Strategy

This is one of the critical stages of marketing communication
strategy. While implementing the strategy any retailer should be
very cautious that the implementation is in letter and spirit as
devised while at the planning stage. An important point to be
mentioned here is the scope for change in strategy at this stage.
Retail market is the most dynamic place in today's era. Therefore,
even after conducting situation analysis and designing the
strategy on that basis a need can arise to make some minor or
major changes at the implementation stage. An ideal strategy
should be flexible with proper scope to accommodate changes.

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Moreover sincere assumptions in this regard must be made.

Reviewing and Evaluating

With the implementation of the plan of action the retailer must
impartially look into the results of implementation of the
communication strategy. Communication strategy once
implemented starts giving results within a reasonable period of
time. In case customer are convinced and motivated to the
message of the retailer it must translate into increase in footfalls,
as well as actual sales. However, the customers can completely
reject the stand taken by the retail store by not visiting the store
and purchasing their products. However, it is worth mentioning
here that with the implementation of any communication strategy
it can be expected that competitor stores also launch a counter
communication campaign. That may not only minimise the
impact of one's communication strategy but completely negate
the outcome. A retail store must therefore have a contingency
plan ready for such situations. In case a contingency plan is in
place then it can immediately be implemented in case such a
situation arises. Whenever we speak about a contingency plan we
do not intend for one fixed plan. Contingency plans are flexible
lines of action against a set of different competitive situations.

SELECTION OF PROMOTION MIX

With the growth of retailing in India you must be observing that
there has been a tremendous rise in various schemes which the
retailer opts to boost his sales. You must have visited a retail
outlet with the banners about discounts, free gifts, and other
such attractive schemes. All these constitute retail sales

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promotion. Such sales promotion tools are excellent generators of
demand is used strategically with a proper timing.

PROMOTIONAL OBJECTIVES
A retail outlet may have multiple promotional objectives. Long-
term objectives of a retail store can be to create a positive store
image which has a lasting impact on its customers. More
important as it is about this positive image is that it should be a
differentiating factor for the store amongst a host of competitors.
Short-term objectives can be primarily to attract new customers.
Moreover it can also claim for an increase in frequency of visits
from the existing customers

Advertising
 Persuasive advertising (health and wellness clubs,hospitality
industry).
 Corporate advertising (financial service providers sponsoring a
particular magazine or an advertorial circulated to specific
corporates about the services rendered by the financial
service provider).
 Informative advertising (a practise of consumer durables firms
informing prospective consumers of the features and related
benefits of the product).
 Financial advertising (ads released by mutual funds, banking
entities, insurance firms informing investors of product
features, inherent risks and benefits).
 Classified advertising (in book catalogues offering sale of
products, services,etc.)

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TYPES OF SALES PROMOTIONS
If we look into types of sales promotion schemes we find there is a
definite distinction which draws a line between the two
classifications of sales promotion. Before we get into classification
you must understand that the sales promotion schemes does not
only help the retailer to boost his sales but, also supports the
cause of the manufacturer. Therefore it is also the responsibility of
the manufacturer to contribute in the endeavour of the retailer.
Now coming back to classification the two types of sales
promotions can be
 Sales promotion completely financed by the retailer
 Sales promotion jointly financed by the retailer and
manufacturer

RETAIL SALES PROMOTION

Sales promotion encompasses the paid communication activities
other than advertising, public relations, and personal selling that
stimulate consumer purchases and dealer effectiveness. The
purpose of a promotional campaign is to build sales in the short

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term—or sometimes as a longterm strategy of constant
promotional pushes to reach sales goals. It includes displays,
contests, sweepstakes, coupons, frequent shopper programs,
prizes, samples, demonstrations, referral gifts, and other limited-
time selling efforts outside of the ordinary promotion routine.

The main priority of a sales promotional strategy should be to

maximize profit by selling as many units as possible at full price
within the “prime season,” and then to sell the remaining units at
lower price. A retail promotion calendar is often based on sales
history and a projection of the assortment plan for the current
period. Then, the retailer plans to use various promotional tools to
drive greater revenues by creating excitement, urgency, or price
satisfaction at various times during the selling period. At the start
of a season, full-margin sales can be driven by “prime”
promotions— displays, upsells, and campaigns designed to
promote and sell the intrinsic value and unique selling attributes
of merchandise. As the season progresses, actual performance is
tracked, with both better and worse results than planned taken
into account. More promotions may then be used—such as loss
leaders, markdowns, and deals (buy pants to get a polo T-shirt
free) to stimulate sales while holding margins

OBJECTIVES
Sales promotion goals are:
 To increase short-term sales volume
 To maintain customer loyalty
 To emphasize novelty
 To complement other promotion tools

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ADVANTAGES AND DISADVANTAGES
The major advantages of sales promotion are that:
 It often has eye-catching appeal.
 Themes and tools can be distinctive.
 The consumer may receive something of value, such as
coupons or free merchandise.
 It helps draw customer traffic and maintain loyalty to the
retailer.
 Impulse purchases are increased.
 Customers can have fun, particularly with promotion tools
such as contests and demonstrations.

The major disadvantages of sales promotion are that:

 It may be hard to terminate certain promotions without
adverse customer reactions.
 The retailer’s image may be hurt if trite promotions are used.
 Frivolous selling points may be stressed rather than the
retailer’s product assortment, prices, customer services, and
other factors.
 Many sales promotions have only short-term effects.
 It should be used mostly as a supplement to other
promotional forms.

PLANNING A RETAIL PROMOTIONAL STRATEGY

Determining Promotional Objectives

A retailer’s broad promotional goals are typically drawn from this
list. In developing a promotional strategy, the firm must determine
which of these are most important:

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  Increase sales.
 Stimulate impulse and reminder buying.
 Raise customer traffic.
 Get leads for sales personnel.
 Present and reinforce the retailer image.
 Inform customers about goods and services.
 Popularize new stores and Web sites.
 Capitalize on manufacturer support.
 Enhance customer relations.
 Maintain customer loyalty.
 Have consumers pass along positive information to friends
and others.

Perhaps the most vital long-term promotion goal for any retailer
is to gain positive word of mouth (WOM), which occurs when one
consumer talks to others—in person, on the phone, by E-mail,
through social media, or in some other format. If a satisfied
customer refers friends to a retailer, this can build into a chain of
customers.

Establishing an Overall Promotional Budget

There are five main procedures for setting the size of a retail
promotional budget. Retailers should weigh the strengths and
weaknesses of each technique in relation to their own
requirements and constraints. To assist firms in their efforts,
there is now computer software available.

Selecting the Promotion Mix

After a budget is set, the promotional mix is determined: the
retailer’s combination of advertising, public relations, personal

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selling, and sales promotion. A firm with a limited budget may
rely on store displays, Web site traffic, flyers, targeted direct
mail, and publicity to generate customer traffic. One with a large
budget may rely more on newspaper and TV ads. Retailers often
use an assortment of forms to reinforce each other.

The promotional mix is affected by the type of retailer involved. In

supermarkets, sampling, frequent shopper promotions, theme
sales, and bonus coupons are among the techniques used most.
At upscale stores, there is more attention to personal selling and
less to advertising and sales promotion as compared with
discounters.

Implementing the Promotional Mix

The implementation of a promotional mix involves choosing which
specific media to use (such as Newspaper A and Newspaper B),
timing, message content, the makeup of the sales force, specific
sales promotion tools, and the responsibility for coordination.

To generate greater awareness of Web retailers, costly advertising

may be necessary in today’s competitive and cluttered landscape.
Netflix has a broad mix of marketing and public relations
programs, including digital and television advertising, affiliates
and device partners, and social media sites such as Facebook and
Twitter to promote its service to potential new members.

After customers have visited a Web site, the retailer can use
explicit opt-in marketing to help sustain relationships with the
customer. Opt-in marketing involves the customer giving
permission for the retailer to send marketing materials, which

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leads to higher receptivity to marketing messages.

Astute marketers collect preference information, so that content

and promotional offers in an E-mail newsletter are relevant to
the customer. This leads to an ongoing, evolving relationship
between the retailer and the customer.

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 RETAIL LOCATION STRATEGY

Retail stores should be located where market opportunities are

best. After a country, region city or trade area, and neighborhood
have been identified as satisfactory; a specific site must be chosen
that will best serve the desired target market. Site selection can be
the difference between success and failure. A thorough study of
customers and their shopping behavior should be made before a
location is chosen. The finest store in the world will not live up to
it potential if it is located where customers cannot or will not travel
to shop. The primary role of the retail store or center is to attract
the shopper to the location. Alternatively, retailers must take the
store to where the people are, either at home or in crowds.
Examples of taking the store to where the crowds are include
airport location, theme parks and vending machines.

Every retail store strives for its competitive advantage. For some
stores, it is price. For others, it is promotional expertise of the
special services that are offered. Despite any differences among
the various stores that may competing for the shopper’s penny
location offers a unique asset for all stores because once a site is
selected, it cannot be occupied by another store. This advantage,
however, points to the importance of location analysis and site
selection. Once a facility is built, purchased, or leased, the
ability to relocate may be restricted for a number of years. In
short, location and site selection is one of the most important
decisions made by a retail owner.

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Importance of Location Decision

Location is a major cost factor because it

 Involves large capital investment
 Affects transportation cost
 Affects human resources

Location is major revenue factor because it

 Affects the amount of customer traffic

 Affect the volume of business

A location decision is influenced by the flow of pedestrian and

vehicular traffic, which determine the footfalls in a retail store.
Footfalls refer to the no. of customers who visit a store in a defined
time period.

Factors affecting retail Location decision

Proper establishment of shop is very important for success in
retail trade. While deciding the location of a retail outlet the
following factors should be taken into consideration
1. Selection of the area Before commencing his business, a
retailer should decide about the area which he would like to serve.
While deciding the area of operations, he should examine the
population of the area, its nature (permanent or shifting), income
level of the people, nearness to big markets, transport and
communication facilities, etc. All these factors will reveal the
demand potential of the area.
2. Choice of the site Once the area is decided, a specific site is
selected for location of the retail shop. A retailer may open his

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shop in special markets or in residential areas. The shop should
be near the consumers in a congested locality or at a place
frequently visited by the consumers. The place of location should
be easily accessible to consumers.
3.Scale of operation A retailer should decide the size of his
business. Size will depend upon his financial and managerial
resources, capacity to bear risks and demand potential of the area.
4.Amount of capital Then the retailer has to decide the amount
and sources of capital. The amount of capital required depends on
the size of business, terms of trade, availability of credit, cost of
decoration of shop and display of goods. Adequate finance is
necessary for success in any business.
5.Decoration of shop The layout and decoration of shop are
decided so that customers find the place attractive and
comfortable for shopping. The retailer should arrange and
display the goods in an attractive manner to attract more and more
customers.
6.Selection of goods The goods to be sold are selected on the
basis of the nature, status and needs of the customers. Changes
in incomes, habits and fashions of customers must be considered
in the choice of goods.
7.Source of supply The wholesalers and manufacturers from
whom goods are to be purchased must be selected carefully.
Availability of supplies, reputation of the brand, price range, and
distance from the shop, means of transport, etc. should be
considered.

8.Sales policy The retailer should adopt a suitable sales policy to

increase sales and profits. Sales policy and prices should be
decided keeping in mind competition and customers.

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Types of Store Locations

A Store area is an area where the retailer attracts

customers. It is also called

Catchment area. There are three basic

types of trade areas

1.Solitary Sites These are single, free standing shops/outlets,

which are isolated from other retailers. They are positioned on
roads or near other retailers or shopping centers. They are mainly
used for food and non-food retailing, or as convenience shops. For
example, kiosks, mom-and-pop stores.
Advantages Less occupancy cost, away from competition, less
operation restrictions.

Disadvantages No pedestrian traffic, low visibility.

2.Unplanned Shopping Areas These are retail locations that have

evolved over time and have multiple outlets in close proximity.
They are further divided as
a. Central business districts such as traditional “downtown”
areas in cities/towns.

b. Secondary business districts in larger cities and main street

or high street locations. c. Neighborhood districts.
d. Locations along a street or motorway
(Strip locations).

Advantages High pedestrian traffic during business hours, high

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resident traffic, nearby transport hub.
Disadvantages High security required, threat of shoplifting,
Poor parking facilities.

1.Planned Shopping Areas These are retail locations that are

architecturally well- planned to provide a number of outlets
preferably under a theme. These sites have large, key retail brand
stores (also called “anchor stores”) and a few small stores to add
diversity and elevate customers’ interest. There are various types
of planned shopping centers such as neighborhood or
strip/community centers, malls, lifestyle centers, specialty
centers, outlet centers.

Advantages High visibility, high customer traffic, excellent

parking facilities.

Disadvantages High security required high cost of occupancy.

Site selection Analysis

Step 1 - Analyze the market in terms of industry, product,
and competitors - How old is the company in this business? How
many similar businesses are there in this location? What the new
location is supposed to provide new products or new market?
How far is the competitor’s location from the company’s prospective
location?
Step 2 – Understand the Demographics – Literacy of
customers in the prospective location, age groups, profession,
income groups, lifestyles, religion.
Step 3 – Evaluate the Market Potential – Density of
population in the prospective location, anticipation of competition

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impact, estimation of product demand, knowledge of laws and
regulations in operations.
Step 4 - Identify Alternative Locations – Is there any other
potential location? What is its cost of occupancy? Which factors
can be compromised if there is a better location around?
Step 5 – Finalize the best and most suitable Location
for the retail outlet.

SELECTION OF SHOPPING CENTRE

1. Comfort
Early malls designed to create the most retail space with the
least cost. Traffic flow was constricted, with a single entrance/exit
and crowded, dead-end corridors. Only the occasional hard bench
was provided to allow shoppers some rest.
Modern mall design focuses on the consumer first, because
uncomfortable consumers mean fewer footfalls and declining
business. Forward-thinking mall developer Westfield Group
worked with TVs design to develop a comprehensive amenities
package for the furniture, area rugs and accessories in its 57
U.S. retail centres’ common areas. Large open areas with
comfortable soft furniture and decorative touches transform a day
at the mall into a relaxing, pleasurable experience.

2. Diversity
Historically, shoppers seeking a specific product or category were
forced to search the mall for their items – a tiring, frustrating
experience. Malls today view diversity differently – not just a very
wide variety of retailers, but a planned selection of retailers
organized to provide convenient shopper access.

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The new North Country Mall in Punjab is a great example. North
Country Mall vertically “stacks” different price points and
merchandise zones on different levels – a practice seldom seen in
Western malls that permits a broader retail selection on a smaller
geographic footprint.

3. Luxury
Newer malls strive to create a luxury hotel ambience for
shoppers. At TVs design we call this “resort retail,” with an
emphasis on creature comfort and providing a hospitality
experience with the same kind of amenities you’d find at a fine
resort. Social gathering areas and services like concierge and a VIP
arrival area help create this resort ambience.

4. Mall Essence
Mall essence is harder to define, but it boils down to branding
the retail environment and the shopping experience. Consumers
are seeking a shopping experience that makes them feel
comfortable, encourages them to stay longer and, more
importantly, persuades them to return. New malls can meet or
exceed these needs and consumer expectations by creating iconic
“shoppertainment” locations.

We at TVs design call this “place making.” Place making

means crafting a relaxed environment that allows consumers to
take home a memorable experience – one that they want to
experience again and again. And that includes almost every
element of the mall – retailer selection, mall design, dining options
and amenities.

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5. Entertainment
Entertainment is one of the elements in place making, and it
applies to every aspect of the mall that encourages shopper
enjoyment. Areas for local community celebrations and festivals,
among them an outdoor plaza, amphitheatre, and outdoor food
court terrace — are all planned as social gathering places.

Mall dining areas are another essential feature of 21st century

malls, and should be more than just “fuelling areas.” Plaza Egaña
in Santiago, Chile, has restaurants on the roof of the mall that
offer great views and open space. Together with a multi-screen
cinema, an IMAX theatre, a food court and a jazz club, they help
create a powerful entertainment destination.

6. Convenience
Convenience covers a number of aspects of mall design. Is the
facility close to public transportation, and can that be
incorporated into the design, as Plaza Egaña has? Is sufficient
parking available to accommodate a busy shopping day? Does
that parking area support multiple entry points to avoid crowding
and congestion? Does the array of retailers match the needs of
local shoppers?

LOCATION ASSESSMENT
Location assessment and data collection is the first step in the
planning, design, and layout of any construction project. This step
involves collection of resource information applicable to the project
site. Information can be obtained through research of existing
publications, maps, studies, and other resources. In addition to

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obtaining information through research of existing documents, it is
important to walk the project site to obtain a visual appreciation of
the site and site features.
Taking good notes and documenting information is very
important in this phase of site assessment and planning. Collected
information can be documented in narrative or graphical format.
Information that is collected in graphical format such as maps
should be of the same scale whenever feasible. This allows the plan
designer to overlay different site maps and compare various
resources and data at a quick glance.

Vegetative Cover
Vegetative cover can be documented in narrative and/or
graphical format. Graphical documentation should be on a map or
overlay and at a minimum include the delineation and
identification of existing vegetation such as grass, shrubs, trees,
groupings or clusters of trees, unique vegetation, and so on.

Soils Information
Soils information is another key component in the planning,
design and layout of construction projects. Soil types in
conjunction with site topography can provide valuable information
in determining areas with a high potential for erosion. Soils data
can also be used in the selection, sizing, design, and placement of
storm water management measures.
Soils information can generally be obtained from the U.S.
Department of Agriculture’s
Natural Resources Conservation Service county soil surveys which
are available through local county soil and water conservation
district offices. Soils data can also be obtained through the

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services of private soils consultants or firms who prepare
geotechnical reports.

Soils data should be documented in both graphical and narrative

form. Soil types should be delineated directly onto an aerial
photograph or an overlay of the same scale as the topographic
map(s) for the project site. This facilitates the comparison of soil
types and their relationship with the topography of the site.
Data collection should also include information pertaining to
critical areas or features such as steep slopes, rock outcrop-
pings, seepage zones, and any other unique or note worthy
landscape features.

Topographical Information
Site topography is critical to project planning, design and
layout. Topographic maps provide useful information that the plan
designer can use to determine drainage patterns, slope gradient
and length, and the location of ecologically sensitive features
such as water bodies.

Hydrological Information
Hydrologic features are critical in planning, designing, and
laying out a construction project. It is extremely important to
identify, delineate, and record all depression areas such as ponds,
lakes and wetlands and conveyance systems, including swales,
ditches, streams, creeks, rivers, and areas of concentrated flow
that are on or adjacent to the project site. This information
allows the plan designer to determine drainage patterns, evaluate
the condition of various drainage features, determine if they can be
incorporated into the project, and select storm water

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management measures to protect ecologically sensitive areas.

Adjacent Areas
Site assessment and data collection should include an evaluation of
adjacent properties and their respective land uses. This
information provides the plan designer with valuable information
that can be used to determine the effects that storm water
runoff and pollutants associated with upstream watershed land
uses (e.g., single-family residential, multi-family residential,
commercial, industrial, agricultural, woodland, etc.) might have on
the proposed project site. It also aids in projecting what impacts a
project might have on downstream watersheds and sensitive areas.
Features of significance that should be documented and
evaluated include but are not limited to rivers, streams, creeks,
lakes, ponds, wetlands, wooded areas, roads, culverts, houses and
other structures. Site assessment should include documenting the
potential for sediment deposition and damage to adjacent
properties as a result of sheet and rill erosion from the project site
once construction begins.

Utility & Highway Corridors

Utility and highway corridors and easements on or adjacent to a
construction project should be identified and delineated on a
project site map. This information is useful when planning,
designing, and laying out a project and developing a construction
plan for the project.

Existing Infrastructure & Potential Problem Areas

A commonly overlooked aspect of site assessment and data
collection is the identification of past activities and potential

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problem areas associated with the project site. These issues can
often delay or even stop a project if they are over- looked.
Natural, Historical & Archeological Features
Natural, historical, and archeological features can also delay or
stop a project if not addressed in the planning, design and layout
of a project. This element of site assessment and data collection
should include features that may be impacted by the overall
project, from initial construction through the final land use.

Regulations
While is it still early in the planning, design and layout process
and many decisions still need to be made, it is not too early to
start evaluating what permits may be needed for the project.
Regulatory requirements can influence land use and project
layout decisions. Often, a project’s design or layout can be
modified or adjusted to avoid the need for a specific permit or to
meet specific regulatory requirements. Therefore, site assessment
and data collection should include documentation identifying the
need or potential need for local, state, and federal regulatory
permits. The types of permits needed will be dependent on the
nature and scope of the project.

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 Relationship Marketing In Retail Sector

Relationship marketing refers to all marketing activities directed

towards establishing, developing and maintaining successful
relational exchanges.

Relationship marketing draws upon number of areas (customer

quality, customer service, social interaction) Relationship marketing
implemented through various components(rewards, customer
services and involvement of customers in planning and execution of
retail strategy) Customer service is the vital part of Relationship
Marketing

THE EVOLUTION OF RELATIONSHIP MARKETING:

Customer Relationship Management (CRM) originated in two

unrelated places.

USA- Database Marketing was used when the marketers directed

their efforts to increase selling effectiveness. Information
Technology and Statistical analogy was also used for this purpose.

Scandinavia and Northern Europe – The Relationship marketing

was emphasized in B2B marketing.

In the later half of 1990, there was a shift from Database marketing
to Relationship Marketing. Marketers and Retailers started using IT
to communicate with customers and that helped them to base their

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product offering.

Relationship Marketing emerged out of 2 major considerations

1. Macro level ( At the macro level there was an increased necessity

to maintain relationship with employees, customers, suppliers and
government)
2. Micro level (At the micro level there was a shift from Transaction
focus to Relationship marketing

Transaction Marketing: - focuses on single sale, product features,

little emphasis on customer service and moderate customer
contact.

Relationship Marketing:- focuses on customer orientation, high

emphasis on customer service, High commitment. Related to this
is Pareto‘s Law which states that 80 % of the company revenue
comes from the 20% of the loyal customers. The fact is that
acquiring a new customer cost 5 times of retaining an existing
customer. Relationship Marketing attempts to optimise the
resources for the retailing by retaining customers.

Relationship Strategies in Relationship Marketing:

1. Personalisation: It describes the social content of the

interaction between service employees and their customers. It can
be regarded as a means of showing recognition and respect ex:
Feeling of familiarity, personal recognition, friendship and social
support by retailer. Sometimes retailers recognize customers calling
by their name.

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2. Special Treatment Benefit: Relationship marketing does not
tell to maintain relationship with all customers. Customer focus
and selectivity is the key aspect of Relationship marketing. It
emphasizes relationship with the loyal customers. Differentiation
required between loyal and the non-loyal one. Up gradation and
service augmentation are the ways to provide special Treatment
benefit to the loyal customers.

3. Communication Benefits: Efforts must be taken to ―Stay in

touch with customers- is the key determinant of Relationship Marketing.
Companies use Direct mail, e-mail and telephone and SMS service to
keep in touch with the customers.

4. Rewards: Pricing incentives, money savings, free gift are the

ways to reward loyal customers. Rewarding efforts must be more
functional and economical.

Relationship marketing in organised vs. unorganised retail

sector:

Organised Retailers can be classified as in store retailer and Non

store retailer. Organised Retailer provide standardized service, large
retail format with high quality ambience, well trained sales staff,
wide range of merchandising.

Unorganised Retailers: (Kirana stores and Central Business district

of a city)
The USP (Unique selling Preposition) of this unorganized retailer is
locational convenience and customized service.
They establish comfortable relationship, and the customers inform

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about their changing needs on a regular basis. Sometimes the
retailers are considered to be the part of their family

Relationship efforts of unorganized retailer are not only confined to

Grocery but also garment, jewellery and durables. Customers
depend on retailers than on brands. This is the result of
relationship.

Loyalty Programme:

The use of loyalty programme is evident from the fact that the
corporate expenditure on loyalty programme is booming.

The following are the bases for loyalty programme.

1. Loyal customers are cheaper to serve: Retailers may not be

required to invest, maintain and communicate with customer
(loyal) as they are already predisposed to search for information (
new arrivals and services)
2. Loyal customers are willing to pay more for a given bundle of
offering: Customers normally stick into one business entity
because of high switching cost and psychological stress. They
therefore will to pay higher prices.
3. They act as Effective marketer for the service offering: The word
of mouth marketing is very effective, and many stores justify their
investment in loyalty programme by seeking profits not so much
from the loyal customer but from the new customer the loyal one
brings.

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RETAIL RESEARCH

Retail Research: Marketing research specifies the information

required to address the marketing issues (marketing opportunities,
evaluate marketing actions, monitor marketing performance) design
the method of collecting information, manages and implements the
data collection process, analyses and communicated findings and
their implications.

Importance of research in retailing:

Retail research can help retailers to take important decisions such

as market positioning, which retail format will be most suitable for
the particular target market, how best to display merchandise and
so on.
At the retail level, research is used for concept testing, business
feasibility analysis, identifying the correct product mix,
understanding the target market profile, understanding and
analyzing consumer behaviour.

Methods of retail research:

Qualitative Research Methods:

It is used to find out what is in consumer‘s mind. The retailer will
be able to get oriented to the range and complexity of consumer
activity and concerns. Such data may help retailer to know more
about things (feelings, thoughts, and intentions, past behaviour)
which cannot be directly observed or measured.

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Focus group study is used to identify the most likely product
positioning, and to know the cues on the various features which
go into the shopping such as ambience, shopping needs and
requirements, style preferences.

3 Major types:

1. Exploratory Research: defines the problem in detail,

suggest hypotheses, used for generating ideas for new product.

2. Orientation Method: getting to know the consumer‘s best view

and vocabulary.

3. Clinical: Gaining insights of issues which otherwise might be

impossible to pursue structured research methods.

Qualitative research can take the form of Focus Group

Discussion, Projective techniques

(Word association test, third person role playing, and sentence

completion test) Quantitative Research through survey:

Survey can help to understand the consumer‘s behaviour: Current

shopping patter, to know the size of the market, the retail formats
currently being used, size of the core target.

The survey in many forms is one of the most widely used and
well knows method of acquiring marketing information by
communicating with the group of customers through questionnaire
or interview. It is efficient and economical.

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Observation Method of Research:

-used to provide information on current behavior. The research

design can be: Casual or systematic.

It will be easy to observe the following information:

 what is the in store traffic pattern

 what is the customers reaction to the displays, visual
merchandising
 what is the pattern of customers movement
 why is the reaction to private labels
 which are frequently asked questions by the customers

Forms of observation:

1) Direct observation: the retailer may use an observer disguised

as a shopper to observe how long customer spend time in the
display area.

2) Contrived observation: Buying teams disguised as customers

will try to find out what happens during normal interaction
between the customer and the retailers.

3) Content Analysis: used to analyse the content or messages of

advertisement

4) Humanistic Enquiry: It involves immersing the researcher in

the system under study.

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The researcher maintains two dairy.

a) Theory construction which records in details the thoughts,

premises, and hypothesis.

b) A detailed date and time sequenced notes which are kept on the
technique used for enquiry with special attention to biases or
distortions

5) Behaviour recording devices: help to overcome deficiencies of

human observers. People meter, Eye movement recorders, voice
pitch analyses.

Brand management in retailing:

Of the top 10 strongest brand in the world five are retail brand.
Brand management possess several challenges to the retailer. The
key issues are:

1. Brand management of the retail outlet, and

2. Deciding whether or not to opt for the strategy of self own
branding.

The 10 strongest brands in the world:

Coco-cola, McDonalds, Sony, Nike, Microsoft, Wal Mart, Ford,

Levis, Gap and Amazon

A retailers brand is valuable since it enhances reach and

endurance with the consumer and ensures more focused strategic

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plan. The elements of store brand are

1. Format
2. Location
3. Visual Merchandising
4. Experience
5. Price
6. Product assortment
7. Service

Own Branding:
Own branding occurs when a retailer sells products under the
retail organizations house brand name. Own branding can be of
two types, integrated own branding (occurs when the retailer also
manufactures the branded retail products. (Raymonds, Bose, Sony
retail outlets) and Independent Brand (occurs when the retailer
procures the products from other suppliers though, they are sold
under the label of the retail house e.g. grocery, garments, shoes).

Significance of Own Branding:

Private labels have showed an increase in tern of both value and

volume across countries. Private label share of the product
categories such as food, drink, personal care ranged between 5%
and 20% in value terms in most countries. A well run private label
brand enhances store profitability by increasing pressure on
branded manufactures.

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Internationalisation of retailing

Evolution of International Retailing:

The geographic shift in consumer spending over the last decade
has been enormous, resulting in a change of priorities for many
retailers. Rising incomes, improved infrastructure and fewer
tariffs have made a number of emerging markets both more
accessible and more attractive. The lure of high growth rates
fuelled interest and investment into these markets, sparking a
sharp rise in the number of market entries from retailers across
the world. Many developed markets, on the other hand, have
faced long periods of stagnation and in some cases, decline. This
has forced retailers from these markets to reconsider domestic
store expansion and look for opportunities in new market
Exacerbated by the rise of e-commerce, the growth in the size and
number of internet retailers has made saturated markets even
more competitive. These two forces of attraction and repulsion have
propelled the internationalisation of retail.

1. Domestic saturation and the high growth nature of emerging

markets are the biggest drivers of the internationalisation of
retail.
2. Acquisition of supply chain infrastructure and local
knowledge mean grocery retailers are best suited to inorganic
international growth.
3. Vertically integrated retailers stand a much greater chance of
success when internationalising compared to multi-brand
retailers.
4. High growth opportunities from luxury brand retailers will be
geographically different from the rest of the retail world.

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 5. The shortage of international home improvement and
gardening retailers proves that some retail concepts are
harder to export than others
6. Despite the importance of internet retailing, real growth
abroad requires stores.

Motives of International retailing:

There are numerous reasons why to proceed internationally,
however the objective of every company for going international is
to expend its business, searching new market and expand its
customer base. There are several reasons listing below for entering
in international market:
1. Growth and Profitability - A lot of companies turn to global
markets for growth. Introducing new products internationally can
broaden their customer base, sales and revenue.

2. Economics of Scale - Expanding size and scope of markets help

to achieve economies of scale. International approaches give
economies of scale while sharing of costs and risks between
markets. Economies of scale occur when the unit cost of a product
declines as production volume increases.

3. Risk Diversification - Several companies move worldwide so

that they can diversify. Selling products in numerous countries
reduces the company‘s exposure to economic as well as political
instability within the country.

4. Uniqueness of Product or Services - The product with

distinctive attributes isn‘t likely to meet competition in the abroad
markets and enjoy massive options throughout worldwide

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marketplaces.

5. Spreading R& D costs - Through spreading the marketplace,

a firm rapidly recovers the cost incurred in R&D. it is especially
true with regard to products including higher cost associated with
R&D. As result of the large marketplace and also due to larger
coverage of the right market segments in international markets,
it facilitates speedy recovery of such costs.

6. Resources and Ideas - Due to unavailability of resources in

domestic country or at better competitive rate companies turn into
global market. Also companies proceed internationally to collect
the different ideas in the different lifestyle of various countries as
well as to broaden their workforce.

7. Employees - All organization wants skilled and well trained

employees, as Company goes to worldwide marketplace to find
alternate source of the labour at lower cost.

International Retail Environment:

1. Political factors:
a. How stable is the political environment in the prospective
country?

b. What are the local taxation policies? How do these affect your
business?

c. c. Is the government involved in trading agreements, such as

the European Union (EU), the North American Free Trade

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 Agreement (NAFTA), or the Association of Southeast Asian
Nations (ASEAN)?

d. What are the country‘s foreign-trade regulations?

e. What are the country‘s social-welfare policies?

2. Economic factors:

a. What are the current and forecast interest rates?

b. What is the current level of inflation in the prospective
country? What is it forecast to be? How does this affect the
possible growth of your market?
c. What are local employment levels per capita, and how are
they changing?

d. What are the long-term prospects for the country‘s economy,

gross domestic product (GDP) per capita, and other economic
factors?

e. What are the current exchange rates between critical

markets, and how will they affect production and distribution
of your goods?

3. Socio cultural factors:

a. What are the local lifestyle trends?

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 b. What are the country‘s current demographics, and how are
they changing?

c. What is the level and distribution of education and income?

d. What are the dominant local religions, and what influence do

they have on consumer attitudes and opinions?

e. What is the level of consumerism, and what are the popular

attitudes toward it?

f. What pending legislation could affect corporate social policies

(e.g., domestic- partner benefits or maternity and paternity
leave)?

g. What are the attitudes toward work and leisure?

4. Technological factors:

a. To what level do the local government and industry FUND

research, and are those levels changing?
b. What is the local governments and industry‘s level of interest
and focus on technology?
c. How mature is the technology?

d. What is the status of intellectual property issues in the local

environment?

e. Are potentially disruptive technologies in adjacent industries

creeping in at the edges of the focal industry?

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5. Environmental factors:

a. What are the local environmental issues?

b. Are there any pending ecological or environmental issues
relevant to your industry?
c. How do the activities of international activist groups (e.g.,
Greenpeace, Earth First!, and People for the Ethical
Treatment of Animals [PETA]) affect your business?
d. Are there environmental-protection laws?
e. What are the regulations regarding waste disposal and energy
consumption?

6. Legal factors:

a. What are the local government‘s regulations regarding

monopolies and private property?
b. Does intellectual property have legal protections?
c. Are there relevant consumer laws?
d. What is the status of employment, health and safety, and
product safety laws?

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 HUMAN RESOURCE MANAGEMENT IN RETAILING

Human Resource Management

Human Resources Management is defined as managing (planning,
organizing, directing & controlling) the functions of employing,
developing, and compensating human resources resulting in the
creation & development of human relations with a view to
contribute proportionately to the organizational, individual & social
goals.

DIFFERENCE BETWEEN PERSONNEL MANAGEMENT & HRM

PERSONNEL MANAGEMENT:

Means persons employed. PM views man as economic man who

works for salary. HRM treats people as human beings having
economic, social & psychological needs

OBJECTIVES OF HRM

1. Societal Objectives: To be ethically & socially responsible to the

needs & challenges of the society
Organizational Objectives : To recognize the role of HRM in
bringing the
2. organizational objectives
3. Functional Objectives: To maintain the dept’s contribution at
to the organization’s
a level appropriate needs. Resources are wasted if HRM is

4. less sophisticated to suit the organizational demands.

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 5. Personal Objectives: to assist the employees in achieving their
personal goals to enhance the individual contribution.

IMPORTANCE OF HUMAN RESOURCE MANAGEMENT

1. Human Resource Management in the Nation’s Well-Being

A nation with abundant physical resources will not benefit

unless HR makes
of them. use the right attitude is responsible for
HR with
making use of national
resources

2. Man vis-à-vis Machine

Most of problems in the organization are human, social,

psychological
than physical,rather
technical or economic.

3. HRM is a central subsystem:

HRM operates
management of upon and controls
the personnel all other
enhances their subsystem.
dignity by
Social significance,
satisfying proper
their personal
needs.

4. Professional Significance

By providing healthy working environment it promotes team work

in employees

5. Significance for individual Enterprises is achieved, by creating

the right attitude among employees through effective
communication.

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HRM FUNCTIONS

A. Managerial Functions
1. Planning
Planning is pre-determined course of action. It involves planning of
HR requirements, recruitment, selection, training. Involves
forecasting of personnel needs, changing values, attitude &
behavior of employees & their impact on their organization

2. Organizing
Organizing explains to carry out determined course of action.
Organization is a structure by which co-operative group of human
beings allocates its task among its members, identifies
relationships & integrates its activities towards a common
objective.

3. Directing
Directing defines execution of plan. At any level the function is
motivating, commanding, leading & activating people.

4. Controlling
The performance has to be verified to check if the personnel
functions are performed in conformity with the plans & directions
of organization.

B. Operative Functions
1. Employment is concerned with securing & employing the people
to achieve organizational objectives. It covers functions such as job

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analysis, human resource planning, recruitment, selection and
internal mobility.

2. Human Resource Development:

HRD is process of improving, molding & changing skills, aptitude
and attitude, values based on present & future job requirements.

3. Compensation
Is process of providing adequate & fair remuneration to the
employees.

4. Human Relations
Is concerned with practicing policies & programs like employment,
development, compensation & interaction among employees &
create a sense of relationship between individual workers,
management & trade unions.

5. Industrial Relations
IR is relation study among employees, employer, government &
trade unions.

6. Recent Trends in HRM :

Includes Quality of work life, total quality in human resources, HR
Accounting,

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Audit & Research

“Human Resource Planning (HRP) is a process by which an

organization should move from current manpower position to its
desired manpower position striving to have right number, right
kind of people at right place & at right time resulting in both
organizational and individual receiving maximum benefit”-
E.W.Vetter

Human Resources Planning means deciding the number and

type of human resources required for each job, unit and total
company for a particular future date in order to carry out
organizational objectives.

OBJECTIVES OF HRP

1. To recruit and retain the HR of required quality & quantity

2. To foresee the employee turnover and make arrangements for
minimizing turnover and filling up vacancies
3. To meet the needs of expansion and diversification
4. To improve the standard, skill, knowledge, discipline
5. To access the surplus and shortage of HR
6. To estimate the cost of HR

BENEFITS OF HUMAN RESOURCE PLANNING

1. It checks the corporate plan of the organization.
2. It offsets uncertainty & change. This enables the
organization to have right men at right time and in right
place.

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 3. It helps to anticipate the cost of salary enhancement, better
benefits.

4. To foresee the need for redundancy and plan to check it or

provide alternative employment in consultation with trade
unions and government through remodeling and economic
plans.

5. To foresee the changes in values, aptitudes and attitude of

human resources.

Define Recruitment

“The process of searching for prospective employees and

stimulating them to apply for jobs in the organization” Edwin B.
Flippo

OBJECTIVES OF RECRUITMENT

 To attract people with multi-dimensional skills & experiences

that suit present & future organizational strategies.
 To induct outsiders with a new perspective to lead the
company.
 To infuse fresh blood at all levels of the organization.
 To develop organizational culture that attracts competent
people to the company.
 To search/ head hunt people whose skills fit in the company.

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METHODS OF RECRUITMENT

1. Traditional Methods
The methods of recruitment is broadly classified as Internal &
External

Internal

a. Present Permanent Employees

Organizations consider the present employees for high level jobs

due to availability of most suitable candidates for jobs or equally
to the external source, to meet the trade union demands and to
motivate the existing employees.

b. Present Temporary/ Casual Employees

Organizations consider temporary or casual employees for low

level jobs or trade union pressures or in order to motivate them on
the present job.

c. Retrenched/ Retired Employees

The organization retrenches the employees due to lack of work. The

organization takes the candidates back due to lack of obligation
and trade union pressure. The organizations prefer to re-employ
their retired employees as token of loyalty to the organization.

d. Dependents of Deceased, Disabled, Retired /employees

Organizations provide employment to the dependents/ family

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members of deceased, disabled to build brand image & develop
commitment.

External
a. Campus
Organizations get inexperienced candidates of different types from
various educational institutions like colleges and train candidates
in different disciplines

b. Private Employment Exchanges

Consultants perform recruitment functions on behalf of the
client company by charging fees. The client company is relieved
from recruitment functions.

c. Public Employment Exchanges

The Government setup Employment exchanges to provide
information about vacancies to candidates.

d. Professional Organizations

Associations maintain complete bio-data of their members and

provide the same to various organizations on requisition.

e. Data Banks
The management can collect the bio-data of the candidates from
different sources like Employment Exchange and feed them in
computer and provide the details of candidates on requisition.

f. Casual Applicants
Candidates apply casually through mail or hand over applications
in HR Dept. This is suitable for temporary or low level jobs.

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g. Trade Unions
Employees seeking change in employment put a word to the trade
union leaders with a view to getting suitable candidate.

i. Modern Methods

a. Internal
Employee Referral
Present employees are aware of qualifications, attitude, experience
and emotions of their friends and relatives. They are aware of job
requirements and organizational culture of their company. Hence
the HR Managers of the company depend on present employees for
reference of the candidates for various jobs. This reduces time and
cost required for recruitment.

External

1. Walk-in
The busy organization and rapid changing companies do not find
time to perform various functions of recruitment, therefore they
advise the potential candidates to attend interview directly and
without prior application on a specified date, time and place.

2. Consult-In

The busy and dynamic companies encourage potential job seekers

to approach them personally and consult those regarding jobs.

3. Head Hunting
The company’s request the professional organizations to search
for jobs for the best candidate particularly for senior executive

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positions. Head Hunters are also called as ‘Search Consultants’

4. Body Shopping
Professional organizations and hi-tech training institutes develop
the pool of human resource for possible employment. The
prospective employers contact these organizations to recruit the
candidates or the organizations themselves approach the
prospective employers to place their human resources. These
professional and training institutions are called ‘Body Shoppers’
and these activities are known as Body Shopping.

5. Mergers & Acquisitions

Strategic Business Alliances like acquisitions, mergers and take-

overs helps in gathering human resources. In addition the
companies also have alliances in sharing their human resources
on adhoc basis.

6. Outsourcing
Some organizations recently started developing human resource
pool employing the candidate for their own organization. These
organizations do not utilize the human resource instead they
supply HRs to various companies based on their temporary needs.

Training:-
Meaning & Definition:-
Training is the act of increasing the knowledge & skill of an
employee for doing a particulars job Dale.S.Beach defines the
training as “… the organized procedure by which people learn
knowledge &/or skill for a definite purpose”.

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Need & Importance of Training

Training is necessary for the following reasons:-

i) Increased Productivity:-
Training improves the performance of employees. Increased skill &
efficiency results in better quantity & quality of production. A
trained workforce will handle machine carefully & will handle
machine carefully & will use the materials is an economical way.

ii) Higher Employee Morale: - A trained worker derives happiness

& job satisfaction from his work. It also gives him job security &
ego satisfaction.

iii) Less Supervision:- The degree of supervision required for a

trained worker will be less. Trained workers may contribute
significantly in reducing managerial problems of supervision.

iv) Less Wastages:- Untrained workers may waste more materials,

damage machines & equipments & may cause accidents. A trained
worker will know the art of operating the machine properly. The
control of various wastes will substantially reduce the
manufacturing cost.

i) Easy Adaptability:- The technological advancement will require

new approach to work. The methods of work are constantly
undergoing a change.
This will necessitate the adoptability of workers to changing work
environment. A trained worker can be more adaptable to change.

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The trained persons will adapt to new situation more easily
because they have basic technical knowledge.

ii) Reduced Turnover & Absenteeism:- Labour turnover &

absenteeism are mainly due to job dissatisfaction when a worker
is properly trained he will take keen interest in his job & can
derive satisfaction from it Training helps in reducing labour
absenteeism by increasing job satisfaction among them.
iii) Employee Development:- Training also helps in the
development of employees. It first helps in locating talent in them
& then developing it to the maximum. Training provides employee
an opportunity to showcase his talent also.

Benefits of Training

i) Leads to improved profitability &/or more positives attitudes

toward profits orientation.
ii) Improves the job knowledge & skills at all levels of the
organization.
iii) Improves the morale of the workforce.
iv) Helps people identify with organizational goals.
v) Helps create a better corporate image.
vi) Fosters authenticity, openness & trust
vii) Improves the relationship between boss & subordinate.
viii) Aids organizational development.
ix) Helps prepare guidelines for work.
x) Provides information for future new in all areas of the
organization.
xi) Organisation gets more effective decision making & problem

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solving.
xii) Aids in developing leadership skill, motivation, loyalty, better
attitude & other aspect that successful workers & managers
usually display.

TRAINING METHODS:-
Training methods are broadly divided into two.
They are i) On – the – job method ii) Off – the – job method

On – the – Job Training Methods:-

On the Job methods refers to methods that are applied in the

workplace, while the Employee is actually working.

i) Job Rotation:- This type of training involves the movement of

the trainee from one job to another. The trainee receives job
knowledge. & gains experience from his supervisor or trainer in
each of the different job assignments. This method gives an
opportunity to the trainee to understand the problems of employees
on other jobs & respect them.

ii) Coaching:- The trainee is placed under a particular supervisor

whose functions as a coach in training the individual. The
supervisor provides feedback to the trainee on his performance
&offers him some suggestions for improvement. A limitation of
this method of training is that the trainee may not have the
freedom or opportunity to express his own ideas.

iii) Job Instruction:- This method is also known as training

through step by step. Under this method the trainer explains to the

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trainee.

iv) Apprenticeship training:- It is meant to give the trainee

sufficient knowledge & skill in those shades & crafts in which a
long period of training required for gaining complete proficiency.
The way of doing the jobs, job knowledge & skills & allows him to
do the job. The trainer Appraises the performance of the trainee,
provides feedback information & corrects the trainer.

v) Internship:- In internship training, educational institutions &

business firms have a joint programme of training. Selected
candidates carry on regular. Studies for the prescribed period. They
also work in some factory or office to acquire practical knowledge &
skills. This method helps to provide a good balance between theory
& practice.

Off – the – Job Training Methods:- off the job training refers to
training imported away from the Employee’s immediate work area.
The employee is separated from the job situation & his attention
Is focused exclusively on learning which can later lead to
improved job performance.

Off the job training methods are a follows:-

i) Vestibule Training: - This is a training method where the actual

work conditions are simulated & the equipment used by the
trainees is similar to what is used on the job. In this way, the
trainees gain experience of using the equipment without any

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pressures of work or cost involved.

ii) Role Playing:- It is described as a method of human interaction

involving realistic behaviour is imaginary situations. The trainees
as sum the roles of different characters is the organizational
context. It basically helps in improving the communication, people-
management & relationship management skills of the trainees.

iii) Case Exercises:- A real life problem encountered in the

organization is presented to the trainees in the form of case study.
They are then asked to analyse the case & present their views &
recommendations for solving the problem.

iv) Sensitivity Training:- This method aims to influence an

individual behaviour through group Decision. The trainees are
enabled to see themselves others see them & develop an
understanding of others views & behaviour

v) Conference or Discussion:- It is a method in training the

clerical, professional & supervisory Personnel. This method
involves a group of people who pose ideas, examine & share facts,
ideas &Data, test assumptions & drew conclusions all of which
contribute to the improvement of job performance.

vi) Programmed Instructions:- The trainee is given a series of

questions after he studies the relevant material required for the
accomplishment of the job. After the trainee answers a question,,
he himself gives a immediate feedback whether it is right or wrong.

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If the answer is correct, he is asked to proceed to the next question
but if it is wrong, he is asked to refer back to the material.

vii) Classroom Lecturers:- This approach is widely used for

helping the employees understand the rules procedures & policies
of the organization. A two way communication makes a session
lively interesting.

Training is an essential part of the orientation program for new

recruits in an organization.

The main objectives of training are:-

i) Improving Employee Performance:

When an employee is recruited by an organization, he might not
have all the skills required to carry out his job. Training the
employee at this stage helps him learn his job faster & excuses
better performance. Training also helps in bridging the gap between
the actual & the expected performance of the employees by
enhancing their knowledge & skills.

ii) Updating Employee Skills:-

Technological changes may result in job changes in terms of the

tasks & activities involved. Training enables employees to update
their skills & helps integrate the technological changes successfully
into organizational systems & processes.

iii) Avoiding Managerial Obsolescence:-

Managerial obsolescence is the failure to adopt new methods &
processes that can improve employee & organizational

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performance. Rapid changes in technical, legal & social
environments have an impact on the way managers perform their
jobs, & those who do not adopt to these change become absolute &
ineffective.

iv) Preparing for Promotion & Managerial Succession:-

Training helps an employee acquire the skills required to assume
greater responsibilities. It makes the transition from an employee’s
present job to the next one, easier & smoother.

v) Retaining & Motivating Employees:-

One way to motivate & retain employee is through a systematic
program of career planning & development.

vi). Creating an Efficient & Effective Organisation:-

A manager who has well trained & well equipped employees need to
spend less time supervising them. Accidents at the workplace can
also be reduced by effective training of the employees.

PERFORMANCE APPRAISAL & COMPENSATION

Performance appraisal can be defined as the process of evaluating
the performance of an employee & communicating the results of
the evaluation to him for the purpose or rewarding or developing
the employee.

According to Edward Flippo “Performance appraisal is the

systematic, periodic & an impartial rating of an employee’s
excellence in matters pertaining to his present job & his potential
for a better job.”

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Objectives of Performance Appraisal

1) Work – Related Objectives:-

a) To access the work of employees in relation to job requirements
b) To improve efficiency

c) To help management is fixing employees according to their

capacity, interest, aptitude & qualifications.
d) To carry out job evaluation.

2) Career Development objectives:-

a) To access the strong & weak points in the working of the
employees & finding remedies for weak points through training.
b) To plan career goal
c) To guide the job change with the help of continuous ranking.

3) Communication:-
a) To provide feedback to employee’s so that they come to know
where they stand & can improve their job performance.
b) To clearly establish goals i.e what is expected of the employee in
terms of performance & future work assignment.
c) To develop positive superior – subordinated relations & thereby
reduce grievances.

4) Organizational Objectives:-
a) To serve as a basis for promote or demotion
b) To serve as a basis for wage & salary administration &
considering pay increases & increments.
c) To serve as a basis for planning suitable training & development
programme

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d) To serve as a basis for transfers of termination in case of
reduction in staff strength.

METHODS OF PERFORMANCE APPRAISAL

Performance appraisal methods can be classified into two. They
are:-
1) Traditional methods
2) Modern methods

Traditional methods:- It is also known as Traits approach. It is

based on the evaluation of traits in a person.

A) Graphic Rating Scale:- This method of appraisal requires the

rater to rate the employee on factors like quantity & quality of
work, job knowledge, dependability, punctuality, attendance, etc.

Rating Scales are of two types viz

a) Continuous rating scale
b) Discontinuous rating scale.

In continuous order like 0,1,2,3,4 & 5 & in discontinuous order,

the appraises assigns the points to each degree.

B) Ranking Method:- It is otherwise called as Straight ranking

method. It is the simplest & old method of merit rating. Every
employee is judges as a whole without distinguishing the rates
from his performance. A list is then prepared for ranking the workers
in order of their performance on the job so that an excellent employee
is at the top & the poor at bottom.

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Advantages:-

It permits comparison of all employees in any single rating group

regardless of the types of work.
It is suitable only when there are limited persons organization.

Disadvantages:-
This method only tells us about & not the actual difference among
them.

C) Paired Comparison method:-

Under this method, the appraiser compares each employee with
every other employee, one at a time. For example, there are five
employees named A, B, C, D & E. The performance of A is first
compared with the performance of B & a decision is made about
whose performance is better. Then A is compared with C, D & E
in that order. The same procedure is repeated for other employees.
After the completion of comparison, the results can be tabulated, &
a rank is created from the number of times each person is
considered to be superior.

D) Forced Distribution method:-

It is developed to prevent the raters from too high or too low.
Under this method, the rate after assigning the points to the
performance of each employee has to distribute his ratings in a
pattern to conform to normal frequency distribution.

E) Checklist Methods:-
The checklist is a simple rating technique in which the supervisor

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is given a list of statements or words & asked to check statements
representing the characteristics & performance of each employee.

F) Critical Incident Method:-

The appraiser makes a note of all the critical incidents that reflect
the performance or behaviour of the employee during the appraisal
period. These are recorded as & when they occur & can
demonstrate either positive or negative traits or performance. At
the end of the appraisal period this records forms the basis for
evaluation of the performance of the employee.

G) Essay or Free Form Appraisal:-

This method requires the manager to write a short essay
describing each employee’s performance during the rating period.
Questions or Guidelines are provided to the appraiser, based on
which he analysis & describes the employee’s performance.

H) Group Appraisal:-
Al employee is appraised by a group of appraisers. This group
consists of the immediate supervisors of the employee to other
supervisor’s who have close contact with the employee’s work,
manager or head of department & consultants. This method widely
used for purposes of promotion, demotion & retrenchment
appraisal. Eq:- Blue Star

I) Confidential Report:-
Assessing the employee’s performance confidentially is a
traditional method.

The superior appraiser the performance of his subordinate based

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on his observations, judgment & intuitions.

II Modern Methods:-
Modern concerns use the following methods for the
performance Appraisal
A) BARS (Behaviorally Anchored Rating Scales):-
BARS concentrates on the behavioral traits
demonstrated
instead by the performance.
of his actual employees
These are three steps in implementing a BARS system.
They are:
i) -
Determination of relevant job dimensions by the
manager &
employee forthe
each job dimension.

for each job dimension.

each scale value, based on consensus.

Example:-

Dimension: Planning & Organising Anchors

Scale Value

5[ ] Excellent Develops a comprehensive plan, documents well,

obtain
approval & distributes to all concerned.
4[ ] Good Lays out all plane.
3[ ] Average Revises due dates as project progresses &
investigate customer

complaints
2[ ] Below Average Poor plans & unrealistic time schedules are
common

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1[ ] Fails due to lack of planning & is not interested in
Unacceptabl
e improving.

B) Assessment Centre:-
An assessment centre is a central location where the managers may
come together to participate in job related exercises evaluated by
trained observers. The principle idea is to evaluate managers over a
period of time, by observing & later evaluating their behaviour across
a series of select exercises such as role-playing in basket exercises,
etc.

C) Human Resources Accounting:-

It deals with cost of & contribution of human resources to the
organization. Cost & Contribution of human resources to the
organization. Cost of the employee includes cost of manpower
planning, recruitment, selection, placement, induction, training,
development wages & benefits, etc. Employee contribution is the
money value of employee service which can be measured by labour
productivity or value added by human resource. Cost of human
resources may be taken as standard. Employee performance can
be measured in terms of employee contribution to the
organization.

D) Management by Objective:- (MBO)

Management by objective is a process whereby the superior &
subordinate managers of an organization jointly identify its common goals,

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 define each individuals major areas of responsibility in terms of results
expected of him & use these measures of guides for operating the unit
& assessing the contribution of its members.
Four Steps in MBO process

1) It is to establish the goals each subordinate is to attain.

2) Setting the performance standards for the subordinates.

3) Actual level of goal attainment is compared with the goals.

4) Establishing new goals & possibly new strategies for goals not
previously attained.

E) Psychological Appraisal:-

It focuses on future potential & not actual performance.

Industrial psychologist are employed for conducting the appraisal.

The appraisal normally consists of in depth interviews,

psychological tests, discussions with supervisors & a review other
evaluations.

The psychological appraisal results are useful for decision making i)

Employee Placement
ii) Career Planning & development iii) Training &
Development
F) Results Method:-

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Organisation of the contemporary periods evaluates employee
performance based on accomplishments they achieve rather than
based on the behavioural factor/traits. Employee accomplishments
include sales turnover, number of units produced, & number of
customers served, number of complaint settled & the like.

G) Balance Scorecard:-

It was developed by Robert Kaplan & David Norton. It brings the

linkages among financial, customer, processes & learning .

H) Managerial Appraisal:-

Harold Koontz has developed a concept of managerial appraisal i.e

appraising managers as managers. According to this concept, the
managers attain organizational objectives by performing the basic
managerial functions Viz. planning, organizing, leading, motivating,
staffing & controlling.

The checklist containing the questions in these areas is prepared

with a five degree rating scale i.e extremely poor performance,
neither poor or not fair performance, fair performance. The
appraisers rate performance of managers by assessing weights to
the scale & appraise only those areas which are clear & are
supported by adequate knowledge.

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i) 360 Degree Performance Appraisal:-

The employee’s performance is evaluated by his supervisor, his

peers, his internal/external customers, his internal/external
suppliers & his subordinates.

Limitation / Pitfalls of Performance Appraisal

1) Halo Effect:- The appraiser allow a single characteristic of the

appraise to dominate his judgment of the employee performance.
This can result in either a positive or negative report.

2) Leniency Effect:- This refers to the situation where the appraiser

tends to give high ratings & only positive feedback to the appraise,
irrespective of his actual performance.

3) Stringency Effect:- An appraiser which feels that the rules &

standards of the organization are not strict enough, tries to be
very strict in rating his appraises. This might lead to
dissatisfaction among his appraises as they would feel that the
evaluation is biased & unfair.

4) Recency Effect:- This occurs when the recent performance of the

appraise dominates the appraisal. The appraiser tends to get
influenced by the performance of the employee over the last 2-3
months of the appraisal period as it is still fresh in his memory.
An employee who has perform well for the preceding nine months
but fail to maintain the same level of performance in the last 3
months preceding

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the appraisal might get the same rating as or an interior one
than someone who performed well only in the last 2-3 months of
the appraisal period.

5) Primacy Effect:- The performance of the appraiser at the

beginning of the appraisal period dominate the evaluation.

6) Central Tendency Effect:- It is the tendency of the appraiser to

rate most of the appraiser in the middle of the performance scale.
The appraiser gives neither high nor low ratings & tends to give
ratings in the middle of the scale to all the appraisers.

7) Stereotyping:- It involves judging someone based on the group

he belongs to & the appraisers perception of the group.

Uses of Performance Appraisal

Apart from evaluating the performance of the employee for

rewards/punishment & development, a good performance
appraisal system has many other users. Some of these are listed
below.

i) Training & development needs of the employees can be

determines.

ii) Organisational effectiveness can be improved by improving the

individual performances of the employees.

iii) The performance appraisal system forms the basis for

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compensation management in the organization.
iv) Can be used as basic for transfers, promotions & other career
planning activities
& individual employees.
v) It also helps in succession planning in the organization.

Compensation

Compensation is the remuneration paid by the management to the

employee for his/her contribution to the organization.

Compensation includes Wages/Salary, incentives, bonus & social

security measures or fringe benefits.

Definitions & Concepts

Wage & Salary administration:- is essentially the application

of systematic approach to the problem of ensuring that the
employee are paid in a logical, equitable & fair manner.

Wage:- Indian Labour Organisation defines the term Wage as

the “the remuneration paid by the employer for the services of
hourly, daily, weekly & fortnightly employees.

Salary: - The term salary is defined as the remuneration paid

to the clerical & managerial personnel employed on monthly or
annual basis. It is also known as Basic Pay.

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 Earnings :- Earnings are the total amount of remuneration
received by an employee during a given period. These include
salary, dearness allowance, House rent allowance, city
compensatory allowance, other allowances, over time payments,
etc.

Nominal/Money Wage:- It is the Wage paid or received in monetary

Real Wage:- It is the amount of Wage arrived after discounting

nominal wage by the living cost. It represents the purchasing power
of money wage.

Objectives of compensation

1) To acquire qualified competent personnel:- Candidates decide

upon their career in a particular organization mostly on the basis
of the amount of remuneration the organization offers qualified &
competent people join the best
– paid organization.

2) To retain the Present Employees:- If the salary level does not

compare favourably with that of other similar organizations,
employees quit the present one & join other organizations.

3) To secure Internal & External Equity:- Internal equity does

mean payment of similar wages for similar jobs within the
organization External equity implies payment of similar wages to
similar jobs in comparable organizations.
4) To Ensure Desired Behaviour:- Good rewards performance
loyalty, accepting new responsibilities & changes.

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5) To Keep Labour & Administrative Costs:- In line with the ability
of the organization to pay.
6) To facilitate pay roll administration of budgeting & wage & salary
control.
7) To promote organization feasibility.

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 Electronic Retailing (E-Retailing)

Introduction
Technology plays a key role in today’s business environment.
Many companies greatly relay on computers and software to provide
accurate information to effectively manage their business. On way
that any corporations have adopted information technology on a
large scale is by installing Enterprise Resource Planning (ERP)
systems to accomplish their business transaction and data
processing needs.

The importance of information technology in retail stem

from the importance of data. Data is nothing but information that
aids decision making. The right data, in the right form to the
right setoff people at the right time, is one the greatest tools in the
hands of the retailer. Information is always with reference to a
particular time frame.

Let us consider an example of a customer at a department

store. After selecting some goods he proceeds towards the billing
counter. Here the billing clerk scans each product at the POS
(Point of Sale) terminal the total number of items and the bill
amount is added up. While doing so he has so checked with
customer if he is a member of the store’s loyalty program. The
customer confirms that he is, gives him the store card for entry
makes the payment by way of credit card and exits the store with
his purchases. The retail industry is one that lives and dies on
margins.

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Non-Store Retailing - :

Meaning –

Non-store retailing is a form of retailing in which sales are

made to consumers without using stores. Therefore, the selling of
goods and services without establishing a physical store is known
as Non- Store Retailing.

It includes such services are vending machines, direct-to-

home selling, telemarketing, catalog sales, mail order, and
television marketing programs. In case of non-store retailing
retailers use such methods to sell products that do not have
customers physically visiting a retail outlet.

Electronic Retailing (e-retailing) - :

Electronic Retailing is the sale of goods and services through the

internet. Electronic retailing or (e-tailing), can include business-to-
business and business-to-consumer sales.

Features / Advantageous of Electronic Retailing –

01. Round the Clock Business –

With this distinct mechanism of commerce, the merchant can

sell round the clock, everyday of the week, 24 hours a day and 365
days a year. There is no need to hire a clerk to run the store. This
makes potential business for the merchants and organizations.

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02. Consumer Convenience –

Trading online makes it easy for people to buy from

merchants online. The convenience of shopping from anywhere and
at any time, from home or office is the major reason for consumers
to buy online. Internet processing, credit card processing software
point or sales etc., made it more convenient for the consumer to
buy online.

03. Level Playing Field –

E-commerce is open to one and all regardless of size and

shape. On the internet no one knows you are a small business. As
long as you have product to sell or buy, you are on the Net. It does
not matter whether the business is small, medium or small. You
can compete with the big players also.

04. Cost Effective –

As new a medium of business, the Net afford the lowest

transaction cost among all other methods of doing business. The
WWW helps to promote services and ideas for a fraction of the cost
of traditional advertising and marketing. There is no printing cost
and no postage cost. It is cost effective because there is no
maintenance cost, stationery cost and other costs.

05. Simplicity –

It is easy for customer to buy and sell products online with fast
applications. Web pages can easily be updated. The process of e-

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commerce is simplified by adding products or services, product
information, viewing orders, downloading order and other
administrative tasks are made easy.

06. Access to All Markets –

A web marketer can attract customers located all over the

world, compete for the global market, build global chain and
operate with global strategies. Opening website is the equivalent
of opening branches everywhere in the world.

07. Reduction in setup cost –

With web marketing, marketer can conduct his operations

without decorative showrooms or retail shops. It reduces
warehouse cost and staff cost. Marketer can operate with just one
central warehouse and a small team of staff.

08. Many products and services from a single stop –

A web market can offer a variety of services and products to

the customer from a single website, a single stop on the net. He is
able to do this because the web provides direct and interactive
access to the customer.

09. Quick Service –

In modern times, speed has become a major ingredient of
successful marketing. The marketing process can be completed
within a shortest possible time. This helps the marketer to enhance
customer value.

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10. Transparency –

Web marketing provides for very high degree of transparency

about business transaction, which was unknown in business
transactions hitherto. There is no suppression of information. By
browsing through the web, buyers can become aware of just about
all sellers selling the particular product and their prices and terms.

11. Creating new business models –

With e-commerce, one can create completely new business

models. In mail order companies, there is a high cost of printing
and mailing catalogues. There is also high cost of staffing
including the order-taking department that answers the phone.

12. Security and Privacy –

Today, secure encryption technology is available to provide

high security to the data. Protocol securities are now available
which assures the customers that their personal sensitive data is
protected by most sophisticated systems.

13. Instant Payment –

In recent years, markets do not like to accept cash or

cheques. The problem with a cheque is that it may get bounced
sometimes. In a credit card (smart card) and ATM the merchants
can get nearly instant approval and goods can be sent out
immediately.

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14. Increase Market Share –

The internet is everywhere. It is changing the business

environment in a great way. Small businesses are it to reach wider
section of consumers. Retailers on the internet are doing potential
businesses on groceries, books, toys, music, electronic goods and
sending e-greeting to the customers. Customers are accessing
websites over the world, all at the click of the button. It increases
market size and has become electronically enabled.

15. Accuracy of Information –

Accuracy of information regarding schemes, discounts etc are

all available accurately. This actually makes him want to buy more.
This is one the reasons as to why web marking is so popular today.

16. Consumer can „get more for less‟

With the web marketing, consumers can get more value for
their money. Web marketers make competitive offers to the
customers. Because of the exhaustive information, wide range of
goods, interactive communicative and more has helped customers
to get more than what they pay for goods or services.

17. Lower Transaction Cost –

If an e-commerce site is developed well, the web can significantly

lower both order taking cost and customer services costs.

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The Important Challenges / Impact of Information Technology
in Retailing (e-retailing) - :

01. Lack of Awareness –

Most of the business people do not understand the

significance and importance of the electronic business medium or
are unsure of the quality and delivery schedule, physical delivery of
goods and mode of payment.

Lack of awareness of the technology and its potential benefits

are also equally responsible for the poor growth of e-retailing. Lack
of interest and willingness to make a paradigm shift has become a
crucial issue. Many companies are not willing to accept that their
business needs a revolutionary change to subsist in the potentially
digital world.

02. Lack of Confidence –

The people in India still show hesitancy in buying through

the Net. Lack of quality products, timely delivery of products as
some of them tend to go out of stock, lack of solutions security
are the potential reasons for not developing e-retailing. People
don’t understand this new way of buying and selling products i.e.,
the services in a digital environment which are available online.

03. Skeptic Attitude –

Though the Internet is continuing to grow at rapid rate, along

with e-retailing transactions, the shoppers are still skeptical about

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safety and have not been quick to trust sending personal
information such as credit card numbers or address over the net.

04. Credit Card Frauds –

In India, distribution channels are just one part of the

problem related to e-payments. The bigger problem is that of
security. All credit card related transactions are approved offline
and given the high incidence of frauds. In fact, there are some
unconfirmed reports of a multi-national bank refusing to approve
credit card transactions carried out by a large Indian portal.

05. Absence of Tax Laws –

E-retailing over the net has effectively eliminated national

borders. Net business posed many peculiar technological and legal
problems making it difficult to impose tax and formulate a sound
taxation policy. The following are the various tax implications e-
commerce;
 There is not fixed physical location for the internet.
 It is difficult to monitor or prevent transmissions of
information or electronic cash across the net.

06. Cyber Laws –

There should not be any legal regulations, or barriers to

faster and increased development of e- retailing. The crying need of
the hour is urgent action to be taken by the government to enact
cyber laws including electronic fund transfer, and amendments of
Official Secrets Acts.

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07. Stock Dilemma –

Many people are not too happy with e-retailing trends.

Though online shopping may be growing but so is frustration with
it. A key source of dissatisfaction is the out of stock dilemma. In
most cases, advertised products or services are not available. The
options of feedback and not receiving suggestions are also reasons
for annoyance.

08. Lack of Skills and Expertise –

Lack of skilled and trained personnel impedes the growth of

implementation of IT related e- retailing. The use of the Net for
trade requires a complex introduction of servers, browser software
and knowledge of web design, hosting, promotion and many more
skills. It requires understanding many new things. Many Indian
businesses are not prepared to approach electronic commerce.

09. Inadequate Government Role –

The government is not taking a serious view of e-commerce

related information technology in terms of its promotion.
Government is not playing an active role of by enacting different
comprehensive cyber laws, bringing amendments to the existing
business laws, not formulating a favourable IT policy and not
making positive intervention when needed and ensuring adequate
infrastructure.

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10. Preferring Foreign Sites –

Online shoppers in India do not prefer Indian websites to a large

extent and prefer US and other foreign websites. There are many
reasons for this as they provide better selection, prices, stock,
quality products, payment process security, customer service and
wide variety of sites among other things.

Integrated Systems and Networking - :

Meaning of System Integration –

System integration is the process of bringing together the

component subsystems into one system and ensuring that the
subsystems function together as a system.

Meaning of Networking –

Networking is creating a group of acquaintances and

associates and keeping it active through regular communication
for mutual benefit.

Importance of Integrated Systems and Networking in Retail

01. Merchandise Management –

The items purchased provide information on merchandise

sold in the store. This is the basis of sales analysis and decisions
on replenishment, re-ordering and merchandise planning. This is

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information helps to reduce production time. This helps to avoid
situation of stock out.

02. Managing Finance – It helps in;

 Strong expense management

 Revenue management
 Ensures complete real-time visibility
 Financial performance of the entire business

03. Collecting Information –

The use of technology aids information collection. It can be

about consumers, frequency of their buying and the typical basket
size etc. This information helps the retailer distinguish the
customer who shops at his store frequently and also reward them.
The data on purchase made is also passed on to the credit card
organization for payment to the merchant establishment and also
for billing the customer.

04. Operations Efficiency –

The information technology is the basis for integrating the

functioning of various departments. A retailer has to invest in
technology. However the benefits of the use of information
technology are many. As the process gets automated the time
involved in particular task is reduced. For example, billing
manually takes a longer time compared to using a technology at the
point of sale systems.

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05. Effective Communication –

Communication within the organization can be faster with

the use of software. Retail stores can communicate with each other
and with warehouses. Electronic Data Interchange (EDI) can also
used for communication with suppliers and vendors. The
information needs of the retailers largely depend on the size and
the spread of the organization.

06. Business Intelligence –

It helps to improve business agility, visibility and decision-

making. Analyze sales and item movement data to understand
demand, optimize staffing levels and improve inventory turn.

Electronic Data Interchange (EDI) - :

Meaning –

EDI is an electronic communication system. It provides

standards for exchanging data via any electronic means. By
adhering to the same standard, two different companies, even in
two different countries, can electronic exchange documents. For
example : purchase orders, invoices, shipping notices etc.

Definition –

In 1996, the National Institute of Standards and Technology

defined EDI as “the computer-to- computer interchange of strictly
formatted messages that represent documents other than

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monetary instruments.

EDI can be formally defined as “The transfer of structured data, by

agreed message standards, from one computer system to another
without human intervention.”

I. Steps the Sender Must Take

Document Preparation : Information necessary to produce a

business document (purchase order, invoice, etc.,) is collected in an
electronic file.
Outbound Translation – The electronic file is converted by the sender’s
translation software into the standard format (following ASC X12
standards and Rail Industry Guidelines)
Outbound Communication – The sender’s computer connects to
a VAN – Upon successful receipt, the VAN processes and routes the

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transaction to the electronic mailbox of the receiver.

II. Steps the Receiver Must Take

Inbound Communication – The receiver’s computer connects with

the VAN and receives any files waiting in its electronic ‘in’ box.
Inbound Translation – The receiver’s translation software ‘maps’ or
translates the electronic file from the ASC X12 standard message
format into a format that the receiver’s financial system can
understand.
Document Processing – The receiver’s internal document
processing system takes over and the newly received document is
handled according to normal internal procedures.

Transmission EDI - :

Trading partners are free to use any method for the

transmission of documents. The transmission of EDI includes;

01. Value-Added Networks –

To address the limitations in peer-to-peer adoption of EDI,

VANs (value-added networks) were established. A VAN as a
regional post office. It receives transactions, examines the ‘from’
and the ‘to’ information, and routes the transaction to the final
recipient. The uses of VANs are;
 It provides retransmitting documents
 It provides third party audit information.
 It acts as a gateway for different transmission methods.
 It helps in handling telecommunications support.

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02. Serial Communications –

At one time a common method of transmitting EDI messages

was using a Bisync modem; one partner would have one or more
modems set up to receive incoming calls, and other would call it
with their own modem.

03. Internet –

As more organizations connected to the internet, eventually

most or all EDI was pushed onto it. Initially, this was through ad-
hoc conventions, such as unencrypted FTP of ASCII text files to a
certain folder on a certain host, permitted only from certain IP
addresses.

04. Peer-to-Peer –

EDI standards are written such that trading IU partners could

connect directly to each other.

Features of Electronic Data Interchange –

1) It implies a sequence of messages between two parties, either of

who may serve as originator or recipient.
2) The formatted data representing the documents may be
transmitted from originator to recipient via telecommunications or
physically transported on electronic storage media.
3) It distinguishes electronic communication or data exchange.
4) In EDI, the usual processing of received messages is by computer

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only.
5) EDI message and are not normally intended for human
interpretation as part of online data processing.
6) It is the transfer of structured data, by agreed message
standards, from one computer system to another without human
intervention.
7) It provides a technical basis for commercial conversations
between two entities, either internal or external.
8) EDI standard describes the rigorous format of electronic
documents.
9) Human Intervention in the processing of a received message is
typically intended only for;
a. Error conditions
b. Quality review
c. Special situations
10) It constitutes the entire electronic data interchange paradigm.
It includes :
a. Transmission
b. Message flow.
c. Document format
d. Software used to interpret the documents

Bar Coding - :

Bar Coding is a series of parallel vertical lines (bars and

space), that can be read by bar code scanners. It is used worldwide
as part of product packages, as price tags, carton labels, on
invoices even in credit card bills. When these bar codes are read by
scanners, the details of the data re made available to the users.

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Factors of Bar Code System for Retail Business

01. Evaluate Product Line –

Barcodes can help to manage inventory. It makes

administration much easier. When setting up a barcode system the
retailers need to;

 Consider the size of actual products.

 Requirements of tags for clothing items.
 Requirements of labels.
 Identifying bar coding system suitable for business.

02. Decide on Bar Coding Needs –

Some wholesalers and retailers have their own bar coding

systems. It is possible to get a system that allows to print own
barcode labels or tags which can then place on products. The
retailers need to consider how they incorporate the barcode system.

03. Industry Specializations –

When it comes to actually pricing and shopping around between

different barcode systems the retailers needs to use the resources
at disposal to find out which one is best for business. Contact an
industry association and ask for their recommendations.

04. Cost Considerations –

Retailers have the impression that barcode systems are
expensive and will just push up their operating costs. When

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considering barcode systems, they need to also evaluate the long-
term benefits for business. A great advantage of bar coding is the
added efficiency that it provides to business.

Advantages of Bar Coding –

01. Barcodes eliminate the possibility of human error –

The occurrence of errors for manually entered data is significantly

higher than that of barcodes. A
barcode scan is fast and reliable, and takes less time than entering
data by hand.

02. Using a barcode system reduces employee training time –

It only minutes to master the hand-held scanner for reading

barcodes. This also makes employee training less expensive, since
they do not have to be paid for extra training time, and another
employee does not have to be compensated for training them.

03. Barcodes are inexpensive to design and print –

Generally they cost mere rupees, regardless of their purpose,

or where they will be affixed. They can be customized economically,
in a variety of finishes and materials.

04. Barcodes are extremely versatile –

They can be used for any kind of necessary data collection.

This could include pricing or inventory information. This could

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include pricing or inventory information. Additionally, barcodes can
be attached to just about any surface, they can used to track not
only the products themselves, but also outgoing shipments and
even equipment.

05. Inventory control improves –

Barcodes make it possible to track inventory so precisely,

inventory levels can be reduced. This translates into a lower
overhead. The location of equipment can also be tracked, reducing
the time spent searching for it, and the money spent replacing
equipment that is presumed lost.

06. Barcodes provides better data –

Barcodes can be used for inventory and pricing information,

it is possible to quickly obtain data on both. They provide fast,
reliable data for a wide variety of applications.

07. Data obtained through barcodes is available rapidly –

Since the information is scanned directly into the central

computer, it is ready almost instantaneously. This quick
turnaround ensures that time will not be wasted on data entry or
retrieval.

08. Barcodes Promote better decision making –

Data is obtained rapidly and accurately, it is possible to
make more informed decisions. Better decision making ultimately
saves both time and money.

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Electronic Article Surveillance (EAS) - :

EAS is a technological method for preventing shoplifting

from retail stores, pilferage of books from libraries or removal of
properties from office buildings. Special tags are fixed to
merchandise or books. Theses tags are removed or deactivated by
the clerks when the item is properly bought or checked out. At the
exists of the store, a detection system sounds an alarm or
otherwise alerts the staff when it senses active tags.

Therefore, EAS systems are designed to help retailers boost

their sales and protect their profits by increasing open
merchandising opportunities while reducing shoplifting and
internal theft.

Electronic Shelf Labels - :

It is a modern system used by retailers for displaying

product pricing on shelves and these are attached to the front
edge of retail shelving. ESL units are typically compact credit-card
sized devices designed to replace traditional paper shelf labels or
individual sticker pricing.

The process involves the use of liquid crystal device (LCD) that
replaces paper shelf labels at the Retailer’s shelf edge. Changing
thousands of paper shelf labels per week is a costly and a lengthy
exercise.

In today’s competitive market environment, retailers are promoted

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to look for means of increasing their profitability and productivity.
As a result, they are pursuing more effective management, focused
on both the purchasing function and control over selling prices.

Customer Database Management System - :

CDM embraces a range of software or cloud computing
applications designed to give large organizations rapid and efficient
access to customer data. Survey and data can be centrally located
and widely accessible within a company, as opposed to being
warehoused in separate departments.

CDM encompasses the collection, analysis, organizing,

reporting and sharing of customer information throughout an
organization. Businesses need a thorough understanding of their
customers‟ need if they are to retain and increase their customer
base.

Efficient CDM solutions provide companies with the ability to

deal instantly with customer issues and obtain immediate
feedback. As a result, customer retention and customer
satisfaction can show dramatic improvement.

Legal Aspects in Retailing - :

Legislation governs the retail firm’s operations and relations

with its channel partners. Its relations with suppliers, competitors,
consumers and employees are governed by appropriate laws. Legal
restrictions are imposed on practices concerning pricing, product,
promotion, distribution, trademarks and HR policies.

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 Legal compliances to be looked into by retail organizations
can be discussed from the Perspectives of People and Operations.

I. People Perspective –

1. Employees’ State Insurance Act – 1948 :

The Employees’ State Insurance Act, 1948 (ESI Act) provides

for health care and cash benefit payments in the case of sickness,
maternity and employment injury. The Act applies to all non -
seasonal factories run with power and employing 10 or more
persons and to those factories which run without power and
employing 20 or more persons.

Under the Act, cash benefits are administered by the Central

Government through Employment State Insurance Corporation
(ESIC), whereas the state government and Union Territory
Administration are administering medical care.

2. Payment of Bonus Act – 1965 :

The payment of Bonus Act, 1965 is the principal act for the
payment of bonus to the employees which was formed with an
objective for rewarding employees for their good work for the
organization. Therefore, The Payment of Bonus Act, 1965, gives to
the employees a statutory right to a share in the profits of his
employer.

This Act applicable to every factory where in 10 or more

persons are employed with the aid of power or an establishment in

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which 20 or more persons are employed without the aid of power of
any day during an accounting year. The act is applicable to
employees drawing wages upto Rs. 10,000/- PM.

3. Payment of Gratuity Act, 1972 :

The act provides for the payment of gratuity to workers

employed in every factory, shop and establishments or educational
institution employing 10 or more persons on any day of the
preceding 12 months. All the employees irrespective of status or
salary are entitled to the payment of gratuity on completion of 5
years of service. The maximum amount of gratuity payable is Rs.
3,50,000/-

4. Employees Provident Fund Act, 1952 :

The employees’ Provident Fund Act, 1952 is an important

piece of Labour Welfare legislation enacted by the Parliament to
provide social security benefits to the workers. The object of the Act
in 1952 was the institution of the compulsory contributory
Provident Fund to the employees to which both the employee and
the employer would contribute. At present, the Employee
contributes 12% of his / her Basic Salary & the same amount is
contributed by the employers.

5. The Minimum Wages Act – 1948 :

It is an Act of Parliament concerning Indian Labour Law that

sets the minimum wages that must be paid to skilled and unskilled
labours. The Indian Constitution has defined a „living wage‟ that is

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the level of income for a worker which will ensure a basic standard
of living including good health, dignity, comfort, education and
provide for any contingency.

In India, minimum wages are declared at national, regional,

sectorial and occupational or skill level. Minimum wages in India
is declared on daily, hourly, and monthly basis.

6. Workmen Compensation Act, 1923 –

The Workmen’s Compensation Act, 1923 provides for payment

of compensation to workmen and their dependents in case of injury
and accident (including certain occupational disease) arising out of
and in the course of employment and resulting in disablement or
death.

7. The Payment of Wages Act, 1936 –

The Central Government is responsible for enforcement of the

Act in Railways, Mines, Oilfields and Air Transport Services, while
the State Governments are responsible for its in factories and
other industrial establishments.

II. Operations Perspective –

The person responsible for running a retail store has to be

aware of various laws and regulations to be followed.

1. The Shops and Establishment Act –

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 This Act was introduced to provide statutory obligation and
rights to employees and employers in the unorganized sector of
employment, i.e., shops and establishments. This was done to
regulate the conditions of work and employment in shops,
commercial establishments, and residential hotels, restaurants,
eating houses, theatres and other places of public entertainment.

2. The Prevention of Food and Adulteration License (1954) –

The Act strictly says that import, manufacture, storage, sale

or distribution of any food article which is adulterated by allowing
its quality or purity to fall below the prescribed standard, or is
misbranded, or in contravention of any provision of the Act or
Rules. Penalty is minimum imprisonment of six months that may
extend upto 3 years and minimum fine of Rs. 1,000/-

3. Industrial Dispute Act, 1947 –

An industrial dispute may be defined as a conflict or

difference of opinion between management and workers on the
terms of employment. It is a disagreement between an employer
and employees’ representative; usually a trade union, over pay and
other working conditions and can result in disturbances in the
relationship between management and workers. It, not only
includes the disagreement between employees and employers, but
also emphasizes the difference of opinion between worker and
worker.

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4. Consumer Protection Act, 1986 –

The Consumer Protection Act, 1986 was enacted to provide a

simpler and quicker access to redressal of consumer grievances. It
makes provision for the establishment of consumer councils and
other authorities for the settlement of consumers’ disputes and for
matters connected therewith.

5. Essential Commodities Act, 1955 –

The Essential Commodities Act, 1955 was enacted to ensure

the easy availability of essential commodities to consumers and to
protect them from exploitation by unscrupulous traders.

The Act provides for the regulation and control of production,

distribution and pricing of commodities which are declared as
essential for maintaining or increasing suppliers or for securing
their equitable distribution and availability at fair prices.

6. The Standards of Weights and Measurement Act, 1976 –

It was established to prescribe specification of measuring

instruments used in commercial transaction, industrial production
and measurement involved in public Health and Human safety.

Social Issues in Retailing - :

The way business is done by retail organization has a big

impact on the lives of customer, communities and colleagues.
Following are the ways in which retail organization can become a

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social acceptable entity.

 Keeping Clean and Green – Keeping the environment clean.

It also involves waste management and working on green
management. This principle advocates that every retail
organization should maintain their surroundings neatly.
Organizations‟ should not unnecessary dump wastes in the
environment.

 Shopping for Tomorrow – This principle states that a retail

organization should supply goods for more sustainable lives of
the consumers.
 Sourcing with care – This principle states that retail
organizations should source the best products, while
minimizing social and environmental impacts.

 Building a great place to work – This principle states that

every retail organization should create a congenial working
environment for the employees in such a way that they
should feel proud to work for the organization.

 Being a good neighbor – This principle states that every

retail organization should support the communities in which
they operate. They should undertake social responsibility
activities.

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 RETAIL AUDIT AND ETHICS IN RETAILING

It helps to ascertain the sales personnel‘s efficiency at the point

of sale or to find out the average time taken on a normal day or
during the weekend.

Retail Process Audit: Such retail process audit helps to

examine a store’ efficiencies in terms of operating process or
reduce the cycle time. For instance with the help of retail
process audit, the retailer can work out ways to improve customer
service delivery and to improve performance.

Retail Store Audit: While visiting the store, the retail auditor will
collect observable information such as the shelf prices, display
space, the presence of special display and in store promotion
activities. The retailers can use retail store audit results to project
and arrive at nationwide and regional estimate of total sales,
inventories etc.

Nielson Retail Index:

It Covers 4 major groups (grocery product, drug, merchandise
and alcoholic Beverages) It usually includes the following variable:

 sales on the basis of retail rupees, Distribution in terms of %

of all stores
 Selling prices, retailer support in terms of shelf spacing,
special displays, in store advertising.

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Consumer Purchase Panel Audit:
It helps to understand how much product is moving through the
distribution channel. Two methods for collecting this data:

1. Home audit approach: panel member aggress to permit an

auditor to check the household stock of certain product categories
at regular intervals
2. Mail Dairy Method: the panel member records details of every
purchase made in certain categories and return the completed
dairy by mail at regular intervals.

Examples of a few Research studies in India:

1. The A.C Nielson Shopper Trends

2. Consumer outlook 2004- study conducted by KSA Technopak

has revealed that personal credit off take has increased from
about 50000 crore in 2000 to about Rs. 1, 60,000 in 2003.
3. KSA Technopak Intimate Apparel Retail study- to explore the
intimate apparel retail scenario in India
4. The BT – Indica Research Index of Consumer Sentiments (BT-
IRICS) used by marketers to measure consumer confidence.

Indian Retail Prognosis- ICICI Bank Research study compilation:

ICICI based on retail banking experience gives data on the Indian
consumer behaviour towards retail banking.

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Retail audit process:

Ethical Issues in Retailing

Meaning of Ethics

The Ethics means a set of moral principles, standards or

values which govern a person’s behaviour. It is a branch of Social
Science. It deals with good and bad with reference to a
particular culture.

Ethics is derived from the Greek word ‘ethos’ which means

character. Ethics is a branch of philosophy that deals with values

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relating to human conduct, with respect to right or good and wrong
or bad actions. Here ethics relates to retailers moral principles and
values.

Ethics in Retailing:

Ethics is a set of rules for human moral behavior.

For retailers they can have explicit code of ethics or implicit code of
ethics.

Explicit code of ethics: Written policy that specifies what is ethical

and unethical behavior.
Implicit: Unwritten but well understood set of rules/standards of
moral responsibilities.

Ethical situations in retailing

 Should a retailer sell merchandise that was made using child
 Labour? Should a retail buyer accept an expensive gift from
vendor?
 Should a retailer treat some customers better than others?

 Should a retailer give preferences to minorities when making

promotion decision?

Ethical and legal issues:

1. Consumer Fraud: The defrauding of a consumer of various
products and services which do not perform as advertised, or
overcharging or levying hidden charges through deceptive business
practices. Agencies for Protection of Consumer Fraud - Indian

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Association Of Consumers (IAC) Consumer Forum (CF) Consumer
Education Society (CES), Karnataka Consumer Services Society
(KCSS)

2. Supplier Labour Practices: Legally prohibited action by an

employer or TRADE union such as refusal to bargain in good
faith. Case of unfair labour practices Apple‘s supplier labour
practices in china scrutinized after Foxconn, Pegaton reviews

3. Retail Theft: It is also called as Shop Lifting Shoplifting (also

known as boosting, five finger discount, or shrinkage within the
retail industry) is theft of goods from a retail establishment. It is
one of the most common crimes. There are people and groups who
make their living from shoplifting, who tend to be more skilled.
Generally, criminal theft involves taking possession of property
illegally.

4. Slotting Allowances: A fee paid by a manufacturer to a retailer

to provide shelf space or a slot for a new product. Is a fee charged
to produce companies or manufacturers by supermarket
distributors (retailers) in order to have their product placed on their
shelves? The fee varies greatly depending on the product,
manufacturer, and market conditions

5. Use of Customer Information: The consumer information

contained here is intended, in part, to alert the reader to
pertinent issues regarding this site. The information contained
herein is not intended as a substitute for professional consultation.

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Some of the Ethical Issues in Retailing –

1. Ethical Practice towards Consumers –

The retailers should charge fair price for the products offered
to them. The consumers have the right to get correct and precise
knowledge about the products sold to them in respect of warranty,
guaranty, price, usage, ingredients etc. Ethical business is
essential in today’s competitive and dynamic environment.

2. Ethical Practice towards Investors / Shareholders –

The shareholders are the owners of the business.

Shareholders must be given fair returns on their investment at
regular intervals. The share holders should be disclosed with
correct information about the financial status of the business
organization. The business organization must act in the interest
of the shareholders.

3. Ethical Practices towards Employees –

Ethical practices must also be followed towards the employees. The

retail industry employs large volume of retail staff. Therefore
proper policies and procedures must be framed for the employees
regarding recruitment, selection, training, promotion, welfare etc.

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Social responsibility:

Social responsibility is an ethical framework which suggests that

an entity, be it an organization or individual, has an obligation to
act for the benefit of society at large. Social responsibility is a
duty every individual has to perform so as to maintain a balance
between the economy and the ecosystems.

A trade-off may exist between economic development, in the

material sense, and the welfare of the society and environment.
Social responsibility means sustaining the equilibrium between the
two. It pertains not only to business organizations but also to
everyone who‘s any action impacts the environment. This
responsibility can be passive, by avoiding engaging in socially
harmful acts, or active, by performing activities that directly
advance social goals.

Consumerism:
Definition- the "social movement seeking to augment the rights
and power of buyers in relation to sellers," (Kotler, 1972)

It is manifest in new laws, regulations, and marketing practices,

as well as in new public attitudes toward government and
business.

Consumerism is a social and economic order that is based on the

systematic creation and fostering of a desire to purchase goods or
services in ever greater amounts.

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Consumerism in India:

 India is a developing economy.

 Not all Indian consumers are well educated.
 Consumers are often exploited, misled by deceptive
advertisements, packaging poor after sales service,
adulteration, price collusion and so on.
 Liberalization and competition
 Survival of the fittest

Changes in the attitude of Indian consumers

 The attitude of Indian consumers has undergone a major

transformation over the last few years.
 He wants to lead a life full of luxury and comfort.
 He wants to live in present and does not believe in savings for
the future.
 He is open to the idea of consumption and a better lifestyle.
 An increase in their income level due to high rate of
industrialization, growth of services sector and better
employment opportunities

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